Tandy Leather Factory Reports Q3 2016 Financial Results

FORT WORTH, Texas, Nov. 09, 2016 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ:TLF) today reported financial results for the third quarter of 2016.  Consolidated net income for the quarter ended September 30, 2016 was $1.0 million compared to $1.1 million for the third quarter of 2015, a decrease of 10%.  Fully diluted earnings per share of $0.11 for the third quarter of 2016 was equal to that reported for last year's third quarter.  Total sales for the quarter ended September 30, 2016 were $18.6 million, down 4% from $19.4 million in the third quarter last year.  

Consolidated sales for the nine months ended September 30, 2016 were $58.8 million, down 2% from 2015's comparable period sales of $59.9 million.  Consolidated net income for the first three quarters of 2016 increased 7% to $4.3 million or $0.46 per fully-diluted share versus $4.1 million or $0.40 per fully-diluted share in the comparable period last year.

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, decreased $209,000 in the third quarter, a 2% decline over last year's third quarter.  Eighty-one stores comprised Tandy Leather's operations on September 30, 2016 compared to eighty-two stores at September 30, 2015.  For the first nine months of 2016, Retail Leathercraft's sales decreased $114,000, or 0.3%, from the first nine months of 2015.  Third quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory stores, decreased 8% or $489,000, from the same quarter last year.  For the first nine months of 2016, Wholesale Leathercraft's sales were down $1,047,000, or 5%, compared to the same period in 2015.  International Leathercraft, consisting of four stores located outside of North America, reported a sales decrease of 3%, or $29,000, compared to the third quarter of 2015.  For the year to date, International Leathercraft's sales were up 3%, or $67,000, over the same period last year.

Consolidated gross profit margin for the current quarter was 62.5%, compared to 61.1% for the third quarter of 2015.  For the first three quarters of 2016, consolidated gross profit margin was 63.2%, improving from last year's gross profit margin of 62.1%.  Consolidated operating expenses increased approximately 1% or $132,000 for the third quarter of 2016 compared to the comparable quarter in 2015, primarily due to higher employee compensation and benefits, rent and depreciation, offset by lower advertising and store relocation costs.  For the year to date, consolidated operating expenses decreased 1% or $196,000, compared to the same period in 2015 with decreases occurring in employee compensation and benefits, advertising, and relocation expenses, offset by higher rent and depreciation.  As a percentage of sales, consolidated operating margin decreased for the quarter to 8.3% compared to 9.6% in last year's third quarter.  On a year-to-date basis, consolidated operating margin increased from 11.0% last year to 11.5% in the current year.

Shannon L. Greene, Chief Executive Officer, commented, "While both sales and earnings this quarter were lower than last year's third quarter, the results were not unexpected.  Sales continue to be challenging as we have discussed all year, but our earnings are ahead of internal expectations.  Said another way, we are achieving success in growing earnings in spite of weak sales. Despite the economic uncertainty, we are planning several new stores in markets that we believe will contribute favorably to our financial results over time."

Mark Angus, President, added, "Compared to last year's third quarter, although our sales were weaker, our gross profit margin improved.  So we are doing the right thing to protect margins as we maneuver around the retail headwinds.  Further, as we head into the Christmas shopping season, we are closely monitoring expenses to maximize earnings."

Tandy Leather Factory, Inc., ( http://www.tandyleather.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, saddle and tack hardware, and do-it-yourself kits. The Company distributes its products through its 27 Leather Factory stores, located in 18 states and 3 Canadian provinces, 82 Tandy Leather retail stores, located in 36 states and 6 Canadian provinces, and four combination wholesale/retail stores located in the United Kingdom, Australia, and Spain.  Its common stock trades on the Nasdaq with the symbol "TLF".  To be included on Tandy Leather Factory's email distribution list, go to http://www.b2i.us/irpass.asp?BzID=1625&to=ea&s=0.

This news release may contain statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: changes in general economic conditions, negative trends in general consumer-spending levels, failure to realize the anticipated benefits of opening retail stores; availability of hides and leathers and resultant price fluctuations; change in customer preferences for our product, and other factors disclosed in our filings with the Securities and Exchange Commission.  These forward-looking statements are made only as of the date hereof, and except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Selected financial data:
  Quarter Ended 09/30/16   Quarter Ended 09/30/15
    Sales   Operating  Income   Sales   Operating  Income
Wholesale Leathercraft $ 5,625,427     $ 468,589     $ 6,114,793     $ 682,461  
Retail Leathercraft   12,119,703       1,120,482       12,328,599       1,122,222  
International Leathercraft               883,232       (49,012 )     912,545       55,068  
Total Operations $ 18,628,362     $ 1,540,059     $ 19,355,937     $ 1,859,751  

