8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

Form 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported:) August 10, 2016

Tandy Leather Factory, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation

1-12368	75-2543540
(Commission File Number)	(IRS Employer Identification Number)

1900 Southeast Loop 820, Fort Worth, Texas	76140
(Address of Principal Executive Offices)	(Zip Code)

(817) 872-3200

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Item 2.02.  Results of Operations and Financial Condition

     Tandy Leather Factory, Inc. on August 10, 2016 issued a press release regarding its financial results for the three and six months ended June 30, 2016.  A copy of the press release is attached as Exhibit 99.1.

     The information in this report and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall they be deemed incorporated by reference in any filing with the Securities and Exchange Commission under the Securities Exchange Act of 1934 or the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.  Financial Statements and Exhibits

(a)   Financial statements of businesses acquired.

Not applicable.

(b)   Pro forma financial information.

Not applicable.

(c)   Exhibits.

No.                     Exhibit

99.1                     Press release dated August 10, 2016

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	TANDY LEATHER FACTORY, INC.
Date:  August 10, 2016	By: /s/ Shannon L. Greene
	Shannon L. Greene, Chief Executive Officer

EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE                                                                                                 AUGUST 10, 2016

TANDY LEATHER FACTORY REPORTS 2ND QUARTER 2016 EARNINGS UP 21%

Weak Sales Offset by Strong Margin Improvement

FORT WORTH, TEXAS – 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.

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

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 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 – International 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 – International 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

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