updated 5/12/2011 7:46:18 AM ET 2011-05-12T11:46:18

FORT WORTH, Texas, May 12, 2011 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (Nasdaq:TLF) today reported financial results for the first quarter of 2011. Net income for the quarter ended March 31, 2011 was $1,151,000, up from net income of $948,000 in the first quarter of 2010, an increase of 21%. Fully-diluted earnings per share for the quarter were $0.11 in the current quarter, compared to $0.09 in last year's first quarter. Total sales for the first quarter were $15.9 million, an increase of 8.9% compared to 2010's first quarter sales of $14.6 million.

Sales from the Retail Leathercraft division, consisting of the Tandy Leather retail store chain, increased $1 million in the first quarter, up 14% from last year's first quarter sales. The store chain consisted of seventy-six stores as of March 31, 2011 and 2010. First quarter sales for the Wholesale Leathercraft division, consisting of the Leather Factory wholesale stores and the National Account group, increased $133,000, or 2% from the same quarter last year. International Leathercraft, consisting of one store located in the United Kingdom, added sales of $509,000 for the quarter, a 32% increase over last year's first quarter sales of $384,000.

Consolidated gross profit margin decreased from 61.5% in the first quarter of 2010 to 60.0% in the first quarter of 2011 due to rising product costs.  Operating expenses increased $172,000 in the first quarter of 2011 to $7.6 million compared to $7.4 million in the first quarter of 2010, decreasing as a percentage of revenue from 51.0% in 2010 to 47.9% in 2011. 

Jon Thompson, Chief Executive Officer and President, commented, "The first quarter was successful as both sales and earnings increased. Further, all three divisions contributed to the sales gain and earnings growth. Gross margin is down slightly as we have discussed in our last several news releases. Product costs are on the rise and we expect they will remain high through the remainder of the year. Our buyers are working hard to limit cost increases as much as possible, but it is getting more difficult. Until we can adjust selling prices in the fourth quarter, the pressure on margins continues."  

Shannon L. Greene, Chief Financial Officer, added, "We controlled our operating expenses well for the quarter as they only rose 2% compared to a year ago. With pressure on gross margin, it is even more important to keep operating expenses in check to maximize earnings. Our inventory levels are higher than we would prefer, however, we prepared for a nationwide Open House event in early April that accounted for a large portion of the inventory reduction originally expected in March. Also, in order to protect margins as much as possible, we will continue to purchase larger quantities of our stock leathers as they become available if we can negotiate aggressive pricing by buying in bulk and paying cash. Despite the challenges, we believe we are on track to meet our 2011 guidance."

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, 76 Tandy Leather retail stores, located in 36 states and 6 Canadian provinces, and one combination wholesale/retail store located in the United Kingdom. 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.

The Tandy Leather Factory, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7760

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:

  Quarter Ended 03/31/11   Quarter Ended 03/31/10
    Sales   Operating

Income
   

Sales
  Operating

Income
Wholesale Leathercraft $6,720,709   $808,314   $6,587,804   $534,196
Retail Leathercraft 8,649,152   1,004,042   7,616,296   922,738
International 509,179   100,132   384,438   79,434
Total Operations $15,879,040   $1,912,488   $14,588,538   $1,536,368
       
Wholesale Leathercraft Quarter Ended 03/31/11   Quarter Ended 03/31/10
  # of stores Sales   # of stores Sales
Same store sales 29 $5,933,280   29 $5,694,280
Closed store sales - -   1 88,896
National account group   787,429     804,628
Total Sales – Wholesale Leathercraft 29 $6,720,709   30 $6,587,804
       
Retail Leathercraft Quarter Ended 03/31/11   Quarter Ended 03/31/10
  # of stores Sales   # of stores Sales
Same store sales 75 $8,554,309   75 $7,583,485
New store sales 1 94,843   1 32,811
Total Sales – Retail Leathercraft 76 $8,649,152   76 $7,616,296
 
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS 
     
  03/31/2011

(unaudited)
12/31/2010

(audited)
ASSETS    
CURRENT ASSETS:    
Cash $3,605,189 $4,293,746
Short-term investments, including certificates of deposit 1,616,593 1,621,593
Accounts receivable-trade, net of allowance for doubtful accounts of $118,000 and $147,000 in 2011 and 2010, respectively 1,434,117 1,253,639
Inventory  20,209,855 20,236,028
Deferred income taxes 302,121 307,509
Other current assets 1,669,881 1,056,201
Total current assets 28,837,756 28,768,716
     
PROPERTY AND EQUIPMENT, at cost 14,539,446 14,390,662
Less accumulated depreciation and amortization (4,333,607) (4,106,121)
  10,205,839 10,284,541
     
