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Tile Shop Holdings, Inc. – ‘8-K’ for 10/18/19 – ‘EX-99.1’

On:  Tuesday, 10/22/19, at 8:03am ET   ·   For:  10/18/19   ·   Accession #:  1552800-19-27   ·   File #:  1-35629

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10/22/19  Tile Shop Holdings, Inc.          8-K:2,3,5,810/18/19    5:696K

Current Report   —   Form 8-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     35K 
 2: EX-99.1     Miscellaneous Exhibit                               HTML    194K 
 3: EX-99.2     Miscellaneous Exhibit                               HTML     16K 
 4: EX-99.3     Miscellaneous Exhibit                               HTML      7K 
 5: EX-99.4     Miscellaneous Exhibit                               HTML     34K 


‘EX-99.1’   —   Miscellaneous Exhibit


This Exhibit is an HTML Document rendered as filed.  [ Alternative Formats ]



 C:   C: 
  Exhibit 991  

Exhibit 99.1

Picture 1



THE TILE SHOP REPORTS THIRD QUARTER 2019 RESULTS; Suspends Dividend; Cancels Share Repurchase Program



MINNEAPOLIS – October 22, 2019Tile Shop Holdings, Inc. (Nasdaq: TTS) (the “Company”), a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories, today announced results for its third quarter ended September 30, 2019.    

Third  Quarter Summary



Net Sales Decreased 3.7%

Comparable Store Sales Decreased 3.5% 

Gross Margin of 68.8%

Net Loss of $1.4 million; Adjusted EBITDA of $8.3 million







 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended

 

(unaudited, amounts in thousands, except per

 

September 30,

 

September 30,

 

share data)

 

2019

 

2018

 

2019

 

2018

 

Net sales

 

$

85,944 

 

$

89,259 

 

$

261,755 

 

$

273,307 

 

Net sales (decline) growth(1)

 

 

(3.7)

%

 

5.7 

%

 

(4.2)

%

 

2.7 

%

Comparable store sales (decline) growth(2)

 

 

(3.5)

%

 

2.1 

%

 

(4.0)

%

 

(2.3)

%

Gross margin rate

 

 

68.8 

%

 

70.6 

%

 

69.7 

%

 

70.4 

%

(Loss) income from operations as a % of net sales

 

 

(0.7)

%

 

4.3 

%

 

1.2 

%

 

6.4 

%

Net (loss) income

 

$

(1,383)

 

$

2,553 

 

$

(217)

 

$

11,522 

 

Net (loss) income per diluted share

 

$

(0.03)

 

$

0.05 

 

$

(0.00)

 

$

0.22 

 

Adjusted EBITDA

 

$

8,338 

 

$

11,857 

 

$

29,756 

 

$

40,675 

 

Adjusted EBITDA as a % of net sales

 

 

9.7 

%

 

13.3 

%

 

11.4 

%

 

14.9 

%

Number of stores open at the end of period

 

 

140 

 

 

140 

 

 

140 

 

 

140 

 





(1)

As compared to the prior year period.

(2)

Comparable store sales (decline) growth is the percentage change in sales of comparable stores period over period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales (decline) growth calculation. Comparable store sales (decline) growth amounts include total charges to customers less any actual returns. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing the Company’s results to those of other businesses.


 

THIRD QUARTER 2019



Net Sales

Net sales decreased $3.3 million, or 3.7%, from $89.3 million in the third quarter of 2018 to $85.9 million in the third quarter of 2019. Comparable store sales decreased $3.1 million, or 3.5%, for the third quarter of 2019 compared to the third quarter of 2018 primarily due to lower customer traffic.  Net sales generated by stores not included in the comparable store base decreased $0.2 million.



Gross Profit

Gross profit decreased $3.8 million, or 6.1%, from $63.0 million in the third quarter of 2018 to $59.2 million in the third quarter of 2019. The gross margin rate was 68.8% for the third quarter of 2019 and 70.6% for the third quarter of 2018. The decrease in the gross margin rate during the third quarter of 2019 was primarily due to higher levels of shrink and damaged inventory write-offs combined with a lower freight collection rate.



Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $0.7 million, or 1.1%, from $59.1 million in the third quarter of 2018 to $59.8 million in the third quarter of 2019.  The increase in selling, general and administrative expenses was driven primarily by an increase in advertising costs, partially offset by a decrease in legal expense and variable store compensation expense.



Inventory

Inventory decreased 9.1% to $100.1 million at the end of the third quarter of 2019 from $110.1 million at the end of the  fourth quarter of 2018.



