EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE
  
NOVEMBER 2, 2005             

TANDY LEATHER FACTORY REPORTS 3RD QUARTER EPS UP 50%

FORT WORTH, TEXAS - Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial results for the third quarter of 2005. Consolidated net income for the quarter ended September 30, 2005 was $696,000 compared to consolidated net income of $427,000 for the third quarter of 2004. Fully diluted earnings per share for the quarter was $0.06, compared to $0.04 in the same quarter of last year. Total sales for the quarter ended September 30, 2005 increased 11.3% to $11.8 million from $10.6 million for the same quarter last year.

Consolidated sales for the nine months ended September 30, 2005 were $36.7 million, an increase of 8.7% over $33.7 million, total sales for the first nine months of 2004. Consolidated net income for the first nine months of 2005 was $2.5 million or $0.23 per fully-diluted share versus $1.9 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 third quarter, a 37% improvement over last year's third quarter. Forty-eight stores comprised the Tandy Leather's retail operations on September 30, 2005, compared to thirty-six retail stores a year ago. Two stores were added in the third quarter of 2005 bringing the total number of new stores added in 2005 to six as of the end of the quarter. For the first nine months of 2005, Retail Leathercraft’s sales increased $3.4 million, or 37%, over the first nine months of 2004. Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory wholesale centers and national account group, increased $190,000 over the same quarter last year, a 2.7% increase. The wholesale centers contributed $166,000 to the increase while the national account group contributed $24,000. For the first nine months of 2005, Wholesale Leathercraft’s sales were down $97,000 over the same period in 2004. The decrease is due predominantly to the national account group sales, which were down $560,000 for the year, versus the sales increase at the wholesale centers of $463,000.

Consolidated gross profit margin for the current quarter was 57.4%, improving from 56.1% for the third quarter of 2004. For the first three quarters, consolidated gross profit margin for the current year was 56.8%, an improvement over last year's gross profit margin of 55.3%. Consolidated operating expenses rose $714,000 in the current quarter and $1.4 million for the first nine months over the same periods a year ago. Costs associated with the new retail stores (personnel, rents, utilities, etc.), marketing and advertising costs account for the majority of the increase.

Wray Thompson, Chairman and Chief Executive Officer, commented, “We performed well in the third quarter, given that it is always one of our weakest quarters of the year. Our Retail Leathercraft segment reported a 37% sales gain for the quarter and same store sales, consisting of 36 Tandy Leather stores, were up 11%. The Leather Factory wholesale centers, part of the Wholesale Leathercraft segment, reported a 2.8% sales gain for the quarter, and our national account group ended the quarter with a modest sales increase of 2%, the first quarterly sales gain in two years. Both segments contributed strongly to the increase in operating income of 14% and 23% for the third quarter and year, respectively. As a result, we are re-iterating our 2005 guidance of $48-51 million in revenue and EPS of 30-34 cents.”

Financial Outlook:

The following statements are based on TLF's current expectations as of November 2, 2005. 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 2006 and estimates consolidated net sales for 2006 will be in the range of $50 to $54 million. Diluted EPS for 2006 is expected to be in the range of $0.35 to $0.38. Average diluted shares outstanding in 2006 are estimated to be approximately 11 million shares. The Company assumes an effective tax rate for the year between 35% and 37%.

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@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 09/30/05
  
Quarter Ended 09/30/04
  
   
 
Sales
  
Operating
Income
  
 
Sales
  
Operating
Income
  
Wholesale Leathercraft
  
$
7,257,584
  
$
652,726
  
$
7,067,483
  
$
583,253
  
Retail Leathercraft
    
4,197,711
    
242,499
    
3,053,712
    
168,459
  
Other
    
321,838
    
2,901
    
458,879
    
23,531
  
Total Operations
  
$
11,777,133
  
$
898,126
  
$
10,580,074
  
$
775,243
  

   
Nine Months Ended 09/30/05
  
Nine Months Ended 09/30/04
  
   
 
