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CST: 13/11/2019 21:42:19   

Tandy Leather Factory Reports Q4 and FY 2018 Financial Results

252 Days ago

FORT WORTH, Texas, March 06, 2019 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ: TLF) today reported financial results for the fourth quarter and year ended December 31, 2018.  A conference call will be conducted by senior management at 10:00 am Eastern Time on March 7, 2019.  Dial-in details are referenced below.

  • Total sales for the fourth quarter of 2018 were $24.7 million, up 1.0% over fourth quarter 2017.  North America reported comparable store sales increase of 0.7%, while new stores added $0.3 million of sales. International reported comparable store sales decline of 1.3%.
  • Q4’18 gross profit margin decreased to 57.4% (after adjusting for a $1.4 million write down for damaged and slow-moving items) compared to prior year’s 62.4%.
  • Q4’18 operating loss was approximately $237,000 due to higher costs associated with its recent change in management, exit costs associated with store closures, and impairment charges for underperforming stores. 
  • At December 31, 2018, cash totaled $24.1 million.  During 2018, cash provided by operations equaled $6.9 million, while 243,387 treasury shares were repurchased at an average price of $6.79.  These stock repurchases were primarily funded by the Company’s line of credit which totaled $9.0 million and bore interest at 4.0%.  To date in 2019, the Company has fully repaid its debt and repurchased an additional 53,626 shares totaling $306,000 under its buy-back program.

Commenting on the results, Janet Carr, Chief Executive Officer, said, “As expected, our fourth-quarter 2018 results reflected the glide path of the business leading into the quarter with some transition and clean-up layered on.  More importantly, in Q4 we began the process of revitalizing our brand and building the operating model and infrastructure that will support our long-term vision for the business.  This work and these investments will continue into 2019 as we put the Company on the right foundation for exciting future growth.”

Consolidated net loss for the quarter ended December 31, 2018 was $0.6 million compared to $1.7 million consolidated net income for the fourth quarter of 2017.  Fully diluted (loss) earnings per share (“EPS”) for the fourth quarter of 2018 were ($0.07), compared to $0.18 in last year’s fourth quarter.  Included in fourth quarter 2018’s results were the following discrete items:

  • $1.4 million write down of inventory to net realizable value for damaged and slow-moving inventory to be disposed or sold through in the first half of 2019.
  • $0.6 million of non-recurring charges related to separation agreements executed with its former officers that included accelerated vesting of restricted stock units, as well as severance payments and other benefits. 
  • $0.2 million of exit costs associated with the recent closure of its Irving, TX; Fort Wayne, IN; and Minto, Australia stores consisting of involuntary termination benefits and lease exit obligation costs.
  • $0.3 million of impairment charges related to four underperforming stores.
  • $0.2 million of additional taxes related to cross-border intercompany transactions with its Canadian subsidiary.

Consolidated net income for full year 2018 decreased to $2.0 million or EPS of $0.21 versus $4.5 million or $0.48 in the comparable period last year.  In addition to the discrete items included in the fourth quarter results mentioned above, 2018 results also include $0.6 million of higher costs associated with the five stores that have opened since April 2017, $0.8 million of higher labor costs for increases in store associate wages and testing extending store operating hours, partially offset by $0.9 million of lower print and postage costs.

At December 31, 2018, inventory totaled $33.9 million, a decrease of $3.4 million from the beginning of the year.  The Company plans to continue to improve its inventory turnover. 

Key Initiatives

Strategic plans to drive future sales growth and long-term profitability include the following key actions that are currently being undertaken: 

  • We are developing a new operating model to better serve our retail and wholesale/business customers and align the cost structure with the related margin earned from those customers.   
  • Enhancing our business processes and infrastructure to support our new operating model requires additional headcount in areas such as human resources, technology and marketing.  We expect that 2019 will be a year of investment and change as we rebuild our infrastructure, and there may be some overlap of old and new systems and people during this transition, which will inflate our 2019 operating expenses.  We believe that these investments in talent and technology will drive future sales growth and cost savings in 2020 and beyond.    
  • Going forward, our retail fleet will be managed primarily for cash flow which may result in an additional four to six store closures in 2019.
  • To support our business priorities, we have made changes to our Retail field organization and incentives, including reducing our store management structure, which allows us to invest in other areas of the business.
  • We are improving our brand proposition, with a focus on our products, promotion and pricing.  Our goal is to ensure that we are investing in the right areas to drive sales growth. 

