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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

_____________________________

FORM 10-Q

_____________________________

(Mark One)

x

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

For the quarterly period ended March 31, 2022

OR

¨

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

 For the transition period from – to –

 

Commission file number: 001-35629

_____________________________

TILE SHOP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________________________

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)

(763) 852-2950 

(Registrant’s telephone number, including area code)

_____________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

TTSH

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes    ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes    ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

x

Non-accelerated filer

¨

Smaller reporting company

¨

Emerging growth company

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes    x No

As of May 2, 2022, there were 52,101,412 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

 

TILE SHOP HOLDINGS, INC.

Table of Contents

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

  

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except per share data)

March 31,

December 31,

2022

2021

(unaudited)

(audited)

Assets

Current assets:

Cash and cash equivalents

$

13,455

$

9,358

Restricted cash

655

655

Receivables, net

3,512

3,202

Inventories

104,701

97,175

Income tax receivable

6,238

6,923

Other current assets, net

8,786

9,769

Total Current Assets

137,347

127,082

Property, plant and equipment, net

79,188

82,285

Right of use asset

117,337

123,101

Deferred tax assets

6,906

6,953

Other assets

2,025

1,337

Total Assets

$

342,803

$

340,758

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

28,561

$

30,884

Income tax payable

616

390

Current portion of lease liability

28,678

28,190

Other accrued liabilities

46,531

38,249

Total Current Liabilities

104,386

97,713

Long-term debt

5,000

5,000

Long-term lease liability, net

103,331

110,261

Other long-term liabilities

4,461

5,560

Total Liabilities

217,178

218,534

Stockholders’ Equity:

Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 52,112,567 and 51,963,377 shares, respectively

5

5

Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares

-

-

Additional paid-in capital

126,805

126,920

Accumulated deficit

(1,200)

(4,713)

Accumulated other comprehensive loss

15

12

Total Stockholders' Equity

125,625

122,224

Total Liabilities and Stockholders' Equity

$

342,803

$

340,758

See accompanying Notes to Consolidated Financial Statements.

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

(dollars in thousands, except per share data)

(unaudited)

Three Months Ended

March 31,

2022

2021

Net sales

$

102,471

$

92,084

Cost of sales

35,626

27,898

Gross profit

66,845

64,186

Selling, general and administrative expenses

62,109

57,278

Income from operations

4,736

6,908

Interest expense

(266)

(168)

Income before income taxes

4,470

6,740

Provision for income taxes

(957)

(1,443)

Net income

$

3,513

$

5,297

Income per common share:

Basic

$

0.07

$

0.11

Diluted

$

0.07

$

0.10

Weighted average shares outstanding:

Basic

50,713,809

50,105,825

Diluted

51,162,891

51,056,798

See accompanying Notes to Consolidated Financial Statements.

 

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(unaudited)

Three Months Ended

March 31,

2022

2021

Net income

$

3,513

$

5,297

Currency translation adjustment

3

8

Other comprehensive income

3

8

Comprehensive income

$

3,516

$

5,305

See accompanying Notes to Consolidated Financial Statements.


Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(unaudited)

 

Common stock

Shares

Amount

Additional
paid-in
capital

Accumulated
deficit

Accumulated
other
comprehensive
income (loss)

Total

Balance at December 31, 2020

51,701,080

$

5

$

158,556

$

(19,487)

$

(12)

$

139,062

Issuance of restricted shares

322,024

-

-

-

-

-

Cancellation of restricted shares

(90,400)

-

-

-

-

-

Stock based compensation

-

-

592

-

-

592

Tax withholdings related to net share settlements of stock based compensation awards

-

-

(603)

-

-

(603)

Foreign currency translation adjustments

-

-

-

-

8

8

Net income

-

-

-

5,297

-

5,297

Balance at March 31, 2021

51,932,704

$

5

$

158,545

$

(14,190)

$

(4)

$

144,356

Balance at December 31, 2021

51,963,377

$

5

$

126,920

$

(4,713)

$

12

$

122,224

Issuance of restricted shares

419,967

-

-

-

-

-

Cancellation of restricted shares

(177,828)

-

-

-

-

-

Stock based compensation

-

-

492

-

-

492

Tax withholdings related to net share settlements of stock based compensation awards

(92,949)

-

(607)

-

-

(607)

Foreign currency translation adjustments

-

-

-

-

3

3

Net income

-

-

-

3,513

-

3,513

Balance at March 31, 2022

52,112,567

$

5

$

126,805

$

(1,200)

$

15

$

125,625

See accompanying Notes to Consolidated Financial Statements.

