Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 03, 2020 | |
Document And Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-35629 | |
Entity Registrant Name | TILE SHOP HOLDINGS, INC. | |
Entity Incorporation State Country Code | DE | |
Entity Tax Identification Number | 45-5538095 | |
Entity Address, Address Line 1 | 14000 Carlson Parkway | |
Entity Address City Or Town | Plymouth | |
Entity Address State Or Province | MN | |
Entity Address Postal Zip Code | 55441 | |
City Area Code | 763 | |
Local Phone Number | 852-2950 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 51,673,420 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Amendment Flag | false | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001552800 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 7,936 | $ 9,104 |
Restricted cash | 815 | 815 |
Receivables, net | 3,225 | 3,370 |
Inventories | 79,053 | 97,620 |
Income tax receivable | 9,641 | 3,090 |
Other current assets, net | 21,940 | 8,180 |
Total Current Assets | 122,610 | 122,179 |
Property, plant and equipment, net | 113,209 | 130,461 |
Right of use asset | 130,397 | 137,737 |
Deferred tax assets | 4,139 | 7,196 |
Other assets | 1,728 | 2,241 |
Total Assets | 372,083 | 399,814 |
Current liabilities: | ||
Accounts payable | 13,239 | 18,181 |
Income tax payable | 193 | 87 |
Current portion of lease liability | 32,270 | 26,993 |
Other accrued liabilities | 42,720 | 24,589 |
Total Current Liabilities | 88,422 | 69,850 |
Long-term debt | 22,000 | 63,000 |
Long-term lease liability, net | 122,682 | 131,451 |
Financing lease obligation, net | 184 | 274 |
Other long-term liabilities | 4,157 | 4,340 |
Total Liabilities | 237,445 | 268,915 |
Stockholders’ Equity: | ||
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 51,370,167 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 | 157,493 | 156,482 |
Accumulated deficit | (22,776) | (25,518) |
Accumulated other comprehensive loss | (84) | (70) |
Total Stockholders' Equity | 134,638 | 130,899 |
Total Liabilities and Stockholders' Equity | $ 372,083 | $ 399,814 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2020 | Dec. 31, 2019 |
Consolidated Balance Sheets [Abstract] | ||
Common stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 51,370,167 | 50,806,674 |
Common stock, shares outstanding | 51,370,167 | 50,806,674 |
Preferred stock, par value (per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Consolidated Statements of Operations [Abstract] | ||||
Net sales | $ 67,730 | $ 88,903 | $ 162,009 | $ 175,811 |
Cost of sales | 22,316 | 27,543 | 51,640 | 52,609 |
Gross profit | 45,414 | 61,360 | 110,369 | 123,202 |
Selling, general and administrative expenses | 47,208 | 60,562 | 109,569 | 119,510 |
(Loss) income from operations | (1,794) | 798 | 800 | 3,692 |
Interest expense | (559) | (943) | (1,407) | (1,921) |
Other income | 2 | 17 | ||
(Loss) income before income taxes | (2,353) | (143) | (607) | 1,788 |
Benefit (provision) for income taxes | 1,593 | (11) | 3,349 | (622) |
Net (loss) income | $ (760) | $ (154) | $ 2,742 | $ 1,166 |
(Loss) income per common share: | ||||
Basic | $ (0.02) | $ 0 | $ 0.05 | $ 0.02 |
Diluted | $ (0.02) | $ 0 | $ 0.05 | $ 0.02 |
Weighted average shares outstanding: | ||||
Basic | 49,926,267 | 50,999,341 | 49,884,169 | 51,476,442 |
Diluted | 49,926,267 | 50,999,341 | 50,052,990 | 51,573,410 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Consolidated Statements of Comprehensive Income (Loss) [Abstract] | ||||
Net (loss) income | $ (760) | $ (154) | $ 2,742 | $ 1,166 |
Currency translation adjustment | 2 | (25) | (14) | 2 |
Other comprehensive (loss) income | 2 | (25) | (14) | 2 |
Comprehensive (loss) income | $ (758) | $ (179) | $ 2,728 | $ 1,168 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Adoption of Lease Standard [Member]Retained Earnings (Deficit) [Member] | Adoption of Lease Standard [Member] | Adjusted Balance [Member]Common Stock [Member] | Adjusted Balance [Member]Additional Paid-in Capital [Member] | Adjusted Balance [Member]Retained Earnings (Deficit) [Member] | Adjusted Balance [Member]Accumulated Other Comprehensive Income (Loss) [Member] | Adjusted Balance [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings (Deficit) [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Beginning balance at Dec. 31, 2018 | $ 4,802 | $ 4,802 | $ 5 | $ 172,255 | $ (21,055) | $ (56) | $ 151,149 | $ 5 | $ 172,255 | $ (25,857) | $ (56) | $ 146,347 |
Beginning balance (in shares) at Dec. 31, 2018 | 52,707,879 | 52,707,879 | ||||||||||
Issuance of restricted shares (in shares) | 357,448 | |||||||||||
