Tandy Leather Factory Reports Soft 1st Quarter Results

Results are In Line with Expectations and Cash Levels Remain Solid


FORT WORTH, Texas, May 03, 2017 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ:TLF) today reported financial results for the first quarter of 2017.  Net income for the quarter ended March 31, 2017 was $1.2 million, down 19% from net income in the first quarter of 2016 of $1.5 million.  Fully-diluted earnings per share for the quarter were $0.13 in the current quarter, compared to $0.16 in last year’s first quarter.  Total sales for the first quarter were $20.1 million, a decrease of 2.5% compared to 2016’s first quarter sales of $20.7 million.

Sales from the North America division, consisting of all stores in the US and Canada, decreased $508,000 in the first quarter, down 2.6% from last year's first quarter sales.  International, consisting of four stores outside of North America, added sales of $918,000 for the quarter, a 1.6% decrease from last year’s first quarter sales of $933,000.

Consolidated gross profit margin decreased minimally from 61.2% in the first quarter of 2016 to 61.0% in the first quarter of 2017.  Operating expenses increased $259,000 in the first quarter of 2017 to $10.5 million compared to $10.3 million in the first quarter of 2016, increasing as a percentage of sales from 49.8% in 2016 to 52.4% in 2017.  Compared to the first quarter of 2016, personnel costs, occupancy and selling costs were the primary contributors to the operating expense increase.       

Shannon L Greene, Chief Executive Officer, commented, “Our results this quarter reflect not only soft sales, but the investment we are making in our personnel, including our new district manager program.  On the sales front, similar to what other retailers are reporting, we’re seeing a pattern where consumer spending starts weak, but is expected to pick up as we move through the year.  While it is still early, we are pleased with the performance of our new district managers and the active role they are taking in helping their local stores aggressively build our customer base and strengthen our brand.  I am confident that, while the first year investment is painful, it will pay off in the long run.  Further, despite the retail headwinds, we are   moving forward with our new store openings.  Our Allen, TX store opened a few weeks ago, and we will be announcing the opening of several more new stores in the very near future.”  

Tina Castillo, Chief Financial Officer added, “While our results this quarter were lower than comparable, we expected a slow start to the year so the results are actually in line with our guidance.  However, that is not to say that we aren’t laser focused on protecting our gross margin and controlling our expenses, particularly in this challenging retail environment.  Rather, our mission is very clear, to profitably grow the business and increase shareholder value.”

Tandy Leather Factory, Inc., (http://www.tandyleather.com), headquartered in Fort Worth, Texas, is a specialty retailer 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 113 North American stores located in 42 US states and 7 Canadian provinces, and four International 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 03/31/17 Quarter Ended 03/31/16
  Sales Income from
Operations
 Sales Income from
Operations
North America*$19,231,714 $1,811,563  $19,739,491 $2,341,209
International 918,131  (74,072)   932,736  21,581
Total Operations$20,149,845 $1,737,491  $20,672,227 $2,362,790
             


North America* Quarter Ended 03/31/17 Quarter Ended 03/31/16
 # of
stores
Sales # of
stores
Sales
Same store sales108$18,737,881 108$19,175,528
New store sales(a)4 407,655 1 79,654
Closed store sales(b)3 86,178 3 484,309
Total Sales – North America112$19,231,714 110$19,739,491
        

(a) Nyack, NY opened March 2016; Philadelphia, PA opened October 2016; Lyndhurst, NJ opened November 2016; and Johnston, RI opened December 2016.  Allen, TX opened April 17,2017 and is not included in these results.

(b) Harrisburg, PA temporarily closed from April 2016 to December 2016; Tucson, AZ closed March 2016; and Allentown, PA closed April 2016.

International Quarter Ended 03/31/17 Quarter Ended 03/31/16
 # of
stores
Sales # of
stores
Sales
Same store sales4$918,131 4$932,736
New store sales-  - -
Total Sales – International 4$918,131 4$932,736
        

* We operate in two segments:  North America and International.  Prior to January 1, 2017, we operated in three segments:  Wholesale, Retail and International.  To better reflect how management analyzes the business and allocates resources, we combined Wholesale and Retail into North America effective January 1, 2017, while International remains the same. All prior year data discussed throughout this press release has been restated to conform to the new reporting segment structure.  There is no change to our consolidated financial position or results.

