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This content is a press release from our partner Globe Newswire. The AP newsroom and editorial departments were not involved in its creation.

Tandy Leather Factory Reports Q4 and FY 2018 Financial Results

March 6, 2019

FORT WORTH, Texas, March 06, 2019 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ: TLF) today reported financial results for the fourth quarter and year ended December 31, 2018. A conference call will be conducted by senior management at 10:00 am Eastern Time on March 7, 2019. Dial-in details are referenced below.

-- Total sales for the fourth quarter of 2018 were $24.7 million, up 1.0% over fourth quarter 2017. North America reported comparable store sales increase of 0.7%, while new stores added $0.3 million of sales. International reported comparable store sales decline of 1.3%. -- Q4’18 gross profit margin decreased to 57.4% (after adjusting for a $1.4 million write down for damaged and slow-moving items) compared to prior year’s 62.4%. -- Q4’18 operating loss was approximately $237,000 due to higher costs associated with its recent change in management, exit costs associated with store closures, and impairment charges for underperforming stores. -- At December 31, 2018, cash totaled $24.1 million. During 2018, cash provided by operations equaled $6.9 million, while 243,387 treasury shares were repurchased at an average price of $6.79. These stock repurchases were primarily funded by the Company’s line of credit which totaled $9.0 million and bore interest at 4.0%. To date in 2019, the Company has fully repaid its debt and repurchased an additional 53,626 shares totaling $306,000 under its buy-back program.

Commenting on the results, Janet Carr, Chief Executive Officer, said, “As expected, our fourth-quarter 2018 results reflected the glide path of the business leading into the quarter with some transition and clean-up layered on. More importantly, in Q4 we began the process of revitalizing our brand and building the operating model and infrastructure that will support our long-term vision for the business. This work and these investments will continue into 2019 as we put the Company on the right foundation for exciting future growth.”

Consolidated net loss for the quarter ended December 31, 2018 was $0.6 million compared to $1.7 million consolidated net income for the fourth quarter of 2017. Fully diluted (loss) earnings per share (“EPS”) for the fourth quarter of 2018 were ($0.07), compared to $0.18 in last year’s fourth quarter. Included in fourth quarter 2018’s results were the following discrete items:

-- $1.4 million write down of inventory to net realizable value for damaged and slow-moving inventory to be disposed or sold through in the first half of 2019. -- $0.6 million of non-recurring charges related to separation agreements executed with its former officers that included accelerated vesting of restricted stock units, as well as severance payments and other benefits. -- $0.2 million of exit costs associated with the recent closure of its Irving, TX; Fort Wayne, IN; and Minto, Australia stores consisting of involuntary termination benefits and lease exit obligation costs. -- $0.3 million of impairment charges related to four underperforming stores. -- $0.2 million of additional taxes related to cross-border intercompany transactions with its Canadian subsidiary.

Consolidated net income for full year 2018 decreased to $2.0 million or EPS of $0.21 versus $4.5 million or $0.48 in the comparable period last year. In addition to the discrete items included in the fourth quarter results mentioned above, 2018 results also include $0.6 million of higher costs associated with the five stores that have opened since April 2017, $0.8 million of higher labor costs for increases in store associate wages and testing extending store operating hours, partially offset by $0.9 million of lower print and postage costs.

At December 31, 2018, inventory totaled $33.9 million, a decrease of $3.4 million from the beginning of the year. The Company plans to continue to improve its inventory turnover.

Key Initiatives

Strategic plans to drive future sales growth and long-term profitability include the following key actions that are currently being undertaken:

-- We are developing a new operating model to better serve our retail and wholesale/business customers and align the cost structure with the related margin earned from those customers. -- Enhancing our business processes and infrastructure to support our new operating model requires additional headcount in areas such as human resources, technology and marketing. We expect that 2019 will be a year of investment and change as we rebuild our infrastructure, and there may be some overlap of old and new systems and people during this transition, which will inflate our 2019 operating expenses. We believe that these investments in talent and technology will drive future sales growth and cost savings in 2020 and beyond. -- Going forward, our retail fleet will be managed primarily for cash flow which may result in an additional four to six store closures in 2019. -- To support our business priorities, we have made changes to our Retail field organization and incentives, including reducing our store management structure, which allows us to invest in other areas of the business. -- We are improving our brand proposition, with a focus on our products, promotion and pricing. Our goal is to ensure that we are investing in the right areas to drive sales growth.

