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Tandy Leather Factory Reports 2nd Quarter 2016 Earnings Up 21%

FORT WORTH, Texas, Aug. 10, 2016 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ:TLF) today reported financial results for the second quarter of 2016. Consolidated net income for the quarter ended June 30, 2016 was $1.8 million compared to $1.5 million for the second quarter of 2015, an increase of 20.8%. Fully diluted earnings per share for the quarter were $0.19, compared to $0.15 in last year’s second quarter. Total sales for the quarter ended June 30, 2016 were $19.5 million, down 1% from $19.8 million in the second quarter last year.

Consolidated sales for the six months ended June 30, 2016 were $40.2 million, down 1% from 2015’s first half sales of $40.6 million. Consolidated net income for the first half of 2016 increased 13% to $3.3 million or $0.35 per fully-diluted share versus $3.0 million or $0.29 per fully-diluted share in the comparable period last year.

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, decreased $38,000 in the second quarter, a 0.3% decline from last year's second quarter. Eighty-one stores comprised Tandy Leather's operations at June 30, 2016 compared to eighty-two stores at June 30, 2015. For the first six months of 2016, Retail Leathercraft’s sales increased $95,000 or 0.4% over the first six months of 2015. Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory stores, decreased 5%, or $329,000, from the same quarter last year. For the first six months of 2016, Wholesale Leathercraft’s sales were down $558,000, or 4%, compared to the same period in 2015. International Leathercraft, consisting of four stores located in the United Kingdom, Spain and Australia, reported a sales increase of 14%, or $117,000, compared to the second quarter of 2015. For the first half of 2016, International Leathercraft’s sales were up 5%, or $96,000, over the same period last year.

Consolidated gross profit margin for the current quarter was 66.1%, compared to 64.8% for the second quarter of 2015. For the first half of 2016, consolidated gross profit margin was 63.6%, improving from last year's gross profit margin of 62.6%. Consolidated operating expenses decreased approximately 4% or $424,000 for the quarter and 2% or $328,000 for the year, compared to the same periods in 2015. For the second quarter, significant decreases occurred in advertising and marketing, store relocation expenses, legal and professional fees, outside services, and employee benefits. For the year, decreases occurred in employee compensation and advertising and marketing expenses. As a percentage of sales, consolidated operating margin increased for the quarter to 14.5% compared to 11.8% in last year’s second quarter. On a year-to-date basis, consolidated operating margin increased from 11.6% last year to 12.9% in the current year.

Shannon L. Greene, Chief Executive Officer, commented, “Sales have been tough this year – and our second quarter was no different. While we are working hard to grow or maintain sales, our real success this quarter was in our gross profit and operating margins. Specifically, we improved our gross profit margin even though sales declined and we reduced our operating expenses at a faster rate than that of sales. Our work is not done, however, as managing effectively through difficult periods such as this is crucial.”

Mark Angus, President, added, “Compared to last year’s second quarter, we sold a little less leather but improved our gross profit margin on those leather sales so that is a win. Further, we cut operating expenses in the second quarter which contributed significantly to the earnings increase. At the half way mark of 2016, we are succeeding at protecting gross profit margins and controlling expenses despite weak sales.”

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, 81 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 06/30/16 Quarter Ended 06/30/15

Sales
Operating
Income

Sales
Operating
Income
Wholesale Leathercraft $6,064,995 $1,548,303 $6,394,278 $968,552
Retail Leathercraft 12,493,943 1,166,009 12,532,411 1,336,669
International Leathercraft 963,967 124,579 846,839 28,621
Total Operations $19,522,905 $2,838,891 $19,773,528 $2,333,842


Six Months Ended 06/30/16 Six Months Ended 06/30/15

Sales
Operating
Income

Sales
Operating
Income
Wholesale Leathercraft $12,561,902 $2,674,562 $13,119,582 $1,920,407
Retail Leathercraft 25,736,527 2,380,959 25,641,824 2,740,121
International Leathercraft 1,896,703 146,160 1,800,886 62,195
Total Operations $40,195,132 $5,201,681 $40,562,292 $4,722,723


Wholesale Leathercraft Quarter Ended 06/30/16 Quarter Ended 06/30/15
# of storesSales # of storesSales
Same store sales 27$6,022,534 27$6,229,566
Closed store sales 1 42,461 1 164,712
Total Sales – Wholesale Leathercraft 27$6,064,995 27$6,394,278


Wholesale Leathercraft Six Months Ended 06/30/16 Six Months Ended 06/30/15
# of storesSales # of storesSales
Same store sales 27$12,373,497 27$12,781,625
Closed store sales 1 188,405 1 337,957
Total Sales – Wholesale Leathercraft 27$12,561,902 27$13,119,582


Retail Leathercraft Quarter Ended 06/30/16 Quarter Ended 06/30/15
# of storesSales # of storesSales
Same store sales 80$12,203,775 80$12,178,185
New store sales 1 259,120 - -
Closed store sales 2 31,048 2 354,226
Total Sales – Retail Leathercraft 81$12,493,943 80$12,532,411


Retail Leathercraft Six Months Ended 06/30/16 Six Months Ended 06/30/15
# of storesSales # of storesSales
Same store sales 80$25,028,341 80$24,958,451
New store sales 1 338,773 - -
Closed store sales 2 369,413 2 683,373
Total Sales – Retail Leathercraft 81$25,736,527 80$25,641,824


International Leathercraft Quarter Ended 06/30/16 Quarter Ended 06/30/15
# of storesSales # of storesSales
Same store sales 3$805,123 3$846,839
New store sales 1 158,844 - -
Total Sales – Intl Leathercraft 4$963,967 3$846,839


