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): March 3, 2005
The 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
The Registrant is furnishing the press release attached as Exhibit 99.1
announcing the Registrant's fourth quarter and annual 2004 financial results.
This press release was issued on March 3, 2005.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press release dated March 3, 2005 furnished pursuant to Item 12.
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.
THE LEATHER FACTORY, INC.
Date: March 3, 2005 BY: /s/ Wray Thompson
Wray Thompson, Chairman of the Board
and Chief Executive Officer
EXHIBIT 99.1
FOR IMMEDIATE RELEASE MARCH 3, 2005
THE LEATHER FACTORY REPORTS 2004 FINANCIAL RESULTS -
RECORD SALES IN 2004 INCREASES 10% OVER 2003
FORT WORTH, TEXAS - The Leather Factory, Inc. (AMEX: TLF) today reported
financial results for the year and fourth quarter ended December 31, 2004.
Consolidated net income for the quarter was $739,000 compared to consolidated
net income of $585,000 for the fourth quarter of 2003. Fully diluted earnings
per share for the quarter were $0.06, compared to $0.05 in the same quarter of
the previous year. Total sales for the quarter ended December 31, 2004
increased 17.5% to $12.4 million from $10.5 million for the fourth quarter of
2003. Consolidated sales for the year ended December 31, 2004 were $46.1
million, an increase of 10.6% over total sales of $41.7 million for 2003.
Consolidated net income for 2004 was $2.6 million or $0.24 per fully-diluted
share versus $2.7 million or $0.25 per fully-diluted share for 2003.
Sales in the Tandy Leather store chain for the fourth quarter of 2004 increased
$1.4 million over the previous year's fourth quarter, representing a 49%
improvement. Forty-two stores comprised Tandy Leather's retail operations on
December 31, 2004, compared to twenty-six retail stores a year earlier. Six
stores were added in the fourth quarter of 2004, bringing the total number of
new stores added in 2004 to sixteen. For 2004, Tandy Leather sales increased
$4.3 million, or 47%, over 2003.
Fourth quarter sales for the wholesale division, which includes the Leather
Factory wholesale centers and national accounts group, increased $387,000 over
the same quarter of 2003, a 5.3% improvement. Excluding national account sales,
the wholesale centers' sales increased $435,000, or 6.8%, for the quarter. For
2004, the wholesale divisions' sales were down 0.2% for the year. Excluding
national account sales, the wholesale centers reported sales gains of $1.1
million, or 4.5%, exceeding the company's guidance of 2 to 4%. Sales to
national accounts were down $1.2 million for the year.
Consolidated gross profit margin for the fourth quarter was 54.7%, an
improvement from 54.2% for the fourth quarter of 2003. For 2004, consolidated
gross profit margin was 55.1%, an improvement over the previous year's gross
profit margin of 54.4%. Consolidated operating expenses for the fourth quarter
of 2004 were 45.2% of sales, down slightly from 45.6% for the same quarter of
2003. Operating expenses totaled 45.9% of sales for 2004 compared to 44.6% for
2003. Costs associated with the new retail stores, personnel costs including
bonuses and employee healthcare programs, advertising, and the initial costs
associated with implementation of compliance with Section 404 of the
Sarbanes-Oxley Act were the significant contributors to the increase.
Wray Thompson, Chairman and Chief Executive Officer, commented, "I'm very
pleased with our 2004 results. Our sales grew by more than 10%, our gross
margin improved in spite of our original concerns surrounding rising metal and
fuel prices, and operating and pre-tax income improved despite our continuing
battle to maintain healthcare costs and the completion of the initial phase of
our SOX 404 compliance efforts. We expect 2005 to build on our accomplishments
in 2004 - the on-going expansion of the Tandy Leather store chain, focused
efforts for continued sales growth in the wholesale division, operating expense
containment, and higher earnings. In addition, 2005 is likely to be a milestone
for us in that I expect we'll have repaid all of our bank debt for the first
time in the company's history."
