Tandy Leather Factory Reports Q3 2010 Earnings Up 7% Year Over Year

FORT WORTH, Texas, Nov. 8, 2010 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (Nasdaq:TLF) today reported financial results for the third quarter of 2010. Consolidated net income for the quarter ended September 30, 2010 was $594,000 compared to consolidated net income of $553,000 for the third quarter of 2009, an increase of 7%. Fully diluted earnings per share for the quarter were $0.06, compared to $0.05 in the third quarter of last year. Total sales for the quarter ended September 30, 2010 were $13.6 million, up 8% from $12.7 million in the third quarter last year.

Consolidated sales for the nine months ended September 30, 2010 were $42.6 million, up 9% from the 2009 first nine month sales of $38.9 million. Consolidated net income for the first three quarters of 2010 was up 29% at $2.6 million or $0.25 per fully-diluted share versus $2.0 million or $0.19 per fully-diluted share in the comparable period last year.   

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $768,000 in the third quarter, a 12% improvement over last year's third quarter. Seventy-six stores comprised Tandy Leather's retail operations on September 30, 2010, compared to seventy-five retail stores a year ago. For the first nine months of 2010, Retail Leathercraft's sales increased $2.9 million, or 15%, over the first nine months of 2009. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale stores and national account group, were up 2% or $136,000 from the same quarter last year. For the first nine months of 2010, Wholesale Leathercraft's sales were up $573,000, or 3%, from the same period in 2009. International Leathercraft reported a sales increase of 21%, or $73,000, compared to the third quarter of 2009. For the year, International Leathercraft's sales were up 27%, or $252,000, over the same period last year. 

Consolidated gross profit margin for the current quarter was 60.0%, a slight improvement from 59.7% for the third quarter of 2009. For the first three quarters, consolidated gross profit margin for the current year was 60.8%, increasing from last year's gross profit margin of 59.1%. Consolidated operating expenses rose approximately 5% for the quarter and 9% for the year, increasing $371,000 in the current quarter and $1.8 million for the first nine months over the same periods a year ago. For the third quarter, the significant increases in expenses occurred in freight out and credit card fees, both of which are related to the sales increase. Legal fees are also up due to an increase in trademark registrations in foreign countries. Employee compensation and benefits are up as well due to the addition of several regional managers to our store management team. For the year, expense increases mirrored that of the third quarter. Consolidated operating margin improved for the quarter to 7.9% compared to 6.5% last year. On a year-to-date basis, consolidated operating margin improved from 7.6% last year to 9.5% in the current year.

Jon Thompson, Chief Executive Officer and President, commented, "The third quarter is historically our weakest quarter and this year was no exception. However, our sales and earnings this quarter were higher than our sales and earnings in last year's third quarter so we accomplished our goal. We are preparing for a solid fourth quarter, even though we will incur some one-time expenses associated with the closing of the Mid-Continent Leather Sales store. We are introducing numerous new products and believe they will contribute nicely to our sales."

Chief Financial Officer and Treasurer, Shannon Greene, added, "In addition to the $7.6 million dividend paid in July, we have invested in extra inventory during the quarter that has pulled our cash down significantly this quarter. We had the opportunity to make several special leather purchases during the quarter which will carry us through the first quarter of next year. While we would have preferred to make those purchases later in the fourth quarter, we do not always get to dictate the timing. Those purchases should take some pressure off gross margins as we begin 2011 and our inventory level will return to more normal levels over the next six months." 

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 29 Leather Factory stores, located in 19 states and 3 Canadian provinces, 76 Tandy Leather retail stores, located in 36 states and 6 Canadian provinces, and one combination wholesale/retail store located in the United Kingdom. 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.