Long-Term Debt

Long-term debt increased $10.0 million from $53.0 million in the fourth quarter of 2018 to  $63.0 million at the end of the third quarter of 2019. The increase reflects additional amounts drawn on the line of credit to fund share repurchases in the second quarter of 2019.



Dividend and Share Repurchase

The Board of Directors decided to suspend the Company’s quarterly cash dividend and cancel the Company’s share repurchase program, each effective immediately, to focus on debt reduction and continued investment in strategic initiatives.



Director Resignation

Christopher T. Cook resigned from the Board of Directors effective October 19, 2019.



NON-GAAP INFORMATION



Adjusted EBITDA



Adjusted EBITDA for the third quarter of 2019 was $8.3 million compared with $11.9 million for the third quarter of 2018.  See the table below for a reconciliation of GAAP net (loss) income to Adjusted EBITDA.





 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

($ in thousands)

 

September 30,

 



 

2019

 

% of net sales(1)

 

2018

 

% of net sales

 

Net (loss) income

 

$

(1,383)

 

(1.6)

%

 

$

2,553 

 

2.9 

%

 

Interest expense

 

 

1,027 

 

1.2 

%

 

 

715 

 

0.8 

%

 

Income taxes

 

 

(274)

 

(0.3)

%

 

 

652 

 

0.7 

%

 

Depreciation & amortization

 

 

8,308 

 

9.7 

%

 

 

7,202 

 

8.1 

%

 

Stock based compensation

 

 

660 

 

0.8 

%

 

 

735 

 

0.8 

%

 

Adjusted EBITDA

 

$

8,338 

 

9.7 

%

 

$

11,857 

 

13.3 

%

 









2

 


 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended

 

($ in thousands)

 

September 30,

 



 

2019

 

% of net sales(1)

 

 

2018

% of net sales

 

Net (loss) income

 

$

(217)

 

(0.1)

%

 

$

11,522 

 

4.2 

%

 

Interest expense

 

 

2,948 

 

1.1 

%

 

 

1,866 

 

0.7 

%

 

Income taxes

 

 

348 

 

0.1 

%

 

 

4,157 

 

1.5 

%

 

Depreciation & amortization

 

 

24,508 

 

9.4 

%

 

 

21,180 

 

7.7 

%

 

Stock based compensation

 

 

2,169 

 

0.8 

%

 

 

1,950 

 

0.7 

%

 

Adjusted EBITDA

 

$

29,756 

 

11.4 

%

 

$

40,675 

 

14.9 

%

 

(1) Amounts do not foot due to rounding.



Pretax Return on Capital Employed



Pretax Return on Capital Employed was 1.7% for the trailing twelve months as of the end of the third quarter of 2019 compared to 7.7% for the trailing twelve months as of the end of the third quarter of 2018. See the table below for a calculation of Pretax Return on Capital Employed.







 

 

 

 

 

 

 



 

 

 

 

 

 

 

($ in thousands)

 

September 30,

 



 

2019(1)

 

2018(1)

 

Income from Operations (trailing twelve months)

 

$

3,762 

 

$

13,769 

 



 

 

 

 

 

 

 

Total Assets

 

 

389,561 

 

 

281,996 

 

Less: Accounts payable

 

 

(25,280)

 

 

(29,015)

 

Less: Income tax payable

 

 

(72)

 

 

(71)

 

Less: Other accrued liabilities

 

 

(26,119)

 

 

(26,751)

 

Less: Lease liability(2)

 

 

(114,490)

 

 

(42,401)

 

Less: Other long-term liabilities

 

 

(3,669)

 

 

(4,346)

 

Capital Employed

 

 

219,931 

 

 

179,412 

 



 

 

 

 

 

 

 

Pretax Return on Capital Employed

 

 

1.7 

%

 

7.7 

%



(1) Income statement accounts represent the activity for the trailing twelve months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balance for the four quarters ended as of each of the balance sheet dates.

(2) Represents the average lease liability and deferred rent account balances for the four quarters ended as of each of the balance sheet dates.



Webcast and Conference Call 



The Company will not hold its previously scheduled third quarter 2019 earnings call at 9:00 a.m. Eastern Time today, Tuesday, October 22, 2019.



About The Tile Shop



The Tile Shop (Nasdaq:TTS) is a leading specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories in the United States. The Tile Shop offers a wide selection of high-quality products, exclusive designs, knowledgeable staff and exceptional customer service in an extensive showroom environment. Each store is outfitted with full-room tiled displays which are enhanced by the complimentary Design Studio, a collaborative platform to create customized 3D design renderings to scale, allowing customers to bring their design ideas to life. The Tile Shop currently operates 141 stores in 31 states and the District of Columbia.



