TANDY LEATHER FACTORY INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
TLF$2.04-4.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001140361-24-036240
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001140361-24-046229
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 62 previous paragraphs and 42 current paragraphs.
20 unchanged; 18 reworded; 4 added; 23 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Nine Months Ended September 30, 2024 and 2023
Current report
Our store footprint consisted of 100 and 103 stores at September 30, 2024 and September 30, 2023, respectively. During the 12-month period ending September 30, 2024, we closed 5 stores and opened 2 new stores for a net decrease of 3 stores. Of the 100 current stores, 2 are temporarily closed during relocation and will reopen before the end of the year.
Current report
On September 17, 2024, the Board of Directors approved the renewal of the stock plan and the Company shall be authorized to repurchase up to $5 million (at then-current market value) of the Company’s common stock in open-market transactions at prevailing market prices upon periodic instructions from the Board or an authorized sub-committee of the Board until September 30, 2026. As of September 30, 2024, $5.0 million remained available for repurchase under this new program.
Current report
Cash Flows (Nine months)
Removed paragraphs (23)
Previous report
Critical Accounting Policies
Previous report
A description of our critical accounting policies appears in Item 7 “Management’s Discussions and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2023.
Previous report
Revenue Recognition. Our revenue is earned from sales of merchandise and generally occurs via three methods: (1) at the store counter, (2) via web sales, and (3) sales of product directly to commercial customers. We recognize revenue when we satisfy the performance obligation of transferring control of product merchandise over to a customer. At the store counter, our performance obligation is met, and revenue is recognized when a sales transaction occurs with a customer. When merchandise is shipped to a customer, our performance obligation is met, and revenue is recognized when control passes to the customer. Shipping terms are normally free on board (“FOB”) shipping point and control passes when the merchandise is shipped to the customer. Sales tax and comparable foreign tax are excluded from net sales, while shipping charged to our customers is included in net sales. Net sales are based on the amount of consideration that we expect to receive, reduced by estimates for future merchandise returns.
Previous report
The sales return allowance is based each year on historical customer return behavior and other known factors and reduces net sales and cost of sales, accordingly. The sales return allowance included in accrued expense and other liabilities was $0.2 million, $0.1 million, and $0.2 million as of June 30, 2024, December 31, 2023, and January 1, 2023. The estimated value of merchandise expected to be returned included in other current assets was less than $0.1 million as of June 30, 2024, December 31, 2023, and January 1, 2023.
Previous report
We record a gift card liability for the unfulfilled performance obligation on the date we issue a gift card to a customer. We record revenue and reduce the gift card liability as the customer redeems the gift card. In addition, for gift card breakage, we recognize a proportionate amount for the expected unredeemed gift cards over the expected customer redemption period, which is one year. As of June 30, 2024, December 31, 2023 and January1, 2023, our gift card liability, included in accrued expenses and other liabilities, was $0.1 million, $0.3 million and $0.3 million, respectively. We recognized gift card revenue of $0.2 million for the six months ended June 30, 2024 and 2023.
Previous report
For the three months ended June 30, 2024 and 2023, we recognized $0.1 million and $0.2 million respectively in net sales associated with gift cards.
Previous report
For the six months ended June 30, 2024 and 2023, we recognized $0.2 million and $0.3 million respectively in net sales associated with gift cards.
Previous report
Inventory. Inventory is stated at the lower of first-in, first-out (“FIFO”) cost or net realizable value, and FIFO layers are maintained at the location level. Finished goods held for sale includes the cost of merchandise purchases, the costs to bring the merchandise to our Texas distribution center, warehousing and handling expenditures, and distributing and delivering merchandise to our stores. These costs include depreciation of long-lived assets utilized in acquiring, warehousing and distributing inventory. Manufacturing inventory including raw materials and work-in-process is valued on a FIFO basis using full absorption accounting which includes material, labor, and other applicable manufacturing overhead. Carrying values of inventory are analyzed and, to the extent that the cost of inventory exceeds the net realizable value, provisions are made to reduce the carrying amount of the inventory.