The Tandy Leather Factory, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7760 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:
  Three Months Ended September 30, 2010 Three Months Ended September 30, 2009
         
    Sales Operating Income   Sales Operating Income
Wholesale Leathercraft $6,012,932 $510,256 $5,877,153 $338,567
Retail Leathercraft 7,212,443 518,718 6,444,179 472,653
International Leathercraft 414,818 46,882 342,272 52,446
Total Operations $13,640,193 $1,075,856 $12,663,604 $863,666
     
     
  Nine Months Ended September 30, 2010 Nine Months Ended September 30, 2009
         
    Sales Operating Income   Sales Operating Income
Wholesale Leathercraft $18,849,015 $1,667,718 $18,276,275 $1,193,341
Retail Leathercraft 22,535,418 2,210,932 19,673,926 1,669,128
International Leathercraft 1,195,120 177,885 942,996 106,500
Total Operations $42,579,553 $4,056,535 $38,893,197 $2,968,969
     
     
Wholesale Leathercraft Three Months Ended September 30, 2010 Three Months Ended September 30, 2009
     
  # of stores Sales # of stores Sales
Same store sales 30 $5,193,313 30 $5,056,473
National account group n/a 819,619 n/a 820,680
Total Sales – Wholesale Leathercraft   $6,012,932   $5,877,153
     
     
Wholesale Leathercraft Nine Months Ended September 30, 2010 Nine Months Ended September 30, 2009
     
  # of stores Sales # of stores Sales
Same store sales 30 $16,544,718 30 $15,798,472
National account group n/a 2,304,297 n/a 2,477,803
Total Sales – Wholesale Leathercraft   $18,849,015   $18,276,275
     
     
  Three Months Ended September 30, 2010 Three Months Ended September 30, 2009
Retail Leathercraft    
   # of stores Sales # of stores Sales
Same store sales 75 $7,163,786 75 $6,444,179
New store sales 1 48,657 0 --
Total Sales – Retail Leathercraft 76 $7,212,443 75 $6,444,179
     
     
Retail Leathercraft Nine Months Ended September 30, 2010 Nine Months Ended September 30, 2009
     
  # of stores Sales # of stores Sales
Same store sales 74 $22,234,331 74 $19,618,466
New store sales 2 301,087 1 55,460
Total Sales – Retail Leathercraft 76 $22,535,418 75 $19,673,926
 
 
Tandy Leather Factory, Inc.
Consolidated Balance Sheets
 
  September 30,  2010 (unaudited) December 31,  2009 (audited)
ASSETS    
CURRENT ASSETS:    
Cash $1,852,942 $7,891,962
Short-term investments, including certificates of deposit 1,646,593 5,017,000
Accounts receivable-trade, net of allowance for doubtful accounts of $148,000 and $136,000 in 2010 and 2009, respectively 1,443,317 1,202,811
Inventory  20,823,503 16,865,826
Deferred income taxes 302,370 271,481
Other current assets 2,548,044 791,884
Total current assets 28,616,769 32,040,964
     
PROPERTY AND EQUIPMENT, at cost 14,568,769 15,111,497
Less accumulated depreciation and amortization (4,611,158) (5,431,776)
  9,957,611 9,679,721
     
GOODWILL 986,206 983,823
OTHER INTANGIBLES, net of accumulated amortization of $464,000 and $418,000 in 2010 and 2009, respectively 262,991 307,802
OTHER assets 320,443 314,921
  $40,144,020 $43,327,231
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
CURRENT LIABILITIES:    
Accounts payable-trade $2,567,209 $1,185,032
Accrued expenses and other liabilities 4,827,027 3,988,144
Income taxes payable 20,521 399,536
Current maturities of long-term debt and capital lease obligations 202,500 202,500
Total current liabilities 7,617,257 5,775,212
     
DEFERRED INCOME TAXES 654,918 682,364
     
LONG-TERM DEBT, net of current maturities 3,358,125 3,510,000
CAPITAL LEASE OBLIGATION, net of current maturities -- --
     
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; 11,150,065 and 11,021,951 shares issued at 2010 and 2009, respectively; 10,256,442 and 10,130,628 shares outstanding at 2010 and 2009, respectively 26,760 26,453
Paid-in capital 5,684,485 5,491,736
Retained earnings 24,872,206 29,959,910
Treasury stock (893,623 and 891,323 shares at cost at 2010 and 2009, respectively) (2,461,068) (2,452,649)
Accumulated other comprehensive income 391,337 334,205
Total stockholders' equity 28,513,720 33,359,655
  $40,144,020 $43,327,231
 
 
Tandy Leather Factory, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three and Nine Months Ended September 30, 2010 and 2009
  THREE MONTHS NINE MONTHS
  2010 2009 2010 2009
         
