The Tile Shop Reports QUARTER RESULTS DECLARES CASH DIVIDEND MINNEAPOLIS – Tile Shop Holdings, Inc. (Nasdaq

The following excerpt is from the company's SEC filing.

: TTS) (the “Company”), a specialty retailer of natural stone

man-made

tiles, setting and maintenance materials, and related accessories, today announced results for its

quarter ended

First Quarter

Summary

omparable Store Sales Declined

70.3% Gross Margin

Diluted Earning

s per Share of $0.08

GAAP Net Income of $4.0 million;

Adjusted EBITDA of $13.8

Opened 2

stores in Q1 – 140 stores open at

end of Q1

Completed 4 store remodels in Q1

Management Commentary

“During the first quarter, we elim inated advertised price promotions which contributed to an increase in our gross margin rate back to the high-end of where we typically expect.  This was a great early sign that our key initiatives are taking hold as we return to what Tile Shop is known for,” said Robert Rucker, interim CEO.  “Without using the promotional lever in the quarter we did experience the volatility in traffic and sales at comparable stores relative to last year that we expected.  However, we are getting our new tile product on the floors of our showrooms fast and I am encouraged by the initial sales results from the new products we’ve recently added to our assortment.  We are also making strides with winning back our pros, as pro feedback continues to be positive and pro sales metrics are starting to reflect this fact.  In addition, our investments in remodels, store compensation and training are helping us build on our commitment to provide exceptional service to all of our customers.  Although much work remains, we are confident we are on the right path.”

Three Months Ended

(unaudited, amounts in thousands, except per

March 31,

share data)

Net sales

91,134 

92,135 

Net sales (decline) growth

(1.1)

8.8 

Comparable store sales (decline) growth

(6.8)

4.9 

Gross margin rate

70.3 

Income from operations as a % of net sales

6.7 

14.7 

Net income

4,011 

8,009 

Net income per diluted share

0.08 

0.15 

13,763 

20,747 

Adjusted EBITDA as a % of net sales

15.1 

22.5 

Number of stores open at the end of period

140 

126 

As compared to the prior year period.

store sales growth is the percentage change in sales of

stores period over period. A store is considered comparable on the first day of the 13th full month of operation. When a store

relocated, it is excluded from the

store sales growth calculation.

store sales growth amounts include total charges to customers less any actual returns.

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.

HIGHLIGHTS FOR THE

QUARTER

Net Sales

decreased $1.0 million, or

from $92.1 million

in the first quarter of 2017 to

$91.1 million

in the first quarter of 2018.

was due to

comparable store sales decrease of

%, or $

, offset by net sales of $5.3 million from stores not included in the comparable store base

The decrease in comparable store sales

was traffic-related

due in part to the Company’s

elimination of advertised price promotions.

Profit

Gross profit

decreased $0.7 million

or 1.1%

from $64.7 million in the first quarter of 2017 to $64.0 million in the first quarter of 2018.

The gross margin rate improved sequentially from

66.8% reported

the fourth quarter of

2017 primarily due to

decreased promotional activity.

Selling,

General and Administrative Expenses

Selling, general and administrative expenses

increased $6.7 million, or 13.1%, from $51.2 million in the first quarter of 2017 to $57.9 million in the first quarter of 2018

.  The

million increase was driven

primarily by

costs associated with opening and operating

fourteen

new stores

over the past twelve months

Inventory

Inventory

increased $19.0 million, or 27.5%, from $69.3 million at March 31, 2017 to $88.3 million at March 31, 2018.  The increase was the result of the Company’s strategy to expand its product assortment and improve its product presentation.

Long-Term Debt

During the quarter, the Company reduced its long-term debt

by approximately $1.9 million.

As part of its ongoing efforts to enhance its capital

structure

, the Company amended its credit agreement to reduce the

minimum

fixed charge ratio to 1.35 and to increase the

maximum

rent adjusted leverage ratio to 4.0.

Store Expansion and Investment

The Company opened

new retail stores in the

, consisting of

its second Connecticut location in Hartford, CT and its third location in the Austin, TX area in Round Rock, TX

. As of

March 31, 2018

operates

states and the District of Columbia.

The Company also remodeled four stores during the first quarter of 2018.

DIVIDEND

The Board of Directors

declared a quarterly dividend of $0.0

 per common share. The dividend is payable 

 to shareholders of record at the close of business

, 2018. 

OUTLOOK

The Company reiterates its previous

ly communicated

annual outlook

Capital investment of approximately $27 to $32

million, including remodeling approximately 30 stores to support

product presentation strategy.

Inventory investment of approximately

% year over year, over the next several quarters, to support our product assortment strategy.

Selling, general and administrative (“SG&A”)

expense increase of approximately $5 to $7 million to support

service strategy, including increased expenses for (1)

the addition of

regional sales leader positions, (2) sales and warehouse staff compensation, and (3) customer relationship management and content management capabilities.  The $5 to $7 million increase in SG&A expense is incremental to the expected SG&A expense increases associated with a full year of operations for the fifteen stores opened in 2017 and the three new stores opening in 2018.

Longer term, the Company remains committed to achieving

EBITDA margin and

pretax

return on capital

employed of greater than 20%

-GAAP

INFORMATION

The Company presents Adjusted EBITDA to provide useful information to investors

regarding the Company’s performance.

Adjusted EBITDA for the

million compared with

million for the

See the “Adjusted EBITDA Reconciliation” table

elow for a r

econciliation of GAAP net

income to Adjusted EBITDA.