International Leathercraft Six Months Ended 06/30/16 Six Months Ended 06/30/15
# of storesSales # of storesSales
Same store sales3$1,597,500 3$1,800,886
New store sales1 299,203 - -
Total Sales – Intl Leathercraft4$1,896,703 3$1,800,886



Tandy Leather Factory, Inc.
Consolidated Balance Sheets
June 30,
2016
(unaudited)
December 31,
2015
(audited)
ASSETS
CURRENT ASSETS:
Cash $9,839,204 $10,962,615
Accounts receivable-trade, net of allowance for doubtful accounts of $0 and $1,746 in 2016 and 2015, respectively 551,824 553,206
Inventory 36,304,595 33,584,539
Prepaid income taxes 765,605 549,277
Deferred income taxes 350,706 326,830
Prepaid expenses 1,623,858 1,514,887
Other current assets 132,985 70,197
Total current assets 49,568,777 47,561,551
PROPERTY AND EQUIPMENT, at cost 24,764,249 23,992,208
Less accumulated depreciation and amortization (9,026,139) (8,297,155)
15,738,110 15,695,053
GOODWILL 959,868 953,356
OTHER INTANGIBLES, net of accumulated amortization of approximately $707,000 and $702,000 in 2016 and 2015, respectively 22,228 27,282
OTHER assets 329,332 329,684
TOTAL ASSETS $66,618,315 $64,566,926
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $1,393,513 $1,983,376
Accrued expenses and other liabilities 4,979,495 6,045,552
Current maturities of capital lease obligations 72,686 72,686
Current maturities of long-term debt 1,382,199 231,952
Total current liabilities 7,827,893 8,333,566
DEFERRED INCOME TAXES 1,721,715 1,702,515
LONG-TERM DEBT, net of current maturities 5,989,530 3,479,273
CAPITAL LEASE OBLIGATIONS, net of current maturities 72,688 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 6,281,711 6,168,489
Retained earnings 56,409,146 53,067,234
Treasury stock at cost (2,042,830 and 1,522,348 shares at 2016 and 2015, respectively) (10,278,584) (6,602,930)
Accumulated other comprehensive income (1,432,926) (1,687,679)
Total stockholders’ equity 51,006,489 50,972,176
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $66,618,315 $64,566,926



Tandy Leather Factory, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three and Six Months Ended June 30, 2016 and 2015
THREE MONTHS SIX MONTHS
2016 2015 2016 2015
NET SALES $19,522,905 $19,773,528 $40,195,132 $40,562,292
COST OF SALES 6,627,115 6,959,147 14,646,596 15,164,983
Gross profit 12,895,790 12,814,381 25,548,536 25,397,309
OPERATING EXPENSES 10,056,899 10,480,539 20,346,855 20,674,586
INCOME FROM OPERATIONS 2,838,891 2,333,842 5,201,681 4,722,723
OTHER INCOME (EXPENSE):
Interest expense (42,027) (34,762) (65,456) (78,925)
Other, net 23,434 9,877 23,395 29,750
Total other income (expense) (18,593) (24,885) (42,061) (49,175)
INCOME BEFORE INCOME TAXES 2,820,298 2,308,957 5,159,620 4,673,548
PROVISION FOR INCOME TAXES 999,383 801,061 1,817,708 1,721,245
NET INCOME $1,820,915 $1,507,896 $3,341,912 $2,952,303
NET INCOME PER COMMON SHARE:
Basic $0.19 $0.15 $0.35 $0.29
Diluted $0.19 $0.15 $0.35 $0.29
Weighted Average Number of Shares Outstanding:
Basic 9,209,446 10,212,933 9,418,645 10,212,137
Diluted 9,227,941 10,241,164 9,437,620 10,241,130



Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, 2016 and 2015
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$3,341,912 $2,952,303
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization 831,793 809,456
(Gain) / loss on disposal or abandonment of assets (6,560) 25,204
Non-cash stock-based compensation 113,302 77,737
Deferred income taxes (4,676) 8,735
Foreign currency translation 256,309 (121,909)
Net changes in assets and liabilities:
Accounts receivable-trade, net 1,382 (133,840)
Inventory (2,720,056) 65,241
Prepaid expenses (108,971) 1,261
Other current assets (62,788) 36,703
Accounts payable-trade (589,863) 423,794
Accrued expenses and other liabilities (1,066,056) 1,267,450
Income taxes payable (216,328) (286,987)
Total adjustments (3,572,572) 2,172,845
Net cash (used in) provided by operating activities (230,600) 5,125,148
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (898,007) (1,088,231)
Proceeds from sale of assets 26,703 741
Increase (decrease) in other assets 352 1,986
Net cash used in investing activities (870,952) (1,085,504)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and long term debt 3,660,505 -
Payments on notes payable and long-term debt - (3,808,812)
Payments on capital lease obligations (6,710) -
Repurchase of common stock (treasury stock) (3,675,654)
Net cash used in financing activities (21,859) (3,808,812)
NET INCREASE (DECREASE) IN CASH (1,123,411) 230,832
CASH, beginning of period 10,962,615 10,636,530
CASH, end of period$9,839,204 $10,867,362
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid during the period$65,456 $78,925
Income tax paid during the period, net of (refunds)$2,034,036 $2,003,680


Contact: Shannon L. Greene, Tandy Leather Factory, Inc. (817) 872-3200 or sgreene@tandyleather.com Mark Gilbert, Magellan Fin, LLC (317) 867-2839 or MGilbert@MagellanFin.com

Source:Tandy Leather Factory, Inc.