  Nine Months Ended 09/30/16   Nine Months Ended 09/30/15
  Sales   Operating  Income   Sales   Operating  Income
Wholesale Leathercraft $ 18,187,330     $ 3,143,151     $ 19,234,375     $ 2,602,868  
Retail Leathercraft   37,856,229       3,501,441       37,970,423       3,862,343  
International Leathercraft                 2,779,935       97,148       2,713,431       117,263  
Total Operations $ 58,823,494     $ 6,741,740     $ 59,918,229     $ 6,582,474  

Wholesale Leathercraft Quarter Ended 09/30/16   Quarter Ended 09/30/15
  # of stores Sales   # of stores Sales
Same store sales 27 $ 5,625,427     27 $ 5,958,309  
Closed store sales -   -     1   156,484  
Total Sales - Wholesale Leathercraft             27 $ 5,625,427     28 $ 6,114,793  

Wholesale Leathercraft Nine Months Ended 09/30/16   Nine Months Ended 09/30/15
  # of stores Sales   # of stores Sales
Same store sales 27 $ 17,998,925     27 $ 18,739,934  
Closed store sales -   188,405     1   494,441  
Total Sales - Wholesale Leathercraft 27 $ 18,187,330     28 $ 19,234,375  

Retail Leathercraft Quarter Ended 09/30/16   Quarter Ended 09/30/15
    # of stores Sales   # of stores Sales
Same store sales 80 $ 11,836,141         80    $ 1,975,960  
New store sales 1   283,562     -   -  
Closed store sales 2   -     2   352,639  
Total Sales - Retail Leathercraft         81 $ 12,119,703     82 $ 12,328,599  

Retail Leathercraft Nine Months Ended 09/30/16   Nine Months Ended 09/30/15
  # of stores Sales   # of stores Sales
Same store sales 80 $ 36,864,480     80 $ 36,934,411  
New store sales 1   622,336     -   -  
Closed store sales 2   369,413     2   1,036,012  
Total Sales - Retail Leathercraft         81 $ 37,856,229     82 $ 37,970,423  

International Leathercraft Quarter Ended 09/30/16   Quarter Ended 09/30/15
  # of stores Sales           # of stores Sales
Same store sales 3 $ 749,161     3      $ 912,545  
New store sales   1   134,071     -   -  
Total Sales - Intl Leathercraft                     4 $ 883,232     3 $ 912,545  

International Leathercraft Nine Months Ended 09/30/16   Nine Months Ended 09/30/15
  # of stores Sales   # of stores Sales
Same store sales 3 $ 2,346,662     3 $ 2,713,431  
New store sales 1   433,273     -   -  
Total Sales - Intl Leathercraft                   4 $ 2,779,935     3 $ 2,713,431  

Tandy Leather Factory, Inc. Consolidated Balance Sheets
 
  September 30,  2016  (unaudited)   December 31,  2015 (audited)
ASSETS      
CURRENT ASSETS:      
  Cash $ 11,448,638     $ 10,962,615  
  Accounts receivable-trade, net of allowance for doubtful accounts      
  of $75 and $1,746 in 2016 and 2015, respectively   513,591       553,206  
  Inventory    37,122,297       33,584,539  
  Prepaid income taxes   1,237,306       549,277  
  Deferred income taxes   359,802       326,830  
  Prepaid expenses   1,852,230       1,514,887  
  Other current assets   16,261       70,197  
  Total current assets   52,550,125       47,561,551  
       
PROPERTY AND EQUIPMENT, at cost   25,394,850       23,992,208  
Less accumulated depreciation and amortization    (9,460,904 )     (8,297,155 )
    15,933,946       15,695,053  
       
GOODWILL   958,630       953,356  
OTHER INTANGIBLES, net of accumulated amortization of approximately      
  $708,000 and $702,000 in 2016 and 2015, respectively   21,284       27,282  
OTHER assets   334,778       329,684  
                             TOTAL ASSETS $ 69,798,763     $ 64,566,926  
       
       
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES:      
  Accounts payable-trade $ 1,981,879     $ 1,983,376  
  Accrued expenses and other liabilities   6,528,527       6,045,552  
  Current maturities of capital lease obligations   72,686       72,686  
  Current maturities of long-term debt   153,578       231,952  
  Total current liabilities   8,736,670       8,333,566  
         
DEFERRED INCOME TAXES   1,753,698       1,702,515  
       
LONG-TERM DEBT, net of current maturities   7,218,151       3,479,273  
    72,687       79,396  
COMMITMENTS AND CONTINGENCIES   -       -  
       
