TANDY LEATHER FACTORY INC
For the period ended Dec 31, 2024. Filed Feb 26, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 26, 2025
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-K
Period ended 2023-12-31; filed 2024-03-22.
0001140361-24-014799
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0001140361-25-006103
ITEM 7. 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 54 previous paragraphs and 52 current paragraphs.
35 unchanged; 13 reworded; 4 added; 6 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 3 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
Consolidated net sales decreased by $1.8 million, or 2.4%, from 2023 to 2024. We believe the decrease in sales was due to ongoing weak consumer demand compared to a year ago, resulting from continued weakness in consumer discretionary spending related to sustained increases in key non-discretionary items like food and housing, exacerbated by temporary store closures and moves.
Current report
Operating expenses increased by $0.4 million in 2024 as compared to the prior year. The primary drivers of the increase were higher employment costs of approximately $1.4 million for full time employees across the Company, and an increase in occupancy and utilities of $0.4 million due to the renewal of our store leases; offset by reduction in accrued bonus of $0.9 million, the expiration and forfeiture of RSUs of $0.2 million, a reduction in credit card fees of $0.2 million, a reduction in office supplies of $0.1 million, and a reduction in repair and maintenance of $0.1 million.
Current report
In the fourth quarter of 2024, the Company renewed the promissory note under its Credit Agreement with JPMorgan Chase Bank, N.A. through October 31, 2025 under the same terms as above.
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 December 31, 2024, $5.0 million remained available for repurchase under this new program.
Removed paragraphs (6)
Previous report
Consolidated net sales decreased by $4.1 million, or 5.1%, from 2022 to 2023. About $1.3 million of the decline came from stores that were open in 2022 but closed in 2023. We believe the rest of the decrease in sales was due to continued weaker consumer demand as a result of inflation and ongoing uncertainty related to global political, economic and public health concerns.
Previous report
Operating expenses declined by $4.3 million in 2023 as compared to the prior year. The primary drivers of the decrease were reduced contract labor of approximately $1.2 million, primarily in accounting and warehouse, as we hired permanent, full-time staff and retail employment costs of $1.5 million resulting from retail labor initiatives. Other savings initiatives included reduced insurance and other taxes of $0.6 million, reduced outside services of $0.4 million, and lower occupancy, supplies and other expenses combined for another $1.0 million in savings, partially offset by increased bonus compensation of $0.5 million.
Previous report
Spain Loan
Previous report
During the second quarter of 2020, the Company borrowed $0.4 million from Banco Santander S.A. under the Institute of Official Credit Guarantee for Small and Medium-sized Enterprises in order to facilitate the continuation of employment and to attenuate the economic effects of the COVID-19 virus. This loan was provided for by the Spanish government as part of a COVID-19 relief program. During the second quarter of 2022, we repaid this loan in full.
Previous report
On April 11, 2022, we entered into an agreement with two institutional shareholders of the Company, to repurchase 359,500 shares of our common stock, par value $0.0024 in a private transaction. The purchase price was $5.00 per share for a total of $1.8 million. The closing of the repurchases took place on April 22, 2022, and these shares were subsequently cancelled. Prior to the repurchase, the shares represented approximately 4.2% of our outstanding common stock.
Previous report
The direct share repurchases described above were separately authorized by our Board of Directors and did not reduce the remaining amount authorized to be repurchased under the open-market plan that was approved by the Board of Directors at the time. In July 2022, the Company repurchased 600 shares of stock under the open market plan.
Reworded paragraphs (13)
Previous wording
Currently, the Company operates a total of 102 retail stores. There are 91 stores in the United States (“U.S,”), 10 stores in Canada and one store in Spain.
Current wording
Currently, the Company operates a total of 101 retail stores. There are 91 stores in the United States (“U.S,”), 9 stores in Canada and one store in Spain.
Previous wording
With COVID-19 and restatement related impacts behind us, and with initiatives to improve our brand proposition and to build the foundation for a modern and efficient retail business taking hold, we believe we have made significant progress toward building a durable, profitable business model. Our cost of sales and operating expenses have stabilized, and we believe we have the structure, and the operating nimbleness, that can deliver operating profit and free cash flow even in the face of economic headwinds. Going forward, our strategy is to continue to manage our cost base and use of cash and focus on strengthening our sales by leveraging our competitive advantage of our retail stores. Improving our employee product knowledge, customer service level and community engagement as well as expanding workshop space in stores with machines are the highest priorities. We need to continue to give customers good reasons to visit stores, and an excellent return on their time investment when they do.
Current wording
Going forward, our strategy is to continue to manage our cost base and use of cash and focus on strengthening our sales by leveraging our competitive advantage of our retail stores. Improving our employee product knowledge, customer service level, in-store and virtual classes and community engagement as well as expanding workshop space in stores with machines are the highest priorities. We need to continue to give customers good reasons to visit stores, and an excellent return on their time investment when they do.
Previous wording
Our store footprint consisted of 102 stores at December 31, 2023 and 103 stores at December 31, 2022.