Previous report
We regularly review all inventory items to determine if there are (i) damaged goods (e.g., for leather, excessive scars or damage from ultra-violet (“UV”) light), (ii) items that need to be removed from our product line (e.g., slow-moving items, inability of a supplier to provide items of acceptable quality or quantity, and to maintain freshness in the product line) and (iii) pricing actions that need to be taken to adequately value our inventory at the lower of FIFO cost or net realizable value.
Previous report
Since the determination of net realizable value of inventory involves both estimation and judgement with regard to market values and reasonable costs to sell, differences in these estimates could result in ultimate valuations that differ from the recorded asset.
Previous report
The majority of inventory purchases and commitments are made in U.S. dollars in order to limit the Company’s exposure to foreign currency fluctuations. Goods shipped to us are recorded as inventory owned by us when the risk of loss shifts to us from the supplier. Inventory is physically counted twice annually in the Texas distribution center. At the store level, inventory is physically counted each quarter. Inventory is then adjusted in our accounting system to reflect actual count results.
Previous report
Leases. We lease real estate for our retail store locations and may lease warehouse equipment for our Texas distribution center under long-term lease agreements; however, as of the end of June 30, 2024, we did not have any warehouse equipment leases. We determine if an arrangement is a lease at inception and recognize right-of-use (“ROU”) assets and lease liabilities at commencement date based on the present value of the lease payments over the lease term. We elected not to record leases with an initial term of 12 months or less on the balance sheet for all our asset classes.
Previous report
For operating leases, the present value of our lease liabilities may include: (1) rental payments adjusted for inflation or market rates, and (2) lease terms with options to renew the lease or options to purchase leased equipment, when it is reasonably certain we will exercise such an option. The exercise of lease renewal or purchase option is generally at our discretion. Payments based on a change in an index or market rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. We discount lease payments using our incremental borrowing rate based on information available as of the measurement date.
Previous report
We recognize rent expense related to our operating leases assets on a straight-line basis over the lease term. Rent expense is recorded in operating expenses.
Previous report
For finance leases, our right-of-use assets are amortized on a straight-line basis over the earlier of the useful life of the right-of-use asset or the end of the lease term with rent expense recorded to operating expenses. We adjust the lease liability to reflect lease payments made during the period and interest incurred on the lease liability using the effective interest method. The interest expense incurred is recorded in interest expense on the Condensed Consolidated Statements of Operations and Comprehensive Income.
Previous report
The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term. We also perform interim reviews of our lease assets for impairment when evidence exists that the carrying value of an asset group, including a lease asset, may not be recoverable.
Previous report
None of our lease agreements contain contingent rental payments, material residual value guarantees or material restrictive covenants. We have no sublease agreements and no lease agreements in which we are named as a lessor.
Previous report
Impairment of Long-Lived Assets. We evaluate long-lived assets on a quarterly basis to identify events or changes in circumstances (“triggering events”) that indicate the carrying value of certain assets may not be recoverable. Upon the occurrence of a triggering event, right-of-use (“ROU”) lease assets, property and equipment and definite-lived intangible assets are reviewed for impairment and an impairment loss is recorded in the period in which it is determined that the carrying amount of the assets is not recoverable. The determination of recoverability is made based upon the estimated undiscounted future net cash flows of assets grouped at the lowest level for which there are identifiable cash flows independent of the cash flows of other groups of assets with such cash flows to be realized over the estimated remaining useful life of the primary asset within the asset group. The Company determined the lowest level of identifiable cash flows that are independent of other asset groups to be primarily at the individual store level. If the estimated undiscounted future net cash flows for a given store are less than the carrying amount of the related store assets, an impairment loss is determined by comparing the estimated fair value with the carrying value of the related assets. The impairment loss is then allocated across the asset group’s major classifications which in this case are operating lease assets and property and equipment. Triggering events at the store level could include material declines in operational and financial performance or planned changes in the use of assets, such as store relocation or store closure. This evaluation requires management to make judgements relating to future cash flows, growth rates and economic and market conditions. The fair value of an asset group is estimated using a discounted cash flow valuation method.
