TANDY LEATHER FACTORY INC - FORM 8-K - EX-99..1 2 - EXHIBIT 99.1 PRESS RELEASE - August 2, 2017

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FOR IMMEDIATE RELEASE                                                                                                                                              August 2, 2017

TANDY LEATHER FACTORY REPORTS  2nd QUARTER FINANCIAL RESULTS
Investments in New Stores and District Manager Program Impacting Results

FORT WORTH, TEXAS – Tandy Leather Factory, Inc. (NASDAQ: TLF) today reported financial results for the second quarter of 2017.  Consolidated net income for the quarter ended June 30, 2017 was $1.0 million compared to $1.8 million for the second quarter of 2016.  Fully diluted earnings per share for the quarter were $0.11, compared to $0.19 in last year’s second quarter.  Total sales for the quarter ended June 30, 2017 were $19.3 million, down 1% from $19.5 million in the second quarter last year.

Consolidated sales for the six months ended June 30, 2017 were $39.4 million, down 2% from 2016’s first half sales of $40.2 million.  Consolidated net income for the first half of 2017 equaled $2.3 million or $0.24 per fully-diluted share versus $3.3 million or $0.35 per fully-diluted share in the comparable period last year.

Sales from the North America segment, consisting of all stores in the US and Canada, decreased $132,000 in the second quarter, down 0.7% from last year's second quarter sales.  For the first six months of 2017, North America’s sales decreased $639,000 or 1.7% from the first six months of 2016.  International, consisting of four stores outside of North America, added sales of $853,000 for the quarter compared to last year’s second quarter sales of $964,000. For the first half of 2017, International Leathercraft’s sales, totaling $1.8 million, were down 7%, or $125,000, over the same period last year.

Consolidated gross profit margin for the current quarter was 66.9%, compared to 66.1% for the second quarter of 2016.  For the first half of 2017, consolidated gross profit margin was 63.9%, improving from last year's gross profit margin of 63.6%.  Consolidated operating expenses increased approximately 11.8% or $1,183,000 for the quarter and 7% or $1,442,000 for the year, compared to the same periods in 2016.   Significant increases in operating expenses relate to personnel and occupancy costs for the six new stores that have opened since the second quarter last year, as well as personnel and travel costs related to the new district manager program that began in early 2017.

Shannon L. Greene, Chief Executive Officer, commented, “While we delivered solid year over year gross margin improvement, our results this quarter and year to date also reflect the investments we are making in our new stores and our district manager program.  In addition, our International segment underperformed, both in top line and bottom line performance.   However, we were pleased to see some positive momentum as the number of sales transactions have steadily improved in both our North America and International segments.  We continue to make progress on our operational and strategic priorities, which will continue to put pressure on short term results, but we’re confident that they are providing the platform for us to remain competitive in this evolving retail landscape and for driving sustainable growth in traffic and sales.”

Tina Castillo, Chief Financial Officer added, “While our results this quarter were lower than comparable, our expectations for 2017 have not changed.  We continue to believe that the top line trend will improve in the second half of 2017 as our new stores and new product roll-outs support sales growth.  Further, we will continue to protect our gross margins and manage our expenses with financial discipline to ensure an acceptable return on investment.”
 
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 115 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.
Contact:
Tina Castillo, Tandy Leather Factory, Inc.
(817) 872-3200 or tcastillo@tandyleather.com
 
  Mark Gilbert, Magellan Fin, LLC
(317) 867-2839 or MGilbert@MagellanFin.com

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.
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Selected financial data:

   
Quarter Ended 6/30/17
    
Quarter Ended 6/30/16
  
   
Net Sales
    
Income from Operations
    
Net Sales
    
Income from Operations
  
North America*
  
$
18,427,425
    
$
1,814,887
    
$
18,558,938
    
$
2,714,312
  
International
    
853,345
      
(159,450
)
    
963,967
      
124,579
  
Total Operations
  
$
19,280,770
    
$
1,655,437
    
$
19,522,905
    
$
2,838,891
  

   
Six Months Ended 6/30/17
    
Six Months Ended 6/30/16
  
   
Net Sales
    
Income from Operations
    
Net Sales
    
Income from Operations
  
North America*
  
$
37,659,139
    
$
3,626,450
    
$
38,298,429
    
$
5,055,521
  
International
    
1,771,476
      
(233,522
)
    
