OREANDA-NEWS. 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.”

 

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 stores Sales   # of stores Sales
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 stores Sales   # of stores Sales
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 stores Sales   # of stores Sales
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 stores Sales   # of stores Sales
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 stores Sales   # of stores Sales
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 stores Sales   # of stores Sales
Same store sales 3 $ 1,597,500     3 $ 1,800,886  
New store sales 1   299,203     -   -  
Total Sales – Intl Leathercraft 4 $ 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