Previous report
Stock-based Compensation. The Company’s stock-based compensation relates primarily to restricted stock unit (“RSU”) awards. Accounting guidance requires measurement and recognition of compensation expense at an amount equal to the grant date fair value. Compensation expense is recognized for service-based stock awards on a straight-line basis or ratably over the requisite service period, based on the closing price of the Company’s stock on the date of grant. The service-based awards typically vest ratably over the requisite service period, provided that the participant is employed on the vesting date. The total compensation expense is reduced by actual forfeitures as they occur over the requisite service period of the awards. Performance-based RSUs vest, if at all, upon the Company satisfying certain performance targets. The Company records compensation expense for awards with a performance condition when it is probable that the condition will be achieved. If the Company determines it is not probable a performance condition will be achieved, no compensation expense is recognized. If the Company changes its assessment in a subsequent period and concludes it is probable a performance condition will be achieved, the Company will recognize compensation expense ratably between the period of the change in assessment through the expected date of satisfying the performance condition for vesting. If the Company subsequently assesses that it is no longer probable that a performance condition will be achieved, the accumulated expense that has been previously recognized will be reversed. The compensation expense ultimately recognized, if any, related to performance-based awards will equal the grant date fair value based on the number of shares for which the performance condition has been satisfied. We issue shares from authorized shares upon the lapsing of vesting restrictions on RSUs. We do not use cash to settle equity instruments issued under stock-based compensation awards.
Previous report
Income Taxes. Income taxes are estimated for each jurisdiction in which we operate. This involves assessing current tax exposure together with temporary differences resulting from differing treatment of items for tax and financial statement accounting purposes. Any resulting deferred tax assets are evaluated for recoverability based on estimated future taxable income. To the extent it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized, a valuation allowance is recorded. Our evaluation regarding whether a valuation allowance is required or should be adjusted also considers, among other things, the nature, frequency, and severity of recent losses, forecasts of future profitability and the duration of statutory carryforward periods. Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in tax rate is recognized through continuing operations in the period that includes the enactment date of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. A tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. We recognize tax liabilities for uncertain tax positions and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense and the effective tax rate in the period in which new information becomes available. We recognize interest and/or penalties related to all tax positions in income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made.
Previous report
We may be subject to periodic audits by the Internal Revenue Service and other taxing authorities. These audits may challenge certain of our tax positions, such as the timing and amount of deductions and allocation of taxable income to the various jurisdictions.
Previous report
Six Months Ended June 30, 2024 and 2023
Previous report
Cash Flows (six months)
Reworded paragraphs (18)
Previous wording
Currently, the Company operates a total of 101 retail stores. There are 91 stores in the United States (“U.S,”), ten stores in Canada and one store in Spain.
Current wording
Currently, the Company operates a total of 100 retail stores. There are 90 stores in the United States (“U.S,”), nine stores in Canada and one store in Spain.
Previous wording
Tandy Leather has been introducing people to leatherworking for over 100 years. Our stores have been and continue to be our competitive advantage: where our consumers learn the craft in classes, open table, and from the expertise of our store staff, where they can touch, feel and test the product, and where they can connect and commune with others passionate about leather. Our websites provide inspiration, detailed product descriptions and specifications, educational information and videos, and a convenient place to also purchase product – especially for those who are far from our retail stores, including a growing international customer base. For many of our retail and web customers, leatherworking evolves from a passion to a trade. Our Commercial Division is tailored to the needs of those customers who build businesses around leather. With dedicated direct account representatives, a direct-from-our-warehouse shipping model, bulk and volume-based competitive pricing, customized product development, and production and pre-production services, we are building long-term, strategic relationships with our largest customers.
