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): October
31, 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 October 31, 2006 issued a press release regarding
its
financial results for the three and nine months ended September 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.
| (c) |
Exhibits.
|
No. Exhibit
99.1 Press
release dated October 31, 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:
November 6, 2006
|
By:
/s/
Wray Thompson
|
|
Wray
Thompson, Chairman of the Board
|
|
|
and
Chief Executive Officer
|
EXHIBIT
99.1
FOR
IMMEDIATE RELEASE October
31, 2006
TANDY
LEATHER FACTORY REPORTS 3RD QUARTER 2006 EPS UP 27%
PROVIDES
2007 REVENUE AND EPS GUIDANCE
FORT
WORTH, TEXAS - Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial
results for the third quarter of 2006. Consolidated net income for the quarter
ended September 30, 2006 was $890,000 compared to consolidated net income of
$696,000 for the third quarter of 2005. Fully diluted earnings per share for
the
quarter was $0.08, compared to $0.06 in the third quarter of last year. Total
sales for the quarter ended September 30, 2006 increased 6.6% to $12.6 million
from $11.8 million for the same quarter last year.
Consolidated
sales for the nine months ended September 30, 2006 were $40.4 million, an
increase of 10% over 2005’s comparable sales of $36.7 million. Consolidated net
income for the first nine months of 2006 was $3.4 million or $0.30 per
fully-diluted share versus $2.5 million or $0.23 per fully-diluted share in
the
comparable period last year.
Sales
in
the Retail Leathercraft segment, which consists of the Tandy Leather stores,
increased $924,000 in the third quarter, a 22% improvement over last year's
third quarter. Sixty-two stores comprised the Tandy Leather's retail operations
on September 30, 2006, compared to forty-eight retail stores a year ago. One
store was added in the third quarter of 2006 bringing the total number of new
stores added in 2006 to twelve. For the first nine months of 2006, Tandy Leather
sales increased $3.3 million, or 26%, over the first nine months of 2005. Third
quarter sales for the Wholesale Leathercraft segment, which consists of the
Leather Factory wholesale centers and national account group, decreased $144,000
over the same quarter last year, a 2% decrease. For the first nine months of
2006, Wholesale Leathercraft’s sales were up $414,000, or 2%, over the same
period in 2005.
Consolidated
gross profit margin for the current quarter was 56.3%, down from 57.4% in the
third quarter of 2005. For the first three quarters of 2006, consolidated gross
profit margin was 56.8%, the same as for the first three quarters of 2005.
Consolidated operating expenses declined $58,000 in the current quarter compared
to the third quarter of 2005. For the first nine months of 2006, consolidated
operating expenses increased $872,000 over the comparable period of 2005. Costs
associated with the new retail stores (personnel, rents, utilities, etc.)
continue to drive operating expense increases, offset somewhat by reductions
in
various corporate expenses and some employee benefit costs. Consolidated
operating margins improved for the quarter and year to 10.1% and 12.4%,
respectively, compared to 7.6% and 10.3% a year ago.
Wray
Thompson, Chairman and Chief Executive Officer, commented, “There are some
bright spots in the quarter, even though our sales were not as strong as we
would have liked. Our operating income for the quarter increased by 40% on
a
sales gain of 7% and for the year, operating income is up 32% on a sales gain
of
10%. As a result, we are
tightening up our 2006 guidance to the high end of our original estimates,
expecting to end the year with revenues of $55 to 56 million and 43 to 44 cents
in fully-diluted earnings per share.”
Mr.
Thompson continued, “Same
store sales in our Retail Leathercraft segment were up 4% and 9% for the quarter
and the year, respectively. In our Wholesale Leathercraft segment, the wholesale
centers are performing according to our expectations, reporting a sales gain
of
4% for the year, even though sales for the quarter were flat. The National
Account group reported sales declines of 3% and 2% for the quarter and the
year
and will probably end the year with similar results. With that said, we are
expecting a strong fourth quarter from our retail stores and wholesale
centers.”
