Business Editors/Retail Writers
FORT WORTH, Texas--(BUSINESS WIRE)--Oct. 31, 2006--Tandy Leather Factory, Inc. (AMEX:TLF) today reported financial results for the third quarter of 2006. Consolidated net income for the quarter ended September 30, 2006 was $890,000 compared to consolidated net income of $696,000 for the third quarter of 2005. Fully diluted earnings per share for the quarter was $0.08, compared to $0.06 in the third quarter of last year. Total sales for the quarter ended September 30, 2006 increased 6.6% to $12.6 million from $11.8 million for the same quarter last year.
Consolidated sales for the nine months ended September 30, 2006 were $40.4 million, an increase of 10% over 2005's comparable sales of $36.7 million. Consolidated net income for the first nine months of 2006 was $3.4 million or $0.30 per fully-diluted share versus $2.5 million or $0.23 per fully-diluted share in the comparable period last year.
Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $924,000 in the third quarter, a 22% improvement over last year's third quarter. Sixty-two stores comprised the Tandy Leather's retail operations on September 30, 2006, compared to forty-eight retail stores a year ago. One store was added in the third quarter of 2006 bringing the total number of new stores added in 2006 to twelve. For the first nine months of 2006, Tandy Leather sales increased $3.3 million, or 26%, over the first nine months of 2005. Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, decreased $144,000 over the same quarter last year, a 2% decrease. For the first nine months of 2006, Wholesale Leathercraft's sales were up $414,000, or 2%, over the same period in 2005.
Consolidated gross profit margin for the current quarter was 56.3%, down from 57.4% in the third quarter of 2005. For the first three quarters of 2006, consolidated gross profit margin was 56.8%, the same as for the first three quarters of 2005. Consolidated operating expenses declined $58,000 in the current quarter compared to the third quarter of 2005. For the first nine months of 2006, consolidated operating expenses increased $872,000 over the comparable period of 2005. Costs associated with the new retail stores (personnel, rents, utilities, etc.) continue to drive operating expense increases, offset somewhat by reductions in various corporate expenses and some employee benefit costs. Consolidated operating margins improved for the quarter and year to 10.1% and 12.4%, respectively, compared to 7.6% and 10.3% a year ago.
Wray Thompson, Chairman and Chief Executive Officer, commented, "There are some bright spots in the quarter, even though our sales were not as strong as we would have liked. Our operating income for the quarter increased by 40% on a sales gain of 7% and for the year, operating income is up 32% on a sales gain of 10%. As a result, we are tightening up our 2006 guidance to the high end of our original estimates, expecting to end the year with revenues of $55 to 56 million and 43 to 44 cents in fully-diluted earnings per share."
Mr. Thompson continued, "Same store sales in our Retail Leathercraft segment were up 4% and 9% for the quarter and the year, respectively. In our Wholesale Leathercraft segment, the wholesale centers are performing according to our expectations, reporting a sales gain of 4% for the year, even though sales for the quarter were flat. The National Account group reported sales declines of 3% and 2% for the quarter and the year and will probably end the year with similar results. With that said, we are expecting a strong fourth quarter from our retail stores and wholesale centers."
Financial Outlook:
The following statements are based on TLF's current expectations as of October 31, 2006. 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 12 Tandy Leather retail stores in 2007 and estimates consolidated net sales for 2007 will be in the range of $60-62 million, an 8-10% increase over 2006 estimates. Diluted EPS for 2007 is expected to be in the range of $0.54 to $0.57, or 24-28% improvement over 2006 estimates. Average diluted shares outstanding in 2006 are estimated to be approximately 11.1 million shares. The Company assumes an effective tax rate for the year between 35% and 37%.
