EXHIBIT 99.1
FOR IMMEDIATE RELEASE AUGUST 7, 2007
TANDY LEATHER FACTORY REPORTS 2ND QUARTER 2007 EPS OF $0.04
FORT WORTH, TEXAS - Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the second quarter of 2007. Consolidated net income for the quarter ended June 30, 2007 was $397,000 compared to consolidated net income of $1,132,000 for the second quarter of 2006. Fully diluted earnings per share for the quarter was $0.04, compared to $0.10 in the second quarter of last year. Total sales for the quarter ended June 30, 2007 were $13.4 million, the same as the second quarter last year.
Consolidated sales for the six months ended June 30, 2007 were $27.9 million, virtually the same as the 2006 first half total sales of $27.8 million. Consolidated net income for the first half of 2007 was $1.7 million or $0.16 per fully-diluted share versus $2.5 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 $646,000 in the second quarter, a 12% improvement over last year's second quarter. Sixty-eight stores comprised the Tandy Leather's retail operations on June 30, 2007, compared to sixty-one retail stores a year ago. Two stores were added in the second quarter of 2007 bringing the total number of new stores added in 2007 to six as of the end of the quarter. For the first six months of 2007, Tandy Leather sales increased $1.3 million, or 13%, over the first six months of 2006. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, decreased $395,000 over the same quarter last year, a 5% decline. For the first six months of 2007, Wholesale Leathercraft’s sales were down $675,000, or 4%, over the same period in 2006.
Consolidated gross profit margin for the current quarter was 57.5%, improving slightly from 57.2% for the second quarter of 2006. For the first two quarters, consolidated gross profit margin for the current year was 58.4%, improving over last year's gross profit margin of 56.6%. Consolidated operating expenses rose $1 million in the current quarter and $1.6 million for the first six months over the same periods a year ago. Personnel costs, advertising and marketing expenses, and legal and professional fees are the primary drivers of the increases. Consolidated operating margins declined for the quarter and year to 5.3% and 9.5%, respectively, compared to 12.7% and 13.4% a year ago.
Ron Morgan, Chief Executive Officer and President, commented, “I don’t have anything positive to say about the second quarter except that it’s over. We knew our sales were flat and we did a poor job of managing expenses. The costs of store openings account for only a small portion of the increase in expenses. We spent more on advertising and marketing expenses in an attempt to boost sales - probably tried too hard. More significant is the fact that our employee headcount is up and most of the increase is in our central warehouse and factory, not in the store system. That concerns me as our goal is to keep expenses as lean as possible to maximize earnings at the store level.”
Chief Financial Officer, Shannon Greene, added, “I echo Ron’s comments. Except for a minimal improvement in gross profit margins, I can’t find anything positive about our second quarter results. I’m not too concerned about the advertising expenses. Those efforts will pay dividends down the road. Besides our personnel costs, our legal and professional expenses are up in the 2nd quarter due to the negotiations on our recent real estate purchase, as well as some trademark and copyright enforcement actions we’ve taken. Regardless, the bottom line is we performed miserably in the second quarter.”
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, 70 Tandy Leather retail stores, located in 33 states and 5 Canadian provinces, and Mid-Continent Leather Sales, one store located in Oklahoma. Its common stock trades on the American Stock Exchange with the symbol "TLF".
| Contact: | Ron Morgan, 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 06/30/07 | | Quarter Ended 06/30/06 |
| | Sales | | Operating Income | | Sales | | Operating Income |
| Wholesale Leathercraft | $7,176,153 | | $411,368 | | $7,571,541 | | $1,245,696 |
| Retail Leathercraft | 5,842,198 | | 265,964 | | 5,196,198 | | 464,538 |
| Other | 358,636 | | 27,019 | | 625,343 | | (11,483) |
| Total Operations | $13,376,987 | | $704,351 | | $13,393,082 | | $1,698,751 |
| | Six Months Ended 06/30/07 | | Six Months Ended 06/30/06 |
| | Sales | | Operating Income | | Sales | | Operating Income |
| Wholesale Leathercraft | $15,116,639 | | 1,757,571 | | $15,791,938 | | $2,764,714 |
| Retail Leathercraft | 12,096,416 | | 819,712 | | 10,737,280 | | 960,362 |
| Other | 671,737 | | 81,848 | | 1,277,513 | | 15,463 |
| Total Operations | $27,884,792 | | $2,659,131 | | $27,806,731 | | $3,740,539 |
Wholesale Leathercraft | Quarter Ended 06/30/07 | | Quarter Ended 06/30/06 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 29 | $6,112,589 | | 29 | $6,441,428 |
| New store sales | 1 | 203,874 | | - | - |
| National account group | n/a | 859,690 | | n/a | 1,130,113 |
| Total Sales - Wholesale Leathercraft | | $7,176,153 | | | $7,571,541 |
Wholesale Leathercraft | Six Months Ended 06/30/07 | | Six Months Ended 06/30/06 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 29 | $12,737,194 | | 29 | $13,553,728 |
| New store sales | 1 | 389,137 | | - | - |
| National account group | n/a | 1,990,308 | | n/a | 2,238,210 |
