EXHIBIT 99.1
FOR IMMEDIATE RELEASE | MARCH 8, 2006 |
TANDY LEATHER FACTORY REPORTS 2005 FINANCIAL RESULTS-
NET INCOME INCREASES 40% OVER 2004
FORT WORTH, TEXAS - Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the year and fourth quarter ended December 31, 2005. Consolidated net income for the quarter was $1.2 million compared to consolidated net income of $739,000 for the fourth quarter of 2004. Fully diluted earnings per share for the quarter were $0.11, compared to $0.06 for the same quarter of the previous year. Total sales for the quarter ended December 31, 2005 increased 13.1% to $14.0 million from $12.4 million for the fourth quarter of 2004. Consolidated sales for the year ended December 31, 2005 were $50.7 million, an increase of 9.9% over total sales of $46.1 million for 2004. Consolidated net income for 2005 was $3.7 million or $0.34 per fully-diluted share versus $2.6 million or $0.24 per fully-diluted share for 2004.
Sales in the Retail Leathercraft division for the fourth quarter of 2005 increased $1.1 million over the previous year's fourth quarter, representing a 26% improvement. Fifty Tandy Leather retail stores comprised Retail Leathercraft’s operations on December 31, 2005, compared to forty-two retail stores a year earlier. Two stores were added in the fourth quarter of 2005, bringing the total number of new stores added in 2005 to eight. For 2005, Retail Leathercraft’s sales increased $4.5 million, or 33%, over 2004.
Fourth quarter sales for the Wholesale Leathercraft division, which includes the thirty Leather Factory wholesale centers and national accounts group, increased $514,000 over the same quarter of 2004, a 6.7% improvement. The wholesale centers' sales increased $416,000, or 6.3%, and national account sales were up $97,000, or 9.5%. For the year, Wholesale Leathercraft’s sales were up $414,000, or 1.4%. Sales in the wholesale centers increased $877,000, or 3.5%, while sales to national accounts were down $463,000, or 8.7%, for the year.
Consolidated gross profit margin for the fourth quarter was 56.5%, an improvement from 54.7% for the fourth quarter of 2004. For 2005, consolidated gross profit margin was 56.7%, an improvement over the previous year's gross profit margin of 55.1%. Consolidated operating expenses for the fourth quarter of 2005 were 43.8% of sales, improving from 45.2% for the same quarter of 2004. Operating expenses totaled 45.7% of sales for 2005, a slight improvement from 45.9% for 2004.
Wray Thompson, Chairman and Chief Executive Officer, commented, "We are very pleased with our results for 2005. Our sales grew by 10%, but more importantly, our operating profit was up by 30%, which tells me that we’re gaining operating efficiency. We expect to carry that momentum into 2006 with the Tandy Leather store chain driving sales growth. Our goal for 2006 will be continued sales growth with greater earnings growth. As a result, while we’re not changing our 2006 revenue guidance at this point, we are raising our 2006 earnings guidance."
Financial Outlook:
The following statements are based on TLF's current expectations as of March 8, 2006. These statements are forward-looking statements and should be read in conjunction with the cautionary information about these statements that appears below.
The Company estimates consolidated net sales for 2006 will be in the range of $53 to $56 million and diluted EPS is expected to be in the range of $0.40 to $0.44. Average diluted shares outstanding in 2006 are estimated to be approximately 11 million shares. The Company assumes an effective tax rate annually between 35% and 37%.
Tandy Leather Factory, Inc., headquartered in Fort Worth, Texas, is a specialty retailer and wholesale distributor of a broad product line including leather, leatherworking tools, belt buckles and adornments, 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 distribution centers and as Tandy Leather Company through its retail stores. Its common stock trades on the American Stock Exchange with the symbol "TLF".
