Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results
for the third quarter of 2008. Consolidated net income for the quarter
ended September 30, 2008 was $421,000 compared to consolidated net
income of $172,000 for the third quarter of 2007. Fully diluted earnings
per share for the quarter was $0.04, compared to $0.02 in the third
quarter of last year. Total sales for the quarter ended September 30,
2008 were $12.2 million, down 4% from $12.8 million in the third quarter
last year.
Consolidated sales for the nine months ended September 30, 2008 were
$39.4 million, down 3% from the 2007 comparable period sales of $40.7
million. Consolidated net income for the first nine months of 2008 was
$1.7 million or $0.15 per fully-diluted share versus $1.9 million or
$0.17 per fully-diluted share in the first nine months of 2007.
Sales in the Retail Leathercraft segment, which consists of the Tandy
Leather stores, increased $69,000 in the third quarter, a 1% improvement
over last year's third quarter. Seventy-three stores comprised the Tandy
Leather's retail operations on September 30, 2008, compared to
seventy-two retail stores a year ago. For the first nine months of 2008,
Tandy Leather sales increased $478,000, or 3%, over the first nine
months of 2007. Third quarter sales for the Wholesale Leathercraft
segment, which consists of the Leather Factory wholesale centers and
national account group, decreased $943,000 or 14% compared to the third
quarter of 2007. For the first nine months of 2008, Wholesale
Leathercraft's sales were down $2.1 million,
or 10%, over the same period in 2007. International Leathercraft,
consisting of one combination wholesale and retail store located in the
United Kingdom, added sales of $324,000 and $560,000 for the quarter and
year, respectively. This store was opened in February 2008.
Consolidated gross profit margin for the current quarter was 58.3%,
improving from 54.2% for the third quarter of 2007. For the first three
quarters, consolidated gross profit margin for the current year was
58.2%, an improvement over last year's
comparable period gross profit margin of 57.1%. Consolidated operating
expenses decreased $459,000 and $143,000 in the current quarter and year
to date, respectively, compared to the same periods a year ago. For the
third quarter, the significant reductions in expenses occurred in
personnel costs, advertising, rent, and professional/consulting fees.
For the year, we achieved reductions in personnel costs, advertising,
professional fees and freight out. Consolidated operating margin
improved for the quarter to 6.3% compared to 0.8% last year. On a
year-to-date basis, consolidated operating margin declined minimally
from 6.7% last year to 6.6% in the current year.
Ron Morgan, Chief Executive Officer, commented, "While we certainly wish
our quarterly sales had been stronger, we are pleased with our third
quarter earnings. Once you get past the revenue line, our income
statement looks good - the improvement in gross profit and the reduction
in operating expenses result in a significant improvement in operating
income. I suspect there are a lot of companies that would be very happy
with a 600% improvement in operating income and 145% improvement in net
income for the quarter! As I said last quarter, we are demonstrating our
ability to make the decisions necessary to keep the company headed in
the right direction and get our expenses under control. That will
continue to be a priority for us as we negotiate our way through this
very difficult business environment."
Chief Financial Officer Shannon Greene added, "We have been very clear
about our goals this year: inventory management, expense control and
cash. At the end of the third quarter, inventory is down more than $3.5
million, or 18%, from its high in September 2007, and we have reduced
our operating expenses this year despite some unique expenses incurred
like our corporate move in the first quarter and the accelerated
depreciation on our former corporate location. Our total cash has
increased 58% this year alone and 187% in the last twelve months. I
don't know what it's going to take to get people's attention, but
eventually, someone is going to notice."
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, 73 Tandy Leather retail stores,
located in 35 states and 5 Canadian provinces, one combination
wholesale/retail store located in the United Kingdom, and Mid-Continent
Leather Sales, one store located in Oklahoma. Its common stock trades on
the American Stock Exchange with the symbol "TLF". To be included on
Tandy Leather Factory's email distribution
list, go to http://www.b2i.us/irpass.asp?BzID=1625&to=ea&s=0.
