Tandy Leather Factory Reports Q3 2009 Earnings up 31% on Higher Sales and Margins

November 9, 2009 7:30 AM EST

FORT WORTH, Texas--(BUSINESS WIRE)-- Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the third quarter of 2009. Consolidated net income for the quarter ended September 30, 2009, was $553,000 compared to consolidated net income of $421,000 for the third quarter of 2008, an increase of 31%. Fully diluted earnings per share for the quarter were $0.05, compared to $0.04 in the third quarter of last year. Total sales for the quarter ended September 30, 2009, were $12.8 million, up 4% from $12.3 million in the third quarter last year.

Consolidated sales for the nine months ended September 30, 2009, were $39.4 million, matching that of the 2008 first nine months. Consolidated net income for the first three quarters of 2009 was up 21% to $2.0 million or $0.19 per fully-diluted share versus $1.7 million or $0.15 per fully-diluted share in the comparable period last year.

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $718,000 in the third quarter, a 13% improvement over last year's third quarter. Seventy-five stores comprised Tandy Leather's retail operations on September 30, 2009, compared to seventy-three retail stores a year ago. For the first nine months of 2009, Retail Leathercraft's sales increased $1.4 million, or 8%, over the first nine months of 2008. Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale stores and national account group, were down 2% or $120,000 from the same quarter last year. For the first nine months of 2009, Wholesale Leathercraft's sales were down $1.7 million, or 8%, from the same period in 2008. International Leathercraft, consisting of one combination wholesale and retail store located in the United Kingdom, reported a sales increase of 6%, or $18,000, compared to the third quarter of 2008. For the year, International Leathercraft's sales were up 68%, or $383,000, over the same period last year. This store was opened in February 2008.

Consolidated gross profit margin for the current quarter was 59.4%, improving from 58.3% for the third quarter of 2008. For the first three quarters, consolidated gross profit margin for the current year was 58.8%, increasing slightly from last year's gross profit margin of 58.2%. Consolidated operating expenses increased approximately 5% for the quarter or $348,000, but decreased approximately 1%, or $212,000, for the year compared to the same periods a year ago. For the third quarter, the significant increases in expenses occurred in employee benefits and compensation, advertising, and utilities. For the year, the largest expense cuts were in professional/consulting fees, rent and utilities, moving expenses, and freight costs. Consolidated operating margin improved for the quarter to 6.8% compared to 6.3% last year. On a year-to-date basis, consolidated operating margin improved from 6.6% last year to 7.8% in the current year.

Jon Thompson, Chief Executive Officer and President, commented, "The strength in our third quarter retail sales pulled our current year sales up to match that of sales last year at this time. Our goal at the beginning of the year was to match last year's sales so we are on pace as of the end of the quarter. It has been a year-long struggle and unfortunately, I do not expect the fourth quarter to be any different."

Chief Financial Officer, Shannon Greene, added, "We are fairly pleased with our results through the end of the third quarter, but we must continue our efforts to keep expenses in check. Our cash is down slightly at the end of September because we purchased a large block of our stock during the quarter. I expect cash to grow in the fourth quarter, barring some unforeseen circumstances, and our inventory in is in good shape to begin the Christmas shopping season."

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, 75 Tandy Leather retail stores, located in 36 states and 5 Canadian provinces, one combination wholesale/retail store located in the United Kingdom, and Mid-Continent Leather Sales, one store located in Oklahoma. Its common stock trades on the NYSE Amex 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 09/30/09  Quarter Ended 09/30/08

                                         Operating               Operating
                            Sales                   Sales
                                         Income                  Income

Wholesale Leathercraft      $5,877,153   $348,567   $5,997,550   $435,790

Retail Leathercraft         6,444,179    472,653    5,726,164    234,743

International Leathercraft  342,272      52,446     324,081      55,008

Other                       123,660      (1,972)    204,195      39,942

Total Operations            $12,787,264  $871,694   $12,251,990  $765,483

                        Nine Months Ended 09/30/09  Nine Months Ended 09/30/08

                                     Operating                   Operating
                        Sales                       Sales
                                     Income                      Income