Cancellation of restricted shares (in shares) | (142,815) | |||||||||||
Repurchase of common stock | (10,455) | (10,455) | ||||||||||
Repurchase of common stock (in shares) | (2,307,023) | |||||||||||
Stock based compensation | 1,509 | 1,509 | ||||||||||
Tax withholdings related to net share settlements of stock based compensation awards | (136) | (136) | ||||||||||
Dividends paid | (5,212) | (5,212) | ||||||||||
Foreign currency translation adjustments | 2 | 2 | ||||||||||
Net (loss) income | 1,166 | 1,166 | ||||||||||
Balance at Jun. 30, 2019 | $ 5 | 157,961 | (19,889) | (54) | 138,023 | |||||||
Balance (in shares) at Jun. 30, 2019 | 50,615,489 | |||||||||||
Beginning balance at Mar. 31, 2019 | $ (1,738) | $ (1,738) | $ 5 | $ 170,306 | $ (19,735) | $ (29) | $ 150,547 | $ 5 | 170,306 | (17,997) | (29) | 152,285 |
Beginning balance (in shares) at Mar. 31, 2019 | 52,901,733 | 52,901,733 | ||||||||||
Issuance of restricted shares (in shares) | 76,275 | |||||||||||
Cancellation of restricted shares (in shares) | (55,496) | |||||||||||
Repurchase of common stock | (10,455) | (10,455) | ||||||||||
Repurchase of common stock (in shares) | (2,307,023) | |||||||||||
Stock based compensation | 770 | 770 | ||||||||||
Tax withholdings related to net share settlements of stock based compensation awards | (54) | (54) | ||||||||||
Dividends paid | (2,606) | (2,606) | ||||||||||
Foreign currency translation adjustments | (25) | (25) | ||||||||||
Net (loss) income | (154) | (154) | ||||||||||
Balance at Jun. 30, 2019 | $ 5 | 157,961 | (19,889) | (54) | 138,023 | |||||||
Balance (in shares) at Jun. 30, 2019 | 50,615,489 | |||||||||||
Beginning balance at Dec. 31, 2019 | $ 5 | 156,482 | (25,518) | (70) | $ 130,899 | |||||||
Beginning balance (in shares) at Dec. 31, 2019 | 50,806,674 | 50,806,674 | ||||||||||
Issuance of restricted shares (in shares) | 698,103 | |||||||||||
Cancellation of restricted shares (in shares) | (134,610) | |||||||||||
Stock based compensation | 1,104 | $ 1,104 | ||||||||||
Tax withholdings related to net share settlements of stock based compensation awards | (93) | (93) | ||||||||||
Foreign currency translation adjustments | (14) | (14) | ||||||||||
Net (loss) income | 2,742 | 2,742 | ||||||||||
Balance at Jun. 30, 2020 | $ 5 | 157,493 | (22,776) | (84) | $ 134,638 | |||||||
Balance (in shares) at Jun. 30, 2020 | 51,370,167 | 51,370,167 | ||||||||||
Beginning balance at Mar. 31, 2020 | $ 5 | 156,969 | (22,016) | (86) | $ 134,872 | |||||||
Beginning balance (in shares) at Mar. 31, 2020 | 51,396,986 | |||||||||||
Issuance of restricted shares (in shares) | 28,494 | |||||||||||
Cancellation of restricted shares (in shares) | (55,313) | |||||||||||
Stock based compensation | 538 | 538 | ||||||||||
Tax withholdings related to net share settlements of stock based compensation awards | (14) | (14) | ||||||||||
Foreign currency translation adjustments | 2 | 2 | ||||||||||
Net (loss) income | (760) | (760) | ||||||||||
Balance at Jun. 30, 2020 | $ 5 | $ 157,493 | $ (22,776) | $ (84) | $ 134,638 | |||||||
Balance (in shares) at Jun. 30, 2020 | 51,370,167 | 51,370,167 |
Consolidated Statements of St_2
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Consolidated Statements of Stockholders' Equity [Abstract] | ||
Dividends declared per share | $ 0.05 | $ 0.10 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash Flows From Operating Activities | ||
Net income | $ 2,742,000 | $ 1,166,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation & amortization | 16,082,000 | 16,200,000 |
Amortization of debt issuance costs | 298,000 | 298,000 |
Loss on disposals of property, plant and equipment | 85,000 | |
Impairment charges | 2,155,000 | 0 |
Change in leases | 3,276,000 | |
Stock based compensation | 1,104,000 | 1,509,000 |
Deferred income taxes | 3,058,000 | 285,000 |
Changes in operating assets and liabilities: | ||
Receivables | 145,000 | (1,878,000) |
Inventories | 18,567,000 | 3,438,000 |
Prepaid expenses and other assets | 908,000 | (290,000) |
Accounts payable | (4,939,000) | 496,000 |
Income tax receivable / payable | (6,445,000) | (136,000) |
Accrued expenses and other liabilities | 4,037,000 | 786,000 |
Net cash provided by operating activities | 40,988,000 | 21,959,000 |
Cash Flows From Investing Activities | ||
Purchases of property, plant and equipment | (929,000) | (17,823,000) |
Proceeds from insurance | 610,000 | |
Net cash used in investing activities | (929,000) | (17,213,000) |
Cash Flows From Financing Activities | ||
Payments of long-term debt and financing lease obligations | (97,223,000) | (33,102,000) |