| Contact: | | Wray Thompson, Tandy Leather Factory, Inc. | | (817) 496-4414 |
| | | Shannon L. Greene, Tandy 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 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 12/31/05 | | Quarter Ended 12/31/04 | |
| | | Sales | | Operating Income | | Sales | | Operating Income | |
| Wholesale Leathercraft | | $ | 8,209,725 | | $ | 1,039,005 | | $ | 7,695,753 | | $ | 706,509 | |
| Retail Leathercraft | | | 5,445,594 | | | 723,009 | | | 4,322,466 | | | 549,784 | |
| Other | | | 397,906 | | | 22,109 | | | 407,301 | | | (74,060 | ) |
| Total Operations | | $ | 14,053,225 | | $ | 1,784,123 | | $ | 12,425,520 | | $ | 1,182,233 | |
| | | Twelve Months Ended 12/31/05 | | Twelve Months Ended 12/31/04 | |
| | | Sales | | Operating Income | | Sales | | Operating Income | |
| Wholesale Leathercraft | | $ | 31,046,268 | | $ | 3,721,890 | | $ | 30,630,121 | | $ | 3,013,316 | |
| Retail Leathercraft | | | 18,023,214 | | | 1,766,960 | | | 13,515,662 | | | 1,210,566 | |
| Other | | | 1,650,092 | | | 84,560 | | | 2,000,501 | | | 34,565 | |
| Total Operations | | $ | 50,719,574 | | $ | 5,573,410 | | $ | 46,146,284 | | $ | 4,258,447 | |
Tandy Leather Retail Stores | | Quarter Ended 12/31/05 | | | | Quarter Ended 12/31/04 | |
| | | # of stores | | Sales | | # of stores | | Sales | |
| Stores opened prior to 10/01/04 | | | 39 | | $ | 4,671,016 | | | 39 | | $ | 4,219,535 | |
| Stores opened after 10/01/04 | | | 11 | | | 774,578 | | | 3 | | | 102,931 | |
| Total Sales - Tandy Leather | | | | | $ | 5,445,594 | | | | | $ | 4,322,466 | |
Tandy Leather Retail Stores | | Year Ended 12/31/05 | | | | Year Ended 12/31/04 | |
| | | # of stores | | Sales | | # of stores | | Sales | |
| Stores opened prior to 07/01/04 | | | 32 | | $ | 13,695,434 | | | 32 | | $ | 12,687,566 | |
| Stores opened after 07/01/04 | | | 18 | | | 4,327,780 | | | 10 | | | 828,096 | |
| Total Sales - Tandy Leather | | | | | $ | 18,023,214 | | | | | $ | 13,515,662 | |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2005 AND 2004
| | | Three Months | | Twelve Months | |
| | | 2005 | | 2004 | | 2005 | | 2004 | |
| NET SALES | | $ | 14,053,225 | | $ | 12,425,520 | | $ | 50,719,574 | | $ | 46,146,284 | |
| COST OF SALES | | | 6,119,138 | | | 5,630,880 | | | 21,964,530 | | | 20,706,239 | |
| Gross Profit | | | 7,934,087 | | | 6,794,640 | | | 28,755,044 | | | 25,440,045 | |
| | | | | | | | | �� | | | | | |
| OPERATING EXPENSES | | | 6,149,964 | | | 5,612,406 | | | 23,181,633 | | | 21,181,599 | |
| INCOME FROM OPERATIONS | | | 1,784,123 | | | 1,182,234 | | | 5,573,411 | | | 4,258,446 | |
| | | | | | | | | | | | | | |
| Interest expense | | | - | | | 12,380 | | | 3,188 | | | 53,400 | |
| Other, net | | | (33,287 | ) | | (5,090 | ) | | (137,690 | ) | | (8,600 | ) |
| Total other expense | | | (33,287 | ) | | 7,290 | | | (134,502 | ) | | 44,800 | |
| | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 1,817,410 | | | 1,174,944 | | | 5,707,913 | | | 4,213,646 | |
| PROVISION FOR INCOME TAXES | | | 636,676 | | | 435,464 | | | 1,994,199 | | | 1,559,605 | |
NET INCOME | | $ | 1,180,734 | | $ | 739,480 | | $ | 3,713,714 | | $ | 2,654,041 | |
| | | | | | | | | | | | | | |
| NET INCOME PER COMMON SHARE - BASIC | | $ | 0.11 | | $ | 0.07 | | $ | 0.35 | | $ | 0.25 | |
| NET INCOME PER COMMON SHARE - DILUTED | | $ | 0.11 | | $ | 0.06 | | $ | 0.34 | | $ | 0.24 | |
| | | | | | | | | | | | | | |
| Weighted Average Number of Shares Outstanding: | | | | | | | | | | | | | |
| Basic | | | 10,735,702 | | | 10,554,776 | | | 10,643,004 | | | 10,543,994 | |
| Diluted | | | 11,047,426 | | | 10,888,883 | | | 10,976,240 | | | 10,961,993 | |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
| | | 12/31/05 (unaudited) | | 12/31/04 | |
| Cash | | $ | 3,215,727 | | $ | 2,560,202 | |
| Accounts receivable, net of allowance for doubtful accounts | | | 2,178,848 | | | 2,032,289 | |
| Inventory | | | 15,669,182 | | | 12,749,709 | |