The Tile Shop is a proud member of the American Society of Interior Designers (ASID), National Association of Homebuilders (NAHB), National Kitchen and Bath Association (NKBA), and the National Tile Contractors Association (NTCA). Visit www.tileshop.com. Join The Tile Shop (#thetileshop) on Facebook, Instagram, Pinterest and Twitter.

  

3

 


 

Non-GAAP Financial Measures



The Company calculates Adjusted EBITDA by taking net income calculated in accordance with GAAP, and adjusting for interest expense, income taxes, depreciation and amortization, and stock based compensation. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. The Company calculates Pretax Return on Capital Employed by taking income from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, deferred rent, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and Pretax Return on Capital Employed differently, limiting the usefulness of these measures for comparative purposes.



The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations.  Company management uses these non-GAAP measures to compare Company performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation, for budgeting and planning purposes, and for assessing the effectiveness of capital allocation over time.  These measures are used in monthly financial reports prepared for management and the Board of Directors.  The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other specialty retailers, many of which present similar non-GAAP financial measures to investors.



Company management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP.  The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the Company’s consolidated financial statements.  In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results.  The Company urges investors to review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate the business.



FORWARD LOOKING STATEMENTS



This press release includes “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.  Forward looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters.  These forward looking statements include any statements regarding the Company’s strategic and operational plan and expected financial performance. Forward looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward looking statements, including but not limited to unforeseen events that may affect the retail market or the performance of the Company’s stores.  The Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.  Investors are referred to the most recent reports filed with the SEC by the Company



Contacts:

Investors and Media:

Mark Davis

763-852-2978

mark.davis@tileshop.com







4

 


 

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

($ in thousands, except share data)





 

 

 

 

 

 



 

 

 

 

 

 



 

(Unaudited)

 

(Audited)



 

September 30,

 

December 31,



 

2019

 

2018

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,371 

 

$

5,557 

Restricted cash

 

 

825 

 

 

825 

Receivables, net

 

 

4,611 

 

 

3,084 

Inventories

 

 

100,080 

 

 

110,095 

Income tax receivable

 

 

3,854 

 

 

3,548 

Other current assets, net

 

 

7,042 

 

 

7,181 

Total Current Assets

 

 

124,783 

 

 

130,290 

Property, plant and equipment, net

 

 

137,151 

 

 

158,356 

Right of use asset

 

 

143,789 

 

 

 -

Deferred tax assets

 

 

5,385 

 

 

7,225 

Other assets

 

 

1,251 

 

 

1,759 

Total Assets

 

$

412,359 

 

$

297,630 



 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

19,855 

 

$

25,853 

Income tax payable

 

 

13 

 

 

179 

Current portion of lease liability

 

 

26,653 

 

 

 -

Other accrued liabilities

 

 

25,871 

 

 

24,484 

Total Current Liabilities

 

 

72,392 

 

 

50,516 

Long-term debt

 

 

63,000 

 

 

53,000 

Long-term lease liability, net

 

 

138,489 

 

 

 -

Financing lease obligation, net

 

 

317 

 

 

436 

Deferred rent

 

 

 -

 

 

43,579 

Other long-term liabilities

 

 

3,482 

 

 

3,752 

Total Liabilities

 

 

277,680 

 

 

151,283 



 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 50,812,054 and 52,707,879 shares, respectively

 

 

 

 

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

 

 

 -

 

 

 -

Additional paid-in-capital

 

 

156,037 

 

 

172,255 

Accumulated deficit

 

 

(21,272)

 

 

(25,857)

Accumulated other comprehensive loss

 

 

(91)

 

 

(56)

Total Stockholders' Equity

 

 

134,679 

 

 

146,347 

Total Liabilities and Stockholders' Equity

 

$

412,359 

 

$

297,630 



5

 


 

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations

($ in thousands, except share, and per share data)

(Unaudited)







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2019

 

2018

 

2019

 

2018

Net sales

 

$

85,944 

 

$

89,259 

 

$

261,755 

 

$

273,307 

Cost of sales

 

 

26,775 

 

 

26,248 

 

 

79,384 

 

 

80,946 

Gross profit

 

 

59,169 

 

 

63,011 

 

 

182,371 

 

 

192,361 

Selling, general and administrative expenses

 

 

59,804 

 

 

59,131 

 

 

179,314 

 

 

174,928 

(Loss) income from operations

 

 

(635)

 

 

3,880 

 

 

3,057 

 

 

17,433 

Interest expense

 

 

(1,027)

 

 

(715)

 

 

(2,948)

 

 

(1,866)