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

 (dollars in thousands)

(unaudited)

Three Months Ended

March 31,

2022

2021

Cash Flows From Operating Activities

Net income

$

3,513

$

5,297

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

6,439

7,194

Amortization of debt issuance costs

79

76

Non-cash lease expense

6,437

6,155

Stock based compensation

492

592

Deferred income taxes

47

(113)

Changes in operating assets and liabilities:

Receivables

(310)

(40)

Inventories

(7,526)

3,324

Other current assets, net

217

1,064

Accounts payable

(2,845)

1,580

Income tax receivable / payable

910

1,558

Accrued expenses and other liabilities

181

3,427

Net cash provided by operating activities

7,634

30,114

Cash Flows From Investing Activities

Purchases of property, plant and equipment

(2,933)

(3,202)

Net cash used in investing activities

(2,933)

(3,202)

Cash Flows From Financing Activities

Payments of long-term debt and financing lease obligations

(10,000)

-

Advances on line of credit

10,000

-

Employee taxes paid for shares withheld

(607)

(603)

Net cash used in financing activities

(607)

(603)

Effect of exchange rate changes on cash

3

7

Net change in cash, cash equivalents and restricted cash

4,097

26,316

Cash, cash equivalents and restricted cash beginning of period

10,013

10,272

Cash, cash equivalents and restricted cash end of period

$

14,110

$

36,588

Cash and cash equivalents

$

13,455

$

35,933

Restricted cash

655

655

Cash, cash equivalents and restricted cash end of period

$

14,110

$

36,588

Supplemental disclosure of cash flow information

Purchases of property, plant and equipment included in accounts payable and accrued expenses

$

566

$

161

Cash paid for interest

339

238

See accompanying Notes to Consolidated Financial Statements. 

7


Table of Contents

Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 1: Background

Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company”) was incorporated in Delaware in June 2012.

The Company is a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories in the United States. The Company manufactures its own setting and maintenance materials, such as thinset, grout, and sealers. The Company’s primary market is retail sales to consumers, contractors, designers and home builders. As of March 31, 2022, the Company had 143 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet. The Company has distribution centers located in Michigan, New Jersey, Oklahoma, Virginia and Wisconsin. The Company also has a sourcing office located in China.

The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.

These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 1 to the Consolidated Financial Statements in such Form 10-K.

Accounting Pronouncements Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (FASB) issued guidance providing optional expedients and exceptions to account for the effects of reference rate reform to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The optional guidance is effective as of the beginning of the reporting period when the election is made through December 31, 2022. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

 

Note 2: Revenues

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration received in exchange for those goods or services. Sales taxes are excluded from revenues.

The following table presents revenues disaggregated by product category:

For the three months ended

March 31,

2022

2021

Man-made tiles

49

%

46

%

Natural stone tiles

25

29

Setting and maintenance materials

16

15

Accessories

8

8

Delivery service

2

2

Total

100

%

100

%

The Company generates revenues by selling tile products, setting and maintenance materials, accessories, and delivery services to its customers through its store locations and online. The timing of revenue recognition coincides with the transfer of control of goods and services ordered by the customer, which falls into one of three categories described below:

Revenue recognized when an order is placed – If a customer places an order in a store and the contents of their order are available, the Company recognizes revenue concurrent with the exchange of goods for consideration from the customer.

8


Table of Contents

Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

 

Revenue recognized when an order is picked up – If a customer places an order for items held in a centralized distribution center, the Company requests a deposit from the customer at the time they place the order. Subsequently, when the contents of the customer’s order are delivered to the store, the customer returns to the store and picks up the items that were ordered. The Company recognizes revenue on this transaction when the customer picks up their order.

Revenue recognized when an order is delivered – If a customer places an order in a store and requests delivery of their order, the Company prepares the contents of their order, initiates the delivery service, and recognizes revenue once the contents of the customer’s order are delivered.

The Company determines the transaction price of its contracts based on the pricing established at the time a customer places an order. The transaction price does not include sales tax as the Company is a pass-through conduit for collecting and remitting sales tax. Any discounts applied to an order are allocated proportionately to the base price of the goods and services ordered. Deposits made by customers are recorded in other accrued liabilities. Deferred revenues associated with customer deposits are recognized at the time the Company transfers control of the items ordered or renders the delivery service. In the event an order is partially fulfilled as of the end of a reporting period, revenue will be recognized based on the transaction price allocated to the goods delivered and services rendered. The customer deposit balance was $19.2 million and $13.8 million as of March 31, 2022 and December 31, 2021, respectively. Revenues recognized during the three months ended March 31, 2022 that were included in the customer deposit balance as of the beginning of the period were $11.5 million.

The Company extends financing to qualified professional customers who apply for credit. Customers who qualify for an account receive 30-day payment terms. The accounts receivable balance was $3.5 million and $3.2 million at March 31, 2022 and December 31, 2021, respectively. The Company expects that the customer will pay for the goods and services ordered within one year from the date the order is placed. Accordingly, the Company does not adjust the promised amount of consideration for the effects of the financing component.

Customers may return purchased items for an exchange or refund. The Company records a reserve for estimated product returns based on the historical returns trends and the current product sales performance. The Company presents the sales returns reserve as an other accrued liability and the estimated value of the inventory that will be returned as an other current asset in the Consolidated Balance Sheet. The components of the sales returns reserve reflected in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 were as follows:

(in thousands)

March 31,

December 31,

2022

2021

Other accrued liabilities

$

6,490

$

5,202

Other current assets

2,209

1,658

Sales returns reserve, net

$