Tandy Leather Factory Reports 1st Quarter 2015 Earnings Down 22%
Sales Up 5%, Gross Profit Margin Down Due to Increase in Leather Sales
FORT WORTH, Texas, May 12, 2015 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (Nasdaq:TLF) today reported financial results for the first quarter of 2015. Net income for the quarter ended March 31, 2015 was $1.4 million, down 22% from net income in the first quarter of 2014 of $1.9 million. Fully-diluted earnings per share for the quarter were $0.14 in the current quarter, compared to $0.18 in last year's first quarter, down 22%. Total sales for the first quarter were $20.8 million, an increase of 5% compared to 2014's first quarter sales of $19.8 million.
Sales from the Retail Leathercraft division, consisting of the Tandy Leather store chain, increased $1.2 million in the first quarter, up 10% from last year's first quarter sales. The store chain consisted of eighty two stores as of March 31, 2015, with two new stores added since March 31, 2014. First quarter sales for the Wholesale Leathercraft division decreased $99,000 or 1% from the same quarter last year. Inside the Wholesale Leathercraft division, the stores' sales were up 1/2% while National Account sales, which were eliminated in April 2014, were down 100%. International Leathercraft, consisting of stores in the United Kingdom, Australia and Spain, added sales of $954,000 for the quarter, a 10% decrease over last year's first quarter sales of $1.1 million.
Consolidated gross profit margin decreased from 64% in the first quarter of 2014 to 61% in the first quarter of 2015. Operating expenses increased $445,000 in the first quarter of 2015 to $10.2 million compared to $9.7 million in the first quarter of 2014, decreasing slightly as a percentage of sales from 49.1% in 2014 to 49.0% in 2015. Compared to the first quarter of 2014, employee compensation and advertising/marketing expense were the primary contributors to the operating expense increase, followed by rent and utilities expenses, and depreciation.
Jon Thompson, Chief Executive Officer and President, commented, "The quarter has been a challenging one, but our results were not unexpected. As we have stated numerous times, gross profit margin fluctuation is primarily the result of two things: the mix of leather and non-leather product sold, and the ratio of retail and wholesale sales made. Each can have a positive or negative impact on margins. Leather is the lowest margin item we sell and we sold significantly more leather this quarter compared to a year ago. While we want to be a leading supplier of leather to our customers, we need to sell our non-leather products to help support margins. We were not impacted in the fourth quarter of 2014 by the West Coast port slow down due to our high inventory levels at that time, but we have been affected in this first quarter. Deliveries have been significantly delayed and therefore, we didn't have many of our non-leather products to sell consistently throughout the quarter."
Shannon L. Greene, Chief Financial Officer, added, "We are still battling the foreign currency headwinds which contributed negatively to our results. If the exchange rates this year had matched last year's rates, our International Leathercraft segment would have reported a 3% sales increase, rather than a 10% decline. Further, our consolidated gross profit would have been up $91,000, rather than down $133,000. Our investment in inventory is down $2.5 million from year-end – partly due to the West Coast port issue – but will begin to build as we move through 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 28 Leather Factory stores, located in 18 states and 3 Canadian provinces, 82 Tandy Leather retail stores, located in 37 states and 6 Canadian provinces, and three combination wholesale/retail stores located in the United Kingdom, Australia and Spain. Its common stock trades on the Nasdaq 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 statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: changes in general economic conditions, negative trends in general consumer-spending levels, failure to realize the anticipated benefits of opening retail stores; availability of hides and leathers and resultant price fluctuations; change in customer preferences for our product, and other factors disclosed in our filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Selected financial data:
Quarter Ended 03/31/15
Quarter Ended 03/31/14
Sales
Income from Operations
Sales
Income from Operations
Wholesale Leathercraft
$
6,725,304
$
951,855
$
6,823,968
$
1,372,637
Retail Leathercraft
13,109,413
1,403,452
11,956,354
1,472,703
International Leathercraft
954,047
33,574
1,058,144
121,323
Total Operations
$
20,788,764
$
2,388,881
$
19,838,466
$
2,966,663
Wholesale Leathercraft
Quarter Ended 03/31/15
Quarter Ended 03/31/14
# of stores
Sales