Wholesale Leathercraft  $18,276,276  $1,243,341     $19,953,958  $1,084,364

Retail Leathercraft     19,673,925   1,669,129      18,232,364   1,421,064

International           942,996      106,499        559,641      6,090
Leathercraft

Other                   469,997      32,431         614,151      66,866

Total Operations        $39,363,194  $3,051,400     $39,360,114  $2,578,384

Wholesale Leathercraft   Quarter Ended 09/30/09  Quarter Ended 09/30/08

                         # of stores Sales       # of stores Sales

Same store sales         30          $5,056,473  30          $5,289,155

National account group   n/a         820,680     n/a         708,395

Total Sales - Wholesale              $5,877,153              $5,997,550
Leathercraft

Wholesale Leathercraft   Nine Months Ended 09/30/09  Nine Months Ended 09/30/08

                         # of stores Sales           # of stores Sales

Same store sales         30          $15,798,472     30          $17,350,183

National account group   n/a         2,477,804       n/a         2,603,775

Total Sales - Wholesale              $18,276,276                 $19,953,958
Leathercraft

Retail Leathercraft   Quarter Ended 09/30/09  Quarter Ended 09/30/08

                      # of stores Sales       # of stores Sales

Same store sales      72          $6,273,553  72          $5,716,139

New store sales       3           170,626     1           10,025

Total Sales - Retail  75          $6,444,179  73          $5,726,164
Leathercraft

Retail Leathercraft   Nine Months Ended 09/30/09  Nine Months Ended 09/30/08

                      # of stores Sales           # of stores Sales

Same store sales      72          $19,242,812     72          $18,222,339

New store sales       3           431,113         1           10,025

Total Sales - Retail  75          $19,673,925     73          $18,232,364
Leathercraft

Tandy Leather Factory, Inc.

Consolidated Balance Sheets

                                                     September 30,  December 31,
                                                     2009           2008

                                                     (unaudited)    (audited)

ASSETS

CURRENT ASSETS:

Cash                                                 $4,197,357     $7,810,298

Short-term investments, including certificates of    5,409,000      3,011,000
deposit

Accounts receivable-trade, net of allowance for
doubtful accounts of $51,000 and $43,000 in 2009     1,694,732      1,180,349
and 2008, respectively

Inventory                                            16,970,065     16,011,147

Prepaid income taxes                                 191,892        -

Deferred income taxes                                241,688        229,501

Other current assets                                 1,043,510      777,550

Total current assets                                 29,748,244     29,019,845

PROPERTY AND EQUIPMENT, at cost                      15,927,686     15,340,732

Less accumulated depreciation and amortization       (5,704,551)    (5,019,885)

                                                     10,223,135     10,320,847

GOODWILL                                             981,170        966,655

OTHER INTANGIBLES, net of accumulated amortization
of $405,000 and $367,000 in 2009 and 2008,           320,069        355,492
respectively

OTHER assets                                         312,870        313,074

                                                     $41,585,488    $40,975,913

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable-trade                               $1,614,303     $1,148,577

Accrued expenses and other liabilities               3,401,695      3,182,194

Income taxes payable                                 -              271,122

Current maturities of long-term debt and capital     202,500        467,611
lease obligations

Total current liabilities                            5,218,498      5,069,504

DEFERRED INCOME TAXES                                679,571        600,309

LONG-TERM DEBT, net of current maturities            3,560,625      3,712,500

CAPITAL LEASE OBLIGATION, net of current maturities  -              328,838

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; 11,021,951 and 10,994,951 shares issued
at 2009 and 2008, respectively; 10,166,328 and       26,453         26,388
10,664,555 shares outstanding at 2008 and 2007,
respectively

Paid-in capital                                      5,491,736      5,464,443

Retained earnings                                    28,653,986     26,641,853

Treasury stock (855,623 and 330,396 shares at cost   (2,320,760)    (828,385)
at 2009 and 2008, respectively)

Accumulated other comprehensive income               275,379        (39,537)

Total stockholders' equity                           32,126,794     31,264,762

                                                     $41,585,488    $40,975,913

Tandy Leather Factory, Inc.

