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Tandy Leather Factory Reports Q3 2014 Financial Results

FORT WORTH, Texas, Nov. 10, 2014 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (Nasdaq:TLF) today reported financial results for the third quarter of 2014. Consolidated net income for the quarter ended September 30, 2014 was $1.6 million compared to consolidated net income of $1.5 million for the third quarter of 2013, an increase of 4%. Fully diluted earnings per share for the quarter were $0.16, compared to $0.15 in the third quarter of last year. Total sales for the quarter ended September 30, 2014 were $19.4 million, up 5% from $18.5 million in the third quarter last year.

Consolidated sales for the nine months ended September 30, 2014 were $58.9 million, up 4% from 2013's comparable period sales of $56.7 million. Consolidated net income for the first three quarters of 2014 was up 10% to $5.2 million or $0.51 per fully-diluted share versus $4.8 million or $0.47 per fully-diluted share in the comparable period last year.

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $940,000 in the third quarter, an 8% improvement over last year's third quarter. Eighty stores comprised Tandy Leather's operations on September 30, 2014. For the first nine months of 2014, Retail Leathercraft's sales increased $2.3 million, or 7%, over the first nine months of 2013. Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory stores, were down 3%, or $182,000, from the same quarter last year. For the first nine months of 2014, Wholesale Leathercraft's sales were down $359,000, or 2%, compared to the same period in 2013. For both the quarter and the year, the sales decline for this segment was due to the elimination of sales to the National Account customer group in early 2014. International Leathercraft, consisting of three stores located in the United Kingdom, Spain and Australia, reported a sales increase of 15%, or $134,000, compared to the third quarter of 2013. For the year, International Leathercraft's sales were up 10%, or $286,000, over the same period last year.

Consolidated gross profit margin for the current quarter was 62.7%, down from 63.2% for the third quarter of 2013. For the first three quarters of this year, consolidated gross profit margin was 63.9%, increasing from last year's gross profit margin of 62.7%. Consolidated operating expenses rose approximately 5% for both the quarter and the year, or $422,000 in the current quarter and $1.4 million for the first nine months over the same periods a year ago. For the third quarter, the significant increases in expenses occurred in employee compensation, advertising and marketing, and store rent and utilities. For the year, expenses increases occurred in employee compensation, depreciation, advertising and marketing, and store rent and utilities. As a percentage of sales, consolidated operating margin declined slightly for the quarter to 12.7% compared to 13.0% last year's third quarter. On a year-to-date basis, consolidated operating margin increased from 13% last year to 13.7% in the current year.

Jon Thompson, Chief Executive Officer and President, commented, "Overall, we are fairly pleased with our third quarter results, although our earnings were not quite as strong as we wanted. Gross profit margins remain strong, even though they pulled back slightly in the third quarter. It is possible the same will occur in the fourth quarter as we hope to sell a lot of leather during the quarter. The fluctuation in our gross profit margins from quarter to quarter is a good indication of the sales mix of leather versus non-leather."

Chief Financial Officer and Treasurer, Shannon Greene, added, "The increase in operating expenses is still trending slightly above the increase in sales for the year, although we were able to correct that for the third quarter, albeit minimally. As has been the case all year, the three expense categories contributing the majority of the increase are employee compensation, advertising and marketing, and store rents and utilities. Employee compensation is up due to an increase in employee headcount at the stores and higher store manager pay. We did some extra marketing campaigns to advertise some of our new product that arrived throughout the summer, rather than wait until the fall to advertise, and we're attending a number of new trade shows this year in order to reach new customers. The increase in rent and utilities is the result of the increase in store size. Employees, advertising and store operations are crucial to our success, so we will continue to look for other areas to trim expenses."

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, 80 Tandy Leather retail stores, located in 36 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 09/30/14 Quarter Ended 09/30/13

Sales
Operating
Income

Sales
Operating
Income
Wholesale Leathercraft $6,294,745 $1,000,329 $6,476,676 $956,721
Retail Leathercraft 12,068,832 1,270,884 11,128,646 1,351,062
International Leathercraft 1,053,657 185,714 919,282 97,570
Total Operations $19,417,234 $2,456,927 $18,524,604 $2,405,353
Nine Months Ended 09/30/14 Nine Months Ended 09/30/13