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 09/30/08 |
| Quarter Ended 09/30/07 | | | Sales |
| Operating Income | | Sales |
| Operating Income |
Wholesale Leathercraft
| |
$5,997,550
| |
$435,791
| |
$6,940,484
| |
$32,686
|
Retail Leathercraft
| |
5,726,164
| |
234,743
| |
5,657,198
| |
58,780
|
International Leathercraft
| |
324,081
| |
55,008
| |
-
| |
-
|
Other
| |
204,195
| |
39,941
| |
208,651
| |
13,811
|
Total Operations
| |
$12,251,990
| |
$765,483
| |
$12,806,333
| |
$105,277
| | | | |
| | | Nine Months Ended 09/30/08 | | Nine Months Ended 09/30/07 | | | Sales | | Operating Income | | Sales | | Operating Income |
Wholesale Leathercraft
| |
$19,953,958
| |
$1,084,364
| |
$22,057,123
| |
$1,790,257
|
Retail Leathercraft
| |
18,232,364
| |
1,421,064
| |
17,753,614
| |
878,492
|
International Leathercraft
| |
559,641
| |
6,091
| |
-
| |
-
|
Other
| |
614,151
| |
66,865
| |
880,388
| |
95,659
|
Total Operations
| |
$39,360,114
| |
$2,578,384
| |
$40,691,125
| |
$2,764,408
| | | | | | |
| Wholesale Leathercraft | | Quarter Ended 09/30/08 | | Quarter Ended 09/30/07 | | | # of stores | | Sales | | # of stores | | Sales |
Same store sales
| |
30
| |
$5,289,155
| |
30
| |
$6,157,021
|
National account group
| |
n/a
| |
708,395
| |
n/a
| |
783,463
|
Total Sales – Wholesale Leathercraft
| | | |
$5,997,550
| | | |
$6,940,484
| | | | |
| Wholesale Leathercraft | | Nine Months Ended 09/30/08 | | Nine Months Ended 09/30/07 | | | # of stores | | Sales | | # of stores | | Sales |
Same store sales
| |
29
| |
$16,911,426
| |
29
| |
$18,729,902
|
New store sales
| |
1
| |
438,757
| |
1
| |
553,451
|
National account group
| |
n/a
| |
2,603,775
| |
n/a
| |
2,773,770
|
Total Sales – Wholesale Leathercraft
| | | |
$19,953,958
| | | |
$22,057,123
| | | | |
| Retail Leathercraft | | Quarter Ended 09/30/08 | | Quarter Ended 09/30/07 | | | # of stores | | Sales | | # of stores | | Sales |
Same store sales
| |
70
| |
$5,588,514
| |
70
| |
$5,654,320
|
New store sales
| |
3
| |
137,650
| |
1
| |
2,878
|
Total Sales – Retail Leathercraft
| |
73
| |
$5,726,164
| |
71
| |
$5,657,198
| | | | |
| Retail Leathercraft | | Nine Months Ended 09/30/08 | | Nine Months Ended 09/30/07 | | | # of stores | | Sales | | # of stores | | Sales |
Same store sales
| |
64
| |
$17,060,659
| |
64
| |
$17,344,767
|
New store sales
| |
9
| |
1,171,705
| |
7
| |
408,847
|
Total Sales – Retail Leathercraft
| |
73
| |
$18,232,364
| |
71
| |
$17,753,614
|
| Tandy Leather Factory, Inc. Consolidated Balance Sheets |
| |
| September 30, 2008 (unaudited)
|
| December 31, 2007 (audited)
| ASSETS | | | | |
CURRENT ASSETS:
| | | | |
Cash
| |
$8,621,574
| |
$6,310,396
|
Certificates of deposit
| |
1,760,000
| |
-
|
Marketable securities
| |
400,000
| |
500,000
|
Accounts receivable-trade, net of allowance for doubtful accounts
of $104,000 and $104,000 in 2008 and 2007, respectively
| |
1,959,430
| |
2,538,816
|
Inventory
| |
17,038,821
| |
17,473,352
|
Deferred income taxes
| |
249,274
| |
256,938
|
Other current assets
| |
974,662
| |
1,102,836
|
Total current assets
| |
31,003,761
| |
28,182,338
| | | | |
|
PROPERTY AND EQUIPMENT, at cost
| |
15,169,776
| |
11,793,317
