Tile Shop Holdings, Inc 10-Q for FY2020 Q1

Tile Shop Holdings, Inc. (TTSH)

10-Q 2020-05-08 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Tile Shop Holdings, Inc filed this 10-Q on May 8, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $94.28M; up 8.5% from $86.91M a year earlier
Net income: $3.5M; up 165.3% from net income of $1.32M a year earlier
Diluted EPS: $0.07; up 133.3% from $0.03 a year earlier

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Delaware	45-5538095
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


14000 Carlson Parkway
Plymouth, Minnesota	55441
(Address of principal executive offices)	(Zip Code)


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		28



	March 31,		December 31,
	2020		2019
	(unaudited)		(audited)
Assets
Current assets:
Cash and cash equivalents	$	5,701	$	9,104
Restricted cash		815		815
Receivables, net		4,209		3,370
Inventories		86,295		97,620
Income tax receivable		9,298		3,090
Other current assets, net		8,049		8,180
Total Current Assets		114,367		122,179
Property, plant and equipment, net		121,069		130,461
Right of use asset		135,451		137,737
Deferred tax assets		2,741		7,196
Other assets		1,988		2,241
Total Assets	$	375,616	$	399,814

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	15,403	$	18,181
Income tax payable		47		87
Current portion of lease liability		27,751		26,993
Other accrued liabilities		27,363		24,589
Total Current Liabilities		70,564		69,850
Long-term debt		37,500		63,000
Long-term lease liability, net		128,187		131,451
Financing lease obligation, net		230		274
Other long-term liabilities		4,263		4,340
Total Liabilities		240,744		268,915

Stockholders’ Equity:
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 51,396,986 and 50,806,674 shares, respectively		5		5
Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares		-		-
Additional paid-in-capital		156,969		156,482
Accumulated deficit		(22,016)		(25,518)
Accumulated other comprehensive loss		(86)		(70)
Total Stockholders' Equity		134,872		130,899
Total Liabilities and Stockholders' Equity	$	375,616	$	399,814


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended
	March 31,
	2020		2019
Net sales	$	94,279	$	86,908
Cost of sales		29,324		25,066
Gross profit		64,955		61,842
Selling, general and administrative expenses		62,361		58,948
Income from operations		2,594		2,894
Interest expense		(848)		(978)
Other income		-		15
Income before income taxes		1,746		1,931
Benefit (provision) for income taxes		1,756		(611)
Net income	$	3,502	$	1,320

Income per common share:
Basic	$	0.07	$	0.03
Diluted	$	0.07	$	0.03

Weighted average shares outstanding:
Basic		49,842,072		51,961,780
Diluted		49,842,072		52,037,996



	Common stock
	Shares	Amount		Additional paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income (loss)		Total
Balance at December 31, 2018	52,707,879	$	5	$	172,255	$	(25,857)	$	(56)	$	146,347
Adoption of lease standard	-		-		-		6,540		-		6,540
Balance at January 1, 2019	52,707,879	$	5	$	172,255	$	(19,317)	$	(56)	$	152,887
Issuance of restricted shares	281,173		-		-		-		-		-
Cancellation of restricted shares	(87,319)		-		-		-		-		-
Stock based compensation	-		-		739		-		-		739
Tax withholdings related to net share settlements of stock based compensation awards	-		-		(82)		-		-		(82)
Dividends paid ($0.05 per share)	-		-		(2,606)		-		-		(2,606)
Foreign currency translation adjustments	-		-		-		-		27		27
Net income	-		-		-		1,320		-		1,320
Balance at March 31, 2019	52,901,733	$	5	$	170,306	$	(17,997)	$	(29)	$	152,285

Balance at December 31, 2019	50,806,674	$	5	$	156,482	$	(25,518)	$	(70)	$	130,899
Issuance of restricted shares	669,609		-		-		-		-		-
Cancellation of restricted shares	(79,297)		-		-		-		-		-
Stock based compensation	-		-		566		-		-		566
Tax withholdings related to net share settlements of stock based compensation awards	-		-		(79)		-		-		(79)
Foreign currency translation adjustments	-		-		-		-		(16)		(16)
Net income	-		-		-		3,502		-		3,502
Balance at March 31, 2020	51,396,986	$	5	$	156,969	$	(22,016)	$	(86)	$	134,872



	For the three months ended
	March 31,
	2020		2019
Man-made tiles	46	%	46	%
Natural stone tiles	29		29
Setting and maintenance materials	14		13
Accessories	10		11
Delivery service	1		1
Total	100	%	100	%


	(in thousands)
	March 31,		December 31,
	2020		2019
Other current (accrued) liabilities	$	6,067	$	5,434
Other current assets		1,800		1,659
Sales returns reserve, net	$	4,267	$	3,775