Tandy Leather Factory, Inc., 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 as The Leather Factory through its wholesale centers (http://www.leatherfactory.com) and as Tandy Leather Company through its retail stores (http://www.tandyleather.com). 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 09/30/06 Quarter Ended 09/30/05
-----------------------------------------------
Operating Operating
Sales Income Sales Income
------------ ----------- ------------ ---------
Wholesale Leathercraft $7,113,181 $910,942 $7,257,583 $652,726
Retail Leathercraft 5,121,556 362,744 4,197,712 242,499
Other 324,856 (9,714) 321,838 2,901
------------ ----------- ------------ ---------
Total Operations $12,559,593 $1,263,972 $11,777,133 $898,126
============ =========== ============ =========
Nine Months Ended Nine Months Ended
09/30/06 09/30/05
-------------------------------------------------
Operating Operating
Sales Income Sales Income
------------ ----------- ------------ -----------
Wholesale
Leathercraft $23,250,338 $3,675,658 $22,836,542 $2,682,884
Retail Leathercraft 15,858,835 1,323,105 12,577,621 1,043,951
Other 1,257,152 5,749 1,252,185 62,452
------------ ----------- ------------ -----------
Total Operations $40,366,325 $5,004,512 $36,666,348 $3,789,287
============ =========== ============ ===========
Wholesale Leathercraft Quarter Ended Quarter Ended
09/30/05 09/30/05
---------------- ---------------
Sales Sales
---------------- ---------------
Distribution centers $5,968,100 $5,970,813
Center converted to retail store - 106,550
National account group 1,145,081 1,180,220
---------------- ---------------
Total Sales - Wholesale Leathercraft $7,113,181 $7,257,583
================ ===============
Nine Months Nine Months
Wholesale Leathercraft Ended 09/30/06 Ended 09/30/05
--------------- ----------------
Sales Sales
--------------- ----------------
Distribution centers $19,548,188 $18,823,270
Center converted to retail store 28,641 284,909
National account group 3,673,509 3,728,363
--------------- ----------------
Total Sales - Wholesale Leathercraft $23,250,338 $22,836,542
=============== ================
Retail Leathercraft Quarter Ended Quarter Ended
09/30/06 09/30/05
------------------- -------------------
# of # of
stores Sales stores Sales
------- ------------------- -----------
Same store sales 46 $4,327,423 46 $4,164,818
Store converted from whsl
center 1 116,322 - -
New store sales 15 677,811 2 32,894
----------- -----------
Total Sales - Retail
Leathercraft 62 $5,121,556 48 $4,197,712
=========== ===========
Retail Leathercraft Nine Months Ended Nine Months Ended
09/30/06 09/30/05
-------------------- --------------------
# of # of
stores Sales stores Sales
------- -------------------- ------------
Same store sales 52 $13,008,836 42 $12,117,898
Store converted from whsl
center 1 332,998 - -
New store sales 9 2,517,001 6 459,723
------------ ------------
Total Sales - Retail
Leathercraft 62 $15,858,835 48 $12,577,621
============ ============
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
THREE MONTHS NINE MONTHS
2006 2005 2006 2005
------------ ------------------------- ------------
NET SALES $12,559,593 $11,777,133 $40,366,325 $36,666,348
COST OF SALES 5,488,179 5,013,331 17,458,476 15,845,392
------------ ------------ ------------ ------------
Gross profit 7,071,414 6,763,802 22,907,849 20,820,956
OPERATING EXPENSES 5,807,442 5,865,676 17,903,337 17,031,669
------------ ------------ ------------ ------------
INCOME FROM
OPERATIONS 1,263,972 898,126 5,004,512 3,789,287
OTHER INCOME
(EXPENSE):
Interest
expense - - - (3,188)
Other, net 37,422 80,185 84,951 104,404
------------ ------------ ------------ ------------
Total other
income
(expense) 37,422 80,185 84,951 101,216
------------ ------------ ------------ ------------
INCOME BEFORE
INCOME TAXES 1,301,394 978,311 5,089,463 3,890,503
PROVISION FOR
INCOME TAXES 410,975 282,221 1,720,288 1,357,522
------------ ------------ ------------ ------------
NET INCOME $890,419 $696,090 $3,369,175 $2,532,981
============ ============ ============ ============
NET INCOME PER
COMMON SHARE-BASIC $0.08 $0.07 $0.31 $0.24
