Tandy Leather Factory Reports Q2 2012 Financial Results

FORT WORTH, Texas, Aug. 9, 2012 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (Nasdaq:TLF) today reported financial results for the second quarter of 2012. Consolidated net income for the quarter ended June 30, 2012 was $1,540,000 compared to consolidated net income of $1,076,000 for the second quarter of 2011, an increase of 43%. Fully diluted earnings per share for the quarter were $0.15, compared to $0.11 in the second quarter of last year. Total sales for the quarter ended June 30, 2012 were $16.9 million, up 6% from $15.9 million in the second quarter last year.

Consolidated sales for the six months ended June 30, 2012 were $35.1 million, up 10% from the 2011 first half sales of $31.8 million. Consolidated net income for the first half of 2012 was up 40% to $3.1 million or $0.30 per fully-diluted share versus $2.2 million or $0.22 per fully-diluted share in the comparable period last year.       

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $929,000 in the second quarter, a 10% improvement over last year's second quarter. Seventy-seven stores comprised Tandy Leather's operations on June 30, 2012. For the first six months of 2012, Retail Leathercraft's sales increased $2.6 million, or 14%, over the first six months of 2011. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory stores and national account group, were down 3% or $188,000 from the same quarter last year. For the first six months of 2012, Wholesale Leathercraft's sales were up $244,000, or 2%, from the same period in 2011. International Leathercraft, consisting of three stores located in the United Kingdom, Spain and Australia, reported a sales increase of 43%, or $229,000, compared to the second quarter of 2011. For the year, International Leathercraft's sales were up 44%, or $462,000, over the same period last year. 

Consolidated gross profit margin for the current quarter was 64.7%, improving from 61.8% for the second quarter of 2011. For the first two quarters of this year, consolidated gross profit margin was 63.6%, increasing from last year's gross profit margin of 60.9%. Consolidated operating expenses rose approximately 5% and 10% for the quarter and the year, respectively, $399,000 in the current quarter and $1.6 million for the first six months over the same periods a year ago. For the second quarter, the significant increases in expenses occurred in employee compensation and benefits, travel, and rent.  For the year, expenses increases mirrored that of the second quarter. Consolidated operating margin improved for the quarter to 14.6% compared to 11.1% last year. On a year-to-date basis, consolidated operating margin improved from 11.6% last year to 14.3% in the current year.

Jon Thompson, Chief Executive Officer and President, commented, "Our second quarter results were solid, achieving higher sales and higher earnings compared to last year's second quarter. All three segments contributed to the increase in profits. We are confident that the intentional increase in our stores' inventory levels is having a positive impact on our sales. Gross profit margins as a percentage of sales were extremely strong this quarter as we continue to take advantage of special buying opportunities. Balancing sales, gross profit margins, inventory and cash can be tricky at times, but we believe the strategy is working as evidenced by our financial results."

Chief Financial Officer and Treasurer, Shannon Greene, added, "We have significantly increased our investment in inventory this year, although it is not as severe as it first appears. Our stores' inventories are up approximately 30% from the end of last year in order to eliminate lost sales due to a lack of product availability. Our central warehouse inventory is up 80% during that same time. However, we ended 2011 with our warehouse being out of most leathers, so the increase this year is simply to get it back up to a reasonable level to support the stores. Further, with the positive sales trends at the stores, it is important that we have sufficient stock to carry us through the rest of the year." 

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, 77 Tandy Leather retail stores, located in 36 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.

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:
  Quarter Ended 06/30/12 Quarter Ended 06/30/11
    Sales   Operating Income   Sales   Operating Income
Wholesale Leathercraft $6,282,990   $1,103,311 $6,471,072   $608,385
Retail Leathercraft 9,863,139   1,309,503 8,934,306   1,038,301
International Leathercraft 758,125   51,958 528,543   122,629
Total Operations $16,904,254   $2,464,772 $15,933,921   $1,769,315
     
