FORT WORTH, Texas--(BUSINESS WIRE)--March 2, 2004--The Leather Factory, Inc. (AMEX: TLF), the world's largest specialty retailer and wholesale distributor of leather and leathercraft products, today reported results for the year ended December 31, 2003. Consolidated net sales for the year were up 5.0% to $41.7 million over 2002 sales of $39.7 million. Net income for 2003 was $2.7 million compared to a net loss of $1.4 million for 2002, or basic earnings per share for 2003 of $0.27 versus $(0.14) for 2002. Diluted earnings per share was $0.25 for 2003 and $(0.13) for 2002. The 2002 results included a $4.0 million charge, net of tax, for the cumulative effect of a previously reported accounting change. Net income for 2002 before the cumulative effect of the accounting change was $2.6 million or $0.26 per share (basic) and $0.24 per share (diluted).
2003 Accomplishments:
-- Addition of 12 new Tandy Leather retail stores
-- Tandy Leather retail store sales up 144% over 2002, a result
of both new store openings and increasing store sales
-- Improved gross profit margin to 54.4% in 2003 from 53.7% as a
result of increased retail sales and efficient purchasing
-- Improved net income to $2.7 million in 2003 from a loss of
$1.4 million in 2002 (after accounting charge of $4.0 million)
-- Bank debt reduced from $4.2 million to $1.8 million
-- Increased operating cash flow by 133% to $3.3 million in 2003
from $1.4 million in 2002
-- Secured a $5 million, two-year line of credit with Wells Fargo
Bank Texas, N.A. with reduced fees and interest rates (below
prime) from the previous credit arrangement
-- Addition of an experienced institutional investor to Board of
Directors
Divisional analysis:
The Tandy Leather division reported sales for the year were up $1.8 million, or 24.8%, to $9.2 million in 2003 from $7.4 million in 2002. The Company opened 12 new Tandy Leather retail stores in 2003, increasing the total number of retail stores from 14 at year-end 2002 to 26 at December 31, 2003. The 2002 sales consisted of $3.6 million from Tandy's central mail order facility, which closed on September 1, 2002, combined with the retail stores contributing sales of $3.8 million. The resulting sales increase at the stores from 2002 to 2003 was $5.4 million.
The Leather Factory warehouse distribution center sales were up $371,000, or 1.2%, from $30.3 million in 2002 to $30.7 million in 2003, as a result of an increase in retail sales for the year. This increase was partially offset by a decrease in sales to national accounts. The Company believes that this decrease arose from planned and expected periodic adjustments to purchasing programs and therefore assumes the decline is temporary.
Robert, Cushman's sales for 2003 decreased $216,000, or 10.6%, due to the continued slowdown in the overall hat industry during the last half of the year.
Consolidated gross profit margins for the year increased from 53.7% in 2002 to 54.4% in 2003. Operating expenses for 2003 were $18.6 million, or 44.6% of sales, compared to $17.2 million, or 43.3% of sales, in 2002. The increase in operating expenses in 2003 is predominantly associated with an increase in advertising efforts and investor relations activities.
Wray Thompson, Chairman and Chief Executive Officer, commented, "We are pleased with the continued sales growth, particularly in the Tandy Leather retail operation. The Leather Factory warehouse distribution centers and Tandy Leather stores are performing well and our Tandy store openings are on schedule. We were able to improve our gross margins slightly for the year and held our fourth quarter operating expenses to match the same percentage of sales in last year's fourth quarter. In 2004, we plan to continue to create shareholder value by focusing on three goals - increasing sales and earnings from existing locations, opening 10-15 new Tandy Leather stores and improving our operating margins."
Financial Outlook:
The following statements are based on TLF's current expectations as of March 2, 2004. These statements are forward-looking statements and should be read in conjunction with the cautionary information about these statements that appears below.
The Company plans to open 10-15 new Tandy Leather stores in 2004 and estimates consolidated net sales for 2004 will be in the range of $46 to $47 million. Basic and diluted EPS for 2004 are expected to be in the range of $0.34 to $0.37 and $0.32 to $0.34, respectively. Average basic and diluted shares outstanding in 2004 are estimated to be approximately 10.5 million and 11 million shares, respectively. The Company assumes an effective tax rate for the year between 35% and 37%.
The Leather Factory, Inc., (http://www.leatherfactory.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, shoe repair supplies, saddle and tack hardware, and do-it-yourself leathercraft kits. The Company distributes its products worldwide though its Leather Factory stores, Tandy Leather retail stores and mail/telephone/website orders (http://www.tandyleather.com). Its common stock trades on the American Stock Exchange with the symbol "TLF".
This news release contains forward-looking statements. All forward-looking statements made here or in other news releases issued by The 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 The 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. Additional risks and uncertainties will be described in TLF's annual report on Form 10-K for 2003 to be filed with the SEC. Investors are reminded that past performance may not be predictive of future results.
Selected financial data:
For the year ended
Net Sales: 12/31/03 12/31/02
------------ ------------
Leather Factory $30,684,092 $30,313,478
Tandy Leather 9,216,838 7,387,874
Cushman 1,811,261 2,027,263
------------ ------------
Total $41,712,191 $39,728,615
============ ============
For the year ended
Tandy Leather sales detail: 12/31/03 12/31/02
----------- -----------
Retail stores (26 in 2003; 14 in 2002) $9,216,838 $3,782,787
Centralized mail order facility (closed
9/1/02) - 3,605,087
----------- -----------
Total $9,216,838 $7,387,874
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The Leather Factory, Inc.
