SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
Form 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 2, 2006
| Tandy Leather Factory, Inc. |
| (Exact Name of Registrant as Specified in Its Charter) |
| Delaware |
| (State or Other Jurisdiction of Incorporation |
| 1-12368 | | 75-2543540 |
| (Commission File Number) | | (IRS Employer Identification Number) |
| 3847 East Loop 820 South, Fort Worth, Texas | | 76119 |
| (Address of Principal Executive Offices) | | (Zip Code) |
| (817) 496-4414 |
| (Registrant’s Telephone Number, Including Area Code) |
| |
| (Former Name or Former Address, if Changed Since Last Report) |
Item 2.02. Results of Operations and Financial Condition
Tandy Leather Factory, Inc. on August 2, 2006 issued a press release regarding its financial results for the three and six months ended June 30, 2006. 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.
No. Exhibit
99.1 Press release dated August 2, 2006
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.
TANDY LEATHER FACTORY, INC.
Date: August 2, 2006 | By: /s/ Wray Thompson |
| | Wray Thompson, Chairman of the Board |
| | and Chief Executive Officer |
EXHIBIT 99.1
FOR IMMEDIATE RELEASE August 2, 2006
TANDY LEATHER FACTORY REPORTS 2ND QUARTER 2006 EPS UP 42%
FORT WORTH, TEXAS - Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the second quarter of 2006. Consolidated net income for the quarter ended June 30, 2006 was $1,132,000 compared to consolidated net income of $787,000 for the second quarter of 2005. Fully diluted earnings per share for the quarter was $0.10, compared to $0.07 in the second quarter of last year. Total sales for the quarter ended June 30, 2006 increased 10% to $13.4 million from $12.1 million for the same quarter last year.
Consolidated sales for the six months ended June 30, 2006 were $27.8 million, an increase of 12% over 2005 first half total sales of $24.9 million. Consolidated net income for the first half of 2006 was $2.5 million or $0.22 per fully-diluted share versus $1.8 million or $0.17 per fully-diluted share in the comparable period last year.
Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $1.1 million in the second quarter, a 27% improvement over last year's second quarter. Sixty-one stores comprised the Tandy Leather's retail operations on June 30, 2006, compared to forty-six retail stores a year ago. Five stores were added in the second quarter of 2006 bringing the total number of new stores added in 2006 to eleven as of the end of the quarter. For the first six months of 2006, Tandy Leather sales increased $2.3 million, or 28%, over the first six months of 2005. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, increased $83,000 over the same quarter last year, a 1% increase. For the first six months of 2006, Wholesale Leathercraft’s sales were up $558,000, or 4%, over the same period in 2005.
Consolidated gross profit margin for the current quarter was 57.6%, improving from 56.6% for the second quarter of 2005. For the first two quarters, consolidated gross profit margin for the current year was 56.9%, a slight improvement over last year's gross profit margin of 56.5%. Consolidated operating expenses rose $377,000 in the current quarter and $930,000 for the first six months over the same periods a year ago. Costs associated with the new retail stores (personnel, rents, utilities, etc.), are the primary drivers of the increases. Consolidated operating margins improved for the quarter and year to 12.7% and 13.4%, respectively, compared to 10.8% and 11.6% a year ago.
Wray Thompson, Chairman and Chief Executive Officer, commented, “Overall, we are pleased with the quarter. Same store sales in our Retail Leathercraft segment, were up 8% and 9% for the quarter and the year, respectively. In our Wholesale Leathercraft segment, both the wholesale centers and the National Account group reported sales gains of 1-5% for the quarter and the year. We continue to achieve our goal of greater operating efficiency as our consolidated operating margins improved by 28% and 29% for the quarter and the year, respectively, on sales gains of 10% and 11%."
Tandy Leather Factory, Inc., (http://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. The Company distributes its products as The Leather Factory through its wholesale centers and as Tandy Leather Company through its retail stores (http://www.tandyleather.com). Its common stock trades on the American Stock Exchange with the symbol "TLF".
| Contact: | Wray Thompson, CEO, Tandy Leather Factory, Inc. | (817) 496-4414 |
| | Shannon L Greene, CFO, Tandy Leather Factory, Inc. | sgreene@tandyleather.com |
This news release may contain forward-looking statements. All forward-looking statements made here or in other news releases issued by Tandy Leather Factory, Inc. 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 Tandy 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.
