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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 storesSales # of storesSales
Same store sales27$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 storesSales # of storesSales
Same store sales27$17,998,925 27$18,739,934
Closed store sales- 188,405 1 494,441
Total Sales – Wholesale Leathercraft27$18,187,330 28$19,234,375


Retail Leathercraft Quarter Ended 09/30/16 Quarter Ended 09/30/15
# of storesSales # of storesSales
Same store sales80$11,836,141 80 $1,975,960
New store sales1 283,562 - -
Closed store sales2 - 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 storesSales # of storesSales
Same store sales80$36,864,480 80$36,934,411
New store sales1 622,336 - -
Closed store sales2 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 storesSales # of storesSales
Same store sales3$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 storesSales # of storesSales
Same store sales3$2,346,662 3$2,713,431
New store sales1 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. Greene Tandy Leather Factory, Inc. (817) 872-3200 sgreene@tandyleather.com Mark Gilbert Magellan Fin, LLC (317) 867-2839 MGilbert@MagellanFin.com

Source:Tandy Leather Factory, Inc.