FORT WORTH, Texas -- The Leather Factory, Inc. (AMEX:TLF) today reported financial results for the first quarter of 2005. Net income for the quarter ended March 31, 2005 was $1.0 million, an 8% increase from $971,000 for the first quarter of 2004. Fully-diluted earnings per share for the quarter increased to $0.10 from $0.09 in the first quarter of last year. Total sales for the first quarter were $12.7 million, up 4% from $12.2 million in the same quarter last year.
Sales from the Retail Leathercraft operation, consisting of the Tandy Leather retail store chain, increased $1.1 million in the first quarter, a 35% improvement over last year's first quarter. The chain consists of forty-four stores as of March 31, 2005, compared to twenty-nine retail stores a year ago. Two new stores were opened in the first quarter of 2005. First quarter sales for the Wholesale Leathercraft operation, consisting of the Leather Factory wholesale centers and the National Account group, decreased $529,000 or 6% over the same quarter last year, due primarily to the previously anticipated decline in national account sales.
Consolidated gross profit margins for the quarter improved to 56.3% compared to 55.2% a year ago. Operating expenses remained relatively flat as a percentage of revenue, increasing by only $310,000. Advertising costs, expenses (rent, personnel, utilities) associated with new retail stores, and costs associated with Sarbanes-Oxley Section 404 compliance were the primary contributors to the additional expense.
Wray Thompson, Chairman and Chief Executive Officer, commented, "I am very pleased with the results for the quarter, which are the clear result of our strategic growth initiatives and cost containment efforts. In our Retail Leathercraft division, we continued to expand the number of stores while also increasing same-store-sales at our existing locations. While our Wholesale Leathercraft division experienced a slight sales decline from last year's record setting first quarter, we were able to decrease our expenses for the division, resulting in an increase in operating income. We were successful in our efforts to contain operating expenses throughout the company, including healthcare costs. All of this, combined with the elimination of our bank debt during the quarter further strengthened our financial position to support our growth strategy for 2005."
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, saddle and tack hardware, and do-it-yourself kits. It also manufactures and distributes decorative hat trims, leather lacing and kits. The Company distributes its products as The Leather Factory through its wholesale centers 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 The Leather Factory, Inc. (TLF) 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. Investors are reminded that past performance may not be predictive of future results.
Selected financial data:
Quarter Ended 03/31/05 Quarter Ended 03/31/04
-------------------------------------------------
Sales Operating Sales Operating
Income Income
------------ ----------- ------------ -----------
Wholesale
Leathercraft $7,913,892 $1,168,982 $8,443,091 $1,078,409
Retail Leathercraft 4,285,606 386,718 3,166,738 301,567
Other 508,018 13,847 571,048 67,159
------------ ----------- ------------ -----------
Total Operations $12,707,516 $1,569,547 $12,180,877 $1,447,135
============ =========== ============ ===========
Wholesale Leathercraft Quarter Ended Quarter Ended
03/31/05 03/31/04
---------------- ---------------
Sales Sales
------------- --------------
Distribution centers $6,648,952 $6,741,294
National account group 1,264,940 1,701,797
------------- --------------
Total Sales - Wholesale Leathercraft $7,913,892 $8,443,091
============= ==============
Retail Leathercraft Quarter Ended Quarter Ended
03/31/05 03/31/04
-------------------- --------------------
# of Sales # of Sales
stores stores
-------------------------------------------
Same store sales 29 $3,218,445 29 $3,166,738
New store sales 15 1,067,161 - -
------------ ------------
Total Sales - Retail
Leathercraft $4,285,606 $3,166,738
============ ============
Three Months
2005 2004
---------- ----------
NET SALES $12,707,516 $12,180,877
COST OF SALES 5,550,233 5,455,964
---------- ----------
Gross Profit 7,157,283 6,724,913
OPERATING EXPENSES 5,587,736 5,277,778
---------- ----------
INCOME FROM OPERATIONS 1,569,547 1,447,135
Interest expense 3,188 13,638
Other, net 15,465 1,737
---------- ----------
Total other expense 18,653 15,375
---------- ----------
INCOME BEFORE INCOME TAXES 1,550,894 1,431,760
PROVISION FOR INCOME TAXES 501,672 460,794
---------- ----------
NET INCOME $1,049,222 $970,966
========== ==========
NET INCOME PER COMMON SHARE - BASIC $0.10 $0.09
========== ==========
NET INCOME PER COMMON SHARE-DILUTED $0.10 $0.09
========== ==========
WEIGHTED AVG NUMBER OF SHARES OUTSTANDING:
Basic 10,584,244 10,506,995
Diluted 10,911,103 11,011,122
THE LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
3/31/05 12/31/04
(unaudited)
----------- -----------
Cash $2,467,091 $2,560,202
Accounts receivable, net of allowance for
doubtful accounts 2,545,218 2,032,289
Inventory 13,127,058 12,749,709
Deferred income taxes 209,166 199,308
Other current assets 874,987 629,723
----------- -----------
Total current assets 19,223,520 18,171,231
Property and equipment, net 1,824,574 1,904,565
Goodwill and other intangibles, net 1,169,770 1,180,618
Other assets 999,252 910,749
----------- -----------
$23,217,116 $22,167,163
=========== ===========
Accounts payable $1,521,494 $1,954,146
Accrued expenses and other liabilities 2,136,945 1,682,003
Income taxes payable 533,561 22,764
Current maturities of capital lease
obligations and long-term debt 134,067 134,067
----------- -----------
Total current liabilities 4,326,067 3,792,980
Deferred income taxes 240,897 313,006
Capital lease obligations and long-term debt,
net of current maturities 212,273 750,944
----------- -----------
Total Liabilities 4,779,237 4,856,930
----------- -----------
Common stock 25,443 25,345
Paid-in capital 4,852,251 4,796,999
Retained earnings 13,507,982 12,458,760
Treasury stock (25,487) (25,487)
Accumulated other comprehensive loss 77,690 54,616
----------- -----------
Total Stockholders' Equity 18,437,879 17,310,233
----------- -----------
$23,217,116 $22,167,163
=========== ===========
THE LEATHER FACTORY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,049,222 $970,966
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation & amortization 118,431 129,418
Gain on disposal of assets (7,703) -
Deferred income taxes (81,867) (19,774)
Other 24,510 (9,766)
Net changes in assets and liabilities:
Accounts receivable-trade, net (512,929) (1,226,807)
Inventory (377,349) (267,966)
Income taxes 510,797 435,654
Other current assets (245,264) (351,800)
Accounts payable (432,652) 810,013
Accrued expenses and other liabilities 454,943 112,810
----------- -----------
Total adjustments (549,183) (388,218)
----------- -----------
Net cash provided by operating activities 500,039 582,748
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (29,030) (82,115)
Payments in connection with businesses
acquired - (125,452)
Proceeds from sale of assets 7,703 -
Increase in other assets (88,502) 14,076
----------- -----------
Net cash used in investing activities (109,829) (193,491)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit
loans (505,154) (525,000)
Payments on notes payable and long-term debt (33,517) (1,134)
Payments received on notes secured by common
stock - 5,000
Repurchase of common stock (treasury stock) - -
Proceeds from issuance of common stock 55,350 82,140
----------- -----------
Net cash used in financing activities (483,321) (438,994)
----------- -----------
NET CHANGE IN CASH (93,111) (49,737)
CASH, beginning of period 2,560,202 1,728,344
----------- -----------
CASH, end of period $2,467,091 $1,678,607
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period $3,188 $16,205
Income taxes paid during the period, net of
(refunds) 72,842 44,914
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