NET SALES $13,640,193 $12,663,604 $42,579,553 $38,893,197
         
COST OF SALES 5,457,668 5,104,455 16,705,466 15,917,561
Gross profit 8,182,525 7,559,149 25,874,087 22,975,636
         
OPERATING EXPENSES 7,106,669 6,695,483 21,817,552 20,006,667
INCOME FROM OPERATIONS 1,075,856 863,666 4,056,535 2,968,969
         
OTHER INCOME (EXPENSE):        
Interest expense (67,565) (68,896) (198,784) (229,383)
Other, net 77,887 (43,818) 161,095 175,872
Total other (income) expense 10,322 (112,714) (37,689) (53,511)
         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES   1,086,178   750,952   4,018,846   2,915,458
         
PROVISION FOR INCOME TAXES 493,532 199,809 1,417,513 955,159
         
NET INCOME FROM CONTINUING OPERATIONS 592,646  551,143  2,601,333  1,960,299
         
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX 1,259 1,822 1,795 51,834
         
NET INCOME $593,905 $552,965 $2,603,128 $2,012,133
         
         
NET INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE:        
Basic $0.06 $0.05 $0.26 $0.19
Diluted $0.06 $0.05 $0.25 $0.19
         
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX PER COMMON SHARE:        
Basic $0.00 0.00 $0.00 $0.00
Diluted $0.00 $0.00 $0.00 $0.00
         
NET INCOME PER COMMON SHARE:        
Basic $0.06 $0.05 $0.26 $0.19
Diluted $0.06 $0.05 $0.25 $0.19
         
Weighted average number of shares outstanding:        
Basic 10,256,442 10,387,462 10,195,868 10,575,904
Diluted 10,257,743 10,457,318 10,236,919 10,636,090
 
 
Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 2010 and 2009
  2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $2,603,128 $2,012,133
Income from discontinued operations 1,795 51,834
  2,601,333 1,960,299
Adjustments to reconcile net income to net cash provided by (used in) operating activities--    
Depreciation & amortization 713,366 852,386
Loss on disposal of assets 11,584 21,520
Non-cash stock-based compensation 22,790 2,540
Deferred income taxes (59,006) 68,326
Other 53,382 284,258
Net changes in assets and liabilities:    
Accounts receivable-trade, net (246,414) (512,476)
Inventory (3,957,677) (971,190)
Income taxes (346,935) (442,750)
Other current assets (1,756,160) (265,960)
Accounts payable 1,382,177 465,726
Accrued expenses and other liabilities 838,883 224,115
Total adjustments (3,344,010) (273,505)
     
Net cash provided by (used in) continuing operating activities (742,677) 1,686,794
Cash provided by (used in) discontinued operating activities (23,706) 41,115
Net cash provided by (used in) operating activities (766,383) 1,727,909
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment (963,222) (731,763)
Purchase of certificates of deposit (2,572,593) (7,526,000)
Proceeds from maturities of certificates of deposit 5,943,000 5,128,000
Proceeds from sale of assets 6,560 2,090
Decrease (increase) in other assets (5,522) 204
     
Net cash provided by (used in) continuing investing activities 2,408,233 (3,127,469)
Cash provided by discontinued investing activities -- --
Net cash provided by (used in) investing activities 2,408,233 (3,127,469)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on long-term debt and notes payable (151,875) (151,875)
Payments on capital lease obligations -- (593,949)
Payment of dividend (7,690,832)  
Repurchase of common stock (treasury stock) (8,419) (1,492,375)
Proceeds from issuance of common stock 170,266 24,818
     
Net cash used in continuing financing activities (7,680,860) (2,213,381)
Cash provided by discontinued financing activities -- --
Net cash used in financing activities (7,680,860) (2,213,381)
     
NET CHANGE IN CASH (6,039,020) (3,612,941)
     
CASH, beginning of period 7,891,962 7,810,298
CASH, end of period $1,852,942 $4,197,357
     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Interest paid during the period $198,784 $229,879
Income taxes paid during the period, net of (refunds) 1,808,619 1,304,838
CONTACT:  Tandy Leather Factory, Inc.          Shannon L. Greene          (817) 872-3200           sgreene@tandyleather.com          Magellan Fin, LLC          Mark Gilbert          (317) 867-2839           MGilbert@MagellanFin.com

Tandy Leather Factory, Inc. Logo

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