FORT WORTH, Texas--(BUSINESS WIRE)--Nov. 1, 2007--Tandy Leather Factory, Inc. (AMEX:TLF) today reported financial results for the third quarter of 2007. Consolidated net income for the quarter ended September 30, 2007 was $171,000 compared to consolidated net income of $890,000 for the third quarter of 2006. Fully diluted earnings per share for the quarter was $0.02, compared to $0.08 in the third quarter of last year. Total sales for the quarter ended September 30, 2007 were $12.8 million, a 2% increase over sales of $12.6 million in third quarter last year.
Consolidated sales for the nine months ended September 30, 2007 were $40.7 million, almost a 1% gain over 2006 sales for the first three quarters of $40.4 million. Consolidated net income for the first three quarters of 2007 was $1.9 million or $0.17 per fully-diluted share versus $3.4 million or $0.30 per fully-diluted share in the comparable period last year.
Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $536,000 in the third quarter, an 11% improvement over last year's third quarter. Seventy-one stores comprised Tandy Leather's retail operations on September 30, 2007, compared to sixty-two retail stores a year ago. Three stores were added in the third quarter of 2007 bringing the total number of new stores added in 2007 to nine as of the end of the quarter. For the first nine months of 2007, Tandy Leather sales increased $1.9 million, or 12%, over the first nine months of 2006. Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, decreased $148,000 over the same quarter last year, a 2% decline. For the first nine months of 2007, Wholesale Leathercraft's sales were down $823,000, or 4%, over the same period in 2006.
Consolidated gross profit margin for the current quarter was 54.2%, declining from 56.2% for the third quarter of 2006. For the first three quarters, consolidated gross profit margin for the current year was 57.1%, improving over last year's gross profit margin of 56.5%. Consolidated operating expenses rose $1 million in the current quarter and $2.6 million for the first nine months over the same periods a year ago. Personnel costs, advertising and marketing expenses, legal and professional fees and depreciation expense are the primary drivers of the increases. Consolidated operating margins declined for the quarter and year to 0.8% and 6.8%, respectively, compared to 10.1% and 12.4% a year ago.
Ron Morgan, Chief Executive Officer and President, commented, "Our pre-announcement of expected earnings earlier this week adequately relayed our extreme disappointment with our third quarter performance. With that said, we can't change the past - we can only go forward. I am confident in our ability to learn from past mistakes and be successful in the future. Our focus for the fourth quarter is expense control at the support units and sales at the stores. Given the current retail environment, I'm not expecting great sales results in the fourth quarter which means expense control will be key."
Chief Financial Officer, Shannon Greene, added, "It's easy to look back and wish different decisions had been made. If we'd known a year ago what we know now about customer spending trends, etc., we probably would have reacted differently. If there's one thing I've learned this year, it's that we are a stubborn bunch and hate to give in - particularly to weak sales. We always believe that we can do better, in spite of the circumstances. With all of that said, we have a lot of work to do to get our expenses down to a level that is acceptable."
Tandy Leather Factory, Inc., (http://www.tandyleatherfactory.com), headquartered in Fort Worth, Texas, is a specialty retailer and wholesale distributor of a broad product line including leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits. The Company distributes its products through its 29 Leather Factory stores, located in 19 states and 3 Canadian provinces, 72 Tandy Leather retail stores, located in 33 states and 5 Canadian provinces, and Mid-Continent Leather Sales, one store located in Oklahoma. Its common stock trades on the American Stock Exchange with the symbol "TLF".
This news release may contain forward-looking statements. All forward-looking statements made here or in other news releases issued by Tandy Leather Factory, Inc. are based on current expectations as of the date of the release. These forward-looking statements involve risks and uncertainties that could cause the results of Tandy Leather Factory, Inc. to differ materially from management's current expectations. Many of these risks and uncertainties are detailed from time to time in TLF's reports filed with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and the most recent quarterly report on Form 10-Q. Investors are reminded that past performance may not be predictive of future results.