Conference Call Information

A conference call will be conducted by senior management at 10:00 a.m. Eastern Time on March 7, 2019, and will be accessible to the public by calling 877-312-5524 or 253-237-1144.  Callers should dial in approximately 5 minutes before the call begins. A conference call replay will be available through 12:00 p.m. Eastern Time on March 12, 2019 and can be accessed by calling 855-859-2056 or 404-537-3406.  For both, reference conference ID number 9687767.  This call will be webcast and can be accessed at the company’s web site at www.tandyleather.com.   

Tandy Leather Factory, Inc., (http://www.tandyleather.com), headquartered in Fort Worth, Texas, is a specialty retailer 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 115 North American stores located in 42 US states and 7 Canadian provinces, and two International stores located in the United Kingdom and Spain.  Its common stock trades on the Nasdaq 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.

Contact: Tina Castillo, Tandy Leather Factory, Inc. (817) 872-3200 or tcastillo@tandyleather.com

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 (UNAUDITED):

  Quarter Ended 12/31/18   Quarter Ended 12/31/17
   
Net Sales
  Loss from
Operations
   
Net Sales
  Income from
Operations
North America $23,913,163   ($200,423 )   $23,488,067   $3,222,571  
International   831,240     (37,000 )     1,014,205     (23,952 )
Total Operations $24,744,403   ($237,423 )   $24,502,272   $3,198,619  


  Year Ended 12/31/18   Year Ended 12/31/17
     

Net Sales
  Income
(Loss) from
Operations
     

Net Sales
  Income
(Loss) from
Operations
North America $79,553,353   $4,182,969     $78,568,219   $7,498,817  
International   3,544,834     (354,506 )     3,753,049     (256,995 )
Total Operations $83,098,187   $3,828,463     $82,321,268   $7,241,822  


North America Quarter Ended 12/31/18   Quarter Ended 12/31/17
  # of
stores
Net Sales   # of
stores
Net Sales
Same stores* 115 $23,655,946   115 $23,488,067
New stores 2   257,217   -   -
Total Sales – North America 117 $23,913,163   115 $23,488,067


North America Year Ended 12/31/18   Year Ended 12/31/17
  # of
stores
Net Sales   # of
stores
Net Sales
Same stores* 111 $77,136,143   111 $77,460,635
New stores 5   1,798,936   3   612,174
Closed/temp close stores 1   618,274   1   495,410
Total Sales – North America 117 $79,553,353   115 $78,568,219


International Quarter Ended 12/31/18   Quarter Ended 12/31/17
  # of
stores
Net Sales   # of
stores
Net Sales
Same stores* 3 $831,240   3 $842,035
Closed store 1   -   1   172,170
Total Sales – International 4 $831,240   4 $1,014,205


International Year Ended 12/31/18   Year Ended 12/31/17
  # of
stores
Net Sales   # of
stores
Net Sales
Same stores* 3 $3,097,440   3 $3,062,862
Closed store 1   447,394   1   690,187
Total Sales – International 4 $3,544,834   4 $3,753,049

*Same store sales are defined as sales from existing stores that were opened during the same comparable fiscal period

TANDY LEATHER FACTORY, INC.
(UNAUDITED)
CONSOLIDATED BALANCE SHEETS

  12/31/18   12/31/17
ASSETS      
CURRENT ASSETS:      
Cash $24,070,351     $18,337,258  
Accounts receivable-trade, net of allowance for doubtful accounts      
   of $15,703 and $22,642 in 2018 and 2017, respectively   408,170       461,212  
Inventory   33,867,276       37,311,197  
Prepaid income taxes   383,478       41,307  
Prepaid expenses   1,244,754       1,473,147  
Other current assets   161,208       189,029  
Total current assets   60,135,237       57,813,150  
       
PROPERTY AND EQUIPMENT, at cost   28,005,563       27,218,481  
Less accumulated depreciation and amortization   (13,606,266 )     (11,750,639 )
    14,399,297       15,467,842  
       
DEFERRED INCOME TAXES   248,228       271,738  
GOODWILL   954,765       962,949  
OTHER INTANGIBLES, net of accumulated amortization of      
   $713,000 and $710,000 in 2018 and 2017, respectively   16,500       19,222  
OTHER ASSETS   386,107       379,695  
  $76,140,134     $74,914,596  
       
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
Accounts payable-trade $1,215,490     $1,413,450  
Accrued expenses and other liabilities   4,939,829       4,953,477  
Current maturities of capital lease obligation   -       -  
Current maturities of long-term debt   747,335       614,311  
Total current liabilities   6,902,654       6,981,238  
       