Conference Call Information

A conference call will be conducted by senior management at 10:00 a.m. Eastern Time on March 7, 2019, and will be accessible to the public by calling 877-312-5524 or 253-237-1144. Callers should dial in approximately 5 minutes before the call begins. A conference call replay will be available through 12:00 p.m. Eastern Time on March 12, 2019 and can be accessed by calling 855-859-2056 or 404-537-3406. For both, reference conference ID number 9687767. This call will be webcast and can be accessed at the company’s web site at www.tandyleather.com.

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 two International stores located in the United Kingdom 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

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 (UNAUDITED):

Quarter Ended Quarter Ended 12/31/17 12/31/18 -------------------- ---------------------- Loss from Income Net Operations Net Sales from Sales Operations -------- ---------- ---------- ---------- North America $23,913,1 ($200,423) $23,488,067 $3,222,57 63 1 International 831,240 (37,000 ) 1,014,205 (23,952 ) Total Operations $24,744,4 ($237,423) $24,502,272 $3,198,61 03 9 -------- -------- - ---------- -------- -

Year Ended 12/31/18 Year Ended 12/31/17 ----------------------- ----------------------- Income Income (Loss) from (Loss) from Net Sales Operations Net Sales Operations ---------- ----------- ---------- ----------- North America $79,553,353 $4,182,969 $78,568,219 $7,498,817 International 3,544,834 (354,506 ) 3,753,049 (256,995 ) Total Operations $83,098,187 $3,828,463 $82,321,268 $7,241,822 ---------- --------- - ---------- --------- -

Quarter Ended Quarter North America 12/31/18 Ended 12/31/17 --------------- --------- # of Net # of Net stores Sales stores Sal es ------ -------- ------ -- $23 Same stores* 115 $23,655,9 115 ,48 46 8,0 67 New stores 2 257,217 - - $23 Total Sales – North America 117 $23,913,1 115 ,48 63 8,0 67 -------- --

North America Year Ended Year Ended 12/31/18 12/31/17 ----------------- --------------- # of Net Sales # of Net stores stores Sales ------ ---------- ------ -------- Same stores* 111 $77,136,143 111 $77,460,6 35 New stores 5 1,798,936 3 612,174 Closed/temp close stores 1 618,274 1 495,410 Total Sales – North America 117 $79,553,353 115 $78,568,2 19 ---------- --------

Quarter Quarter Ended International Ended 12/31/17 12/31/18 --------- --------------- # of Net # of Net stores Sal stores Sales es ------ -- ------ -------- $83 Same stores* 3 1,2 3 $842,035 40 Closed store 1 - 1 172,170 $83 $1,014,20 Total Sales – International 4 1,2 4 5 40 -- --------

International Year Ended Year Ended 12/31/18 12/31/17 --------------- --------------- # of Net # of Net stores Sales stores Sales ------ -------- ------ -------- Same stores* 3 $3,097,44 3 $3,062,86 0 2 Closed store 1 447,394 1 690,187 Total Sales – International 4 $3,544,83 4 $3,753,04 4 9 -------- --------

*Same store sales are defined as sales from existing stores that were opened during the same comparable fiscal period

TANDY LEATHER FACTORY, INC.(UNAUDITED)CONSOLIDATED BALANCE SHEETS

12/31/18 12/31/17 -------------- -------------- ASSETS CURRENT ASSETS: Cash $24,070,351 $18,337,258 Accounts receivable-trade, net of allowance for doubtful accounts of $15,703 and $22,642 in 2018 and 2017, respectively 408,170 461,212 Inventory 33,867,276 37,311,197 Prepaid income taxes 383,478 41,307 Prepaid expenses 1,244,754 1,473,147 Other current assets 161,208 189,029 ----------- - ----------- - Total current assets 60,135,237 57,813,150 PROPERTY AND EQUIPMENT, at cost 28,005,563 27,218,481 Less accumulated depreciation and amortization (13,606,266 ) (11,750,639 ) ----------- - ----------- - 14,399,297 15,467,842 DEFERRED INCOME TAXES 248,228 271,738 GOODWILL 954,765 962,949 OTHER INTANGIBLES, net of accumulated amortization of $713,000 and $710,000 in 2018 and 2017, respectively 16,500 19,222 OTHER ASSETS 386,107 379,695 ----------- - ----------- - $76,140,134 $74,914,596 ------------ - ------------ - LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable-trade $1,215,490 $1,413,450 Accrued expenses and other liabilities 4,939,829 4,953,477 Current maturities of capital lease obligation - - Current maturities of long-term debt 747,335 614,311 ----------- - ----------- - Total current liabilities 6,902,654 6,981,238 DEFERRED INCOME TAXES 1,556,493 1,636,958 LONG-TERM DEBT, net of current maturities 8,220,683 6,757,419 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, 11,346,778 and 11,313,692 shares issued at 2018 and 2017, 9,060,561 and 9,270,862 outstanding at 2018 and 2017, respectively 27,232 27,153 Paid-in capital 7,158,821 6,831,271 Retained earnings 65,716,761 63,921,244 Treasury stock at cost (2,286,217 and 2,042,830 shares at 2018 and 2017) (11,931,850 ) (10,278,584 ) Accumulated other comprehensive income (1,510,660 ) (962,103 ) ----------- - ----------- - Total stockholders’ equity 59,460,304 59,538,981 ----------- - ----------- - $76,140,134 $74,914,596 ------------ - ------------ -