Advances on line of credit | 56,099,000 | 43,000,000 |
Dividends paid | (5,212,000) | |
Repurchases of common stock | (10,455,000) | |
Employee taxes paid for shares withheld | (93,000) | (136,000) |
Net cash used in financing activities | (41,217,000) | (5,905,000) |
Effect of exchange rate changes on cash | (10,000) | 5,000 |
Net change in cash, cash equivalents and restricted cash | (1,168,000) | (1,154,000) |
Cash, cash equivalents and restricted cash beginning of period | 9,919,000 | 6,382,000 |
Cash, cash equivalents and restricted cash end of period | 8,751,000 | 5,228,000 |
Cash, cash equivalents and restricted cash end of period | 8,751,000 | 5,228,000 |
Supplemental disclosure of cash flow information | ||
Purchases of property, plant and equipment included in accounts payable and accrued expenses | 103,000 | 1,225,000 |
Cash paid for interest | 1,445,000 | 1,828,000 |
Cash paid for income taxes, net | $ 22,000 | $ 471,000 |
Background
Background | 6 Months Ended |
Jun. 30, 2020 | |
Background [Abstract] | |
Background | No te 1: Background Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company” or “we”) 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 June 30, 2020, the Company had 142 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 has a sourcing operation 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 and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020 . 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, 2019. 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 June 2016, the Financial Accounting Standards Board (“FASB”) issued a final standard on accounting for credit losses. The new standard was initially effective for the Company in 2020, and requires a change in credit loss calculations using the expected loss method. In November 2019, the FASB issued Accounting Standards Update 2019-10, “Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates,” which, among other things, defers the effective date of Accounting Standards Update 2016-13, the standard on accounting for credit losses, for public filers that are considered smaller reporting companies as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those years. Early adoption is permitted. The Company is evaluating the effect of this standard on its consolidated financial statements and related disclosures. In March 2020, the 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 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 |
Impact of the COVID-19 Pandemic
Impact of the COVID-19 Pandemic | 6 Months Ended |
Jun. 30, 2020 | |
Impact of the COVID-19 Pandemic [Abstract] | |
Impact of the COVID-19 Pandemic | Note 2: Impact of the COVID-19 Pandemic The COVID-19 pandemic has impacted, and is likely to continue impacting, the Company’s operations. As previously announced, the Company’s sales and traffic decreased by approximately 50 % during the weeks immediately following the end of the first quarter of 2020 when compared to the same period in 2019. As shelter in place orders started to ease throughout the quarter, the Company’s traffic and sales started to recover. The proliferation of COVID-19 across the world has also resulted in supply chain disruptions, as a number of the Company’s suppliers have been adversely impacted by restrictions placed on their operations. Following the onset of COVID-19, the Company took immediate steps to curtail operating expenses. These activities included workforce reductions, the suspension of incentive compensation programs, salaried employee wage reductions, and adjustments to the number of replenishment trucks sent from the Company’s distribution centers to its stores. These cost savings measures, combined with a lower level of variable selling expenses, resulted in a $ 13.4 million reduction in selling, general and administrative expenses during the second quarter of 2020 when compared to the second quarter of 2019. Additionally, the Company took actions to conserve cash by limiting inventory purchases, cutting anticipated spending on capital projects, and negotiating rent deferrals with the Company’s landlords. These actions contributed to the cash generating activities that enabled the Company to reduce its debt balance by $ 15.5 million during the second quarter of 2020. While the Company is cautiously optimistic that it will continue to benefit from improved traffic and sales trends, the recent escalation of COVID-19 cases across many of the markets the Company serves could have a negative impact on the Company. Specifically, the Company could be adversely impacted by limitations on the Company’s employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring the Company’s stores to close or employees to remain at home; limitation of carriers to deliver the Company’s product to customers; limitations on the ability of the Company’s customers to conduct their business and purchase the Company’s products and services; and limitations on the ability of the Company’s customers to pay the Company in a timely manner. These events could have a material, adverse effect on the Company’s results of operations, cash flows and liquidity. In addition, even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of the economic impact of the pandemic, including any recession that has occurred or may occur in the future. The Company’s Credit Agreement with Bank of America, N.A., Fifth Third Bank, and Citizen’s Bank (the “Credit Agreement”) provides the Company with a senior credit facility consisting of a $ 100.0 million revolving line of credit through September 18, 2023 . Borrowings outstanding consisted of $ 22.0 million on the revolving line of credit as of June 30, 2020. The Credit Agreement includes financial and other covenants, including covenants to maintain certain fixed charge ratios and consolidated total rent adjusted leverage ratios. The Company was in compliance with its covenants as of June 30, 2020. Prior to the outbreak of the COVID-19 pandemic in the United States, the Company believed that it had the ability to comply with the financial covenants under the Credit Agreement over the next twelve months; however, given the uncertainty surrounding the COVID-19 pandemic, there can be no assurances as to the Company’s ability to do so. If the escalation of COVID-19 cases results in a decline in sales and traffic similar to what the Company experienced during the initial weeks of the second quarter of 2020, it is likely that the Company will be unable to comply with certain covenants (such as the leverage ratio) in its Credit Agreement. Under the terms of the Credit Agreement, the lenders could call the debt in advance of its maturity in the event of default. If an event of default were to occur, the Company anticipates it would enter into discussions with the lenders to waive the event of default. Failure to obtain such a waiver or refinance the debt if such an event were to occur would have a material adverse effect on the Company’s liquidity, financial condition and results of operations. |
Revenues
Revenues | 6 Months Ended |
Jun. 30, 2020 | |
Revenues [Abstract] | |
Revenues | Note 3: 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 For the six months ended June 30, June 30, 2020 2019 2020 2019 Man-made tiles 47 % 47 % 46 % 47 % Natural stone tiles 28 29 29 29 Setting and maintenance materials 14 13 14 13 Accessories 9 10 9 10 Delivery service 2 1 2 1 Total 100 % 100 % 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. 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. 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. Customer deposits are presented as an other accrued liability in the Consolidated Balance Sheet. The customer deposit balance was $ 9.7 million and $ 7.7 million as of June 30, 2020 and December 31, 2019, respectively. Revenues recognized during the six-month period ended June 30, 2020 that were included in the customer deposit balance as of the beginning of the period were $ 7.5 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 $ 3.2 million and $ 3.4 million at June 30, 2020 and December 31, 2019, 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 qualifies for the practical expedient outlined in ASC 606-10-32-18 and 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 current (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 Sheet as of June 30, 2020 and December 31, 2019 are as follows: (in thousands) June 30, December 31, 2020 2019 Other current (accrued) liabilities $ 4,989 $ 5,434 Other current assets 1,471 1,659 Sales returns reserve, net $ 3,518 $ 3,775 |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2020 | |
Inventories [Abstract] | |
Inventories | Note 4: Inventories Inventories are stated at the lower of cost (determined using the moving average cost method) or net realizable value. Inventories consist primarily of merchandise held for sale. Inventories were comprised of the following as of June 30, 2020 and December 31, 2019: (in thousands) June 30, December 31, 2020 2019 Finished goods $ 77,170 $ 95,435 Raw materials 1,883 2,185 Total $ 79,053 $ 97,620 The Company provides provisions for losses related to shrinkage and other amounts that are otherwise not expected to be fully recoverable. These provisions are calculated based on historical shrinkage, selling price, margin and current business trends. The provision for losses related to shrinkage and other amounts was $ 0.7 million and $ 0.2 million as of June 30, 2020 and December 31, 2019, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2020 | |