Financial
Outlook:
The
following statements are based on TLF's current expectations as of October
31, 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 plans to open 12 Tandy Leather retail stores in 2007 and estimates
consolidated net sales for 2007 will be in the range of $60-62 million, an
8-10%
increase over 2006 estimates. Diluted EPS for 2007 is expected to be in the
range of $0.54 to $0.57, or 24-28% improvement over 2006 estimates. Average
diluted shares outstanding in 2006 are estimated to be approximately 11.1
million shares. The Company assumes an effective tax rate for the year 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, 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
(http://www.leatherfactory.com)
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@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 09/30/06
|
Quarter
Ended 09/30/05
|
||||||
|
Sales
|
Operating
Income
|
Sales
|
Operating
Income
|
||||
|
Wholesale
Leathercraft
|
$7,113,181
|
$910,942
|
$7,257,583
|
$652,726
|
|||
|
Retail
Leathercraft
|
5,121,556
|
362,744
|
4,197,712
|
242,499
|
|||
|
Other
|
324,856
|
(9,714)
|
321,838
|
2,901
|
|||
|
Total
Operations
|
$12,559,593
|
$1,263,972
|
$11,777,133
|
$898,126
|
|||
|
Nine
Months Ended 09/30/06
|
Nine
Months Ended 09/30/05
|
||||||
|
Sales
|
Operating
Income
|
Sales
|
Operating
Income
|
||||
|
Wholesale
Leathercraft
|
$23,250,338
|
$3,675,658
|
$22,836,542
|
$2,682,884
|
|||
|
Retail
Leathercraft
|
15,858,835
|
1,323,105
|
12,577,621
|
1,043,951
|
|||
|
Other
|
1,257,152
|
5,749
|
1,252,185
|
62,452
|
|||
|
Total
Operations
|
$40,366,325
|
$5,004,512
|
$36,666,348
|
$3,789,287
|
|||
|
Wholesale
Leathercraft
|
Quarter
Ended 09/30/05
|
Quarter
Ended 09/30/05
|
||||
|
Sales
|
Sales
|
|||||
|
Distribution
centers
|
$5,968,100
|
$5,970,813
|
||||
|
Center
converted to retail store
|
-
|
106,550
|
||||
|
National
account group
|
1,145,081
|
1,180,220
|
||||
|
Total
Sales - Wholesale Leathercraft
|
$7,113,181
|
$7,257,583
|
||||
|
Wholesale
Leathercraft
|
Nine
Months Ended 09/30/06
|
Nine
Months Ended 09/30/05
|
||||
|
Sales
|
Sales
|
|||||
|
Distribution
centers
|
$19,548,188
|
$18,823,270
|
||||
|
Center
converted to retail store
|
28,641
|
284,909
|
||||
|
National
account group
|
3,673,509
|
3,728,363
|
||||
|
Total
Sales - Wholesale Leathercraft
|
$23,250,338
|
$22,836,542
|
||||
|
Retail
Leathercraft
|
Quarter
Ended 09/30/06
|
Quarter
Ended 09/30/05
|
|||
|
#
of stores
|
Sales
|
#
of stores
|
Sales
|
||
|
Same
store sales
|
46
|
$4,327,423
|
46
|
$4,164,818
|
|
|
Store
converted from whsl center
|
1
|
116,322
|
-
|
-
|
|
|
New
store sales
|
15
|
677,811
|
2
|
32,894
|
|
|
Total
Sales - Retail Leathercraft
|
62
|
$5,121,556
|
48
|
$4,197,712
|
|
|
Retail
Leathercraft
|
Nine
Months Ended 09/30/06
|
Nine
Months Ended 09/30/05
|
|||
|
#
of stores
|