Financial Outlook:
The following statements are based on TLF's current expectations as of March 3,
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 estimates consolidated net sales for 2005 will be in the range of
$48 to $51 million and diluted EPS is expected to be in the range of $0.28 to
$0.32. Average diluted shares outstanding in 2005 is estimated to be
approximately 11 million shares. The Company assumes an effective tax rate
annually between 35% and 37%.
The Leather Factory, Inc., (http://www.leatherfactory.com), headquartered in
Fort Worth, Texas, is a marketer and 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
leathercraft kits. The Company distributes its products worldwide though its
Leather Factory stores, Tandy Leather retail stores and mail/telephone/website
orders (http://www.tandyleather.com). Its common stock trades on the American
Stock Exchange with the symbol "TLF".
Contact: Wray Thompson, CEO, The Leather Factory, Inc. (817) 496-4414
Shannon L. Greene, CFO, The Leather Factory, Inc.sgreene@leatherfactory.com
This news release contains forward-looking statements. All forward-looking
statements made here or in other news releases issued by The 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 The 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 12/31/04 QUARTER ENDED 12/31/03
----------------------- -------------------------
OPERATING OPERATING
SALES INCOME SALES INCOME
------------ ----------- ----------- ---------
Wholesale (Leather Factory) $ 7,695,753 $ 706,509 $ 7,308,934 $ 836,064
Retail (Tandy Leather) 4,322,466 549,784 2,904,693 173,553
Cushman 407,301 (74,060) 358,734 (99,087)
------------ ----------- ----------- ---------
Total Operations $ 12,425,520 $ 1,182,233 $10,572,361 $ 910,530
============ =========== =========== =========
TWELVE MONTHS ENDED 12/31/04 TWELVE MONTHS ENDED 12/31/03
---------------------------- ----------------------------
OPERATING OPERATING
SALES INCOME SALES INCOME
----------- ---------- ----------- ----------
Wholesale (Leather Factory) $30,630,121 $3,013,316 $30,684,092 $3,462,457
Retail (Tandy Leather) 13,515,662 1,210,566 9,216,838 604,291
Cushman 2,000,501 34,565 1,811,261 30,911
----------- ---------- ----------- ----------
Total Operations $46,146,284 $4,258,447 $41,712,191 $4,097,659
=========== ========== =========== ==========
TANDY LEATHER RETAIL STORES QUARTER ENDED 12/31/04 QUARTER ENDED 12/31/03
---------------------- ----------------------
# OF STORES SALES # OF STORES SALES
----------- ----------- ----------- ----------
Stores opened prior to 01/01/04 26 $ 3,148,426 26 $2,904,693
Stores opened after 01/01/04 16 1,174,040 0 -
----------- ----------- ----------- ----------
Total Sales - Tandy Leather $ 4,322,466 $2,904,693
=========== ==========
TANDY LEATHER RETAIL STORES YEAR ENDED 12/31/04 YEAR ENDED 12/31/03
---------------------- -----------------------
# OF STORES SALES # OF STORES SALES
----------- ----------- ----------- ----------
Stores opened prior to 07/01/03 22 $ 9,805,300 22 $8,765,478
Stores opened after 07/01/03 20 3,710,362 4 451,360
----------- ----------- ----------- ----------
Total Sales - Tandy Leather $13,515,662 $9,216,838
=========== ==========
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004 AND 2003
Three Months Twelve Months
2004 2003 2004 2003
--------------- ------------ ------------ ------------
NET SALES $ 12,425,520 $10,572,361 $46,146,284 $41,712,191
COST OF SALES 5,630,880 4,836,832 20,706,239 19,020,292
--------------- ------------ ------------ ------------
Gross Profit 6,794,640 5,735,529 25,440,045 22,691,899
OPERATING EXPENSES 5,612,406 4,824,999 21,181,599 18,594,240
--------------- ------------ ------------ ------------
INCOME FROM OPERATIONS 1,182,234 910,530 4,258,446 4,097,659
Interest expense 12,380 32,388 53,400 206,942
Other, net (5,090) (13,342) (8,600) (81,773)
--------------- ------------ ------------ ------------
Total other expense 7,290 19,046 44,800 125,169
--------------- ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,174,944 891,484 4,213,646 3,972,490