Income Taxes [Abstract] | |
Income Taxes | Note 5: Income Taxes The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020, includes significant income and payroll tax provisions. Additionally, the CARES Act modified the rules associated with net operating losses (“NOLs”) and made technical corrections to tax depreciation methods for qualified improvement property. Under the temporary provisions of CARES Act, NOL carryforwards and carrybacks may offset 100% of taxable income for taxable years beginning before 2021. In addition, NOLs arising in 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund. The Company's effective tax rate for the three months ended June 30, 2020 and 2019 was 67.7 % and ( 7.7 )%, respectively. The Company's effective tax rate for the six months ended June 30, 2020 and 2019 was 551.7 % and 34.8 % , respectively. The difference between the Company’s effective rate of 551.7 % and the expected federal statutory rate of 21.0 % for the six months ended June 30, 2020 is primarily due to refinement of estimates associated with the CARES Act which gives the Company the ability to carry back federal NOLs to years with a federal statutory tax rate of 35 %. For the three months ended June 30, 2020 and 2019 , the Company recorded a (benefit) provision for income taxes of $( 1.6 ) million and $ 0.0 million, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded a (benefit) provision for income taxes of $( 3.3 ) million and $ 0.6 million, respectively. The decrease in the provision for income taxes is due to lower pretax earnings and the benefit generated from the NOL carryback tax rate differential. The Company records interest and penalties relating to uncertain tax positions in income tax expense when applicable. As of June 30, 2020 and 2019 , the Company has no t recognized any liabilities for uncertain tax positions, no r have interest and penalties related to uncertain tax positions been accrued. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 6 Months Ended |
Jun. 30, 2020 | |
Earnings (Loss) Per Share [Abstract] | |
Earnings (Loss) Per Share | Note 6: Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding, after taking into consideration all dilutive potential shares outstanding during the period. Basic and diluted earnings (loss) per share were calculated as follows: (all amounts in thousands except share and per share data) For the three months ended For the six months ended June 30, June 30, 2020 2019 2020 2019 Net (loss) income $ ( 760 ) $ ( 154 ) $ 2,742 $ 1,166 Weighted average shares outstanding - basic 49,926,267 50,999,341 49,884,169 51,476,442 Effect of dilutive securities attributable to stock based awards - - 168,821 96,968 Weighted average shares outstanding - diluted 49,926,267 50,999,341 50,052,990 51,573,410 (Loss) income per common share: Basic $ ( 0.02 ) $ ( 0.00 ) $ 0.05 $ 0.02 Diluted $ ( 0.02 ) $ ( 0.00 ) $ 0.05 $ 0.02 Anti-dilutive securities excluded from earnings per share calculation 2,585,401 2,835,890 1,903,737 2,047,585 |
Other Accrued Liabilities
Other Accrued Liabilities | 6 Months Ended |
Jun. 30, 2020 | |
Other Accrued Liabilities [Abstract] | |
Other Accrued Liabilities | Note 7: Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) June 30, December 31, 2020 2019 Legal settlement accrual $ 14,500 $ - Customer deposits 9,715 7,727 Sales returns reserve 4,989 5,434 Accrued wages and salaries 4,083 4,064 Payroll and sales taxes 4,085 2,764 Other current liabilities 5,348 4,600 Total other accrued liabilities $ 42,720 $ 24,589 |
Long-term Debt
Long-term Debt | 6 Months Ended |
Jun. 30, 2020 | |
Long-term Debt [Abstract] | |