|
Less accumulated depreciation and amortization
| |
(4,867,095)
| |
(4,794,505)
| | |
10,302,681
| |
6,998,812
| | | | |
|
GOODWILL
| |
981,904
| |
990,536
|
OTHER INTANGIBLES, net of accumulated amortization of $352,000 and
$313,000 in 2008 and 2007, respectively
| |
345,666
| |
384,134
|
OTHER assets
| |
344,486
| |
1,095,686
| | | $42,978,498 | | $37,651,506 | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
CURRENT LIABILITIES:
| | | | |
Accounts payable-trade
| |
$2,764,175
| |
$1,497,564
|
Accrued expenses and other liabilities
| |
3,615,419
| |
2,072,640
|
Income taxes payable
| |
67,910
| |
67,150
|
Current maturities of long-term debt and capital lease obligations
| |
463,892
| |
135,000
|
Total current liabilities
| |
6,911,396
| |
3,772,354
| | | | |
|
DEFERRED INCOME TAXES
| |
533,599
| |
148,648
| | | | |
|
LONG-TERM DEBT, net of current maturities
| |
3,763,125
| |
3,915,000
|
CAPITAL LEASE OBLIGATION, net of current maturities
| |
396,526
| |
-
| | | | |
|
COMMITMENTS AND CONTINGENCIES
| |
-
| |
-
| | | | |
|
STOCKHOLDERS' EQUITY:
| | | | |
Preferred stock, $0.10 par value; 20,000,000 shares authorized;
none issued or outstanding; attributes to be determined on issuance
| |
-
| |
-
|
Common stock, $0.0024 par value; 25,000,000 shares authorized;
10,994,951 and 10,982,951 shares issued at 2008 and 2007,
respectively; 10,989,092 and 10,977,092 shares outstanding at 2008
and 2007, respectively
| |
26,388
| |
26,359
|
Paid-in capital
| |
5,456,823
| |
5,419,477
|
Retained earnings
| |
25,698,434
| |
24,037,672
|
Treasury stock (5,859 shares at cost)
| |
(25,487)
| |
(25,487)
|
Accumulated other comprehensive income
| |
217,694
| |
357,483
|
Total stockholders' equity
| |
31,373,852
| |
29,815,504
| | | $42,978,498 | | $37,651,506 |
| Tandy Leather Factory, Inc. Consolidated Statements of Income (Unaudited) For the Three and Nine Months Ended September 30, 2008 and 2007 |
| |
| THREE MONTHS |
| NINE MONTHS | | | 2008 |
| 2007 | | 2008 |
| 2007 |
NET SALES
| |
$12,251,990
| | |
$12,806,333
| | |
$39,360,114
| | |
$40,691,125
| | | | | | | | | |
|
COST OF SALES
| |
5,108,833
|
| |
5,864,699
|
| |
16,464,284
|
| |
17,465,869
|
| | | | | | | | |
|
Gross profit
| |
7,143,157
| | |
6,941,634
| | |
22,895,830
| | |
23,225,256
| | | | | | | | | |
|
OPERATING EXPENSES
| |
6,377,674
|
| |
6,836,357
|
| |
20,317,446
|
| |
20,460,848
|
| | | | | | | | |
|
INCOME FROM OPERATIONS
| |
765,483
| | |
105,277
| | |
2,578,384
| | |
2,764,408
| | | | | | | | | |
|
OTHER INCOME (EXPENSE):
| | | | | | | | |
Interest expense
| |
(80,072
|
)
| |
(50,494
|
)
| |
(249,725
|
)
| |
(50,494
|
)
|
Other, net
| |
25,672
|
| |
272,658
|
| |
332,355
|
| |
349,172
|
|
Total other income (expense)
| |
(54,400
|
)
| |
222,164
|
| |
82,630
|
| |
298,678
|
| | | | | | | | |
|
INCOME BEFORE INCOME TAXES
| |
711,083
| | |
327,441
| | |
2,661,014
| | |
3,063,086
| | | | | | | | | |
|
PROVISION FOR INCOME TAXES
| |
290,069
|
| |
155,835
|
| |
1,000,252
|
| |
1,148,438
|
| | | | | | | | |
|
NET INCOME
| |
$421,014
|
| |
$171,606
|
| |
$1,660,762
|
| |
$1,914,648
|
| | | | | | | | |
|
NET INCOME PER COMMON SHARE-BASIC
| |
$ 0.04
|
| |
$ 0.02
|
| |
$ 0.15