  Six Months Ended 06/30/12 Six Months Ended 06/30/11
    Sales   Operating Income   Sales   Operating Income
Wholesale Leathercraft $13,435,407   $2,336,163 $13,191,781   $1,418,439
Retail Leathercraft 20,145,953   2,668,228 17,583,458   2,040,602
International Leathercraft 1,499,972   14,556 1,037,722   222,762
Total Operations $35,081,332   $5,018,947 $31,812,961   $3,681,803
     
Wholesale Leathercraft Quarter Ended 06/30/12 Quarter Ended 06/30/11
  # of stores Sales # of stores Sales
Same store sales 29 $6,070,345 29 $5,838,551
National account group n/a 212,645 n/a 632,521
Total Sales – Wholesale Leathercraft 29 $6,282,990 29 $6,471,072
           
Wholesale Leathercraft Six Months Ended 06/30/12 Six Months Ended 06/30/11
  # of stores Sales # of stores Sales
Same store sales 29 $12,411,129 29 $11,771,831
National account group n/a 1,024,278 n/a 1,419,950
Total Sales – Wholesale Leathercraft 29 $13,435,407 29 $13,191,781
           
Retail Leathercraft Quarter Ended 06/30/12 Quarter Ended 06/30/11
   # of stores Sales # of stores Sales
Same store sales 76 $9,768,973 76 $8,924,874
New store sales 1 94,166 1 9,432
Total Sales – Retail Leathercraft 77 $9,863,139 77 $8,934,306
     
     
Retail Leathercraft Six Months Ended 06/30/12 Six Months Ended 06/30/11
  # of stores Sales # of stores Sales
Same store sales 76 $19,946,496 76 $17,574,026
New store sales 1 199,457 1 9,432
Total Sales – Retail Leathercraft 77 $20,145,953 77 $17,583,458
         
     
International Leathercraft Quarter Ended 06/30/12 Quarter Ended 06/30/11
  # of stores Sales # of stores Sales
Same store sales 1 $485,350 1 $528,543
New store sales 2 272,775 -- --
Total Sales – Intl Leathercraft 3 $758,125 1 $528,543
     
     
International Leathercraft Six Months Ended 06/30/12 Six Months Ended 06/30/11
  # of stores Sales # of stores Sales
Same store sales 1 $1,015,206 1 $1,037,722
New store sales 2 484,766 -- --
Total Sales – Intl Leathercraft 3 $1,499,972 1 $1,037,722
 
 
Tandy Leather Factory, Inc.
Consolidated Balance Sheets
     
  June 30, 2012 December 31, 2011
  (unaudited) (audited)
ASSETS    
CURRENT ASSETS:    
Cash $3,816,559 $10,765,591
Short-term investments, including certificates of deposit 85,533 423,893
Accounts receivable-trade, net of allowance for doubtful accounts of $170,000 and $81,000 in 2012 and 2011, respectively 1,118,871 1,328,579
Inventory  29,749,811 19,940,251
Prepaid income taxes -- --
Deferred income taxes 392,283 281,251
Other current assets 1,564,186 948,459
Total current assets 36,727,243 33,688,024
     
PROPERTY AND EQUIPMENT, at cost 15,360,240 14,999,826
Less accumulated depreciation and amortization (5,167,913) (4,700,476)
  10,192,327 10,299,350
     
GOODWILL  987,634 987,009
OTHER INTANGIBLES, net of accumulated amortization of $562,000 and $539,000 in 2012 and 2011, respectively 165,040 187,292
Other assets 338,039 341,240
  $48,410,283 $45,502,915
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
CURRENT LIABILITIES:    
Accounts payable-trade $3,018,362 $1,622,697
Accrued expenses and other liabilities 6,078,453 4,641,191
Income taxes payable 334,240 638,897
Current maturities of long-term debt  202,500 202,500
Total current liabilities 9,633,555 7,105,285
     
DEFERRED INCOME TAXES 851,931 858,829
     
LONG-TERM DEBT, net of current maturities 3,003,750 3,105,000
     
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 shares issued at 2012 and 2011; 10,156,442 shares outstanding at 2012 and 2011 26,760 26,760
Paid-in capital 5,746,543 5,736,543
Retained earnings 31,759,549 31,181,936
Treasury stock at cost (993,623 shares at 2012 and 2011) (2,894,068) (2,894,068)
Accumulated other comprehensive income  282,263 382,630
Total stockholders' equity 34,921,047 34,433,801
  $48,410,283 $45,502,915
Tandy Leather Factory, Inc.
Consolidated Statements of Income 
(Unaudited)
For the Three and Six Months Ended June 30, 2012 and 2011  
       
