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 2, 2004
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The Leather Factory, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-12368 75-2543540
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(Commission File Number) (IRS Employer Identification Number)
3847 East Loop 820 South, Fort Worth, Texas 76119
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(Address of Principal Executive Offices) (Zip Code)
(817) 496-4414
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(Registrant's Telephone Number, Including Area Code)
_____________________________________________________________________________
(Former Name or Former Address, if Changed Since Last Report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
99.1 Press release dated March 2, 2004.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Registrant is furnishing the press release attached as Exhibit 99.1
announcing the Registrant's 2003 financial results. This press release was
issued on March 2, 2004.
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 2, 2004 BY: /s/ Wray Thompson
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Wray Thompson, Chairman of the Board
and Chief Executive Officer
EXHIBIT 99.1
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FOR IMMEDIATE RELEASE MARCH 2, 2004
THE LEATHER FACTORY, INC. REPORTS 2003 FINANCIAL RESULTS -
REVENUE OF $41.7 MILLION AND EPS OF $0.27
FORT WORTH, TEXAS - The Leather Factory, Inc. (AMEX: TLF), the world's largest
specialty retailer and wholesale distributor of leather and leathercraft
products, today reported results for the year ended December 31, 2003.
Consolidated net sales for the year were up 5.0% to $41.7 million over 2002
sales of $39.7 million. Net income for 2003 was $2.7 million compared to a net
loss of $1.4 million for 2002, or basic earnings per share for 2003 of $0.27
versus $(0.14) for 2002. Diluted earnings per share was $0.25 for 2003 and
$(0.13) for 2002. The 2002 results included a $4.0 million charge, net of tax,
for the cumulative effect of a previously reported accounting change. Net
income for 2002 before the cumulative effect of the accounting change was $2.6
million or $0.26 per share (basic) and $0.24 per share (diluted).
2003 Accomplishments:
- Addition of 12 new Tandy Leather retail stores
- Tandy Leather retail store sales up 144% over 2002, a result of both new
store openings and increasing store sales
- Improved gross profit margin to 54.4% in 2003 from 53.7% as a result of
increased retail sales and efficient purchasing
- Improved net income to $2.7 million in 2003 from a loss of $1.4 million in
2002 (after accounting charge of $4.0 million)
- Bank debt reduced from $4.2 million to $1.8 million
- Increased operating cash flow by 133% to $3.3 million in 2003 from $1.4
million in 2002
- Secured a $5 million, two-year line of credit with Wells Fargo Bank Texas,
N.A. with reduced fees and interest rates (below prime) from the previous
credit arrangement
- Addition of an experienced institutional investor to Board of Directors
Divisional analysis:
The Tandy Leather division reported sales for the year were up $1.8 million, or
24.8%, to $9.2 million in 2003 from $7.4 million in 2002. The Company opened 12
new Tandy Leather retail stores in 2003, increasing the total number of retail
stores from 14 at year-end 2002 to 26 at December 31, 2003. The 2002 sales
consisted of $3.6 million from Tandy's central mail order facility, which closed
on September 1, 2002, combined with the retail stores contributing sales of $3.8
million. The resulting sales increase at the stores from 2002 to 2003 was $5.4
million.
The Leather Factory warehouse distribution center sales were up $371,000, or
1.2%, from $30.3 million in 2002 to $30.7 million in 2003, as a result of an
increase in retail sales for the year. This increase was partially offset by a
decrease in sales to national accounts. The Company believes that this decrease
arose from planned and expected periodic adjustments to purchasing programs and
therefore assumes the decline is temporary.
Robert, Cushman's sales for 2003 decreased $216,000, or 10.6%, due to the
continued slowdown in the overall hat industry during the last half of the year.
Consolidated gross profit margins for the year increased from 53.7% in 2002 to
54.4% in 2003. Operating expenses for 2003 were $18.6 million, or 44.6% of
sales, compared to $17.2 million, or 43.3% of sales, in 2002. The increase in
operating expenses in 2003 is predominantly associated with an increase in
advertising efforts and investor relations activities.
Wray Thompson, Chairman and Chief Executive Officer, commented, "We are pleased
with the continued sales growth, particularly in the Tandy Leather retail
operation. The Leather Factory warehouse distribution centers and Tandy Leather
stores are performing well and our Tandy store openings are on schedule. We
were able to improve our gross margins slightly for the year and held our fourth
quarter operating expenses to match the same percentage of sales in last year's
fourth quarter. In 2004, we plan to continue to create shareholder value by
focusing on three goals - increasing sales and earnings from existing locations,
opening 10-15 new Tandy Leather stores and improving our operating margins."
Financial Outlook:
The following statements are based on TLF's current expectations as of March 2,
2004. 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 10-15 new Tandy Leather stores in 2004 and estimates
consolidated net sales for 2004 will be in the range of $46 to $47 million.
Basic and diluted EPS for 2004 are expected to be in the range of $0.34 to $0.37
and $0.32 to $0.34, respectively. Average basic and diluted shares outstanding
in 2004 are estimated to be approximately 10.5 million and 11 million shares,
respectively. The Company assumes an effective tax rate for the year between
35% and 37%.
The 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, shoe repair supplies, 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, The Leather Factory, Inc. (817) 496-4414
Shannon L. Greene, 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. Additional risks and uncertainties will be
described in TLF's annual report on Form 10-K for 2003 to be filed with the SEC.
Investors are reminded that past performance may not be predictive of future
results.