Consolidated Statements of Income
For the Years Ended December 31, 2003 and 2002
2003 2002
----------- -----------
NET SALES $41,712,191 $39,728,615
COST OF SALES 19,020,292 18,393,914
----------- -----------
Gross Profit 22,691,899 21,334,701
OPERATING EXPENSES 18,594,240 17,202,927
----------- -----------
INCOME FROM OPERATIONS 4,097,658 4,131,774
OTHER (INCOME) EXPENSE:
Interest expense 206,942 246,878
Other, net (81,774) 65,039
----------- -----------
Total other expense 125,168 311,917
----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 3,972,490 3,819,857
PROVISION FOR INCOME TAXES 1,232,116 1,224,868
----------- -----------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 2,740,374 2,594,989
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF INCOME TAXES - (4,008,831)
----------- -----------
NET INCOME (LOSS) $ 2,740,374 $(1,413,842)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE - BASIC:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCTG PRINCIPLE $ 0.27 $ 0.26
CUMULATIVE EFFECT OF CHANGE IN ACCTG
PRINCIPLE, NET OF TAX - (0.40)
----------- -----------
$ 0.27 $ (0.14)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE - BASIC:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCTG PRINCIPLE $ 0.25 $ 0.24
CUMULATIVE EFFECT OF CHANGE IN ACCTG
PRINCIPLE, NET OF TAX - (0.37)
----------- -----------
$ 0.25 $ (0.14)
=========== ===========
Weighted Average Number of Shares Outstanding:
Basic 10,323,549 10,063,581
Diluted 10,861,305 10,761,670
The Leather Factory, Inc.
Consolidated Balance Sheets
December 31, 2003 and 2002
December 31, December 31,
2003 2002
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 1,728,344 $ 101,557
Cash restricted for payment on revolving
credit facility - 553,839
Accounts receivable-trade, net of allowance
for doubtful accounts of $31,000 and $78,000
in 2003 and 2002, respectively 1,828,738 1,938,698
Inventory 11,079,893 12,695,344
Prepaid income taxes 206,023 55,644
Deferred income taxes 134,312 159,090
Other current assets 702,236 672,117
----------- -----------
Total current assets 15,679,546 16,176,289
----------- -----------
PROPERTY AND EQUIPMENT, at cost 5,574,992 5,321,749
Less accumulated depreciation and
amortization (3,669,099) (3,301,898)
----------- -----------
1,905,893 2,019,851
GOODWILL, net of accumulated amortization of
$758,000 and $734,000 in 2003 and 2002,
respectively 704,235 686,484
OTHER INTANGIBLES, net of accumulated
amortization of $164,000 and $113,000 in
2003 and 2002, respectively 432,549 483,507
OTHER assets 336,183 309,471
----------- -----------
$19,058,406 $19,675,602
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $ 1,545,079 $ 1,594,909
Accrued expenses and other liabilities 1,000,427 2,503,331
Notes payable and current maturities of
long-term debt 1,134 4,218,968
----------- -----------
Total current liabilities 2,546,640 8,317,208
----------- -----------
DEFERRED INCOME TAXES 209,289 186,076
NOTES PAYABLE AND LONG-TERM DEBT, net of
current maturities 1,792,984 2,256
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000,000
shares authorized, none issued or outstanding - -
Common stock, $0.0024 par value; 25,000,000
shares authorized, 10.487,961 and 10,149,961
shares issued and outstanding at 2003 and
2002, respectively 25,171 24,360
Paid-in capital 4,673,158 4,163,901
Retained earnings 9,804,719 7,064,345
Less: Notes receivable-secured by common
stock (20,000) (44,003)
Accumulated other comprehensive loss 26,445 (38,541)
----------- -----------
Total stockholders' equity 14,509,493 11,170,062
----------- -----------
$19,058,406 $19,675,602
=========== ===========
The Leather Factory, Inc.
Consolidated Statements of Cash Flow
For the Years Ended December 31, 2003 and 2002
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,740,374 $(1,413,842)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities -
Depreciation and amortization 529,262 491,312
Loss on disposal of assets (9,103) -
Amortization of deferred financing costs - 37,038
Deferred income taxes 47,086 (30,184)
Other 48,140 (2,502)
Cumulative effect of change in accounting
principle - 4,008,831
Net changes in assets and liabilities, net
of effect of business acquisitions:
Accounts receivable-trade, net 109,960 359,255
Inventory 1,615,451 (3,463,866)
Income taxes (150,380) 16,124
Other current assets (30,120) (192,726)
Accounts payable-trade (49,831) 291,311
Accrued expenses and other liabilities (1,502,903) 1,332,179
----------- -----------
Total adjustments 607,562 2,846,772
----------- -----------
Net cash provided by operating
activities 3,347,936 1,432,930
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (360,202) (1,073,515)
Payments in connection with businesses
acquired - (435,747)
Proceeds from sale of assets 6,217 -
(Increase) decrease in other assets (27,970) (14,754)
Other intangible costs - (1,625)
----------- -----------
Net cash used in investing activities (381,955) (1,525,641)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving
credit loans (2,420,550) (286,889)
Payments on notes payable and long-term
debt (6,557) (27,482)
Decrease (increase) in cash restricted for
payment on revolver 553,839 (62,110)
Payments received on notes secured by common
stock 24,003 27,936
Proceeds from issuance of common stock and
warrants 510,068 133,774
----------- -----------
Net cash used in financing activities (1,339,195) (214,772)
----------- -----------
NET INCREASE (DECREASE) IN CASH 1,626,786 (307,483)
CASH, beginning of period 101,557 409,040
----------- -----------
CASH, end of period $ 1,728,343 $ 101,557
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period $ 216,275 $ 213,791
Income tax paid during the period, net of
(refunds) 1,138,799 1,254,679
CONTACT: The Leather Factory Inc., Fort Worth
Wray Thompson, 817-496-4414
or
Shannon L. Greene
sgreene@leatherfactory.com
SOURCE: The 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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