Selected financial data:
Quarter Ended 09/30/07 Quarter Ended 09/30/06
----------------------------------------------
Operating Operating
Sales Income Sales Income
----------- ---------- ----------- -----------
Wholesale Leathercraft $6,940,484 $32,686 $7,088,181 $910,942
Retail Leathercraft 5,657,198 58,780 5,121,556 362,744
Other 208,651 13,811 349,856 (9,714)
----------- ---------- ----------- -----------
Total Operations $12,806,333 $105,277 $12,559,593 $1,263,972
=========== ========== =========== ===========
Nine Months Ended Nine Months Ended
09/30/07 09/30/06
---------------------------------------------
Operating Operating
Sales Income Sales Income
----------- ---------- ----------- ----------
Wholesale Leathercraft $22,057,123 1,790,257 $22,880,119 $3,675,658
Retail Leathercraft 17,753,614 878,492 15,858,836 1,323,105
Other 880,388 95,659 1,627,370 5,749
----------- ---------- ----------- ----------
Total Operations $40,691,125 $2,764,408 $40,366,325 $5,004,512
=========== ========== =========== ==========
Wholesale Leathercraft Quarter Ended Quarter Ended
09/30/07 09/30/06
------------------ ------------------
# of # of
stores Sales stores Sales
------- ---------- ------- ----------
Same store sales 29 $5,992,708 29 $5,968,100
New store sales 1 164,314 - -
National account group n/a 783,463 n/a 1,120,081
---------- ----------
Total Sales - Wholesale
Leathercraft $6,940,484 $7,088,181
========== ==========
Nine Months Ended Nine Months Ended
Wholesale Leathercraft 09/30/07 09/30/07
------------------- -------------------
# of # of
stores Sales stores Sales
------- ----------- ------- -----------
Same store sales 29 $18,729,902 29 $19,521,828
New store sales 1 553,451 - -
National account group n/a 2,773,770 n/a 3,358,291
----------- -----------
Total Sales - Wholesale
Leathercraft $22,057,123 $22,880,119
=========== ===========
Retail Leathercraft Quarter Ended Quarter Ended
09/30/07 09/30/06
-------------------- ------------------
# of # of
stores Sales stores Sales
--------- ---------- ------- ----------
Same store sales 61 $5,319,336 61 $5,084,332
New store sales 10 337,862 1 37,224
---------- ----------
Total Sales - Retail
Leathercraft 71 $5,657,198 62 $5,121,556
========== ==========
Retail Leathercraft Nine Months Ended Nine Months Ended
09/30/07 09/30/06
------------------- -------------------
# of Sales # of Sales
stores stores
------- ----------- ------- -----------
Same store sales 52 $15,247,415 52 $14,856,542
New store sales 19 2,506,199 10 1,002,294
----------- -----------
Total Sales - Retail
Leathercraft 71 $17,753,614 62 $15,858,836
=========== ===========
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
THREE MONTHS NINE MONTHS
------------------------- -------------------------
2007 2006 2007 2006
------------ ------------ ------------ ------------
NET SALES $12,806,333 $12,559,593 $40,691,125 $40,366,325
COST OF SALES 5,864,699 5,488,179 17,465,869 17,458,476
------------ ------------ ------------ ------------
Gross Profit 6,941,634 7,071,414 23,225,256 22,907,849
OPERATING EXPENSES 6,836,357 5,807,442 20,460,848 17,903,337
------------ ------------ ------------ ------------
INCOME FROM
OPERATIONS 105,277 1,263,972 2,764,408 5,004,512
Interest expense 50,494 - 50,494 -
Other, net (272,658) (37,422) (349,172) (84,951)
------------ ------------ ------------ ------------
Total other
expense (222,164) (37,422) (298,678) (84,951)
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 327,441 1,301,394 3,063,086 5,089,463
PROVISION FOR
INCOME TAXES 155,835 410,975 1,148,438 1,720,288
------------ ------------ ------------ ------------
NET INCOME $171,606 $890,419 $1,914,648 $3,369,175
============ ============ ============ ============
NET INCOME PER
COMMON SHARE -
BASIC $0.02 $0.08 $0.17 $0.31