Consolidated Statements of Income

(Unaudited)

For the Three and Nine Months Ended September 30, 2009 and 2008

                             THREE MONTHS              NINE MONTHS

                             2009         2008         2009         2008

NET SALES                    $12,787,264  $12,251,990  $39,363,194  $39,360,114

COST OF SALES                5,189,674    5,108,833    16,207,276   16,464,284

Gross profit                 7,597,590    7,143,157    23,155,918   22,895,830

OPERATING EXPENSES           6,725,896    6,377,674    20,104,518   20,317,446

INCOME FROM OPERATIONS       871,694      765,483      3,051,400    2,578,384

OTHER INCOME (EXPENSE):

Interest expense             (68,895)     (80,072)     (229,879)    (249,725)

Other, net                   (48,307)     25,672       171,881      332,355

Total other income (expense) (117,202)    (54,400)     (57,998)     82,630

INCOME BEFORE INCOME TAXES   754,492      711,083      2,993,402    2,661,014

PROVISION FOR INCOME TAXES   201,527      290,069      981,269      1,000,252

NET INCOME                   $552,965     $421,014     $2,012,133   $1,660,762

NET INCOME PER COMMON        $ 0.05       $ 0.04       $ 0.19       $ 0.15
SHARE-BASIC

NET INCOME PER COMMON        $ 0.05       $ 0.04       $ 0.19       $ 0.15
SHARE-DILUTED

Weighted Average Number of
Shares Outstanding:

Basic                        10,387,492   10,988,092   10,575,904   10,982,209

Diluted                      10,457,348   11,073,942   10,636,090   11,072,717

Tandy Leather Factory, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

For the Nine Months Ended September 30, 2009 and 2008

                                                      2009         2008

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                            $2,012,133   $1,660,762

Adjustments to reconcile net income to net

cash provided by (used in) operating activities-

Depreciation & amortization                           852,943      758,364

Loss on disposal of assets                            26,008       13,385

Non-cash stock-based compensation                     2,540        22,875

Deferred income taxes                                 67,075       392,615

Other                                                 284,258      (131,157)

Net changes in assets and liabilities:

Accounts receivable-trade, net                        (514,383)    579,386

Inventory                                             (958,918)    434,531

Income taxes                                          (463,014)    760

Other current assets                                  (265,960)    128,174

Accounts payable                                      465,726      1,266,611

Accrued expenses and other liabilities                219,501      1,542,779

Total adjustments                                     (284,224)    5,008,323

Net cash provided by operating activities             1,727,909    6,669,085

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment                    (731,763)    (3,272,993)

Purchase of certificates of deposit                   (7,526,000)  (1,858,000)

Proceeds from maturities of certificates of deposit   5,128,000    -

Decrease in marketable securities                     -            100,000

Proceeds from sale of assets                          2,090        39,556

Decrease (increase) in other assets                   204          751,200

Net cash used in investing activities                 (3,127,469)  (4,240,237)

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments on long-term debt and notes payable          (151,875)    (84,375)

Payments on capital lease obligations                 (593,949)    (145,795)

Repurchase of common stock (treasury stock)           (1,492,375)  -

Proceeds from issuance of common stock                24,818       14,500

Net cash used in financing activities                 (2,213,381)  (215,670)

NET CHANGE IN CASH                                    (3,612,941)  2,213,178

CASH, beginning of period                             7,810,298    6,310,396

CASH, end of period                                   $4,197,357   $8,523,574

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest paid during the period                       $229,879     $249,725

Income taxes paid during the period, net of (refunds) 1,304,838    634,749

NON-CASH INVESTING ACTIVITIES:

Equipment acquired under capital lease financing      -            803,713
arrangements

    Source: Tandy Leather Factory, Inc.

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