Shannon Greene - Interim CEO.

Analysts:.

Welcome to the First Quarter 2016 Tandy Leather Factory Earnings Conference Call. [Operator Instructions]. I would now like to introduce your first speaker for today, Shannon Greene, CEO. Ma'am, you may begin..

Thank you. Welcome to our first quarter 2016 earnings conference call. I'm Shannon Greene, Interim CEO and Mark Angus, our Interim President is joining me today will be available for questions at the end of the call.

Before we get started I remind you that the earnings release and related SEC filings are available on our Investor Relations section of our website and a replay of this webcast will be available later today.

I will remind everyone that there maybe forward-looking statements on the call today statements would include words like expect, believe, anticipate, plan, intend, target or words with similar meanings and are based on our beliefs and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from our forward-looking statements about those results.

These risks are detailed in our various filings with the SEC such as the most recent Form 10-K and 10-Q as well as the news releases and other communications. We do not undertake to update or revise any forward-looking statements which speak only as of the time they are made.

We are off to a fairly good start in 2016, all the sales are slightly behind our internal target, gross profit margin improved over last year's first quarter suggesting that product mix is more normal than last year. Expenses increased less than 1% but that’s still faster than sales so we have some work to do there.

Our inventory is in good shape and we ended the quarter with a solid net cash balance. Our debt borrowings are solely to support our stock buyback plan that is currently in place. Since August of last year we have purchased a little more than 1 million shares at an average price of $7.04.

Our interpretation of our sales results over the last year or so is that for whatever reasons consumers are cautious with their discretionary spending and what we sell falls into that category. Small businesses are making smaller purchases albeit more frequently in some cases in order to manage their cash flow.

Despite the uncertainty our job is to manage successfully through this cycle however long it lasts. We’re now shying away from growth and expansion just because business is tough. On the contrary we’re pushing ahead, challenging the norm and taking some calculated risk that we believe will move us forward.

The key will be to protect margins as we consider new sales initiatives and opportunities. Quick run through of the numbers, first quarter consolidated sales totaling $24.7 million decreased 0.6% or 117,000 from last year's first quarter sales.

Retail leather craft segment reported a 1% sales increase which consist of flat same store sales and new store sales of $80,000. We closed one retail store in the first quarter which had sales during the quarter of $103,000. Our wholesale leathercraft segment reported a 3% sales decline which is all same store.

Our international leathercraft segment reported a sales decline of 2% which consist of a 17% same store sales loss partially offset by new store sales of a $140,000.

While the current foreign currency exchange rates have stabilized somewhat compared to last year's rate we continue to be negatively affected due to the weak currencies in our foreign markets against the U.S. dollar. That weakness causes our products to be more expensive which can result in our foreign customer purchasing lap.

Consolidated gross profit margin for the quarter was 61.2% improving from 60.5% in last year's first quarter. Consolidated operating expenses this quarter increased 1% or $96,000 compared to a year ago. Rent and utilities, employee benefit programs, licenses and legal fees are the expense categories that cause the majority of the increase.

Income from operations was $2.4 million for the quarter decreasing $26,000 or 1% compared to the first quarter of 2015. We ended the quarter with total assets of $65.3 million up $700,000 from the end of 2015, cash was slightly higher at almost $11.5 million versus $11 million a year ago.

We’re holding $33.6 million in inventory at March 31, $48,000 higher than at year-end 2015. Current liabilities decreased $944,000, our bank debt totaled $6.6 million at March 31, consisting solely of borrowings on the line of credit in-place for our stock buyback program. We purchased 404,000 shares in the first quarter at an average price of $7.10.

Our current ratio is 6.5, EBITDA for the first three months of 2016 with $2.8 million, there are five stores year-to-date operating losses in 2016 totaling $29,000. Looking further into 2016, we believe we’re on track with our revenue and earnings guidance that being a flat top line and mid-single digit growth in earnings.

We have opened one new store so far and plan to open another 1 to 2 stores in the U.S. We have closed a total of three stores in the U.S. this year as of today. Last thing before we get a question, just to remind about our Annual Meeting Stockholders on June 7th, at 11 A.M in our corporate offices in Fort Worth. You’re personally invited.

We would love to meet you. That concludes our prepared remarks. We appreciate your time today and we will be happy to answer whatever questions you may have. Operator we’re now ready to questions..

Operator:.

Thank you for participating in our earnings conference call today. We look forward to speaking with you again next quarter. Have a great day..

Ladies and gentlemen thank you for participating on today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day..