 
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS
 
 3/31/17
(unaudited)
 12/31/16
(audited)
ASSETS   
CURRENT ASSETS:   
Cash$16,407,211  $16,862,304 
Accounts receivable-trade, net of allowance for doubtful accounts   
of $3,548 and $2,404 in 2017 and 2016, respectively 524,692   560,984 
Inventory 34,382,003   33,177,539 
Prepaid income taxes 474,487   964,323 
Prepaid expenses 1,710,217   1,608,860 
Other current assets 264,617   140,232 
Total current assets 53,763,227   53,314,242 
    
PROPERTY AND EQUIPMENT, at cost 26,156,413   25,536,352 
Less accumulated depreciation and amortization (10,350,479)   (9,884,559) 
  15,805,934   15,651,793 
    
DEFERRED INCOME TAXES 376,884   331,086 
GOODWILL 957,347   956,201 
OTHER INTANGIBLES, net of accumulated amortization of   
$709,000 and $708,000 in 2017 and 2016, respectively 20,396   20,840 
OTHER ASSETS 344,986   334,408 
 $71,268,774  $70,608,570 
    
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
CURRENT LIABILITIES:   
Accounts payable-trade$2,424,445  $1,621,884 
Accrued expenses and other liabilities 4,219,821   5,937,187 
Current maturities of capital lease obligation 72,686   72,686 
Current maturities of long-term debt 1,075,044   614,311 
Total current liabilities 7,791,996   8,246,068 
    
DEFERRED INCOME TAXES 1,854,493   1,911,882 
    
LONG-TERM DEBT, net of current maturities 6,296,685   6,757,419 
CAPITAL LEASE OBLIGATION, net of current maturities -   - 
COMMITMENTS AND CONTINGENCIES -   - 
    
STOCKHOLDERS' EQUITY:   
Preferred stock, $0.10 par value; 20,000,000 shares   
authorized, none issued or outstanding -   - 
Common stock, $0.0024 par value; 25,000,000 shares   
authorized, 11,318,331 and 11,309,326 shares issued at 2016 and 2015,   
9,275,501 and 9,266,496 outstanding at 2016 and 2015, respectively 27,164   27,142 
Paid-in capital 6,413,051   6,368,279 
Retained earnings 60,700,758   59,469,493 
Treasury stock at cost (2,042,830 shares at 2017 and 2016) (10,278,584)   (10,278,584) 
Accumulated other comprehensive income (1,536,789)   (1,893,129) 
Total stockholders' equity 55,325,600   53,693,201 
 $71,268,774  $70,608,570 
    


TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
 
 2017 2016
    
NET SALES$20,149,845  $20,672,227
COST OF SALES 7,863,800   8,019,481
 Gross profit 12,286,045   12,652,746
    
OPERATING EXPENSES 10,548,554   10,289,956
INCOME FROM OPERATIONS 1,737,491   2,362,790
    
OTHER (INCOME) EXPENSE:   
Interest expense 36,344   23,429
Other, net (2,651)   39
 Total other (income) expense 33,693   23,468
    
INCOME BEFORE INCOME TAXES 1,703,798   2,339,322
    
PROVISION FOR INCOME TAXES 472,533   818,325
    
NET INCOME$1,231,265  $1,520,997
    
    
NET INCOME PER COMMON SHARE:   
BASIC$0.13  $0.16
DILUTED$0.13  $0.16
    
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:   
BASIC 9,309,424   9,698,951
DILUTED 9,330,303   9,718,453


TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
 
  2017   2016 
CASH FLOWS FROM OPERATING ACTIVITIES:   
 Net income$1,231,265  $1,520,997 
 Adjustments to reconcile net income to net cash provided by (used in) operating activities:   
 Depreciation and amortization 458,118   414,228 
 Loss / (gain) on disposal or abandonment of assets 335   (12,023) 
 Non-cash stock-based compensation 44,794   43,762 
 Deferred income taxes (103,187)   31,717 
 Foreign currency translation 344,789   614,366 
 Net changes in assets and liabilities:   
 Accounts receivable-trade, net 36,292   (129,374) 
 Inventory (1,204,464)   (47,763) 
 Prepaid expenses (101,357)   (112,282) 
 Other current assets (126,374)   (76,076) 
 Accounts payable-trade 802,561   (63,065) 
 Accrued expenses and other liabilities (1,717,366)   (1,471,776) 
 Income taxes payable 489,836   360,847 
 Total adjustments (1,076,023)   (447,439) 
 Net cash provided by operating activities 155,242   1,073,558 
    
CASH FLOWS FROM INVESTING ACTIVITIES:   
 Purchase of property and equipment (599,757)   (606,932) 
 Proceeds from sale of assets -   22,625 
 (Decrease) in other assets (10,578)   (154) 
 Net cash used in investing activities (610,335)   (584,461) 
    
CASH FLOWS FROM FINANCING ACTIVITIES:   
 Proceeds from notes payable and long term debt -   2,870,000 
 Payments on capital lease obligations -   (6,710) 
 Repurchase of common stock (treasury stock) -   (2,870,740) 
 Net cash used in financing activities -   (7,450) 
    
NET (DECREASE) INCREASE IN CASH (455,093)   481,647 
    
CASH, beginning of period 16,862,304   10,962,615 
    
CASH, end of period$16,407,211  $11,444,262 
    
    
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   
Interest paid during the period$36,344  $23,429 
Income tax paid during the period, net of (refunds)$17,303  $457,478 

 


            

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