FORT WORTH, Texas--(BUSINESS WIRE)--Aug. 7, 2007--Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the second quarter of 2007. Consolidated net income for the quarter ended June 30, 2007 was $397,000 compared to consolidated net income of $1,132,000 for the second quarter of 2006. Fully diluted earnings per share for the quarter was $0.04, compared to $0.10 in the second quarter of last year. Total sales for the quarter ended June 30, 2007 were $13.4 million, the same as the second quarter last year.
Consolidated sales for the six months ended June 30, 2007 were $27.9 million, virtually the same as the 2006 first half total sales of $27.8 million. Consolidated net income for the first half of 2007 was $1.7 million or $0.16 per fully-diluted share versus $2.5 million or $0.22 per fully-diluted share in the comparable period last year.
Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $646,000 in the second quarter, a 12% improvement over last year's second quarter. Sixty-eight stores comprised the Tandy Leather's retail operations on June 30, 2007, compared to sixty-one retail stores a year ago. Two stores were added in the second quarter of 2007 bringing the total number of new stores added in 2007 to six as of the end of the quarter. For the first six months of 2007, Tandy Leather sales increased $1.3 million, or 13%, over the first six months of 2006. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, decreased $395,000 over the same quarter last year, a 5% decline. For the first six months of 2007, Wholesale Leathercraft's sales were down $675,000, or 4%, over the same period in 2006.
Consolidated gross profit margin for the current quarter was 57.5%, improving slightly from 57.2% for the second quarter of 2006. For the first two quarters, consolidated gross profit margin for the current year was 58.4%, improving over last year's gross profit margin of 56.6%. Consolidated operating expenses rose $1 million in the current quarter and $1.6 million for the first six months over the same periods a year ago. Personnel costs, advertising and marketing expenses, and legal and professional fees are the primary drivers of the increases. Consolidated operating margins declined for the quarter and year to 5.3% and 9.5%, respectively, compared to 12.7% and 13.4% a year ago.
Ron Morgan, Chief Executive Officer and President, commented, "I don't have anything positive to say about the second quarter except that it's over. We knew our sales were flat and we did a poor job of managing expenses. The costs of store openings account for only a small portion of the increase in expenses. We spent more on advertising and marketing expenses in an attempt to boost sales - probably tried too hard. More significant is the fact that our employee headcount is up and most of the increase is in our central warehouse and factory, not in the store system. That concerns me as our goal is to keep expenses as lean as possible to maximize earnings at the store level."
Chief Financial Officer, Shannon Greene, added, "I echo Ron's comments. Except for a minimal improvement in gross profit margins, I can't find anything positive about our second quarter results. I'm not too concerned about the advertising expenses. Those efforts will pay dividends down the road. Besides our personnel costs, our legal and professional expenses are up in the 2nd quarter due to the negotiations on our recent real estate purchase, as well as some trademark and copyright enforcement actions we've taken. Regardless, the bottom line is we performed miserably in the second quarter."
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, 70 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 06/30/07 Quarter Ended 06/30/06
------------------------------------------------
Operating Operating
Sales Income Sales Income
----------- ----------- ----------- ------------
Wholesale
Leathercraft $7,176,153 $411,368 $7,571,541 $1,245,696
Retail Leathercraft 5,842,198 265,964 5,196,198 464,538
Other 358,636 27,019 625,343 (11,483)
----------- ----------- ----------- ------------
Total Operations $13,376,987 $704,351 $13,393,082 $1,698,751
=========== =========== =========== ============
Six Months Ended Six Months Ended
06/30/07 06/30/06
------------------------------------------------
Operating Operating
Sales Income Sales Income
----------- ----------- ----------- ------------
Wholesale
Leathercraft $15,116,639 1,757,571 $15,791,938 $2,764,714
Retail Leathercraft 12,096,416 819,712 10,737,280 960,362
Other 671,737 81,848 1,277,513 15,463
----------- ----------- ----------- ------------
Total Operations $27,884,792 $2,659,131 $27,806,731 $3,740,539
=========== =========== =========== ============
Wholesale
Leathercraft Quarter Ended 06/30/07 Quarter Ended 06/30/06
----------------------- ------------------------
# of stores Sales # of stores Sales
------------------------------------------------
Same store sales 29 $6,112,589 29 $6,441,428
New store sales 1 203,874 - -
National account
group n/a 859,690 n/a 1,130,113
----------- ------------
Total Sales -
Wholesale
Leathercraft $7,176,153 $7,571,541
=========== ============
Wholesale Six Months Ended Six Months Ended
Leathercraft 06/30/07 06/30/06
----------------------- ------------------------
# of stores Sales # of stores Sales
------------------------------------------------
Same store sales 29 $12,737,194 29 $13,553,728
New store sales 1 389,137 - -
National account
group n/a 1,990,308 n/a 2,238,210
----------- ------------
Total Sales -
Wholesale
Leathercraft $15,116,639 $15,791,938
=========== ============
Retail Leathercraft Quarter Ended 06/30/07 Quarter Ended 06/30/06