============ ============ ============ ============
NET INCOME PER
COMMON SHARE -
DILUTED $0.02 $0.08 $0.17 $0.30
============ ============ ============ ============
Weighted Average
Number of
Shares
Outstanding:
Basic 10,968,635 10,818,130 10,943,817 10,788,720
Diluted 11,152,731 11,102,383 11,157,013 11,105,903
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
09/30/07 12/31/06
(unaudited)
------------ ------------
Cash $3,757,534 $6,739,891
Accounts receivable, net of allowance for
doubtful accounts 2,294,922 2,599,279
Inventory 20,721,612 17,169,358
Prepaid income taxes 520,826 -
Deferred income taxes 287,942 266,018
Other current assets 974,559 1,089,258
------------ ------------
Total current assets 28,557,395 27,863,804
Property and equipment, net 6,512,114 1,876,605
Goodwill and other intangibles, net 1,386,253 1,106,815
Other assets 1,189,678 1,069,411
------------ ------------
$37,645,440 $31,916,635
============ ============
Accounts payable $2,341,491 $1,776,646
Accrued expenses and other liabilities 2,431,130 3,424,010
Income taxes payable - 59,392
Current maturities of capital lease
obligations and long-term debt 95,547 111,723
------------ ------------
Total current liabilities 4,868,168 5,371,771
Deferred income taxes 225,396 221,621
Capital lease obligations and long-term debt,
net of current maturities 3,965,625 -
------------ ------------
Total Liabilities 9,059,189 5,593,392
------------ ------------
Common stock 26,340 26,124
Paid-in capital 5,389,111 5,292,591
Retained earnings 22,864,188 20,949,540
Treasury stock (25,487) (25,487)
Accumulated other comprehensive loss 332,099 80,475
------------ ------------
Total Stockholders' Equity 28,586,251 26,323,243
------------ ------------
$37,645,440 $31,916,635
============ ============
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
2007 2006
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,914,648 $3,369,175
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 470,832 291,257
Gain on disposal of assets - (1,750)
Non-cash stock-based compensation 22,876 78,600
Deferred income taxes (18,149) 56,975
Other 233,465 36,217
Net changes in assets and liabilities:
Accounts receivable-trade, net 360,709 (248,942)
Inventory (3,202,032) (1,493,683)
Income taxes (580,218) (412,676)
Other current assets 98,716 (648,879)
Accounts payable 516,201 1,924,072
Accrued expenses and other liabilities (992,879) (830,874)
----------- -----------
Total adjustments (3,090,479) (1,249,683)
----------- -----------
Net cash (used by) provided by operating
activities (1,175,831) 2,119,492
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,084,907) (382,187)
Payments in connection with businesses
acquired (650,000) -
Proceeds from sale of assets 25,339 1,750
Increase in other assets (120,267) 9,407
----------- -----------
Net cash used in investing activities (5,829,835) (371,030)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit
loans 4,050,000 -
Payments on notes payable and long-term debt (100,550) (100,550)
Proceeds from issuance of common stock 73,860 106,590
----------- -----------
Net cash provided by financing
activities 4,023,310 6,040
----------- -----------
NET CHANGE IN CASH (2,982,356) 1,754,502
CASH, beginning of period 6,739,891 3,215,727
----------- -----------
CASH, end of period $3,757,535 $4,970,229
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period $50,494 -
Income taxes paid during the period, net of
(refunds) 1,758,519 $1,833,737
CONTACT: Tandy Leather Factory, Inc.
Ron Morgan, CEO, 817-496-4414
or
Shannon L. Greene, CFO, 817-496-4414
sgreene@leatherfactory.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Tandy Leather Factory, Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.
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