Current wording
Our store footprint consisted of 101 stores at December 31, 2024 and 102 stores at December 31, 2023.
Previous wording
Since January 1, 2023, we closed two stores and opened one store. 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
Since January 1, 2024, we closed two stores and opened one store. We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projections 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 $1.3 million, or 2.9%, from 2022 to 2023. Our gross margin percentage for the year ended December 31, 2023 increased to 59.2% versus 57.9% in the same period in 2022, due to reduction in freight and warehouse overhead, relatively stronger full-priced selling throughout the year and product and customer mix shifts.
Current wording
Gross profit decreased by $3.4 million, or 7.4%, from 2023 to 2024. Our gross margin percentage for the year ended December 31, 2024 decreased to 56.2% versus 59.2% in the same period in 2023, due to higher freight and warehouse overhead throughout the year, and increased promotional activity to compensate for weak consumer discretionary spending.
Previous wording
Other income consists primarily of interest income and foreign currency gain. For the year ended December 31, 2023, we recognized other income of $0.1 million. During the year ended December 31, 2022, we recognized other income of less than $0.1 million related to interest earned on our short term investment.
Current wording
Other income consists primarily of interest income and foreign currency gain. For the year ended December 31, 2024 and 2023, we recognized other income of $0.5 million of which $0.3 million was related to interest earned on our short term investment and $0.3 million in foreign currency exchange gain offset by $0.1 million in foreign tax penalties.
Previous wording
Our effective tax rate was 17.1% and 12.9% for the years ended December 31, 2023 and 2022, 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 release of valuation allowance associated with our deferred tax assets.
Current wording
Our effective tax rate was 24.2% and 17.1% for the years ended December 31, 2024 and 2023, 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 release of valuation allowance associated with our deferred tax assets in 2023.
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 balance as of December 31, 2023 totaled $12.2 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 balance as of December 31, 2024 totaled $13.3 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 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. 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 on the open market on or prior to August 31, 2024. As of December 31, 2022 and December 31, 2023, $5.0 million remained available for repurchase under this new program.
Current 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 on the open market on or prior to August 31, 2024. As of December 31, 2024, the Company had purchased less than $10,000 of shares under this plan.
Previous wording
For 2022, we generated $1.1 million of cash from operations driven by net income of $1.2 million, the add-back of non-cash expenses of $5.5 million, including depreciation, amortization, and stock-based compensation, a decrease in income taxes, net of $0.9 million due to collecting $1.4 million of refunds from NOL carryback claims that partially offset current year installment payments and recording the current year income tax provision, and a decrease in accounts receivable of $0.2 million among other changes, offset by the increase of inventory of $0.3 million (including currency effects), a decrease in accounts payable and accrued expenses of $3.3 million and a decrease in operating lease liabilities of $3.4 million. We invested $0.6 million in capital expenditures for the purchase of store fixtures and systems implementations. We used cash in financing activities to repurchase 360,100 shares of Tandy common stock in purchases totaling $1.8 million at an average price of $5.00 per share, and to repay the loan from Spain in the amount of $0.4 million. The activities above, in addition to the effect of exchange rate changes, resulted in a net decrease in cash of $2.2 million.
Current wording
For 2024, we generated $4.6 million of cash from operations driven by net income of $0.8 million, the add-back of non-cash expenses of $5.4 million, including depreciation, amortization, loss on disposal of fixed assets, stock based compensation, and deferred taxes, a decrease in inventory of $2.0 million, and an increase in accrued expense of $0.3 million; offset by a decrease in operating lease liabilities payments of $3.5 million and an increase in prepaid expense of $0.4 million. We invested $2.9 million in capital expenditures for store build-out and fixtures for new and relocated stores, a new roof for our Fort Worth headquarters building of $1 million, and expenditures related to our ERP and e-commerce systems. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $1.1 million.
Previous wording
Leases. We lease certain real estate for our retail store locations and warehouse equipment for our Texas distribution center, both under long-term lease agreements. Starting in 2019, with the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), once we have determined an arrangement is a lease, at inception we recognize a lease asset and lease liability 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. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.
Current wording
Leases. We lease certain real estate for our retail store locations and periodically lease warehouse equipment for our Texas distribution center, both usually under long-term lease agreements. Starting in 2019, with the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), once we have determined an arrangement is a lease, at inception we recognize a lease asset and lease liability 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. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.
Previous wording
None of our lease agreements contain material residual value guarantees or material restrictive covenants. As of December 31, 2023, we have no sublease agreements and no lease agreements in which we are named as a lessor. We do not have any contingent rental payment agreements. On September 8, 2022, we entered into a concession agreement for our store on the Fort Liberty (formerly Fort Bragg) military base in which the concession payment is based on a sliding scale percentage of sales. At the end of November, 2023, we closed that store.
Current wording
None of our lease agreements contain material residual value guarantees or material restrictive covenants. As of December 31, 2024, we have no sublease agreements and no lease agreements in which we are named as a lessor. We do not have any contingent rental payment agreements.