Other income

 

 

 

 

40 

 

 

22 

 

 

112 

(Loss) income before income taxes

 

 

(1,657)

 

 

3,205 

 

 

131 

 

 

15,679 

Benefit from (provision for) income taxes

 

 

274 

 

 

(652)

 

 

(348)

 

 

(4,157)

Net (loss) income

 

$

(1,383)

 

$

2,553 

 

$

(217)

 

$

11,522 



 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

0.05 

 

$

(0.00)

 

$

0.22 

Diluted

 

$

(0.03)

 

$

0.05 

 

$

(0.00)

 

$

0.22 



 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

49,769,739 

 

 

51,920,830 

 

 

50,901,289 

 

 

51,896,678 

Diluted

 

 

49,769,739 

 

 

52,303,777 

 

 

50,901,289 

 

 

52,056,136 



 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.05 

 

$

0.05 

 

$

0.15 

 

$

0.15 





Tile Shop Holdings, Inc. and Subsidiaries

Rate Analysis

(Unaudited)



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2019

 

2018

 

2019

 

2018

Gross margin rate

 

68.8 

%

 

70.6 

%

 

69.7 

%

 

70.4 

%

SG&A expense rate

 

69.6 

%

 

66.2 

%

 

68.5 

%

 

64.0 

%

(Loss) income from operations margin rate

 

(0.7)

%

 

4.3 

%

 

1.2 

%

 

6.4 

%

Adjusted EBITDA margin rate

 

9.7 

%

 

13.3 

%

 

11.4 

%

 

14.9 

%



6

 


 



Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

($ in thousands)

(Unaudited)



 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2019

 

2018

Cash Flows From Operating Activities

 

 

 

 

 

 

Net (loss) income

 

$

(217)

 

$

11,522 

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

 

 

 

 

 

 

Depreciation & amortization

 

 

24,508 

 

 

21,180 

Amortization of debt issuance costs

 

 

446 

 

 

607 

Loss on disposals of property, plant and equipment

 

 

90 

 

 

76 

Impairment charges on property, plant and equipment

 

 

 -

 

 

319 

Change in leases

 

 

(1,267)

 

 

2,345 

Stock based compensation

 

 

2,169 

 

 

1,950 

Deferred income taxes

 

 

190 

 

 

1,415 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Receivables

 

 

(1,527)

 

 

(1,342)

Inventories

 

 

10,015 

 

 

(21,051)

Prepaid expenses and other assets

 

 

47 

 

 

(2,374)

Accounts payable

 

 

(3,307)

 

 

(6,550)

Income tax receivable / payable

 

 

(362)

 

 

2,520 

Accrued expenses and other liabilities

 

 

2,827 

 

 

5,104 

Net cash provided by operating activities

 

 

33,612 

 

 

15,721 

Cash Flows From Investing Activities

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(22,839)

 

 

(22,893)

Proceeds from insurance

 

 

610 

 

 

13 

Net cash used in investing activities

 

 

(22,229)

 

 

(22,880)

Cash Flows From Financing Activities

 

 

 

 

 

 

Payments of long-term debt and financing lease obligations

 

 

(43,153)

 

 

(95,235)

Advances on line of credit

 

 

53,000 

 

 

114,095 

Dividends paid

 

 

(7,706)

 

 

(7,800)

Repurchases of common stock

 

 

(10,455)

 

 

 -

Employee taxes paid for shares withheld

 

 

(226)

 

 

(52)

Debt issuance costs

 

 

 -

 

 

(374)

Net cash (used in) provided by financing activities

 

 

(8,540)

 

 

10,634 

Effect of exchange rate changes on cash

 

 

(29)

 

 

(11)

Net change in cash

 

 

2,814 

 

 

3,464 

Cash, cash equivalents and restricted cash beginning of period

 

 

6,382 

 

 

7,476 

Cash, cash equivalents and restricted cash end of period

 

$

9,196 

 

$

10,940 



 

 

 

 

 

 

Cash and cash equivalents

 

$

8,371 

 

$

10,105 

Restricted cash

 

 

825 

 

 

835 

Cash, cash equivalents and restricted cash end of period

 

$

9,196 

 

$

10,940 



 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

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

 

$

1,320 

 

$

2,229 

Cash paid for interest

 

 

2,853 

 

 

1,846 

Cash paid for income taxes, net

 

 

471 

 

 

240 



7

 



Dates Referenced Herein

This ‘8-K’ Filing    Date    Other Filings
12/31/19None on these Dates
Filed on:10/22/19
10/19/19
For Period end:10/18/19
9/30/19
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Filing Submission 0001552800-19-000027   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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