SECURITIES AND EXCHANGE COMMISSION |
| WASHINGTON, D.C. |
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FORM 8-K |
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CURRENT REPORT PURSUANT |
TO SECTION 13 OR 15(d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 |
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| Date of report (Date of earliest event reported): | May 6, 2005 |
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The Leather Factory, Inc. (Exact Name of Registrant as Specified in Its Charter) |
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Delaware (State or Other Jurisdiction of Incorporation) |
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1-12368 (Commission File Number) | 75-2543540 (IRS Employer Identification Number) |
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3847 East Loop 820 South, Fort Worth, Texas (Address of Principal Executive Offices) | 76119 (Zip Code) |
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(817) 496-4414 (Registrant’s Telephone Number, Including Area Code) |
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_____________________________________________________ (Former Name or Former Address, if Changed Since Last Report |
Item 2.02. Results of Operations and Financial Condition
The Leather Factory, Inc. on May 6, 2005 issued a press release regarding its financial results for the quarter ended March 31, 2005. A copy of the press release is attached as Exhibit 99.1.
The information in this report and the exhibit attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
99.1 Press release dated May 6, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE LEATHER FACTORY, INC.
Date: May 16, 2005 BY:/s/ Wray Thompson
Wray Thompson, Chairman of the Board
and Chief Executive Officer
EXHIBIT 99.1
FOR IMMEDIATE RELEASE MAY 6, 2005
THE LEATHER FACTORY SETS 1ST QUARTER 2005 EARNINGS RECORD
FULLY-DILUTED EPS OF $0.10
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.,(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(www.tandyleather.com). Its common stock trades on the American Stock Exchange with the symbol "TLF".
Contact: Wray Thompson, CEO, The Leather Factory, Inc. (817) 496-4414
Shannon L. Greene, CFO, The Leather Factory, Inc. sgreene@leatherfactory.com
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.
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
| | 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 |
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| OPERATING EXPENSES | 5,587,736 | 5,277,778 |
| INCOME FROM OPERATIONS | 1,569,547 | 1,447,135 |
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| Interest expense | 3,188 | 13,638 |
| Other, net | 15,465 | 1,737 |
| Total other expense | 18,653 | 15,375 |
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| INCOME BEFORE INCOME TAXES | 1,550,894 | 1,431,760 |
| PROVISION FOR INCOME TAXES | 501,672 | 460,794 |
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NET INCOME | $ 1,049,222 | $ 970,966 |
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NET INCOME PER COMMON SHARE - BASIC | $ 0.10 | $ 0.09 |
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NET INCOME PER COMMON SHARE-DILUTED | $ 0.10 | $ 0.09 |
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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 (unaudited) | 12/31/04 |
| 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 |
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| 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 |
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| 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 |
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| 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) |
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| 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) |
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| NET CHANGE IN CASH | (93,111) | | (49,737) |
| CASH, beginning of period | 2,560,202 | | 1,728,344 |
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| CASH, end of period | $2,467,091 | | $1,678,607 |
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| 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 |
Selected financial data:
| | Quarter Ended 03/31/05 | | Quarter Ended 03/31/04 |
| | Sales | | Operating Income | | Sales | | Operating 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 03/31/05 | | Quarter Ended 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 03/31/05 | | Quarter Ended 03/31/04 |
| | # of stores | Sales | | # of stores | Sales |
| 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 |