PROVISION FOR INCOME TAXES 435,464 306,010 1,559,605 1,232,116
--------------- ------------ ------------ ------------
NET INCOME $ 739,480 $ 585,474 $ 2,654,041 $ 2,740,374
=============== ============ ============ ============
NET INCOME PER COMMON SHARE - BASIC $ 0.07 $ 0.06 $ 0.25 $ 0.27
=============== ============ ============ ============
NET INCOME PER COMMON SHARE - DILUTED $ 0.06 $ 0.05 $ 0.24 $ 0.25
=============== ============ ============ ============
Weighted Average Number of Shares Outstanding:
Basic 10,554,776 10,484,184 10,543,994 10,323,549
Diluted 10,888,883 10,941,853 10,961,993 10,861,305
THE LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
12/31/04 12/31/03
(UNAUDITED)
------------ ------------
Cash $ 2,560,202 $ 1,728,344
Accounts receivable, net of allowance for doubtful accounts 2,032,289 1,828,738
Inventory 12,749,709 11,079,893
Prepaid income taxes - 206,023
Deferred income taxes 199,308 134,312
Other current assets 1,214,569 702,236
------------ ------------
TOTAL CURRENT ASSETS 18,756,077 15,679,546
------------ ------------
Property and equipment, net 1,904,565 1,905,893
Goodwill and other intangibles, net 1,180,618 1,136,784
Other assets 325,903 336,183
------------ ------------
$22,167,163 $19,058,406
============ ============
Accounts payable $ 1,954,146 $ 1,545,079
Accrued expenses and other liabilities 1,682,003 1,000,427
Income taxes payable 22,764 -
Notes payable and current maturities of long-term debt 134,067 1,134
------------ ------------
TOTAL CURRENT LIABILITIES 3,792,980 2,546,640
------------ ------------
Deferred income taxes 313,006 209,289
Notes payable and long-term debt, net of current maturities 750,944 1,792,984
------------ ------------
Total liabilities 4,856,930 4,548,913
Common stock 25,345 25,171
Paid-in capital 4,796,999 4,673,158
Treasury stock (5,859 shares) (25,487) -
Retained earnings 12,458,760 9,804,719
Notes receivable secured by common stock - (20,000)
Accumulated other comprehensive loss 54,616 26,445
------------ ------------
Total Stockholders' Equity 17,310,233 14,509,493
------------ ------------
$22,167,163 $19,058,406
============ ============
THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004 AND 2003
2004 2003
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,654,041 $ 2,740,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization 452,654 529,262
Loss on disposal of assets (2,000) (9,103)
Deferred income taxes 38,721 47,991
Other 20,122 47,235
Net changes in assets and liabilities:
Accounts receivable-trade, net (203,550) 109,960
Inventory (1,609,441) 1,615,451
Income taxes 228,787 (150,379)
Other current assets (110,132) (30,119)
Accounts payable 409,068 (49,830)
Accrued expenses and other liabilities 681,575 (1,502,904)
------------ ------------
Total adjustments (94,196) 607,564
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,559,845 3,347,938
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (391,034) (360,202)
Payments in connection with businesses acquired (156,452) -
Proceeds from sale of assets 2,000 6,217
Increase in other assets 10,280 (27,970)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (535,206) (381,955)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit loans (1,287,830) (2,420,550)
Payments on notes payable and long-term debt (23,479) (6,556)
Decrease in cash restricted for payment on revolving credit facility - 553,839
Payments received on notes secured by common stock 20,000 24,003
Repurchase of common stock (treasury stock) (25,487) -
Proceeds from issuance of common stock 124,015 510,068
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (1,192,781) (1,339,196)
------------ ------------
NET CHANGE IN CASH 831,858 1,626,787
CASH, beginning of period 1,728,344 101,557
------------ ------------
CASH, end of period $ 2,560,202 $ 1,728,344
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 59,773 $ 216,275
Income taxes paid during the period, net of (refunds) 1,197,347 1,138,799
NON-CASH INVESTING ACTIVITIES:
Equipment acquired under capital lease financing arrangements $ 402,201 -