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THE TILE SHOP REPORTS FOURTH QUARTER 2019 RESULTS

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MINNEAPOLIS, March 13, 2020 (GLOBE NEWSWIRE) -- Tile Shop Holdings, Inc. (OTC Pink: TTSH) (the “Company”), a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories, today announced results for its fourth quarter ended December 31, 2019.

Fourth Quarter Summary

Net Sales Decreased 6.4%
Comparable Store Sales Decreased 6.6%
Gross Margin of 68.4%
Net Loss of $4.2 million; Adjusted EBITDA of $5.1 million

Three Months Ended

Full Year Ended

(unaudited, amounts in thousands, except share and per

December 31,

December 31,

share data)

2019

2018

2019

2018

Net sales

$

78,596

$

83,947

$

340,351

$

357,254

Net sales (decline) growth(1)

(6.4

)%

6.8

%

(4.7

)%

3.7

%

Comparable store sales (decline) growth(2)

(6.6

)%

5.0

%

(4.6

)%

(0.6

)%

Gross margin rate

68.4

%

70.3

%

69.4

%

70.4

%

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

(5.6

)%

0.8

%

(0.4

)%

5.1

%

Net (loss) income

$

(4,246

)

$

(1,080

)

$

(4,463

)

$

10,442

Net (loss) income per share

$

(0.09

)

$

(0.02

)

$

(0.09

)

$

0.20

Adjusted EBITDA

$

5,089

$

8,680

$

34,846

$

49,355

Adjusted EBITDA as a % of net sales

6.5

%

10.3

%

10.2

%

13.8

%

Number of stores open at the end of period

142

140

142

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. Company management believes the comparable store sales (decline) growth metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.

FOURTH QUARTER 2020

Net Sales
Net sales decreased $5.3 million, or 6.4%, from $83.9 million in the fourth quarter of 2018 to $78.6 million in the fourth quarter of 2019. Comparable store sales decreased $5.5 million, or 6.6%, for the fourth quarter of 2019 compared to the fourth quarter of 2018 primarily due to lower customer traffic. Net sales generated by stores not included in the comparable store base increased $0.2 million.

Gross Profit
Gross profit decreased $5.3 million, or 9.0%, from $59.0 million in the fourth quarter of 2018 to $53.7 million in the fourth quarter of 2019. The gross margin rate was 68.4% for the fourth quarter of 2019 and 70.3% for the fourth quarter of 2018. The decrease in the gross margin rate during the fourth quarter of 2019 was primarily due to higher levels of discounts, an increase in shrink and damaged inventory write-offs, and a lower freight collection rate.

Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $0.1 million, or 0.2%, from $58.3 million in the fourth quarter of 2018 to $58.2 million in the fourth quarter of 2019. The decrease in selling, general and administrative expenses was driven primarily by a decrease in variable store compensation expense.

Inventory
Inventory decreased $12.5 million from $110.1 million at the end of the fourth quarter of 2018 to $97.6 million at the end of the fourth quarter of 2019.

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

NON-GAAP INFORMATION

Adjusted EBITDA

Adjusted EBITDA for the fourth quarter of 2019 was $5.1 million compared with $8.7 million for the fourth quarter of 2018. See the table below for a reconciliation of GAAP net (loss) income to Adjusted EBITDA.

Three Months Ended

(unaudited, $ in thousands)

December 31,

2019

% of net sales

2018

% of net sales(1)

Net loss

$

(4,246

)

(5.4

)%

$

(1,080

)

(1.3

)%

Interest expense

843

1.1

%

824

1.0

%

Income taxes

(1,022

)

(1.3

)%

1,001

1.2

%

Depreciation & amortization

9,038

11.5

%

7,216

8.6

%

Stock based compensation

476

0.6

%

719

0.9

%

Adjusted EBITDA

$

5,089

6.5

%

$

8,680

10.3

%

Full Year Ended

(unaudited, $ in thousands)

December 31,

2019

% of net sales(1)

2018

% of net sales(1)

Net (loss) income

$

(4,463

)

(1.3

)%

$

10,442

2.9

%

Interest expense

3,792

1.1

%

2,690

0.8

%

Income taxes

(674

)

(0.2

)%

5,158

1.4

%

Depreciation & amortization

33,546

9.9

%

28,396

7.9

%

Stock based compensation

2,645

0.8

%

2,669

0.7

%

Adjusted EBITDA

$

34,846

10.2

%

$

49,355

13.8

%

(1) Amounts do not foot due to rounding.

Pretax Return on Capital Employed

Pretax Return on Capital Employed was (0.7%) for the year ended December 31, 2019 compared to 9.7% for the year ended December 31, 2018. See the table below for a calculation of Pretax Return on Capital Employed.

(unaudited, $ in thousands)

December 31,

2019(1)

2018(1)

(Loss) income from operations

$

(1,357

)

$

18,138

Total Assets

415,107

288,722

Less: Accounts payable

(23,362

)

(27,785

)

Less: Income tax payable

(49

)

(111

)

Less: Other accrued liabilities

(26,146

)

(27,269

)

Less: Lease liability (2)

(162,077

)

(42,974

)

Less: Other long-term liabilities

(3,816

)

(4,091

)

Capital Employed

$

199,657

$

186,492

Pretax Return on Capital Employed

(0.7

)%

9.7

%

(1) Income statement accounts represent the activity for the fiscal year 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 an earnings conference call for its fourth quarter 2019 financial results.

About The Tile Shop

The Tile Shop (OTC Pink: TTSH) 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 142 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.

