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 storesSales # of storesSales
Same store sales28$6,725,304  28$6,353,531 
Closed store sales- -  1 127,590 
National account groupn/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 storesSales # of storesSales
Same store sales79$12,829,124  79$11,916,631 
New store sales3 280,289  1 39,723 
Total Sales – Retail Leathercraft $13,109,413   $11,956,354 


International LeathercraftQuarter Ended 03/31/15 Quarter Ended 03/31/14
 # of storesSales # of storesSales
Same store sales3$954,047  3$1,058,144 
New store sales- -  - - 
Total Sales – International Leathercraft3$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 

 


            

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