1,896,703
      
146,160
  
Total Operations
  
$
39,430,615
    
$
3,392,928
    
$
40,195,132
    
$
5,201,681
  


North America*
  
Quarter Ended 6/30/17
    
Quarter Ended 6/30/16
  
   
# of stores
    
Net Sales
    
# of stores
    
Net Sales
  
Same stores
    
108
    
$
17,861,074
      
108
    
$
18,485,428
  
New stores
    
6
      
447,059
      
-
      
-
  
Temp closed store
    
1
      
119,292
      
1
      
73,510
  
Total Sales – North America
    
115
    
$
18,427,425
      
109
    
$
18,558,938
  

North America*
  
Six Months Ended 6/30/17
    
Six Months Ended 6/30/16
  
   
# of stores
    
Net Sales
    
# of stores
    
Net Sales
  
Same stores
    
107
    
$
36,501,344
      
107
    
$
37,401,837
  
New stores
    
7
      
952,325
      
1
      
338,774
  
Closed/temp close stores
    
3
      
205,470
      
3
      
557,818
  
Total Sales – North America
    
115
    
$
37,659,139
      
109
    
$
38,298,429
  

International – there were no new stores or closed stores for the three and six-months ended June 30, 2017 and 2016, so total sales are equal to same store sales.

* 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.

2


 
TANDY LEATHER FACTORY, INC.
CONSOLIDATED BALANCE SHEETS

   
6/30/17
(unaudited)
    
12/31/16
(audited)
  
ASSETS
            
CURRENT ASSETS:
            
Cash
  
$
14,841,370
    
$
16,862,304
  
Accounts receivable-trade, net of allowance for doubtful accounts
                
    of $16,209 and $2,404 in 2017 and 2016, respectively
    
497,317
      
560,984
  
Inventory
    
37,327,488
      
33,177,539
  
Prepaid income taxes
    
455,423
      
964,323
  
Prepaid expenses
    
1,478,762
      
1,608,860
  
Other current assets
    
140,488
      
140,232
  
Total current assets
    
54,740,848
      
53,314,242
  
                 
PROPERTY AND EQUIPMENT, at cost
    
26,585,838
      
25,536,352
  
Less accumulated depreciation and amortization
    
(10,831,122
)
    
(9,884,559
)
     
15,754,716
      
15,651,793
  
                 
DEFERRED INCOME TAXES
    
404,615
      
375,236
  
GOODWILL
    
959,797
      
956,201
  
OTHER INTANGIBLES, net of accumulated amortization of
                
    $709,000 and $708,000 in 2017 and 2016, respectively
    
19,954
      
20,840
  
OTHER ASSETS
    
363,529
      
334,408
  
   
$
72,243,459
    
$
70,652,720
  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
CURRENT LIABILITIES:
                
Accounts payable-trade
  
$
1,484,043
    
$
1,621,884
  
Accrued expenses and other liabilities
    
4,471,813
      
5,937,187
  
Current maturities of capital lease obligation
    
72,686
      
72,686
  
Current maturities of long-term debt
    
1,535,778
      
614,311
  
Total current liabilities
    
7,564,320
      
8,246,068
  
                 
DEFERRED INCOME TAXES
    
1,838,066
      
1,956,032
  
                 
LONG-TERM DEBT, net of current maturities
    
5,835,952
      
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, 11,313,692 and 11,235,992 shares issued at 2017 and 2016,
                
   9,270,862 and 9,193,162 outstanding at 2017 and 2016, respectively
    
27,153
      
26,966
  
Paid-in capital
    
6,762,832
      
6,368,455
  
Retained earnings
    
61,728,490
      
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
    
(1,234,770
)
    
(1,893,129
)
Total stockholders' equity
    
57,005,121
      
53,693,201
  
   
$
72,243,459
    
$
70,652,720
  
                 