Sales
  
Operating
Income
  
 
Sales
  
Operating
Income
  
Wholesale Leathercraft
  
$
22,836,543
  
$
2,682,885
  
$
22,934,369
  
$
2,306,807
  
Retail Leathercraft
    
12,577,621
    
1,043,952
    
9,193,196
    
660,782
  
Other
    
1,252,185
    
62,451
    
1,593,199
    
108,625
  
Total Operations
  
$
36,666,349
  
$
3,789,288
  
$
33,720,764
  
$
3,076,214
  


Wholesale Leathercraft
 
Quarter Ended 09/30/05
  
Quarter Ended 09/30/04
  
   
 
  
Sales
    
Sales
  
Distribution centers
    
 
  
$
6,077,364
    
 
  
$
5,910,887
  
National account group
    
 
    
1,180,220
    
 
    
1,156,596
  
Total Sales - Wholesale Leathercraft
   
 
  
$
7,257,584
    
 
  
$
7,067,483
  


Wholesale Leathercraft
 
Nine Months Ended 09/30/05
  
Nine Months Ended 09/30/04
  
   
 
  
Sales
  
 
  
Sales
  
Distribution centers
    
 
  
$
19,108,181
    
 
  
$
18,645,805
  
National account group
    
 
    
3,728,363
    
 
    
4,288,564
  
Total Sales - Wholesale Leathercraft
   
 
  
$
22,836,544
    
 
  
$
22,934,369
  


Retail Leathercraft
 
Quarter Ended 09/30/05
  
Quarter Ended 09/30/04
  
   
# of stores
  
Sales
  
# of stores
  
Sales
  
Same store sales
   
36
  
$
3,393,999
    
36
  
$
3,053,712
  
New store sales
   
12
    
803,712
    
-
    
-
  
Total Sales - Retail Leathercraft
       
$
4,197,711
        
$
3,053,712
  


Retail Leathercraft
 
Nine Months Ended 9/30/05
  
Nine Months Ended 09/30/04
  
   
# of stores
  
Sales
  
# of stores
  
Sales
  
Same store sales
   
32
  
$
9,758,809
    
32
  
$
9,024,854
  
New store sales
   
16
    
2,818,812
    
4
    
168,342
  
Total Sales - Retail Leathercraft
       
$
12,577,621
        
$
9,193,196
  
 

TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

   
THREE MONTHS
  
NINE MONTHS
  
   
2005
  
2004
  
2005
  
2004
  
NET SALES
  
$
11,777,133
  
$
10,580,074
  
$
36,666,349
  
$
33,720,764
  
COST OF SALES
    
5,013,331
    
4,640,641
    
15,845,392
    
15,075,359
  
Gross Profit
    
6,763,802
    
5,939,433
    
20,820,957
    
18,645,405
  
                           
OPERATING EXPENSES
    
5,865,676
    
5,164,190
    
17,031,669
    
15,569,191
  
INCOME FROM OPERATIONS
    
898,126
    
775,243
    
3,789,288
    
3,076,214
  
                           
Interest expense
    
-
    
14,910
    
3,188
    
41,019
  
Other, net
    
(80,185
)
  
(30,600
)
  
(104,404
)
  
(3,509
)
Total other (income) expense
    
(80,185
)
  
(15,690
)
  
(101,216
)
  
37,510
  
INCOME BEFORE INCOME TAXES
   
978,311
    
790,933
    
3,890,504
    
3,038,704
  
PROVISION FOR INCOME TAXES
    
282,221
    
363,548
    
1,357,522
    
1,124,141
  
NET INCOME
  
$
696,090
  
$
427,385
  
$
2,532,982
  
$
1,914,563
  
NET INCOME PER COMMON SHARE - BASIC
  
$
0.07
  
$
0.04
  
$
0.24
  
$
0.18
  
NET INCOME PER COMMON SHARE - DILUTED
  
$
0.06
  
$
0.04
  
$
0.23
  
$
0.17
  
                           
Weighted Average Number of Shares Outstanding:
                          
