Tandy Leather Factory(TLF) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) Unaudited consolidated financial statements for Tandy Leather Factory, Inc. as of March 31, 2025, show a $17.7 million gain from headquarters sale, boosting net income and cash Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $23,594 | $13,271 | | Inventory | $34,350 | $35,556 | | Property and equipment, net | $6,251 | $12,335 | | Total Assets | $77,916 | $74,924 | | Liabilities & Equity | | | | Total current liabilities | $13,188 | $9,886 | | Total stockholders' equity | $56,889 | $57,153 | | Total Liabilities and Stockholders' Equity | $77,916 | $74,924 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $19,036 | $19,275 | | Gross profit | $10,718 | $10,920 | | Income from operations | $262 | $649 | | Gain on disposal of Headquarter | $17,676 | $0 | | Net income | $12,676 | $525 | | Diluted EPS | $1.47 | $0.06 | Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($536) | $1,086 | | Net cash provided from (used in) investing activities | $23,566 | ($1,227) | | Net cash used in financing activities | ($12,745) | ($1) | | Net increase in cash and cash equivalents | $10,323 | $156 | - The company finalized the sale of its corporate headquarters for net proceeds of $24.9 million, resulting in a gain of $17.7 million[73][75] Notes to Condensed Consolidated Financial Statements (Unaudited) This section details accounting policies, business operations, $5.0 million credit facility, headquarters sale impact, and new CEO appointment - The company operates as a specialty retailer of leather and related items through 101 retail stores (91 in the U.S., 9 in Canada, 1 in Spain) and its websites[17][20] - The company has an unused $5.0 million credit facility with JPMorgan Chase Bank, N.A., renewed through October 31, 2025[59][60] - The company sold its corporate headquarters for net proceeds of $24.9 million, realizing a gain of $17.7 million, and subsequently signed a 10-year lease for new facilities[73][75] - Johan Hedberg was appointed as the new Chief Executive Officer on January 6, 2025[76] - A $5.0 million share repurchase program was renewed until September 30, 2026, with the full amount remaining available[71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, noting 1.2% sales decrease to $19.0 million, 59.6% drop in operating income to $0.3 million, and liquidity boosted by headquarters sale Results of Operations Net sales decreased 1.2% to $19.0 million due to store closures and weak demand, with operating expenses up 1.8%, causing a 59.6% decline in operating income to $0.3 million Selected Financial Data (in thousands) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $19,036 | $19,275 | $(239) | (1.2)% | | Gross profit | $10,718 | $10,920 | $(202) | (1.8)% | | Gross margin % | 56.3% | 56.7% | - | (0.4)% | | Operating expenses | $10,456 | $10,271 | $185 | 1.8% | | Income from operations | $262 | $649 | $(387) | (59.6)% | - The decrease in sales was attributed to temporary store closures for relocation and ongoing weak consumer demand[91] - Operating expenses increased by $0.2 million (1.8%) due to higher employment costs ($0.3 million) and occupancy costs ($0.1 million)[94] Capital Resources, Liquidity and Financial Condition The company's liquidity is strong with $23.6 million cash, significantly boosted by $23.6 million from headquarters sale, despite $0.5 million used in operations and $12.7 million in financing - The company's cash balance was $23.6 million as of March 31, 2025[96] Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used by) from operating activities | $(536) | $1,086 | | Net cash from (used in) investing activities | $23,566 | $(1,227) | | Net cash used in financing activities | $(12,745) | $(1) | | Net increase in cash | $10,323 | $156 | - Key cash flow events in Q1 2025 included receiving $24.9 million from the headquarters sale, purchasing $1.3 million in assets for the new facility, and paying dividends of $12.7 million[101] PART II. OTHER INFORMATION Legal Proceedings The company is periodically involved in ordinary course litigation, but no pending matters are expected to materially impact its financial position or operating results - There are no pending legal proceedings expected to have a material impact on the company's financial position or results of operations[69][106] Risk Factors This section highlights new risks: increased costs/reduced sales from U.S. tariff hikes, and a new annual rental expense exceeding $1.5 million for headquarters and flagship store - Increased U.S. tariff rates on imported goods, particularly from China, pose a new risk, potentially increasing product costs and decreasing sales[107] - The company faces increased expenses from renting its new headquarters and flagship store, with initial combined rent expected to exceed $1.5 million per year, potentially impacting profitability[108] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase program, noting no repurchases in Q1 2025, with $5.0 million remaining available until September 30, 2026 Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Value Remaining Under Program | | :--- | :--- | :--- | :--- | | Jan 1 – Jan 31, 2025 | 0 | $0 | $5,000,000 | | Feb 1 – Feb 28, 2025 | 0 | $0 | $5,000,000 | | Mar 1 – Mar 31, 2025 | 0 | $0 | $5,000,000 | | Total | 0 | $0 | $5,000,000 | Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, stock plans, CEO employment agreements, and SEC-required certifications - The report includes a list of filed exhibits, such as the Certificate of Incorporation, Bylaws, stock plans, and employment agreements[110] - Key filed exhibits include the employment agreement for the new CEO, Johan Hedberg, and certifications pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002[111] Signatures - The Form 10-Q report was duly signed and authorized on May 12, 2025, by Johan Hedberg, the Chief Executive Officer[113]