GOODWILL  994,009 990,368
OTHER INTANGIBLES, net of accumulated amortization of $507,000 and $495,000 in 2011 and 2010, respectively 221,778 232,416
OTHER assets 318,869 319,533
  $40,578,251 $40,595,574
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
CURRENT LIABILITIES:    
Accounts payable-trade $2,024,797 $1,247,821
Accrued expenses and other liabilities 2,707,485 4,893,236
Income taxes payable 555,879 554,380
Current maturities of long-term debt  202,500 202,500
Total current liabilities 5,490,661 6,897,937
     
DEFERRED INCOME TAXES 788,819 628,543
     
LONG-TERM DEBT, net of current maturities 3,256,875 3,307,500
     
COMMITMENTS AND CONTINGENCIES    
     
STOCKHOLDERS' EQUITY:    
Preferred stock, $0.10 par value; 20,000,000 shares authorized; none issued or outstanding; attributes to be determined on issuance - -
Common stock, $0.0024 par value; 25,000,000 shares authorized; 11,150,065 shares issued at 2011 and 2010; 10,156,442 shares outstanding at 2011 and 2010 26,760 26,760
Paid-in capital 5,722,287 5,703,387
Retained earnings 27,579,911 26,429,335
Treasury stock at cost (993,623 shares at 2011 and 2010) (2,894,068) (2,894,068)
Accumulated other comprehensive income  607,006 496,180
Total stockholders' equity 31,041,896 29,761,594
  $40,578,251 $40,595,574
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
     
  2011 2010
NET SALES $15,879,040 $14,588,538
COST OF SALES 6,354,192 5,611,942
Gross profit 9,524,848 8,976,596
     
OPERATING EXPENSES 7,612,360 7,440,228
INCOME FROM OPERATIONS 1,912,488 1,536,368
     
OTHER (INCOME) EXPENSE:    
Interest expense 62,003 65,604
Other, net 48,832 (1,467)
Total other (income) expense 110,835 64,137
     
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES  1,801,653 1,472,231
     
PROVISION FOR INCOME TAXES 651,077 524,654
     
NET INCOME FROM CONTINUING OPERATIONS 1,150,576 947,577
     
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX - 536
     
NET INCOME  $1,150,576 $948,113
     
NET INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE:    
BASIC $0.11 $0.09
DILUTED $0.11 $0.09
     
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX PER COMMON SHARE:    
BASIC $0.00 $0.00
DILUTED $0.00 $0.00
     
NET INCOME PER COMMON SHARE:    
BASIC $0.11 $0.09
DILUTED $0.11 $0.09
     
Weighted Average Number of Shares Outstanding:    
 Basic 10,156,442 10,137,715
 Diluted 10,169,701 10,213,677
TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
     
  2011 2010
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income  $1,150,576 $948,113
Income from discontinued operations - 536
  1,150,576 947,577
     
Adjustments to reconcile net income to net cash provided by operating activities--    
Depreciation and amortization 245,004 234,026
(Gain) loss on disposal or abandonment of assets (2,925) 246
Non-cash stock-based compensation 18,900 -
Deferred income taxes 165,664 5,113
Other 102,119 80,343
Net changes in assets and liabilities, net of effect of business acquisitions:    
Accounts receivable-trade, net (180,478) (262,172)
Inventory 26,173 (513,681)
Income taxes 1,499 35,575
Other current assets (613,680) (707,195)
Accounts payable-trade 776,976 428,607
Accrued expenses and other liabilities (2,185,751) (30,870)
Total adjustments (1,646,499) (730,008)
Net cash(used in) provided by continuing operating activities (495,923) 217,569
Cash provided from discontinued operations - 6,831
Net cash (used in) provided by operating activities (495,923) 224,400
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment (169,186) (99,117)
Purchases of certificates of deposit  - (2,572,598)
Proceeds from maturities of certificates of deposit 5,000 594,000
Proceeds from sale of assets 21,513 90
Decrease (increase) in other assets 664 (3,297)
Net cash used in investing activities (142,009) (2,080,922)
     
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments on capital lease obligations - -
Payments on notes payable and long-term debt (50,625) (50,625)
Repurchase of common stock ( treasury stock) - (8,419)
Proceeds from exercise of stock options  - -
Net cash provided by financing activities (50,625) (59,044)
     
NET INCREASE (DECREASE) IN CASH (688,557) (1,915,566)
     
CASH, beginning of period 4,293,746 7,891,962
     
CASH, end of period $3,605,189 $5,976,396
     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Interest paid during the period $62,003 $65,604
Income tax paid during the period, net of (refunds) 411,721 477,177
CONTACT: Shannon L. Greene, Tandy Leather Factory, Inc.
         (817) 872-3200 or sgreene@tandyleather.com
         
         Mark Gilbert, Magellan Fin, LLC
         (317) 867-2839 or MGilbert@MagellanFin.com

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