Sales
|
#
of stores
|
Sales
|
||
|
Same
store sales
|
52
|
$13,008,836
|
42
|
$12,117,898
|
|
|
Store
converted from whsl center
|
1
|
332,998
|
-
|
-
|
|
|
New
store sales
|
9
|
2,517,001
|
6
|
459,723
|
|
|
Total
Sales - Retail Leathercraft
|
62
|
$15,858,835
|
48
|
$12,577,621
|
|
TANDY
LEATHER FACTORY, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
2005
|
THREE
MONTHS
|
NINE
MONTHS
|
||||||
|
2006
|
2005
|
2006
|
2005
|
||||
|
NET
SALES
|
$12,559,593
|
$11,777,133
|
$40,366,325
|
$36,666,348
|
|||
|
COST
OF SALES
|
5,488,179
|
5,013,331
|
17,458,476
|
15,845,392
|
|||
|
Gross
profit
|
7,071,414
|
6,763,802
|
22,907,849
|
20,820,956
|
|||
|
OPERATING
EXPENSES
|
5,807,442
|
5,865,676
|
17,903,337
|
17,031,669
|
|||
|
INCOME
FROM OPERATIONS
|
1,263,972
|
898,126
|
5,004,512
|
3,789,287
|
|||
|
OTHER
INCOME (EXPENSE):
|
|||||||
|
Interest
expense
|
-
|
-
|
-
|
(3,188)
|
|||
|
Other,
net
|
37,422
|
80,185
|
84,951
|
104,404
|
|||
|
Total
other income (expense)
|
37,422
|
80,185
|
84,951
|
101,216
|
|||
|
INCOME
BEFORE INCOME TAXES
|
1,301,394
|
978,311
|
5,089,463
|
3,890,503
|
|||
|
PROVISION
FOR INCOME TAXES
|
410,975
|
282,221
|
1,720,288
|
1,357,522
|
|||
|
NET
INCOME
|
$890,419
|
$696,090
|
$3,369,175
|
$2,532,981
|
|||
|
NET
INCOME PER COMMON SHARE-BASIC
|
$0.08
|
$0.07
|
$0.31
|
$0.24
|
|||
|
NET
INCOME PER COMMON SHARE-DILUTED
|
$0.08
|
$0.06
|
$0.30
|
$0.23
|
|||
|
Weighted
Average Number of Shares Outstanding:
|
|||||||
|
Basic
|
10,818,130
|
10,679,389
|
10,788,720
|
10,626,857
|
|||
|
Diluted
|
11,102,383
|
11,029,840
|
11,105,903
|
10,965,922
|
|||
TANDY
LEATHER FACTORY, INC.
CONSOLIDATED
BALANCE SHEETS
|
September
30,
2006
(unaudited)
|
December
31,
2005
(audited)
|
||
|
ASSETS
|
|||
|
CURRENT
ASSETS:
|
|||
|
Cash
|
$4,970,230
|
$3,215,727
|
|
|
Accounts
receivable-trade, net of allowance for doubtful accounts
|
|||
|
of
$134,000 and $138,000 in 2006 and 2005, respectively
|
2,427,790
|
2,178,848
|
|
|
Inventory
|
17,162,865
|
15,669,182
|
|
|
Prepaid
income taxes
|
213,095
|
-
|
|
|
Deferred
income taxes
|
229,015
|
273,872
|
|
|
Other
current assets
|
1,006,938
|
358,058
|
|
|
Total
current assets
|
26,009,933
|
21,695,687
|
|
|
PROPERTY
AND EQUIPMENT, at cost
|
6,757,607
|
6,424,091
|
|
|
Less
accumulated depreciation and amortization
|
(4,878,481)
|
(4,664,614)
|
|
|
1,879,126
|
1,759,477
|
||
|
GOODWILL
|
751,082
|
746,611
|
|
|
OTHER
INTANGIBLES, net of accumulated amortization of
|
|||
|
$252,000
and $223,000 in 2006 and 2005, respectively
|
370,248
|
398,967
|
|
|
OTHER
assets
|
1,070,323
|
1,079,731
|
|
|
$30,080,712
|
$25,680,473
|
||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||
|
CURRENT
LIABILITIES:
|
|||
|
Accounts
payable-trade
|
$3,144,495
|
$1,220,420
|
|
|
Accrued
expenses and other liabilities
|
1,719,699
|
2,550,573
|
|
|
Income
taxes payable
|