============ ============ ============ ============
NET INCOME PER
COMMON SHARE-
DILUTED $0.08 $0.06 $0.30 $0.23
============ ============ ============ ============
Weighted Average
Number of Shares
Outstanding:
Basic 10,818,130 10,679,389 10,788,720 10,626,857
Diluted 11,102,383 11,029,840 11,105,903 10,965,922
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2006 2005
(unaudited) (audited)
------------- ------------
ASSETS
CURRENT ASSETS:
Cash $4,970,230 $3,215,727
Accounts receivable-trade, net of
allowance for doubtful accounts of
$134,000 and $138,000 in 2006 and 2005,
respectively 2,427,790 2,178,848
Inventory 17,162,865 15,669,182
Prepaid income taxes 213,095 -
Deferred income taxes 229,015 273,872
Other current assets 1,006,938 358,058
------------- ------------
Total current assets 26,009,933 21,695,687
------------- ------------
PROPERTY AND EQUIPMENT, at cost 6,757,607 6,424,091
Less accumulated depreciation and
amortization (4,878,481) (4,664,614)
------------- ------------
1,879,126 1,759,477
GOODWILL 751,082 746,611
OTHER INTANGIBLES, net of accumulated
amortization of $252,000 and $223,000 in
2006 and 2005, respectively 370,248 398,967
OTHER assets 1,070,323 1,079,731
------------- ------------
$30,080,712 $25,680,473
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $3,144,495 $1,220,420
Accrued expenses and other liabilities 1,719,699 2,550,573
Income taxes payable - 199,581
Current maturities of capital lease
obligations 134,067 134,067
------------- ------------
Total current liabilities 4,998,261 4,104,641
------------- ------------
DEFERRED INCOME TAXES 218,371 206,253
LONG-TERM DEBT, net of current maturities - -
CAPITAL LEASE OBLIGATIONS, net of current
maturities 11,172 111,722
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; 10,837,000
and 10,741,835 shares issued at 2006 and
2005, respectively; 10,831,141 and
10,735,976 outstanding at 2006 and 2005,
respectively 26,008 25,780
Paid-in capital 5,173,407 4,988,445
Retained earnings 19,541,650 16,172,475
Treasury stock (25,487) (25,487)
Accumulated other comprehensive income 137,330 96,644
------------- ------------
Total stockholders' equity 24,852,908 21,257,857
------------- ------------
$30,080,712 $25,680,473
============= ============
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
2006 2005
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,369,175 $2,532,981
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation & amortization 291,257 346,217
Gain on disposal of assets (1,750) (9,145)
Non-cash stock-based compensation 78,600 -
Deferred income taxes 56,975 (173,744)
Other 36,217 35,123
Net changes in assets and liabilities:
Accounts receivable-trade, net (248,942) (375,163)
Inventory (1,493,683) (4,784,330)
Income taxes (412,676) (30,268)
Other current assets (648,880) (230,761)
Accounts payable 1,924,075 1,312,001
Accrued expenses and other liabilities (830,874) 1,373,522
----------- -----------
Total adjustments (1,249,681) (2,536,548)
----------- -----------
Net cash provided by operating activities 2,119,494 (3,567)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (382,187) (197,746)
Proceeds from sale of assets 1,750 9,145
Decrease (increase) in other assets 9,407 (168,567)
----------- -----------
Net cash used in investing activities (371,030) (357,168)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit
loans - (505,154)
Payments on capital lease obligations (100,551) (100,551)
Proceeds from issuance of common stock 106,590 174,413
----------- -----------
Net cash provided by (used in) financing
activities 6,039 (431,292)
----------- -----------
NET CHANGE IN CASH 1,754,503 (792,027)
CASH, beginning of period 3,215,727 2,560,202
----------- -----------
CASH, end of period $4,970,230 $1,768,175
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period - $3,188
Income taxes paid during the period, net of
(refunds) $1,833,737 1,541,134
CONTACT: Tandy Leather Factory, Inc., Fort Worth
Wray Thompson, CEO, 817-496-4414
or
Shannon L. Greene, CFO, 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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