Selected financial data:
| | Quarter Ended 06/30/06 | | Quarter Ended 06/30/05 |
| | Sales | | Operating Income | | Sales | | Operating Income |
| Wholesale Leathercraft | $7,7484,892 | | $1,245,696 | | $7,665,067 | | $861,177 |
| Retail Leathercraft | 5,196,198 | | 464,538 | | 4,094,303 | | 414,734 |
| Other | 447,992 | | (11,483) | | 422,329 | | 45,703 |
| Total Operations | $13,393,082 | | $1,698,751 | | $12,181,699 | | $1,321,614 |
| | Six Months Ended 06/30/06 | | Six Months Ended 06/30/05 |
| | Sales | | Operating Income | | Sales | | Operating Income |
| Wholesale Leathercraft | $16,137,156 | | $2,764,714 | | $15,578,959 | | $2,030,159 |
| Retail Leathercraft | 10,737,280 | | 960,362 | | 8,379,909 | | 801,452 |
| Other | 932,295 | | 15,463 | | 930,347 | | 59,550 |
| Total Operations | $27,806,731 | | $3,740,539 | | $24,889,215 | | $2,891,161 |
Wholesale Leathercraft | Quarter Ended 06/30/05 | | Quarter Ended 06/30/05 |
| | | Sales | | | Sales |
| Distribution centers | | $6,441,428 | | | $6,289,667 |
| Center converted to retail store | | - | | | 92,197 |
| National account group | | 1,307,464 | | | 1,283,203 |
| Total Sales - Wholesale Leathercraft | | $7,748,892 | | | $7,665,067 |
Wholesale Leathercraft | Six Months Ended 06/30/06 | | Six Months Ended 06/30/05 |
| | | Sales | | | Sales |
| Distribution centers | | $13,525,087 | | | $12,852,458 |
| Center converted to retail store | | 28,641 | | | 178,359 |
| National account group | | 2,583,428 | | | 2,548,142 |
| Total Sales - Wholesale Leathercraft | | $16,137,156 | | | $15,578,959 |
Retail Leathercraft | Quarter Ended 06/30/06 | | Quarter Ended 6/30/05 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 44 | $4,358,929 | | 44 | $4,054,993 |
| Store converted from wholesale center | 1 | 117,771 | | - | - |
| New store sales | 16 | 719,498 | | 2 | 39,310 |
| Total Sales - Retail Leathercraft | 61 | $5,196,198 | | 46 | $4,094,303 |
Retail Leathercraft | Six Months Ended 06/30/06 | | Six Months Ended 06/30/05 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 42 | $8,944,653 | | 42 | $8,178,808 |
| Store converted from wholesale center | 1 | 216,677 | | - | - |
| New store sales | 18 | 1,575,950 | | 4 | 201,101 |
| Total Sales - Retail Leathercraft | 61 | $10,737,280 | | 46 | $8,379,909 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005
| | THREE MONTHS | THREE MONTHS | | SIX MONTHS | SIX MONTHS |
| | 2006 | 2005 | | 2006 | 2005 |
| NET SALES | $13,393,082 | $12,181,699 | | $27,806,731 | $24,889,215 |
| COST OF SALES | 5,670,782 | 5,281,828 | | 11,970,297 | 10,832,061 |
| Gross Profit | 7,722,300 | 6,899,871 | | 15,836,434 | 14,057,154 |
| | | | | | |
| OPERATING EXPENSES | 6,023,549 | 5,578,257 | | 12,095,895 | 11,165,993 |
| INCOME FROM OPERATIONS | 1,698,751 | 1,321,614 | | 3,740,539 | 2,891,161 |
| | | | | | |
| Interest expense | - | - | | - | 3,188 |
| Other, net | (29,421) | (39,684) | | (47,530) | (24,219) |
| Total other expense | (29,421) | (39,684) | | (47,530) | (21,031) |
| | | | | | |
| INCOME BEFORE INCOME TAXES | 1,728,172 | 1,361,298 | | 3,788,069 | 2,912,192 |
| PROVISION FOR INCOME TAXES | 595,678 | 573,629 | | 1,309,313 | 1,075,301 |
NET INCOME | $1,132,494 | $787,669 | | $2,478,756 | $1,836,891 |
| NET INCOME PER COMMON SHARE - BASIC | $0.11 | $0.07 | | $0.23 | $0.17 |
| NET INCOME PER COMMON SHARE - DILUTED | $0.10 | $0.07 | | $.022 | $0.17 |
| | | | | | |
| Weighted Average Number of Shares Outstanding: | | | | | |