| Deferred income taxes | | | 273,872 | | | 199,308 | |
| Other current assets | | | 358,058 | | | 629,723 | |
Total current assets | | | 21,695,687 | | | 18,171,231 | |
| Property and equipment, net | | | 1,759,477 | | | 1,904,565 | |
| Goodwill and other intangibles, net | | | 1,145,578 | | | 1,180,618 | |
| Other assets | | | 1,079,731 | | | 910,749 | |
| | | $ | 25,680,473 | | $ | 22,167,163 | |
| | | | | | | | |
| Accounts payable | | $ | 1,220,420 | | $ | 1,954,146 | |
| Accrued expenses and other liabilities | | | 2,550,573 | | | 1,682,003 | |
| Income taxes payable | | | 199,581 | | | 22,764 | |
| Notes payable and current maturities of long-term debt | | | 134,067 | | | 134,067 | |
Total current liabilities | | | 4,104,641 | | | 3,792,980 | |
| Deferred income taxes | | | 206,253 | | | 313,006 | |
| Notes payable and long-term debt, net of current maturities | | | 111,722 | | | 750,944 | |
| Total liabilities | | | 4,422,616 | | | 4,856,930 | |
| | | | | | | | |
| Common stock | | | 25,780 | | | 25,345 | |
| Paid-in capital | | | 4,988,445 | | | 4,796,999 | |
| Treasury stock (5,859 shares) | | | (25,487 | ) | | (25,487 | ) |
| Retained earnings | | | 16,172,475 | | | 12,458,760 | |
| Accumulated other comprehensive loss | | | 96,644 | | | 54,616 | |
| Total Stockholders' Equity | | | 21,257,857 | | | 17,310,233 | |
| | | $ | 25,680,473 | | $ | 22,167,163 | |
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2005 AND 2004
| | | 2005 | | 2004 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | |
| Net income | | $ | 3,713,714 | | $ | 2,654,041 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| Depreciation & amortization | | | 456,706 | | | 452,654 | |
| Loss on disposal of assets | | | (9,145 | ) | | (2,000 | ) |
| Deferred income taxes | | | (181,317 | ) | | 38,721 | |
| Other | | | 38,276 | | | 20,123 | |
| Net changes in assets and liabilities: | | | | | | | |
| Accounts receivable-trade, net | | | (146,559 | ) | | (112,738 | ) |
| Inventory | | | (2,919,473 | ) | | (1,303,762 | ) |
| Income taxes | | | 176,817 | | | 228,787 | |
| Other current assets | | | 271,665 | | | (102,163 | ) |
| Accounts payable | | | (733,726 | ) | | 406,357 | |
| Accrued expenses and other liabilities | | | 868,570 | | | 658,692 | |
| Total adjustments | | | (2,178,186 | ) | | 284,670 | |
Net cash provided by operating activities | | | 1,535,528 | | | 2,938,711 | |
| | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | |
| Purchase of property and equipment | | | (272,826 | ) | | (369,559 | ) |
| Payments in connection with businesses acquired | | | - | | | (556,794 | ) |
| Proceeds from sale of assets | | | 9,145 | | | 2,000 | |
| Increase in other assets | | | (168,982 | ) | | 10,280 | |
Net cash used in investing activities | | | (432,663 | ) | | (914,073 | ) |
| | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | |
| Net increase (decrease) in revolving credit loans | | | (505,154 | ) | | (1,287,830 | ) |
| Payments on notes payable and long-term debt | | | (134,067 | ) | | (23,478 | ) |
| Payments received on notes secured by common stock | | | - | | | 20,000 | |
| Repurchase of common stock (treasury stock) | | | - | | | (25,487 | ) |
| Proceeds from issuance of common stock | | | 191,881 | | | 124,015 | |
Net cash used in financing activities | | | (447,340 | ) | | (1,192,780 | ) |
| | | | | | | | |
| NET CHANGE IN CASH | | | 655,525 | | | 831,858 | |
| CASH, beginning of period | | | 2,560,202 | | | 1,728,344 | |
| | | | | | | | |
| CASH, end of period | | $ | 3,215,727 | | $ | 2,560,202 | |
| | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | |
| Interest paid during the period | | $ | 3,188 | | $ | 59,773 | |
| Income taxes paid during the period, net of (refunds) | | | 1,954,364 | | | 1,197,347 | |
| | | | | | | | |
| NON-CASH INVESTING ACTIVITIES: | | | | | | | |
| Equipment acquired under capital lease financing arrangements | | | - | | $ | 402,201 | |