Sales
Operating
Income

Sales
Operating
Income
Wholesale Leathercraft $19,576,180 $3,479,908 $19,934,996 $2,853,219
Retail Leathercraft 36,226,810 4,171,500 33,930,587 4,243,006
International Leathercraft 3,156,317 428,459 2,869,861 276,052
Total Operations $58,959,307 $8,079,867 $56,735,444 $7,372,277
Wholesale Leathercraft Quarter Ended 09/30/14 Quarter Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 29 $6,294,745 29 $6,105,137
National account group n/a -- n/a 371,539
Total Sales – Wholesale Leathercraft 29 $6,294,745 29 $6,476,676
Wholesale Leathercraft Nine Months Ended 09/30/14 Nine Months Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 29 $19,227,530 29 $18,897,124
National account group n/a 348,650 n/a 1,037,872
Total Sales – Wholesale Leathercraft 29 $19,576,180 29 $19,934,996
Retail Leathercraft Quarter Ended 09/30/14 Quarter Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 76 $11,664,143 76 $10,979,163
New store sales 4 404,689 -- --
Closed store sales 2 -- 2 149,483
Total Sales – Retail Leathercraft 80 $12,068,832 76 $11,128,646
Retail Leathercraft Nine Months Ended 09/30/14 Nine Months Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 76 $35,086,069 76 $33,451,109
New store sales 4 1,140,741 -- --
Closed store sales 2 -- 2 479,478
Total Sales – Retail Leathercraft 80 $36,226,810 76 $33,930,587
International Leathercraft Quarter Ended 09/30/14 Quarter Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 3 $1,053,657 3 $919,282
New store sales -- -- -- --
Total Sales – Intl Leathercraft 3 $1,053,657 3 $919,282
International Leathercraft Nine Months Ended 09/30/14 Nine Months Ended 09/30/13
# of stores Sales # of stores Sales
Same store sales 3 $3,156,317 3 $2,869,861
New store sales -- -- -- --
Total Sales – Intl Leathercraft 3 $3,156,317 3 $2,869,861
Tandy Leather Factory, Inc.
Consolidated Balance Sheets
September 30,
2014
(unaudited)
December 31,
2013
(audited)
ASSETS
CURRENT ASSETS:
Cash $4,866,016 $11,082,679
Accounts receivable-trade, net of allowance for doubtful accounts of $1,000 at 2014 and 2013 702,002 762,405
Inventory 39,365,204 26,300,830
Prepaid income taxes 463,329 --
Deferred income taxes 419,824 309,533
Prepaid expenses 1,621,327 1,609,644
Other current assets 98,580 478,593
Total current assets 47,536,282 40,543,684
PROPERTY AND EQUIPMENT, at cost 21,808,785 20,290,990
Less accumulated depreciation and amortization (6,763,514) (5,863,280)
15,045,271 14,427,710
GOODWILL 975,657 981,985
OTHER INTANGIBLES, net of accumulated amortization of $655,000 and $622,000 in 2014 and 2013, respectively 69,304 103,228
Other assets 334,991 341,959
$63,961,505 $56,398,566
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $1,942,108 $1,884,637
Accrued expenses and other liabilities 5,940,106 5,808,882
Income taxes payable -- 272,198
Current maturities of long-term debt 6,202,500 202,500
Total current liabilities 14,084,714 8,168,217
DEFERRED INCOME TAXES 1,095,362 1,212,557
LONG-TERM DEBT, net of current maturities 1,991,250 2,396,250
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; 11,239,157 and 11,192,356 shares issued at 2014 and 2013; 10,245,534 and 10,198,733 shares outstanding at 2014 and 2013 26,979 26,862
Paid-in capital 5,993,953 5,892,907
Retained earnings 44,206,367 41,507,592
Treasury stock at cost (993,623 shares at 2014 and 2013) (2,894,068) (2,894,068)
Accumulated other comprehensive income (543,052) 88,249
Total stockholders' equity 46,790,179 44,621,542
$63,961,505 $56,398,566
Tandy Leather Factory, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three and Nine Months Ended September 30, 2014 and 2013
THREE MONTHS NINE MONTHS
2014 2013 2014 2013
NET SALES $19,417,234 $18,524,604 $58,959,307 $56,735,444
COST OF SALES 7,242,525 6,823,661 21,289,269 21,183,551
Gross profit 12,174,709 11,700,943 37,670,038 35,551,893
OPERATING EXPENSES 9,717,782 9,295,590 29,590,171 28,179,616
INCOME FROM OPERATIONS 2,456,927 2,405,353 8,079,867 7,372,277
OTHER INCOME (EXPENSE):
Interest expense (63,684) (51,021) (154,367) (158,659)
Other, net 37,525 13,777 44,203 138,800
Total other income (expense) (26,159) (37,244) (110,164) (19,859)
INCOME BEFORE INCOME TAXES 2430,768 2,368,109 7,969,703 7,352,418
PROVISION FOR INCOME TAXES 802,206 806,277 2,721,244 2,574,912
NET INCOME $1,628,562 $1,561,832 $5,248,459 $4,777,506
NET INCOME PER COMMON SHARE:
Basic $0.16 $0.15 $0.51 $0.47
Diluted $0.16 $0.15 $0.51 $0.47
Weighted Average Number of Shares Outstanding:
Basic 10,203,711 10,176,744 10,200,411 10,163,490
Diluted 10,241,410 10,221,512 10,240,109 10,205,348
Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 2014 and 2013
2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,248,459 $4,777,506
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 1,088,758 889,395
Loss on disposal or abandonment of assets 8,603 89,531
Non-cash stock-based compensation 48,441 11,686
Deferred income taxes (227,486) 190,144
Other (606,442) (70,330)
Net changes in assets and liabilities, net of effect of business acquisitions:
Accounts receivable-trade, net 60,403 (122,953)
Inventory (13,064,374) (3,629,704)
Income taxes (735,527) (119,811)
Prepaid expenses (11,683) (1,069,399)
Other current assets 380,013 (276,072)
Accounts payable-trade 57,471 686,823
Accrued expenses and other liabilities 131,224 (15,234)
Total adjustments (12,870,599) (3,435,924)
Net cash (used in) provided by operating activities (7,622,140) 1,341,582
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,719,465) (2,415,484)
Proceeds from sale of assets 19,935 515
Decrease (increase) in other assets 6,968 (420)
Net cash used in investing activities (1,692,562) (2,415,389)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in revolving credit loan 6,000,000 --
Payments on notes payable and long-term debt (405,000) (455,625)
Proceeds from issuance of common stock 52,722 113,800
Payment of cash dividend (2,549,683) --
Net cash provided by (used in) financing activities 3,098,039 (341,825)
NET DECREASE IN CASH (6,216,663) (1,415,632)
CASH, beginning of period 11,082,679 7,705,182
CASH, end of period $4,866,016 $6,289,550
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $154,367 $158,659
Income tax paid during the period, net of (refunds) $3,690,817 $2,507,842

CONTACT: Shannon L. Greene, Tandy Leather Factory, Inc. (817) 872-3200 or shannon.greene@tandyleather.com Mark Gilbert, Magellan Fin, LLC (317) 867-2839 or MGilbert@MagellanFin.com

Source:Tandy Leather Factory, Inc.