-
|
199,581
|
|
|
Current
maturities of capital lease obligations
|
134,067
|
134,067
|
|
|
Total
current liabilities
|
4,998,261
|
4,104,641
|
|
|
DEFERRED
INCOME TAXES
|
218,371
|
206,253
|
|
|
LONG-TERM
DEBT, net of current maturities
|
-
|
-
|
|
|
CAPITAL
LEASE OBLIGATIONS, net of current maturities
|
11,172
|
111,722
|
|
|
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;
|
|||
|
10,837,000
and 10,741,835 shares issued at 2006 and 2005,
respectively;
|
|||
|
10,831,141
and 10,735,976 outstanding at 2006 and 2005, respectively
|
26,008
|
25,780
|
|
|
Paid-in
capital
|
5,173,407
|
4,988,445
|
|
|
Retained
earnings
|
19,541,650
|
16,172,475
|
|
|
Treasury
stock
|
(25,487)
|
(25,487)
|
|
|
Accumulated
other comprehensive income
|
137,330
|
96,644
|
|
|
Total
stockholders' equity
|
24,852,908
|
21,257,857
|
|
|
$30,080,712
|
$25,680,473
|
TANDY
LEATHER FACTORY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
|
2006
|
2005
|
||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||
|
Net
income
|
$3,369,175
|
$2,532,981
|
|
|
Adjustments
to reconcile net income to net
|
|||
|
cash
provided by operating activities-
|
|||
|
Depreciation
& amortization
|
291,257
|
346,217
|
|
|
Gain
on disposal of assets
|
(1,750)
|
(9,145)
|
|
|
Non-cash
stock-based compensation
|
78,600
|
-
|
|
|
Deferred
income taxes
|
56,975
|
(173,744)
|
|
|
Other
|
36,217
|
35,123
|
|
|
Net
changes in assets and liabilities:
|
|||
|
Accounts
receivable-trade, net
|
(248,942)
|
(375,163)
|
|
|
Inventory
|
(1,493,683)
|
(4,784,330)
|
|
|
Income
taxes
|
(412,676)
|
(30,268)
|
|
|
Other
current assets
|
(648,880)
|
(230,761)
|
|
|
Accounts
payable
|
1,924,075
|
1,312,001
|
|
|
Accrued
expenses and other liabilities
|
(830,874)
|
1,373,522
|
|
|
Total
adjustments
|
(1,249,681)
|
(2,536,548)
|
|
|
Net
cash provided by operating activities
|
2,119,494
|
(3,567)
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||
|
Purchase
of property and equipment
|
(382,187)
|
(197,746)
|
|
|
Proceeds
from sale of assets
|
1,750
|
9,145
|
|
|
Decrease
(increase) in other assets
|
9,407
|
(168,567)
|
|
|
Net
cash used in investing activities
|
(371,030)
|
(357,168)
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||
|
Net
increase (decrease) in revolving credit loans
|
-
|
(505,154)
|
|
|
Payments
on capital lease obligations
|
(100,551)
|
(100,551)
|
|
|
Proceeds
from issuance of common stock
|
106,590
|
174,413
|
|
|
Net
cash provided by (used in) financing activities
|
6,039
|
(431,292)
|
|
|
NET
CHANGE IN CASH
|
1,754,503
|
(792,027)
|
|
|
CASH,
beginning of period
|
3,215,727
|
2,560,202
|
|
|
CASH,
end of period
|
$4,970,230
|
$1,768,175
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||
|
Interest
paid during the period
|
-
|
$3,188
|
|
|
Income
taxes paid during the period, net of (refunds)
|
$1,833,737
|
1,541,134
|