| Total Sales - Wholesale Leathercraft | | $15,116,639 | | | $15,791,938 |
Retail Leathercraft | Quarter Ended 06/30/07 | | Quarter Ended 06/30/06 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 56 | $5,318,712 | | 56 | $5,085,747 |
| New store sales | 12 | 523,486 | | 5 | 110,451 |
| Total Sales - Retail Leathercraft | 68 | $5,842,198 | | 61 | $5,196,198 |
Retail Leathercraft | Six Months Ended 06/30/07 | | Six Months Ended 06/30/06 |
| | # of stores | Sales | | # of stores | Sales |
| Same store sales | 53 | $10,711,743 | | 53 | $10,442,131 |
| New store sales | 15 | 1,384,673 | | 8 | 295,149 |
| Total Sales - Retail Leathercraft | 68 | $12,096,416 | | 61 | $10,737,280 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| | THREE MONTHS | | SIX MONTHS |
| | 2007 | 2006 | | 2007 | 2006 |
| NET SALES | $13,376,987 | $13,393,082 | | $27,884,792 | $27,806,731 |
| COST OF SALES | 5,691,397 | 5,670,782 | | 11,601,249 | 11,970,297 |
| Gross Profit | 7,685,590 | 7,722,300 | | 16,283,543 | 15,836,434 |
| | | | | | |
| OPERATING EXPENSES | 6,981,239 | 6,023,549 | | 13,624,412 | 12,095,895 |
| INCOME FROM OPERATIONS | 704,351 | 1,698,751 | | 2,659,131 | 3,740,539 |
| | | | | | |
| Interest expense | - | - | | - | - |
| Other, net | (27,522) | (29,421) | | (76,514) | (47,530) |
| Total other expense | (27,522) | (29,421) | | (76,514) | (47,530) |
| | | | | | |
| INCOME BEFORE INCOME TAXES | 731,873 | 1,728,172 | | 2,735,645 | 3,788,069 |
| PROVISION FOR INCOME TAXES | 335,181 | 595,678 | | 992,603 | 1,309,313 |
NET INCOME | $396,692 | $1,132,494 | | $1,743,042 | $2,478,756 |
| NET INCOME PER COMMON SHARE - BASIC | $0.04 | $0.10 | | $0.16 | $0.23 |
| NET INCOME PER COMMON SHARE - DILUTED | $0.04 | $0.10 | | $0.16 | $0.22 |
| | | | | | |
| Weighted Average Number of Shares Outstanding: | | | | | |
| Basic | 10,915,061 | 10,790,661 | | 10,904,270 | 10,773,772 |
| Diluted | 11,114,466 | 11,112,475 | | 11,132,257 | 11,107,692 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
| | 06/30/07 (unaudited) | 12/31/06 |
| Cash | $3,720,098 | 6,739,891 |
| Accounts receivable, net of allowance for doubtful accounts | 2,978,801 | 2,599,279 |
| Inventory | 20,179,588 | 17,169,358 |
| Prepaid income taxes | 487,096 | - |
| Deferred income taxes | 297,306 | 266,018 |
| Other current assets | 1,098,695 | 1,089,258 |
Total current assets | 28,761,584 | 27,863,804 |
| Property and equipment, net | 1,997,605 | 1,876,605 |
| Goodwill and other intangibles, net | 1,398,339 | 1,106,815 |
| Other assets | 1,184,970 | 1,069,411 |
| | $33,342,498 | $31,916,635 |
| | | |
| Accounts payable | $1,963,588 | $1,776,646 |
| Accrued expenses and other liabilities | 2,789,484 | 3,424,010 |
| Income taxes payable | - | 59,392 |
| Current maturities of capital lease obligations and long-term debt | 44,689 | 111,723 |
Total current liabilities | 4,797,761 | 5,371,771 |
| Deferred income taxes | 252,848 | 221,621 |
| Capital lease obligations and long-term debt, net of current maturities | - | - |
| Total Liabilities | 5,050,609 | 5,593,392 |
| | | |
| Common stock | 26,306 | 26,124 |
| Paid-in capital | 5,362,620 | 5,292,591 |
| Retained earnings | 22,692,584 | 20,949,540 |
| Treasury stock | (25,487) | (25,487) |
| Accumulated other comprehensive loss | 235,866 | 80,475 |
| Total Stockholders' Equity | 28,291,889 | 26,323,243 |
| | $33,342,498 | $31,916,635 |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
| | 2007 | | 2006 |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
| Net income | $1,743,042 | | $2,478,756 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation & amortization | 306,214 | | 191,481 |
| Gain on disposal of assets | - | | (1,750) |
| Non-cash stock-based compensation | 15,250 | | 44,960 |
| Deferred income taxes | (61) | | 27,067 |
| Other | 72,251 | | 37,337 |
| Net changes in assets and liabilities: | | | |
| Accounts receivable-trade, net | (323,170) | | (555,007) |
| Inventory | (2,660,008) | | (1,251,365) |
| Income taxes | (546,488) | | (87,213) |
| Other current assets | (25,420) | | (207,521) |
| Accounts payable | 138,298 | | 1,175,499 |
| Accrued expenses and other liabilities | (634,526) | | 702,086 |
| Total adjustments | (3,657,660) | | 75,575 |
Net cash provided by operating activities | (1,914,618) | | 2,554,330 |
| | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
| Purchase of property and equipment | (352,880) | | (229,775) |
| Payments in connection with businesses acquired | (650,000) | | - |
| Proceeds from sale of assets | 25,339 | | 1,750 |
| Increase in other assets | (115,560) | | (24,966) |
Net cash used in investing activities | (1,093,101) | | (252,991) |
| | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
| Net increase (decrease) in revolving credit loans | - | | - |
| Payments on notes payable and long-term debt | (67,034) | | (67,033) |
| Proceeds from issuance of common stock | 54,960 | | 72,435 |
Net cash used in financing activities | (12,074) | | 5,402 |
| | | | |
| NET CHANGE IN CASH | (3,019,793) | | 2,306,741 |
| CASH, beginning of period | 6,739,891 | | 3,215,727 |
| | | | |
| CASH, end of period | $3,720,098 | | $5,522,468 |
| | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | |
| Interest paid during the period | - | | - |
| Income taxes paid during the period, net of (refunds) | $1,548,067 | | $1,285,653 |