($ in thousands)

GAAP net income

Interest expense

554 

485 

Income taxes

1,581 

5,075 

Depreciation and amortization

7,000 

6,336 

Stock-based compensation

617 

842 

In prior periods, the Company also adjusted for special charges,

including shareholder and other litigation costs. The Company has recast the Adjusted EBITDA presentation for the three months ended March 31, 2017 to conform to the current presentation.

Webcast and Conference Call

As announced on

, 2018, the Company will host a conference call via live webcast for investors and other interested parties beginning at 9:00 a.m. Eastern Time on

Thursday

April 19

, 2018.  The call will be hosted by Bob Rucker, interim CEO, Kirk Geadelmann, CFO, Cabell Lolmaugh,

Senior Vice President

and COO, and Ken Cooper, Investor Relations. 

Participants may access the live webcast by visiting the Company’s Investor Relations page at www.tileshop.com. The call can also be accessed by dialing (844) 421-0597, or (716) 247-5787 for international participants. A webcast replay of the call will be available on the Company’s Investor Relations page at

Additional details can be located at

under the Financial Information – SEC Filings section of the Company’s Investor Relations page.  

Contact

Investors and Media:

852-2950

ken.cooper@tileshop.com

The Tile Shop (

Nasdaq:

TTS) is a leading specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. The

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 up to 50 full-room tiled displays which are enhanced by the complimentary Design Studio, a collaborative platform to create customized 3-D design renderings to scale, allowing customers to bring their design ideas to life. The Tile Shop currently operates 140 stores in 31 states and the District of Columbia, with an average size of 20,

00 square feet and sells products online at

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

. Join The Tile Shop (#thetileshop) on Facebook, Instagram, Pinterest and Twitter.

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.  In prior periods, the Company also adjusted for special charges, including shareholder and other litigation costs. The Company has recast the Adjusted EBITDA presentation for the three months ended March 31, 2017 to conform to the current presentation. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales.

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, and for budgeting and planning purposes.  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 (including the financial performance of new stores).  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.

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

($ in thousands, except share data)

(Unaudited)

(Audited)

December 31,

Assets

Current assets:

Cash and cash equivalents

7,152 

6,621 

Restricted cash

835 

855 

Trade receivables, net

2,885 

2,381 

Inventories

88,317 

85,259 

Income tax receivable

4,616 

5,726 

Other current assets, net

6,559 

4,717 

Total Current Assets

110,364 

105,559 

Property, plant and equipment, net

150,156 

151,405 

Deferred tax assets

11,228 

11,654 

Other assets

1,947 

2,107 

Total Assets

273,695 

270,725 

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

25,986 

30,771 

Current portion of long-term debt

9,459 

8,833 

Income tax payable

43 

Other accrued liabilities

29,665 

22,413 

Total Current Liabilities

65,153 

62,034 

Long-term debt, net

15,692 

18,182 

Capital lease obligation, net

543 

576 

Deferred rent

41,958 

41,290 

Other long-term liabilities

4,477 

4,769 

Total Liabilities

127,823 

126,851 

Stockholders’ Equity:

Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 52,429,157 and 52,156,850 shares, respectively

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

Additional paid-in-capital

178,126 

180,109 

Accumulated deficit

(32,288)

(36,239)

Accumulated other comprehensive loss

29 

(1)

Total Stockholders' Equity

145,872 

143,874 

Total Liabilities and Stockholders' Equity

Consolidated Statements of Operations

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

Cost of sales

27,096 

27,390 

Gross profit

64,038 

64,745 

57,927 

51,212 

6,111 

13,533 

(554)

(485)

Other income

Income before income taxes

5,592 

13,084 

Provision for income taxes

(1,581)

(5,075)

Income per common share:

0.16 

Weighted average shares outstanding:

51,881,681 

51,523,627 

51,899,210 

52,140,945 

Rate Analysis

SG&A expense rate

63.6 

55.6 

Income from operations margin rate

Adjusted EBITDA margin rate

Consolidated Statements of Cash Flows

Cash Flows From Operating Activities

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

Depreciation & amortization

Amortization of debt issuance costs

167 

174 

Loss on disposals of property, plant and equipment

1,039 

710 

Stock based compensation

Deferred income taxes

426 

1,223 

Changes in operating assets and liabilities:

(504)

(559)

(3,058)

5,016 

Prepaid expenses and other assets

(1,771)

4,589 

(6,085)

(2,413)

Income tax receivable / payable

1,135 

3,888 

Accrued expenses and other liabilities

6,810 

(7,836)

Net cash provided by operating activities

9,858 

20,054 

Cash Flows From Investing Activities

Purchases of property, plant and equipment

(4,846)

(9,963)

Net cash used in investing activities

Cash Flows From Financing Activities

Payments of long-term debt and capital lease obligations

(16,904)

(16,272)

Advances on line of credit

15,000 

Dividends paid

(2,600)

(2,581)

Proceeds from exercise of stock options

Employee taxes paid for shares withheld

(32)

Net cash used in financing activities

(4,504)

(3,843)

Effect of exchange rate changes on cash

Net change in cash

511 

6,253 

Cash, cash equivalents and restricted cash beginning of period

7,476 

10,336 

Cash, cash equivalents and restricted cash end of period

7,987 

16,589 

Supplemental disclosure of cash flow information

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

1,895 

2,867 

Cash paid for interest

558 

481 

Cash paid (received) for income taxes, net

(44)

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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