| Basic | 10,790,661 | 10,615,802 | | 10,773,772 | 10,600,156 |
| Diluted | 11,112,475 | 10,955,282 | | 11,107,692 | 10,933,433 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
| | 06/30/06 (unaudited) | 12/31/05 |
| Cash | $5,522,468 | $3,215,727 |
| Accounts receivable, net of allowance for doubtful accounts | 2,733,855 | 2,178,848 |
| Inventory | 16,920,547 | 15,669,182 |
| Deferred income taxes | 264,290 | 273,872 |
| Other current assets | 565,579 | 358,058 |
Total current assets | 26,006,739 | 21,695,687 |
| Property and equipment, net | 1,816,917 | 1,759,477 |
| Goodwill and other intangibles, net | 1,130,959 | 1,145,578 |
| Other assets | 1,104,697 | 1,079,731 |
| | $30,059,312 | $25,680,473 |
| | | |
| Accounts payable | $2,395,919 | $1,220,420 |
| Accrued expenses and other liabilities | 3,252,659 | 2,550,573 |
| Income taxes payable | 112,368 | 199,581 |
| Current maturities of capital lease obligations and long-term debt | 134,067 | 134,067 |
Total current liabilities | 5,895,013 | 4,104,641 |
| Deferred income taxes | 223,738 | 206,253 |
| Capital lease obligations and long-term debt, net of current maturities | 44,689 | 111,722 |
| Total Liabilities | 6,163,440 | 4,422,616 |
| | | |
| Common stock | 25,948 | 25,780 |
| Paid-in capital | 5,105,672 | 4,988,445 |
| Retained earnings | 18,651,231 | 16,172,475 |
| Treasury stock | (25,487) | (25,487) |
| Accumulated other comprehensive loss | 138,508 | 96,644 |
| Total Stockholders' Equity | 23,895,872 | 21,257,857 |
| | $30,059,312 | $25,680,473 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
| | 2006 | | 2005 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| Net income | $2,478,756 | | $1,836,891 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation & amortization | 191,481 | | 235,677 |
| Gain on disposal of assets | (1,750) | | (9,144) |
| Non-cash stock-based compensation | 44,960 | | - |
| Deferred income taxes | 27,067 | | (109,046) |
| Other | 37,338 | | 2,341 |
| Net changes in assets and liabilities: | | | |
| Accounts receivable-trade, net | (555,007) | | (488,611) |
| Inventory | (1,251,365) | | (2,207,276) |
| Income taxes | (87,213) | | 195,044 |
| Other current assets | (207,521) | | (316,921) |
| Accounts payable | 1,175,499 | | 56,470 |
| Accrued expenses and other liabilities | 702,086 | | 1,728,515 |
| Total adjustments | 75,575 | | (912,951) |
Net cash provided by operating activities | 2,554,331 | | 923,940 |
| | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| Purchase of property and equipment | (229,775) | | (83,115) |
| Proceeds from sale of assets | 1,750 | | 9,144 |
| Increase in other assets | (24,966) | | (138,725) |
Net cash used in investing activities | (252,991) | | (212,696) |
| | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| Net increase (decrease) in revolving credit loans | - | | (505,154) |
| Payments on notes payable and long-term debt | (67,034) | | (67,034) |
| Proceeds from issuance of common stock | 72,435 | | 116,163 |
Net cash used in financing activities | 5,401 | | (456,025) |
| | | | |
| NET CHANGE IN CASH | 2,306,741 | | 255,219 |
| CASH, beginning of period | 3,215,727 | | 2,560,202 |
| | | | |
| CASH, end of period | $5,522,468 | | $2,815,421 |
| | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | |
| Interest paid during the period | - | | $3,188 |
| Income taxes paid during the period, net of (refunds) | $1,285,653 | | 972,205 |