|
| |
$ 0.17
|
|
NET INCOME PER COMMON SHARE-DILUTED
| |
$ 0.04
|
| |
$ 0.02
|
| |
$ 0.15
|
| |
$ 0.17
|
| | | | | | | | |
| | | | | | | | |
| Weighted Average Number of Shares Outstanding: | | | | | | | | |
Basic
| |
10,988,092
| | |
10,968,635
| | |
10,982,209
| | |
10,943,817
| |
Diluted
| |
11,073,942
| | |
11,152,731
| | |
11,072,717
| | |
11,157,013
| |
| Tandy Leather Factory, Inc. Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2008 and 2007 |
| |
| 2008 |
| 2007 |
CASH FLOWS FROM OPERATING ACTIVITIES:
| | | | |
Net income
| |
$1,660,762
| | |
$1,914,648
| |
Adjustments to reconcile net income to net cash provided by (used
in) operating activities-
| | | | |
Depreciation & amortization
| |
670,010
| | |
470,832
| |
Loss on disposal of assets
| |
14,760
| | |
-
| |
Non-cash stock-based compensation
| |
22,875
| | |
22,876
| |
Deferred income taxes
| |
392,615
| | |
(18,149
|
)
|
Other
| |
(131,157
|
)
| |
233,465
| |
Net changes in assets and liabilities:
| | | | |
Accounts receivable-trade, net
| |
579,386
| | |
360,709
| |
Inventory
| |
434,531
| | |
(3,202,032
|
)
|
Income taxes
| |
760
| | |
(580,218
|
)
|
Other current assets
| |
128,174
| | |
98,716
| |
Accounts payable
| |
1,266,611
| | |
516,201
| |
Accrued expenses and other liabilities
| |
1,542,779
|
| |
(992,879
|
)
|
Total adjustments
| |
4,921,344
|
| |
(3,090,479
|
)
| | | | |
|
Net cash provided by (used in) operating activities
| |
6,582,106
|
| |
(1,175,831
|
)
| | | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES:
| | | | |
Purchase of property and equipment
| |
(3,184,639
|
)
| |
(5,084,908
|
)
|
Payments in connection with businesses acquired
| |
-
| | |
(650,000
|
)
|
Proceeds from sale of assets
| |
38,181
| | |
25,339
| |
Decrease (increase) in other assets
| |
751,200
| | |
(120,267
|
)
|
Increase in certificates of deposit
| |
(1,760,000
|
)
| |
-
| |
Decrease in marketable securities
| |
100,000
|
| |
-
|
| | | | |
|
Net cash used in investing activities
| |
(4,055,258
|
)
| |
(5,829,836
|
)
| | | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES:
| | | | |
Proceeds from notes payable and long-term debt
| |
-
| | |
4,050,000
| |
Payments on long-term debt and notes payable
| |
(84,375
|
)
| |
-
| |
Payments on capital lease obligations
| |
(145,795
|
)
| |
(100,550
|
)
|
Proceeds from issuance of common stock
| |
14,500
|
| |
73,860
|
| | | | |
|
Net cash used in financing activities
| |
(215,670
|
)
| |
4,023,310
|
| | | | |
|
NET CHANGE IN CASH
| |
2,311,178
| | |
(2,982,357
|
)
| | | | |
|
CASH, beginning of period
| |
6,310,396
|
| |
6,739,891
|
| | | | |
|
CASH, end of period
| |
$8,621,574
|
| |
$3,757,534
|
| | | | |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
| | | | |
Interest paid during the period
| |
$249,725
| | |
$50,494
| |
Income taxes paid during the period, net of (refunds)
| |
634,749
| | |
1,758,519
| | | | | |
|
NON-CASH INVESTING ACTIVITIES:
| | | | |
Equipment acquired under capital lease financing arrangements
| |
803,712
| | |
-
| |
Tandy Leather Factory, Inc. Shannon L. Greene, 817-872-3200 sgreene@tandyleather.com or Magellan
Fin, LLC Mark Gilbert, 317-867-2839 MGilbert@MagellanFin.com |