Current wording
Tandy Leather has been introducing people to leatherworking for over 100 years. Our stores have been and continue to be our competitive advantage: where our consumers learn the craft in classes, open table , and from the expertise of our store staff, where they can touch, feel and test the product, and where they can connect and commune with others passionate about leather. Our websites provide inspiration, detailed product descriptions and specifications, educational information and videos, and a convenient place to also purchase products – especially for those who are far from our retail stores, including a growing international customer base. For many of our retail and web customers, leatherworking evolves from a passion to a trade. Our Commercial Division is tailored to the needs of those customers who build businesses around leather. With dedicated direct account representatives, a direct-from-our-warehouse shipping model, bulk and volume-based competitive pricing, customized product development, and production and pre-production services, we are building long-term, strategic relationships with our largest customers.
Previous wording
Consolidated net sales for the quarter ended June 30, 2024 decreased $0.2 million, or 1.1%, compared to the corresponding prior year period. We believe the decrease in sales was due to ongoing weak consumer demand compared to a year ago resulting from ongoing uncertainty related to global political, economic and other uncontrollable factors.
Current wording
Consolidated net sales for the quarter ended September 30, 2024 decreased $0.2 million, or 1.1%, compared to the corresponding prior year period. We believe the decrease in sales was due in part to temporary store closures related to store relocation and weather including Hurricanes Beryl, Debby, Francine and Helene, and ongoing weak consumer demand compared to a year ago resulting from uncertainty related to global political, economic and other uncontrollable factors.
Previous wording
Our store footprint consisted of 101 and 103 stores at June 30, 2024 and June 30, 2023, respectively.
Current wording
Our store footprint consisted of 100 and 103 stores at September 30, 2024 and September 30, 2023, respectively. During the 12-month period ending September 30, 2024, we closed 5 stores and opened 2 new stores for a net decrease of 3 stores. Of the 100 current stores, 2 are temporarily closed during relocation and will reopen before the end of the year.
Previous wording
We opened one store and closed one store in the second quarter. We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projection for the store, the long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use similar factors to determine whether to open new stores.
Current wording
We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projection for the store, the long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use similar factors to determine whether to open new stores.
Previous wording
Gross profit for the quarter decreased by $0.9 million, or 8.3%, compared to the same period in 2023, and our gross margin percentage for the quarter ended June 30, 2024, decreased year over year by 450 basis points due to a one-time accounting adjustment in cost of sales as reported in our 2023 second quarter 10-Q.
Current wording
Gross profit for the quarter decreased by $0.9 million, or 8.4%, compared to the same period in 2023, and our gross margin percentage for the quarter ended September 30, 2024, decreased year-over-year by 460 basis points due primarily to timing of capitalization of our inventoriable costs, and greater promotional activity this year compared to same period last year, to help overcome decreased consumer discretionary spend.
Previous wording
Operating expenses for the quarter decreased $0.2 million or 1.7% compared to the corresponding prior year period, primarily as a result of a decrease in employment costs of $0.4 million and a decrease in office supplies of $0.1 million partially offset by an increase in medical group insurance of about $0.1 million, increase in other outside services of $0.1 million, and an increase in marketing of $0.1 million.
Current wording
Operating expenses for the quarter increased by $0.2 million or 2.3% compared to the corresponding prior year period, primarily as a result of an increase in employment costs of $0.6 million due to higher wages, in particular for retail and other hourly employees, partially offset by a decrease in bonus accrual of $0.3 million and a decrease of $0.1 million in miscellaneous operating expenses including travel, repairs, and insurance.
Previous wording
Our effective tax rate for the three months ended June 30, 2024 and June 30 2023 was 32.9% respectively. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, expenses that are nondeductible for tax purposes, and the change in our valuation allowance associated with our deferred tax assets.