----------------------- ------------------------
# of stores Sales # of stores Sales
------------------------------------------------
Same store sales 56 $5,318,712 56 $5,085,747
New store sales 12 523,486 5 110,451
----------- ------------
Total Sales - Retail
Leathercraft 68 $5,842,198 61 $5,196,198
=========== ============
Retail Leathercraft Six Months Ended Six Months Ended
06/30/07 06/30/06
----------------------- ------------------------
# of stores Sales # of stores Sales
------------------------------------------------
Same store sales 53 $10,711,743 53 $10,442,131
New store sales 15 1,384,673 8 295,149
----------- ------------
Total Sales - Retail
Leathercraft 68 $12,096,416 61 $10,737,280
=========== ============
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
THREE MONTHS SIX MONTHS
------------------------- -------------------------
2007 2006 2007 2006
---------------------------------------------------
NET SALES $13,376,987 $13,393,082 $27,884,792 $27,806,731
COST OF SALES 5,691,397 5,670,782 11,601,249 11,970,297
------------------------- -------------------------
Gross Profit 7,685,590 7,722,300 16,283,543 15,836,434
OPERATING EXPENSES 6,981,239 6,023,549 13,624,412 12,095,895
------------------------- -------------------------
INCOME FROM
OPERATIONS 704,351 1,698,751 2,659,131 3,740,539
Interest
expense - - - -
Other, net (27,522) (29,421) (76,514) (47,530)
------------------------- -------------------------
Total other
expense (27,522) (29,421) (76,514) (47,530)
------------------------- -------------------------
INCOME BEFORE
INCOME TAXES 731,873 1,728,172 2,735,645 3,788,069
PROVISION FOR
INCOME TAXES 335,181 595,678 992,603 1,309,313
------------------------- -------------------------
NET INCOME $ 396,692 $ 1,132,494 $ 1,743,042 $ 2,478,756
========================= =========================
NET INCOME PER
COMMON SHARE -
BASIC $ 0.04 $ 0.10 $ 0.16 $ 0.23
========================= =========================
NET INCOME PER
COMMON SHARE -
DILUTED $ 0.04 $ 0.10 $ 0.16 $ 0.22
========================= =========================
Weighted
Average Number
of Shares
Outstanding:
Basic 10,915,061 10,790,661 10,904,270 10,773,772
Diluted 11,114,466 11,112,475 11,132,257 11,107,692
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
06/30/07 12/31/06
(unaudited)
-------------------------
Cash $ 3,720,098 6,739,891
Accounts receivable, net of allowance for
doubtful accounts 2,978,801 2,599,279
Inventory 20,179,588 17,169,358
Prepaid income taxes 487,096 -
Deferred income taxes 297,306 266,018
Other current assets 1,098,695 1,089,258
-------------------------
Total current assets 28,761,584 27,863,804
Property and equipment, net 1,997,605 1,876,605
Goodwill and other intangibles, net 1,398,339 1,106,815
Other assets 1,184,970 1,069,411
-------------------------
$33,342,498 $31,916,635
=========================
Accounts payable $ 1,963,588 $ 1,776,646
Accrued expenses and other liabilities 2,789,484 3,424,010
Income taxes payable - 59,392
Current maturities of capital lease
obligations and long-term debt 44,689 111,723
-------------------------
Total current liabilities 4,797,761 5,371,771
Deferred income taxes 252,848 221,621
Capital lease obligations and long-term debt,
net of current maturities - -
-------------------------
Total Liabilities 5,050,609 5,593,392
-------------------------
Common stock 26,306 26,124
Paid-in capital 5,362,620 5,292,591
Retained earnings 22,692,584 20,949,540
Treasury stock (25,487) (25,487)
Accumulated other comprehensive loss 235,866 80,475
-------------------------
Total Stockholders' Equity 28,291,889 26,323,243
-------------------------
$33,342,498 $31,916,635
=========================
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
2007 2006
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,743,042 $ 2,478,756
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 306,214 191,481
Gain on disposal of assets - (1,750)
Non-cash stock-based compensation 15,250 44,960
Deferred income taxes (61) 27,067
Other 72,251 37,337
Net changes in assets and liabilities:
Accounts receivable-trade, net (323,170) (555,007)
Inventory (2,660,008) (1,251,365)
Income taxes (546,488) (87,213)
Other current assets (25,420) (207,521)
Accounts payable 138,298 1,175,499
Accrued expenses and other
liabilities (634,526) 702,086
------------ ------------
Total adjustments (3,657,660) 75,575
------------ ------------
Net cash provided by operating
activities (1,914,618) 2,554,330
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (352,880) (229,775)
Payments in connection with businesses
acquired (650,000) -
Proceeds from sale of assets 25,339 1,750
Increase in other assets (115,560) (24,966)
------------ ------------
Net cash used in investing activities (1,093,101) (252,991)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving
credit loans - -
Payments on notes payable and long-term
debt (67,034) (67,033)
Proceeds from issuance of common stock 54,960 72,435
------------ ------------
Net cash used in financing activities (12,074) 5,402
------------ ------------
NET CHANGE IN CASH (3,019,793) 2,306,741
CASH, beginning of period 6,739,891 3,215,727
------------ ------------
CASH, end of period $ 3,720,098 $ 5,522,468
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period - -
Income taxes paid during the period, net
of (refunds) $ 1,548,067 $ 1,285,653
CONTACT: Tandy Leather Factory, Inc.
Ron Morgan, CEO, 817-496-4414
or
Shannon L. Greene, CFO, 817-496-4414
sgreene@leatherfactory.com
SOURCE: Tandy Leather Factory, Inc.
"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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