3


TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,

   
THREE MONTHS
    
SIX MONTHS
  
   
2017
    
2016
    
2017
    
2016
  
NET SALES
  
$
19,280,770
    
$
19,522,905
    
$
39,430,615
    
$
40,195,132
  
                                 
COST OF SALES
    
6,385,236
      
6,627,115
      
14,249,036
      
14,646,596
  
                                 
          Gross profit
    
12,895,534
      
12,895,790
      
25,181,579
      
25,548,536
  
                                 
OPERATING EXPENSES
    
11,240,097
      
10,056,899
      
21,788,651
      
20,346,855
  
                                 
INCOME FROM OPERATIONS
    
1,655,437
      
2,838,891
      
3,392,928
      
5,201,681
  
                                 
OTHER INCOME (EXPENSE):
                                
          Interest expense
    
(53,680
)
    
(42,027
)
    
(90,024
)
    
(65,456
)
          Other, net
    
17,012
      
23,434
      
19,663
      
23,395
  
               Total other income (expense)
    
(36,668
)
    
(18,593
)
    
(70,361
)
    
(42,061
)
                                 
INCOME BEFORE INCOME TAXES
    
1,618,769
      
2,820,298
      
3,322,567
      
5,159,620
  
                                 
PROVISION FOR INCOME TAXES
    
591,037
      
999,383
      
1,063,570
      
1,817,708
  
                                 
NET INCOME
  
$
1,027,732
    
$
1,820,915
    
$
2,258,997
    
$
3,341,912
  
                                 
                                 
                                 
NET INCOME PER COMMON SHARE:
                                
Basic
  
$
0.11
    
$
0.19
    
$
0.24
    
$
0.35
  
Diluted
  
$
0.11
    
$
0.19
    
$
0.24
    
$
0.35
  
                                 
Weighted Average Number of Shares Outstanding:
                                
  Basic
    
9,225,960
      
9,209,446
      
9,212,846
      
9,418,645
  
  Diluted
    
9,229,129
      
9,227,941
      
9,225,474
      
9,437,620
  




 
4


TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30,



   
2017
    
2016
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
  
$
2,258,997
    
$
3,341,912
  
Adjustments to reconcile net income to net cash used in operating activities:
                
Depreciation and amortization
    
929,408
      
831,793
  
Loss / (gain) on disposal or abandonment of assets
    
515
      
(6,560
)
Non-cash stock-based compensation
    
171,160
      
113,302
  
Deferred income taxes
    
(147,345
)
    
(4,676
)
Foreign currency translation
    
627,609
      
256,309
  
Net changes in assets and liabilities:
                
Accounts receivable-trade, net
    
63,667
      
1,382
  
Inventory
    
(4,149,949
)
    
(2,720,056
)
Prepaid expenses
    
130,098
      
(108,971
)
Other current assets
    
(256
)
    
(62,788
)
Accounts payable-trade
    
(137,841
)
    
(589,863
)
Accrued expenses and other liabilities
    
(1,465,374
)
    
(1,066,056
)
Income taxes payable
    
508,900
      
(216,328
)
Total adjustments
    
(3,469,408
)
    
(3,572,572
)
                            Net cash used in operating activities
    
(1,210,411
)
    
(230,600
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchase of property and equipment
    
(1,004,906
)
    
(898,007
)
Proceeds from sale of assets
    
100
      
26,703
  
(Increase) decrease in other assets
    
(29,121
)
    
352
  
Net cash used in investing activities
    
(1,033,927
)
    
(870,952
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Proceeds from notes payable and long term debt
    
-
      
3,660,505
  
Payments on capital lease obligations
    
-
      
(6,710
)
Repurchase of common stock (treasury stock)
    
-
      
(3,675,654
)
Proceeds from exercise of stock options
    
223,404
      
-
  
Net cash provided by (used in) financing activities
    
223,404
      
(21,859
)
                 
NET DECREASE IN CASH
    
(2,020,934
)
    
(1,123,411
)
                 
CASH, beginning of period
    
16,862,304
      
10,962,615
  
                 
CASH, end of period
  
$
14,841,370
    
$
9,839,204
  
                 
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
                
Interest paid during the period
  
$
90,024
    
$
65,456
  
Income tax paid during the period, net of (refunds)
  
$
554,670
    
$
2,034,036
  



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TANDY LEATHER FACTORY INC Reports