Current wording
Our effective tax rate for the three months ended September 30, 2024 and September 30, 2023 was 27.7% and 24.0% respectively. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, and expenses that are nondeductible for tax purposes, and the estimates in our valuation allowance associated with our deferred tax assets.
Previous wording
Consolidated net sales for the six months ended June 30, 2024 decreased $1.3 million, or 3.4%, compared to the corresponding prior year period. We believe the decrease in sales was due to ongoing weak consumer demand compared to a year ago due to continued weaker consumer demand resulting from ongoing uncertainty related to global political, economic and other uncontrollable factors, and a decline in consumer response to our promotional activities.
Current wording
Consolidated net sales for the nine months ended September 30, 2024 decreased $1.5 million, or 2.7%, compared to the corresponding prior year period. We believe the decrease in sales was due in part to temporary store closure and ongoing weak consumer demand compared to a year ago, continued weaker consumer demand resulting from ongoing uncertainty related to global political, economic and other uncontrollable factors, exacerbated by temporary store closures and moves.
Previous wording
We opened one store and closed one store in the six months ending June 30, 2024. We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projection for the store, the long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use similar factors to determine whether to open new stores.
Current wording
We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projection for the store, the long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use similar factors to determine whether to open new stores.
Previous wording
Gross profit decreased by $1.8 million, or 7.9%, compared to the same period in 2023, and our gross margin percentage for the six months ended June 30, 2024, decreased year over year by 280 basis points due to a one-time accounting adjustment in cost of sales as reported in our 2023 second quarter 10-Q.
Current wording
Gross profit decreased by $2.7 million, or 8.1%, compared to the same period in 2023, and our gross margin percentage for the nine months ended September 30, 2024, decreased year over year by 340 basis points due to a one-time accounting adjustment in cost of sales as reported in our 2023 second quarter 10-Q, and timing of capitalization of inventoriable costs in Q3 2024 and greater promotional activity to help overcome decreased consumer discretionary spend .
Previous wording
Operating expenses decreased $0.7 million or 3.5% compared to the corresponding prior year period, primarily as a result of a decrease in employment costs of $1.0 million, partially offset by an increase in medical insurance of $0.2 million and an increase in marketing expense of $0.1 million.
Current wording
Operating expenses decreased by $0.5 million or 1.7% compared to the corresponding prior year period, primarily as a result of a decrease in bonus accrual of $1.0 million, partially offset by an increase in medical insurance of $0.2 million, an increase in employment costs of $0.2 million, and an increase in utilities of $0.1 million.
Previous wording
Our effective tax rate for the six months ended June 30, 2024 was 26.9% compared to 31.1% for the same period in 2023. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, expenses that are nondeductible for tax purposes, and the change in our valuation allowance associated with our deferred tax assets.
Current wording
Our effective tax rate for the nine months ended September 30, 2024 was 26.5% compared to 28.8% for the same period in 2023. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, expenses that are nondeductible for tax purposes, and the change in our valuation allowance associated with our deferred tax assets.
Previous wording
We require cash principally for day-to-day operations, to purchase inventory and to finance capital investments. We expect to fund our operating and liquidity needs primarily from a combination of current cash balances and cash generated from operating activities. Any excess cash will be invested as determined by our Board of Directors in accordance with its approved investment policy. Our cash balances as of June 30, 2024 totaled $11.5 million.
Current wording
We require cash principally for day-to-day operations, to purchase inventory and to finance capital investments. We expect to fund our operating and liquidity needs primarily from a combination of current cash balances and cash generated from operating activities. Any excess cash will be invested as determined by our Board of Directors in accordance with its approved investment policy. Our cash balances as of September 30, 2024 totaled $10.1 million.