Non-GAAP Financial Measures

The Company calculates Adjusted EBITDA by taking net (loss) 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 (loss) 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 such 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.

Contact:
Investors and Media:
Mark Davis
763-852-2978
mark.davis@tileshop.com

Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
($ in thousands, except share data)

(Unaudited)

(Audited)

December 31,

December 31,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

9,104

$

5,557

Restricted cash

815

825

Receivables, net

3,370

3,084

Inventories

97,620

110,095

Income tax receivable

3,090

3,548

Other current assets, net

8,180

7,181

Total Current Assets

122,179

130,290

Property, plant and equipment, net

130,461

158,356

Right of use asset

137,737

-

Deferred tax assets

7,196

7,225

Other assets

2,241

1,759

Total Assets

$

399,814

$

297,630

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

18,181

$

25,853

Current portion of lease liability

26,993

-

Income tax payable

87

179

Other accrued liabilities

24,589

24,484

Total Current Liabilities

69,850

50,516

Long-term debt, net

63,000

53,000

Long-term lease liability, net

131,451

-

Financing lease obligation, net

274

436

Deferred rent

-

43,579

Other long-term liabilities

4,340

3,752

Total Liabilities

268,915

151,283

Stockholders’ Equity:

Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 50,806,674 and 52,707,879 shares, respectively

5

5

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

-

-

Additional paid-in-capital

156,482

172,255

Accumulated deficit

(25,518

)

(25,857

)

Accumulated other comprehensive loss

(70

)

(56

)

Total Stockholders' Equity

130,899

146,347

Total Liabilities and Stockholders' Equity

$

399,814

$

297,630

Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
($ in thousands, except share and per share data)
(Unaudited)

Three Months Ended

Twelve Months Ended,

December 31,

December 31,

2019

2018

2019

2018

Net sales

$

78,596

$

83,947

$

340,351

$

357,254

Cost of sales

24,848

24,969

104,232

105,915

Gross profit

53,748

58,978

236,119

251,339

Selling, general and administrative expenses

58,162

58,273

237,476

233,201

(Loss) income from operations

(4,414

)

705

(1,357

)

18,138

Interest expense

(843

)

(824

)

(3,792

)

(2,690

)

Other (expense) income

(11

)

40

12

152

(Loss) income before income taxes

(5,268

)

(79

)

(5,137

)

15,600

Benefit from (provision for) income taxes

1,022

(1,001

)

674

(5,158

)

Net (loss) income

$

(4,246

)

$

(1,080

)

$

(4,463

)

$

10,442

(Loss) earnings per common share:

Basic

$

(0.09

)

$

(0.02

)

$

(0.09

)

$

0.20

Diluted

$

(0.09

)

$

(0.02

)

$

(0.09

)

$

0.20

Weighted average shares outstanding:

Basic

49,802,402

51,940,086

50,624,309

51,907,619

Diluted

49,802,402

51,940,086

50,624,309

52,089,160

Tile Shop Holdings, Inc. and Subsidiaries
Rate Analysis
(Unaudited)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2019

2018

2019

2018

Gross margin rate

68.4

%

70.3

%

69.4

%

70.4

%

SG&A expense rate

74.0

%

69.4

%

69.8

%

65.3

%

(Loss) income from operations margin rate

(5.6

)%

0.8

%

(0.4

)%

5.1

%

Adjusted EBITDA margin rate

6.5

%

10.3

%

10.2

%

13.8

%

Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)

Twelve Months Ended,

December 31,

2019

2018

Cash Flows From Operating Activities

Net (loss) income

$

(4,463

)

$

10,442

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation & amortization

33,546

28,396

Amortization of debt issuance costs

595

756

Loss on disposals of property, plant and equipment

399

353

Impairment charges of property, plant and equipment

-

652

Change in leases

(1,900

)

2,386

Stock based compensation

2,645

2,669

Deferred income taxes

(1,621

)

4,429

Changes in operating assets and liabilities:

Trade receivables

(286

)

(703

)

Inventories

12,475

(24,836

)

Prepaid expenses and other current assets

(184

)

(2,410

)

Accounts payable

(4,503

)

(8,201

)

Income tax receivable / payable

357

2,229

Accrued expenses and other liabilities

1,503

2,008

Net cash provided by operating activities

38,563

18,170

Cash Flows From Investing Activities

Purchases of property, plant and equipment

(27,000

)

(35,287

)

Proceeds from insurance

610

1,033

Proceeds from the sale of property, plant and equipment

-

111

Net cash used in investing activities

(26,390

)

(34,143

)

Cash Flows From Financing Activities

Payments of long-term debt and financing lease obligations

(53,204

)

(103,267

)

Advances on line of credit

63,000

129,095

Dividends paid

(7,706

)

(10,404

)

Repurchases of common stock

(10,456

)

-

Employee taxes paid for shares withheld

(256

)

(119

)

Debt issuance costs

-

(374

)

Net cash (used in) provided by financing activities

(8,622

)

14,931

Effect of exchange rate changes on cash

(14

)

(52

)

Net change in cash and cash equivalents

3,537

(1,094

)

Cash and cash equivalents beginning of period

6,382

7,476

Cash and cash equivalents end of period

$

9,919

$

6,382

Cash and cash equivalents

$

9,104

$

5,557

Restricted cash

815

825

Cash, cash equivalents and restricted cash end of period

$

9,919

$

6,382

Supplemental disclosure of cash flow information

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

$

98

$

3,974

Cash paid for interest

3,735

2,625

Cash paid for taxes, net of refunds

471

1,507