Selected financial data:
FOR THE YEAR ENDED
NET SALES: 12/31/03 12/31/02
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Leather Factory $30,684,092 $30,313,478
Tandy Leather 9,216,838 7,387,874
Cushman 1,811,261 2,027,263
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Total $41,712,191 $39,728,615
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FOR THE YEAR ENDED
TANDY LEATHER SALES DETAIL: 12/31/03 12/31/02
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Retail stores (26 in 2003; 14 in 2002) $9,216,838 $3,782,787
Centralized mail order facility (closed 9/1/02) - 3,605,087
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Total $9,216,838 $7,387,874
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THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
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NET SALES $41,712,191 $39,728,615
COST OF SALES 19,020,292 18,393,914
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Gross Profit 22,691,899 21,334,701
OPERATING EXPENSES 18,594,240 17,202,927
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INCOME FROM OPERATIONS 4,097,658 4,131,774
OTHER (INCOME) EXPENSE:
Interest expense 206,942 246,878
Other, net (81,774) 65,039
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Total other expense 125,168 311,917
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INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 3,972,490 3,819,857
PROVISION FOR INCOME TAXES 1,232,116 1,224,868
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NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,740,374 2,594,989
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
NET OF INCOME TAXES - (4,008,831)
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NET INCOME (LOSS) $ 2,740,374 $(1,413,842)
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NET INCOME (LOSS) PER COMMON SHARE - BASIC:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE . . . . . $ 0.27 $ 0.26
CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE, NET OF TAX . . . . . . - (0.40)
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$ 0.27 $ (0.14)
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NET INCOME (LOSS) PER COMMON SHARE - BASIC:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE . . . . . $ 0.25 $ 0.24
CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE, NET OF TAX . . . . . . - (0.37)
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$ 0.25 $ (0.14)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,323,549 10,063,581
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,861,305 10,761,670
THE LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
DECEMBER 31, 2003 DECEMBER 31, 2002
ASSETS
CURRENT ASSETS:
Cash $ 1,728,344 $ 101,557
Cash restricted for payment on revolving credit facility - 553,839
Accounts receivable-trade, net of allowance for doubtful accounts
of $31,000 and $78,000 in 2003 and 2002, respectively 1,828,738 1,938,698
Inventory 11,079,893 12,695,344
Prepaid income taxes 206,023 55,644
Deferred income taxes 134,312 159,090
Other current assets 702,236 672,117
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Total current assets 15,679,546 16,176,289
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PROPERTY AND EQUIPMENT, at cost 5,574,992 5,321,749
Less accumulated depreciation and amortization (3,669,099) (3,301,898)
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1,905,893 2,019,851
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GOODWILL, net of accumulated amortization of $758,000 and
734,000 in 2003 and 2002, respectively 704,235 686,484
OTHER INTANGIBLES, net of accumulated amortization of
164,000 and $113,000 in 2003 and 2002, respectively 432,549 483,507
OTHER assets 336,183 309,471
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$ 19,058,406 $ 19,675,602
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $ 1,545,079 $ 1,594,909
Accrued expenses and other liabilities 1,000,427 2,503,331
Notes payable and current maturities of long-term debt 1,134 4,218,968
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Total current liabilities 2,546,640 8,317,208
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DEFERRED INCOME TAXES 209,289 186,076
NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities 1,792,984 2,256
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000,000 shares
authorized, none issued or outstanding - -
Common stock, $0.0024 par value; 25,000,000 shares
authorized, 10.487,961 and 10,149,961 shares issued
and outstanding at 2003 and 2002, respectively 25,171 24,360
Paid-in capital 4,673,158 4,163,901
Retained earnings 9,804,719 7,064,345
Less: Notes receivable-secured by common stock (20,000) (44,003)
Accumulated other comprehensive loss 26,445 (38,541)
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Total stockholders' equity 14,509,493 11,170,062
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$ 19,058,406 $ 19,675,602
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THE LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,740,374 $(1,413,842)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities -
Depreciation and amortization 529,262 491,312
Loss on disposal of assets (9,103) -
Amortization of deferred financing costs - 37,038
Deferred income taxes 47,086 (30,184)
Other 48,140 (2,502)
Cumulative effect of change in accounting principle. - 4,008,831
Net changes in assets and liabilities, net of effect of
business acquisitions:
Accounts receivable-trade, net 109,960 359,255
Inventory 1,615,451 (3,463,866)
Income taxes (150,380) 16,124
Other current assets (30,120) (192,726)
Accounts payable-trade (49,831) 291,311
Accrued expenses and other liabilities (1,502,903) 1,332,179
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Total adjustments 607,562 2,846,772
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Net cash provided by operating activities 3,347,936 1,432,930
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (360,202) (1,073,515)
Payments in connection with businesses acquired - (435,747)
Proceeds from sale of assets 6,217 -
(Increase) decrease in other assets (27,970) (14,754)
Other intangible costs - (1,625)
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Net cash used in investing activities (381,955) (1,525,641)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in revolving credit loans (2,420,550) (286,889)
Payments on notes payable and long-term debt (6,557) (27,482)
Decrease (increase) in cash restricted for payment on revolver 553,839 (62,110)
Payments received on notes secured by common stock 24,003 27,936
Proceeds from issuance of common stock and warrants 510,068 133,774
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Net cash used in financing activities (1,339,195) (214,772)
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NET INCREASE (DECREASE) IN CASH 1,626,786 (307,483)
CASH, beginning of period 101,557 409,040
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CASH, end of period $ 1,728,343 $ 101,557
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period $ 216,275 $ 213,791
Income tax paid during the period, net of (refunds) 1,138,799 1,254,679