Previous wording
On January 3, 2023, the Company entered into a credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. Under the Credit Agreement, the bank will provide the Company a credit facility of up to $5,000,000 on standard terms and conditions, including affirmative and negative covenants set forth in the Credit Agreement. As security for the credit facility, the Company has pledged as collateral certain of its assets, including the Company’s cash in deposit accounts, inventory and equipment. As of the date of this filing, no funds had been borrowed under this facility.
Current wording
On November 2, 2023, the Company renewed the promissory note under its credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. through October 31, 2024. Under the Credit Agreement, the bank will provide the Company a credit facility of up to $5,000,000 on standard terms and conditions, including affirmative and negative covenants set forth in the Credit Agreement. As security for the credit facility, the Company has pledged as collateral certain of its assets, including the Company’s cash in deposit accounts, inventory and equipment. The interest rate is based on CME term SOFR + 210 basis points and the maturity is 1 year. As of the date of this filing, no funds had been borrowed under this facility, and we are in compliance with all covenants.
Previous wording
On August 8, 2022, the Board of Directors approved a new program to repurchase up to $5.0 million of the Company’s common stock between that date and August 31, 2024. As of June 30, 2024, $5.0 million remained available for repurchase under this new program.
Current wording
On August 7, 2022, the Board of Directors approved a new program to repurchase up to $5.0 million of the Company’s common stock between that date and August 31, 2024. As of August 31, 2024, the Company had purchased less than $10,000 of shares under this plan.
Previous wording
For the six months ended June 30, 2024, cash from operations generated $0.6 million driven by a net income of $0.6 million, non-cash expense of $2.8 million, including depreciation, amortization, and stock-based compensation, a net reduction in inventory of $0.8 million partially offset by a reduction in lease liability payments of $1.8 million, decrease in accrued expense and other liabilities of $0.7 million, an increase in prepaid expense of $0.4 million, and an increase in accounts receivable of $0.1 million. We invested $1.4 million in capital expenditure primarily related to replacing a new roof at our corporate headquarters and other new capital investments due to new store openings and store relocations. The activities above, in addition to the effect of exchange rate changes, resulted in a net decrease in cash of $0.6 million.
Current wording
For the nine months ended September 30, 2024, cash from operations generated $0.1 million driven by a net income of $0.5 million, non-cash expense of $4.1 million, including depreciation, amortization, and stock-based compensation, a decrease in deferred income taxes of $0.2 million, partially offset by a reduction in lease liability payments of $2.7 million, an increase in income tax payments of $1.0 million, decrease in accrued expense and other liabilities of $0.6 million, an increase in prepaid expense of $0.3 million, and an increase in inventory of $0.1 million. We invested $2.3 million in capital expenditure primarily related to replacing a new roof at our corporate headquarters and other new capital investments due to new store openings and store relocations. The activities above, in addition to the effect of exchange rate changes, resulted in a net decrease in cash of $2.1 million.
Previous wording
For the six months ended June 30, 2023, cash from operations generated $2.3 million driven by a net income of $1.2 million, non-cash expense of $2.7 million, including depreciation, amortization, and stock-based compensation, a net reduction in inventory of $0.7 million, offset by a change in other assets of $0.1 million, income tax payable of $0.4 million, and a reduction in lease liability payments of $1.7 million. We invested $0.1 million in capital expenditures primarily related to system modifications and improvements. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $2.0 million.
Current wording
For the nine months ended September 30, 2023, cash from operations generated $1.2 million driven by a net income of $1.7 million, non-cash expense of $4.1 million, including depreciation, amortization, and stock-based compensation, accounts receivable of $0.1 million, prepaid expense of $0.1 million, offset by a reduction in lease liability payments of $2.7 million, a reduction in accounts payable of $1.7 million, and an increase in inventory of $0.4 million. We invested $0.3 million in capital expenditures primarily related to system modifications and improvements. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $0.6 million.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our store footprint consisted of 101 and 103 stores at June 30, 2024 and June 30, 2023, respectively.