STOCKHOLDERS' EQUITY:      
Preferred stock, $0.10 par value; 20,000,000 shares authorized;      
  none issued or outstanding; attributes to be determined on issuance   -       -  
    Common stock, $0.0024 par value; 25,000,000 shares authorized;      
     11,309,326 and 11,275,641 shares issued at 2016 and 2015, respectively;      
    9,266,496 and 9,753,293 shares outstanding at 2016 and 2015, respectively   27,142       27,062  
    Paid-in capital   6,324,995       6,168,489  
   Retained earnings   57,409,496       53,067,234  
  Treasury stock at cost (2,042,830 shares at 2016; 1,522,348 shares at 2015)   (10,278,584 )     (6,602,930 )
  Accumulated other comprehensive income   (1,465,492 )     (1,687,679 )
  Total stockholders' equity   52,017,557       50,972,176  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 69,798,763     $ 64,566,926  

Tandy Leather Factory, Inc. Consolidated Statements of Income (Unaudited) For the Three and Nine Months Ended September 30, 2016 and 2015
       
  THREE MONTHS   NINE MONTHS
    2016       2015       2016       2015  
NET SALES $ 18,628,362     $ 19,355,937     $ 58,823,494     $ 59,918,229  
               
COST OF SALES   6,983,491       7,523,240       21,630,087       22,688,223  
               
  Gross profit   11,644,871       11,832,697       37,193,407       37,230,006  
               
OPERATING EXPENSES   10,104,812       9,972,946       30,451,667       30,647,532  
               
INCOME FROM OPERATIONS   1,540,059       1,859,751       6,741,740       6,582,474  
               
OTHER INCOME (EXPENSE):              
  Interest expense   (43,493 )     (228,235 )     (108,949 )     (307,160 )
  Other, net   3,570       38,320       26,965       68,070  
      Total other income (expense)   (39,923 )     (189,915 )     (81,984 )     (239,090 )
               
INCOME BEFORE INCOME TAXES   1,500,136       1,669,836       6,659,756       6,343,384  
               
PROVISION FOR INCOME TAXES   499,786       558,492       2,317,494       2,279,737  
               
NET INCOME $ 1,000,350     $ 1,111,344     $ 4,342,262     $ 4,063,647  
               
               
               
NET INCOME PER COMMON SHARE:              
Basic $ 0.11     $ 0.11     $ 0.46     $ 0.40  
Diluted $ 0.11     $ 0.11     $ 0.46     $ 0.40  
               
Weighted Average Number of Shares Outstanding:              
  Basic   9,188,483       10,175,650       9,341,364       10,199,841  
  Diluted   9,206,382       10,199,092       9,359,405       10,226,877  

Tandy Leather Factory, Inc. Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended September 30, 2016 and 2015
 
    2016       2015  
CASH FLOWS FROM OPERATING ACTIVITIES:      
  Net income $ 4,342,262     $ 4,063,647  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:      
      Depreciation and amortization   1,273,078       1,163,116  
      (Gain) loss on disposal or abandonment of assets   (6,306 )     25,782  
      Non-cash stock-based compensation   156,586       106,569  
      Deferred income taxes   18,211       (67,646 )
      Foreign currency translation   236,139       (882,354 )
      Net changes in assets and liabilities:      
          Accounts receivable-trade, net   39,615       40,042  
          Inventory   (3,537,758 )     (2,182,520 )
          Prepaid expenses   (492,234 )     (310,400 )
          Other current assets   53,936       (91,331 )
          Accounts payable-trade   (1,497 )     1,242,840  
          Accrued expenses and other liabilities   482,975       1,002,238  
          Income taxes payable   (688,029 )     (531,754 )
  Total adjustments   (2,465,284 )     (485,418 )
                  Net cash provided by operating activities   1,876,978       3,578,229  
       
CASH FLOWS FROM INVESTING ACTIVITIES:      
  Purchase of property and equipment   (1,385,431 )     (1,339,098 )
  Proceeds from sale of assets   26,703       11,372  
  Purchase of intangible assets   -       (10,000 )
  (Increase) in other assets   (10,368 )     (2,902 )
                  Net cash used in investing activities   (1,369,096 )     (1,340,628 )
       
CASH FLOWS FROM FINANCING ACTIVITIES:      
  Net (decrease) in revolving credit loans   -       (3,500,000 )
  Proceeds from notes payable and long-term debt   3,660,505       3,711,224  
  Payments on notes payable and long-term debt   -       (2,143,125 )
  Payments on capital lease obligations   (6,710 )     -  
  Repurchase of common stock (treasury stock)   (3,675,654 )     (3,708,862 )
  Proceeds from issuance of common stock   -       9,920  
                  Net cash used in financing activities   (21,859 )     (5,630,843 )
       
NET CHANGE IN CASH   486,023       (3,393,242 )
       
CASH, beginning of period   10,962,615       10,636,530  
       
CASH, end of period $ 11,448,638     $ 7,243,288  
       
       
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:      
Interest paid during the period $   108,949     $   307,160  
Income tax paid during the period $ 3,005,523     $ 2,883,552  
Shannon L. GreeneTandy Leather Factory, Inc.(817) 872-3200sgreene@tandyleather.comMark GilbertMagellan Fin, LLC(317) 867-2839MGilbert@MagellanFin.com

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