Basic
    
10,679,389
    
10,560,661
    
10,626,857
    
10,540,374
  
Diluted
    
11,029,840
    
10,931,940
    
10,965,922
    
10,986,541
  

TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
   
09/30/05
(unaudited)
  
12/31/04
  
Cash
  
$
1,768,175
  
$
2,560,202
  
Accounts receivable, net of allowance for doubtful accounts
    
2,407,452
    
2,032,289
  
Inventory
    
17,534,039
    
12,749,709
  
Prepaid income taxes
    
7,504
    
-
  
Deferred income taxes
    
274,071
    
199,308
  
Other current assets
    
860,484
    
629,723
  
Total current assets
    
22,851,725
    
18,171,231
  
Property and equipment, net
    
1,785,312
    
1,904,565
  
Goodwill and other intangibles, net
    
1,155,033
    
1,180,618
  
Other assets
    
1,079,316
    
910,749
  
   
$
26,871,386
  
$
22,167,163
  
               
Accounts payable
  
$
3,266,147
  
$
1,954,146
  
Accrued expenses and other liabilities
    
3,055,525
    
1,682,003
  
Income taxes payable
    
-
    
22,764
  
Current maturities of capital lease obligations and long-term debt
    
134,067
    
134,067
  
Total current liabilities
    
6,455,739
    
3,792,980
  
Deferred income taxes
    
214,025
    
313,006
  
Capital lease obligations and long-term debt, net of current maturities
    
145,239
    
750,944
  
Total Liabilities
    
6,815,003
    
4,856,930
  
               
Common stock
    
25,729
    
25,345
  
Paid-in capital
    
4,971,028
    
4,796,999
  
Retained earnings
    
14,991,741
    
12,458,760
  
Treasury stock
   
(25,487
)
  
(25,487
)
Accumulated other comprehensive loss
    
93,372
    
54,616
  
Total Stockholders' Equity
    
20,056,383
    
17,310,233
  
   
$
26,871,386
  
$
22,167,163
  

 
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTMEBER 30, 2005 AND 2004

   
2005
  
2004
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
 
$
2,532,982
  
$
1,914,563
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Depreciation & amortization
    
346,216
    
366,077
  
Gain on disposal of assets
    
(9,145
)
  
-
  
Deferred income taxes
    
(173,744
)
  
13,759
  
Other
    
35,123
    
3,137
  
Net changes in assets and liabilities:
              
Accounts receivable-trade, net
    
(375,163
)
  
(413,810
)
Inventory
    
(4,784,330
)
  
(1,739,977
)
Income taxes
    
(30,268
)
  
191,666
  
Other current assets
    
(230,761
)
  
93,380
  
Accounts payable
    
1,312,001
    
87,279
  
Accrued expenses and other liabilities
    
1,373,522
    
178,494
  
Total adjustments
    
(2,536,549
)
  
(1,219,995
)
Net cash provided by operating activities
   
(3,567
)
  
694,568
  
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Purchase of property and equipment
    
(197,746
)
  
(267,552
)
Payments in connection with businesses acquired
    
-
    
(156,454
)
Proceeds from sale of assets
    
9,145
    
-
  
Increase in other assets
   
(168,567
)
  
11,387
  
Net cash used in investing activities
    
(357,168
)
  
(412,619
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Net increase (decrease) in revolving credit loans
    
(505,154
)
  
(786,162
)
Payments on notes payable and long-term debt
    
(100,551
)
  
(1,134
)
Payments received on notes secured by common stock
    
-
    
5,000
  
Repurchase of common stock (treasury stock)
    
-
    
(23,960
)
Proceeds from issuance of common stock
    
174,413
    
124,015
  
Net cash used in financing activities
    
(431,292
)
  
(682,241
)
               
NET CHANGE IN CASH
    
(792,027
)
  
(400,292
)
CASH, beginning of period
    
2,560,202
    
1,728,344
  
               
CASH, end of period
  
$
1,768,175
  
$
1,328,052
  
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
              
Interest paid during the period
  
$
3,188
  
$
43,960
  
Income taxes paid during the period, net of (refunds)
    
1,541,134
    
848,427