TANDY LEATHER FACTORY, INC.CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31,

THREE MONTHS TWELVE MONTHS 2018 2017 2018 2017 ---------- - ---------- - ---------- - ---------- - NET SALES $24,744,403 $24,502,272 $83,098,187 $82,321,268 COST OF SALES 11,972,449 9,205,353 32,517,996 30,207,439 ---------- - ---------- - ---------- - ---------- - Gross profit 12,771,954 15,296,919 50,580,191 52,113,829 OPERATING EXPENSES 13,009,377 12,098,300 46,751,728 44,872,007 ---------- - ---------- - ---------- - ---------- - (LOSS) INCOME FROM OPERATIONS (237,423 ) 3,198,619 3,828,463 7,241,822 OTHER EXPENSE (INCOME): Interest expense 81,423 62,390 304,957 205,555 Other (income), net (53,732 ) (11,258 ) (180,191 ) (126,857 ) ---------- - ---------- - ---------- - ---------- - Total other expense 27,691 51,132 124,766 78,698 ---------- - ---------- - ---------- - ---------- - (LOSS) INCOME BEFORE INCOME TAXES (265,114 ) 3,147,487 3,703,697 7,163,124 PROVISION FOR INCOME TAXES 363,235 1,476,147 1,739,869 2,711,373 ---------- - ---------- - ---------- - ---------- - NET (LOSS) INCOME ($628,349 ) $1,671,340 $1,963,828 $4,451,751 ----------- - ----------- - ----------- - ----------- - NET(LOSS) INCOME PER COMMON SHARE: Basic ($0.07 ) $0.18 $0.21 $0.48 ----------- - ----------- - ----------- - ----------- - Diluted ($0.07 ) $0.18 $0.21 $0.48 ----------- - ----------- - ----------- - ----------- - Weighted Average Number of Shares Outstanding: Basic 9,143,746 9,270,862 9,185,203 9,242,092 Diluted 9,143,746 9,272,330 9,185,662 9,256,810

TANDY LEATHER FACTORY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)FOR THE YEAR ENDED DECEMBER 31,

2018 2017 ---------- - ---------- - CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,963,828 $4,451,751 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,797,281 1,875,102 Impairment of long-lived assets 285,477 - Loss on disposal or abandonment of assets 1,321 3,139 Non-cash stock-based compensation 327,629 239,599 Deferred income taxes (90,997 ) (215,576 ) Foreign currency translation (502,559 ) 883,670 Net changes in assets and liabilities: Accounts receivable-trade, net 53,042 99,772 Inventory 3,443,921 (4,133,658 ) Prepaid expenses 239,082 135,713 Other current assets 27,821 (48,797 ) Accounts payable-trade (197,960 ) (208,434 ) Accrued expenses and other liabilities (181,959 ) (983,710 ) Income taxes payable (308,129 ) 923,016 ---------- - ---------- - Total adjustments 4,893,970 (1,430,164 ) ---------- - ---------- - Net cash provided by operating activities 6,857,798 3,021,587 ---------- - ---------- - CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (1,091,433 ) (1,689,645 ) Proceeds from sale of assets / insurance 27,396 35,963 (Increase) in other assets (3,690 ) (43,669 ) Net cash used in investing activities (1,067,727 ) (1,697,351 ) ---------- - ---------- - CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable and long term debt 1,596,288 - Repurchase of common stock (treasury stock) (1,653,266 ) - Proceeds from exercise of stock options - 223,404 Net cash (used in) provided by financing activities (56,978 ) 150,718 ---------- - ---------- - NET INCREASE IN CASH 5,733,093 1,474,954 CASH, beginning of period 18,337,258 16,862,304 ---------- - ---------- - CASH, end of period $24,070,351 $18,337,258 ----------- - ----------- - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid during the period $304,957 $205,555 Income tax paid during the period, net of (refunds) $2,138,995 $1,788,357