	(all amounts in thousands except share and per share data)
		For the three months ended
		March 31,
		2020		2019
Net income		$	3,502	$	1,320
Weighted average shares outstanding - basic			49,842,072		51,961,780
Effect of dilutive securities attributable to stock based awards			-		76,216
Weighted average shares outstanding - diluted			49,842,072		52,037,996
Income per common share:
Basic		$	0.07	$	0.03
Diluted		$	0.07	$	0.03
Anti-dilutive securities excluded from earnings per share calculation			2,065,632		1,639,659


Leases (in thousands)	Classification		March 31, 2020		December 31, 2019
Assets
Operating lease assets	Right of use asset	$	135,451	$	137,737
Financing lease assets	Property, plant and equipment, net of accumulated depreciation		102		113
Total leased assets		$	135,553	$	137,850

Liabilities
Current
Operating	Current portion of lease liability	$	27,751	$	26,993
Financing	Other accrued liabilities		168		162
Noncurrent
Operating	Long-term lease liability, net		128,187		131,451
Financing	Financing lease obligation, net		230		274
Total lease liabilities		$	156,336	$	158,880



Lease cost (in thousands)	Classification		March 31, 2020		March 31, 2019
Operating lease cost	SG&A expenses	$	8,221	$	8,013
Financing lease cost
Amortization of leased assets	Depreciation and amortization		12		12
Interest on lease liabilities	Interest expense		16		21
Variable lease cost(1)	SG&A expenses		3,398		3,225
Short term lease cost	SG&A expenses		248		264
Net lease cost		$	11,895	$	11,535


Other Information (in thousands)		March 31, 2020		March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9,067	$	8,602
Operating cash flows from financing leases	$	22	$	21
Financing cash flows from financing leases	$	60	$	33



($ in thousands)	March 31,
	2020(1)			2019(1)
(Loss) income from Operations (trailing twelve months)	$	(1,657)		$	13,347

Total Assets		401,279			328,030
Less: Accounts payable		(19,260)			(29,242)
Less: Income tax payable		(44)			(116)
Less: Other accrued liabilities		(25,805)			(27,035)
Less: Lease liability(2)		(160,115)			(67,122)
Less: Other long-term liabilities		(3,917)			(3,937)
Capital Employed	$	192,138		$	200,578

Pretax Return on Capital Employed		(0.9)	%		6.7	%



	Pricing	Fair Value at
	Category	March 31, 2020		December 31, 2019
Assets	(in thousands)
Cash and cash equivalents	Level 1	$	5,701	$	9,104
Restricted cash	Level 1		815		815



	(in thousands)
	2020		% of sales(1)		2019		% of sales
Net sales	$	94,279			$	86,908
Cost of sales		29,324	31.1	%		25,066	28.8	%
Gross profit		64,955	68.9	%		61,842	71.2	%
Selling, general and administrative expenses		62,361	66.1	%		58,948	67.8	%
Income from operations		2,594	2.8	%		2,894	3.3	%
Interest expense		(848)	(0.9)	%		(978)	(1.1)	%
Other income		-	-	%		15	0.0	%
Income before income taxes		1,746	1.9	%		1,931	2.2	%
Benefit (provision) for income taxes		1,756	1.9	%		(611)	(0.7)	%
Net income	$	3,502	3.7	%	$	1,320	1.5	%



	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Maximum Number of Shares that May Yet be Purchased Under Plans or Programs
January 1, 2020 - January 31, 2020	13,746	(1)	$	0.00	-	-
February 1, 2020 - February 29, 2020	41,313	(2)		1.91	-	-
March 1, 2020 - March 31, 2020	24,238	(1)		0.00	-	-
	79,297		$	1.00	-	-


Exhibit No.	Description
3.1	Certificate of Incorporation of Tile Shop Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (Reg. No. 333-182482) filed with the Securities and Exchange Commission on July 2, 2012).
3.2	By-Laws of Tile Shop Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 (Reg. No. 333-182482) filed with the Securities and Exchange Commission on July 2, 2012).
10.1*	Letter Agreement, dated as of April 24, 2020, by and between the Company and Cabell H. Lolmaugh (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2020).
10.2*	Letter Agreement, dated as of April 24, 2020, by and between the Company and Nancy DiMattia (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2020).
10.3*	Letter Agreement, dated as of April 24, 2020, by and between the Company and Mark B. Davis (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2020).
31.1**	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2**	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1***	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2***	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
99.1	Director Standstill Commitment (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 13, 2020).
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema Document.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document.


	TILE SHOP HOLDINGS, INC.

Dated: May 8, 2020	By:	/s/ CABELL H. LOLMAUGH
		Cabell H. Lolmaugh
		Chief Executive Officer


Dated: May 8, 2020	By:	/s/ NANCY DIMATTIA
		Nancy DiMattia
		Chief Financial Officer


Dated: May 8 2020
		/s/ CABELL H. LOLMAUGH
		Cabell H. Lolmaugh
		Chief Executive Officer