DEFERRED INCOME TAXES   1,556,493       1,636,958  
       
LONG-TERM DEBT, net of current maturities   8,220,683       6,757,419  
       
COMMITMENTS AND CONTINGENCIES      
       
STOCKHOLDERS' EQUITY:      
Preferred stock, $0.10 par value; 20,000,000 shares      
   authorized, none issued or outstanding   -       -  
Common stock, $0.0024 par value; 25,000,000 shares      
   authorized, 11,346,778 and 11,313,692 shares issued at 2018 and 2017,      
   9,060,561 and 9,270,862 outstanding at 2018 and 2017, respectively   27,232       27,153  
Paid-in capital   7,158,821       6,831,271  
Retained earnings   65,716,761       63,921,244  
Treasury stock at cost (2,286,217 and 2,042,830 shares at 2018 and 2017)   (11,931,850 )     (10,278,584 )
Accumulated other comprehensive income   (1,510,660 )     (962,103 )
Total stockholders' equity   59,460,304       59,538,981  
  $76,140,134     $74,914,596  
       



TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31,

  THREE MONTHS   TWELVE MONTHS
    2018       2017       2018       2017  
NET SALES $24,744,403     $24,502,272     $83,098,187     $82,321,268  
               
COST OF SALES   11,972,449       9,205,353       32,517,996       30,207,439  
               
    Gross profit   12,771,954       15,296,919       50,580,191       52,113,829  
               
OPERATING EXPENSES   13,009,377       12,098,300       46,751,728       44,872,007  
               
(LOSS) INCOME FROM OPERATIONS   (237,423 )     3,198,619       3,828,463       7,241,822  
               
OTHER EXPENSE (INCOME):              
    Interest expense   81,423       62,390       304,957       205,555  
    Other (income), net   (53,732 )     (11,258 )     (180,191 )     (126,857 )
         Total other expense   27,691       51,132       124,766       78,698  
               
(LOSS) INCOME BEFORE INCOME TAXES   (265,114 )     3,147,487       3,703,697       7,163,124  
               
PROVISION FOR INCOME TAXES   363,235       1,476,147       1,739,869       2,711,373  
               
NET (LOSS) INCOME ($628,349 )   $1,671,340     $1,963,828     $4,451,751  
               
               
               
NET(LOSS) INCOME PER COMMON SHARE:              
Basic ($0.07 )   $0.18     $0.21     $0.48  
Diluted ($0.07 )   $0.18     $0.21     $0.48  
               
Weighted Average Number of Shares Outstanding:              
  Basic   9,143,746       9,270,862       9,185,203       9,242,092  
  Diluted   9,143,746       9,272,330       9,185,662       9,256,810  


TANDY LEATHER FACTORY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31,

    2018       2017  
CASH FLOWS FROM OPERATING ACTIVITIES:      
  Net income $1,963,828     $4,451,751  
  Adjustments to reconcile net income to net cash provided by operating activities:      
  Depreciation and amortization   1,797,281       1,875,102  
  Impairment of long-lived assets   285,477       -  
  Loss on disposal or abandonment of assets   1,321       3,139  
  Non-cash stock-based compensation   327,629       239,599  
  Deferred income taxes   (90,997 )     (215,576 )
  Foreign currency translation   (502,559 )     883,670  
  Net changes in assets and liabilities:      
       Accounts receivable-trade, net   53,042       99,772  
       Inventory   3,443,921       (4,133,658 )
       Prepaid expenses   239,082       135,713  
       Other current assets   27,821       (48,797 )
       Accounts payable-trade   (197,960 )     (208,434 )
       Accrued expenses and other liabilities   (181,959 )     (983,710 )
       Income taxes payable   (308,129 )     923,016  
  Total adjustments   4,893,970       (1,430,164 )
               Net cash provided by operating activities   6,857,798       3,021,587  
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
  Purchase of property and equipment   (1,091,433 )     (1,689,645 )
  Proceeds from sale of assets / insurance   27,396       35,963  
  (Increase) in other assets   (3,690 )     (43,669 )
               Net cash used in investing activities   (1,067,727 )     (1,697,351 )
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
  Proceeds from notes payable and long term debt   1,596,288       -  
  Repurchase of common stock (treasury stock)   (1,653,266 )     -  
  Proceeds from exercise of stock options   -       223,404  
               Net cash (used in) provided by financing activities   (56,978 )     150,718  
       
NET INCREASE IN CASH   5,733,093       1,474,954  
       
CASH, beginning of period   18,337,258       16,862,304  
       
CASH, end of period $24,070,351     $18,337,258  
       
       
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:      
Interest paid during the period $304,957     $205,555  
Income tax paid during the period, net of (refunds) $2,138,995     $1,788,357  

 

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