# of stores
Sales
Same store sales
28
$
6,725,304
28
$
6,353,531
Closed store sales
-
-
1
127,590
National account group
n/a
-
n/a
342,847
Total Sales – Wholesale Leathercraft
$
6,725,304
$
6,823,968
Retail Leathercraft
Quarter Ended 03/31/15
Quarter Ended 03/31/14
# of stores
Sales
# of stores
Sales
Same store sales
79
$
12,829,124
79
$
11,916,631
New store sales
3
280,289
1
39,723
Total Sales – Retail Leathercraft
$
13,109,413
$
11,956,354
International Leathercraft
Quarter Ended 03/31/15
Quarter Ended 03/31/14
# of stores
Sales
# of stores
Sales
Same store sales
3
$
954,047
3
$
1,058,144
New store sales
-
-
-
-
Total Sales – International Leathercraft
3
$
954,047
3
$
1,058,144
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2015 (unaudited)
December 31, 2014 (audited)
ASSETS
CURRENT ASSETS:
Cash
$
9,928,649
$
10,636,530
Accounts receivable-trade, net of allowance for doubtful accounts
of $370 and $395 in 2015 and 2014, respectively
664,149
625,054
Inventory
30,407,882
32,875,492
Prepaid income taxes
-
336,828
Deferred income taxes
302,571
371,491
Prepaid expenses
1,472,133
1,348,652
Other current assets
113,870
157,758
Total current assets
42,889,254
46,351,805
PROPERTY AND EQUIPMENT, at cost
22,724,155
22,199,943
Less accumulated depreciation and amortization
(7,312,549
)
(7,037,665
)
15,411,606
15,162,278
GOODWILL
962,091
971,786
OTHER INTANGIBLES, net of accumulated amortization of approximately
$674,000 and $665,000 in 2015 and 2014, respectively
46,748
58,026
OTHER assets
327,635
329,979
TOTAL ASSETS
$
59,637,334
$
62,873,874
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade
$
1,742,070
$
1,255,218
Accrued expenses and other liabilities
4,297,326
5,394,514
Income taxes payable
86,575
-
Current maturities of long-term debt
202,500
3,702,500
Total current liabilities
6,328,471
10,352,232
DEFERRED INCOME TAXES
1,456,916
1,458,005
LONG-TERM DEBT, net of current maturities
1,890,000
1,940,625
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;
11,275,641 and 11,239,157 shares issued at 2015 and 2014, respectively;
10,282,018 and 10,245,534 shares outstanding at 2015 and 2014
27,072
26,984
Paid-in capital
6,052,221
6,013,325
Retained earnings
48,109,236
46,664,829
Treasury stock at cost (993,623 shares at 2015 and 2014)
(2,894,068
)
(2,894,068
)
Accumulated other comprehensive income
(1,332,514
)
(688,058
)
Total stockholders' equity
49,961,947
49,123,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
59,637,334
$
62,873,874
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015 and 2014
2015
2014
NET SALES
$
20,788,764
$
19,838,466
COST OF SALES
8,205,836
7,122,743
Gross profit
12,582,928
12,715,723
OPERATING EXPENSES
10,194,047
9,749,060
INCOME FROM OPERATIONS
2,388,881
2,966,663
OTHER (INCOME) EXPENSE:
Interest expense
44,163
45,828
Other, net
(19,873
)
(1,344
)
Total other (income) expense
24,290
44,484
INCOME BEFORE INCOME TAXES
2,364,591
2,922,179
PROVISION FOR INCOME TAXES
920,184
1,067,767
NET INCOME
$
1,444,407
$
1,854,412
NET INCOME PER COMMON SHARE:
BASIC
$
0.14
$
0.18
DILUTED
$
0.14
$
0.18
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
BASIC
10,211,333
10,198,733
DILUTED
10,241,096
10,239,505
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
1,444,407
$
1,854,412
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization
383,936
346,555
Loss on disposal or abandonment of assets
5,804
3,600
Non-cash stock-based compensation
29,064
-
Deferred income taxes
67,831
(58,670
)
Foreign currency translation
(585,107
)
(124,726
)
Net changes in assets and liabilities:
Accounts receivable-trade, net
(39,095
)
(124,239
)
Inventory
2,467,610
(4,231,692
)
Prepaid expenses
(123,481
)
(30,478
)
Other current assets
43,888
318,050
Accounts payable-trade
486,852
843,414
Accrued expenses and other liabilities
(1,097,188
)
(578,676
)
Income taxes payable
423,403
332,579
Total adjustments
2,063,517
(3,304,283
)
Net cash provided by (used in) operating activities
3,507,924
(1,449,871
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment
(677,444
)
(641,282
)
Decrease in other assets
2,344
9,014
Net cash used in investing activities
(675,100
)
(632,268
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in revolving credit loans
(3,500,000
)
-
Payments on notes payable and long-term debt
(50,625
)
(50,625
)
Proceeds from issuance of common stock
9,920
-
Net cash used in financing activities
(3,540,705
)
(50,625
)
NET DECREASE IN CASH
(707,881
)
(2,132,764
)
CASH, beginning of period
10,636,530
11,082,679
CASH, end of period
$
9,928,649
$
8,949,915
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period
$
44,163
$
45,828
Income tax paid during the period, net of (refunds)
$
379,690
$
791,137
Contact:
Shannon L. Greene, Tandy Leather Factory, Inc.
(817) 872-3200 or sgreene@tandyleather.com
Mark Gilbert, Magellan Fin, LLC
(317) 867-2839 or MGilbert@MagellanFin.com