  THREE MONTHS   SIX MONTHS
  2012   2011   2012   2011
               
NET SALES $16,904,254   $15,933,921   $35,081,332   $31,812,961
               
COST OF SALES 5,964,053   6,088,667   12,775,498   12,442,859
               
 Gross profit 10,940,201   9,845,254   22,305,834   19,370,102
               
OPERATING EXPENSES 8,475,429   8,075,939   17,286,887   15,688,299
               
INCOME FROM CONTINUING OPERATIONS 2,464,772   1,769,315   5,018,947   3,681,803
               
OTHER INCOME (EXPENSE):              
 Interest expense (58,235)   (62,132)   (116,627)   (124,135)
 Other, net 42,757   (45,767)   62,571   (94,599)
 Total other income (expense) (15,478)   (107,899)   (54,056)   (218,734)
               
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,449,294   1,661,416   4,964,891   3,463,069
               
PROVISION FOR INCOME TAXES 909,656   585,060   1,851,147   1,236,137
               
NET INCOME $1,539,638   $1,076,356   $3,113,744   $2,226,932
               
               
NET INCOME PER COMMON SHARE:              
Basic $0.15   $0.11   $0.30   $0.22
Diluted $0.15   $0.11   $0.30   $0.22
               
Weighted Average Number of Shares Outstanding:              
 Basic 10,156,442   10,156,442   10,156,442   10,156,442
 Diluted 10,172,171   10,168,098   10,172,561   10,175,561
   
   
  Tandy Leather Factory, Inc.
  Consolidated Statements of Cash Flows
  (Unaudited)
  For the Six Months Ended June 30, 2012 and 2011
         
    2012   2011
  CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income 3,113,744   2,226,932
Adjustments to reconcile net income to net cash (used in) provided by operating activities:      
Depreciation and amortization  524,053    497,351
Loss on disposal or abandonment of assets  6,145    79,035
Non-cash stock-based compensation  10,000    26,030
Deferred income taxes  (117,930)    232,119
Other  (97,094)    117,789
Net changes in assets and liabilities, net of effect of business acquisitions:      
Accounts receivable-trade, net  209,708    (99,985)
Inventory (9,809,560)   (24,219)
Income taxes  (304,657)    (611,129)
Other current assets  (615,727)    (298,022)
Accounts payable-trade  1,395,665    250,374
Accrued expenses and other liabilities  1,437,262    (1,867,753)
Total adjustments  (7,362,135)    (1,698,410)
Net cash (used in) provided by operating activities  (4,248,391)    528,522
         
  CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchase of property and equipment  (403,611)    (497,485)
Proceeds from maturities of certificates of deposit  336,000    645,252
Proceeds from sale of assets  1,150    25,473
Decrease (increase) in other assets  3,201    2,841
Net cash (used in) provided by investing activities  (63,260)    176,081
         
  CASH FLOWS FROM FINANCING ACTIVITIES:      
Payments on notes payable and long-term debt  (101,250)    (101,250)
Payment of cash dividend (2,536,131)   --
Net cash (used in) provided by financing activities  (2,637,381)    (101,250)
         
  NET (DECREASE) INCREASE IN CASH  (6,949,032)    603,353
         
  CASH, beginning of period  10,765,591    4,293,746
         
  CASH, end of period  $3,816,559    4,897,099
         
         
  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:      
  Interest paid during the period $116,627   $124,135
  Income tax paid during the period, net of (refunds) $2,273,330   $1,471,101
CONTACT: Shannon L. Greene         Tandy Leather Factory, Inc.         (817) 872-3200 or sgreene@tandyleather.com                  Mark Gilbert         Magellan Fin, LLC         (317) 867-2839 or MGilbert@MagellanFin.com

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