Long-term Debt | Note 8: Long-term Debt On September 18, 2018 , Holdings and its operating subsidiary, The Tile Shop, LLC, entered into the Credit Agreement with Bank of America, N.A., Fifth Third Bank and Citizens Bank. The Credit Agreement provides the Company with a senior credit facility consisting of a $ 100.0 million revolving line of credit through September 18, 2023 . Borrowings pursuant to the Credit Agreement initially bear interest at a LIBOR or base rate. The LIBOR-based rate ranges from LIBOR plus 1.50 % to 2.25 % depending on the Company’s rent adjusted leverage ratio. The base rate is equal to the greatest of (a) the Federal funds rate plus 0.50 %, (b) the Bank of America “prime rate,” and (c) the Eurodollar rate plus 1.00 %, in each case plus 0.50 % to 1.25 % depending on the Company’s rent adjusted leverage ratio. At June 30, 2020 the base interest rate was 4.25 % and the LIBOR-based interest rate was 2.16 %. Borrowings outstanding consisted of $ 22.0 million on the revolving line of credit as of June 30, 2020. In addition, the Company has standby letters of credit outstanding related to its workers compensation and medical insurance policies. Standby letters of credit totaled $ 1.3 million on both June 30, 2020 and December 31, 2019. There was $ 76.7 million available for borrowing on the revolving line of credit as of June 30, 2020, which may be used to support the Company’s growth and for working capital purposes. The Credit Agreement is secured by virtually all of the assets of the Company, including but not limited to, inventory, receivables, equipment and real property. The Credit Agreement contains customary events of default, conditions to borrowings, and restrictive covenants, including restrictions on the Company’s ability to dispose of assets, make acquisitions, incur additional debt, incur liens, or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain certain fixed charge coverage ratios and consolidated total rent adjusted leverage ratios. The Company was in compliance with the covenants as of June 30, 2020. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Leases | Note 9: Leases The Company leases its retail stores, certain distribution space, and office space. Leases generally have a term of ten to fifteen years , and contain renewal options. Assets acquired under operating leases are included in the Company’s right of use assets in the accompanying Consolidated Balance Sheet. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. The depreciable life of assets and leasehold improvements is limited by the expected lease term. In accordance with the FASB’s recent Staff Q&A regarding rent concessions related to the effects of the COVID-19 pandemic, the Company has elected to account for the concessions verbally agreed to by landlords that do not result in a substantial increase in the rights of the lessor or the obligations of the lessee as though enforceable rights and obligations for those concessions existed in the original lease agreements and the Company has elected to not re-measure the related lease liabilities and right-of-use assets. For qualifying rent abatement concessions, the Company has recorded negative lease expense for the amount of the concession during the period of relief. During the three months ended June 30, 2020, the Company recognized less than $ 0.1 million of negative lease expense related to rent abatement concessions. F or qualifying deferrals of rental payments, the Company has recognized a non-interest bearing payable classified as a Current portion of lease liability in the Consolidated Balance Sheet in lieu of recognizing a decrease in cash for the lease payment that would have been made based on the original terms of the lease agreement. The deferred rent payment balance will be reduced in future periods as amounts due are repaid. Rental payments deferred during the three-month period ending June 30, 2020 totaled $ 4.9 million. The majority of the repayments are expected to occur between the third quarter of 2020 and the third quarter of 2021. Leases (in thousands) Classification June 30, 2020 December 31, 2019 Assets Operating lease assets Right of use asset $ 130,397 $ 137,737 Financing lease assets Property, plant and equipment, net of accumulated depreciation 89 113 Total leased assets $ 130,486 $ 137,850 Liabilities Current Operating Current portion of lease liability $ 32,270 $ 26,993 Financing Other accrued liabilities 174 162 Noncurrent Operating Long-term lease liability, net 122,682 131,451 Financing Financing lease obligation, net 184 274 Total lease liabilities $ 155,310 $ 158,880 Three Months Ended Lease cost (in thousands) Classification June 30, 2020 June 30, 2019 Operating lease cost SG&A expenses $ 8,236 $ 7,998 Financing lease cost Amortization of leased assets Depreciation and amortization 12 12 Interest on lease liabilities Interest expense 14 19 Variable lease cost (1) SG&A expenses 3,507 3,333 Short term lease cost SG&A expenses 153 218 Net lease cost $ 11,922 $ 11,580 Six Months Ended Lease cost (in thousands) Classification June 30, 2020 June 30, 2019 Operating lease cost SG&A expenses $ 16,457 $ 16,010 Financing lease cost Amortization of leased assets Depreciation and amortization 24 24 Interest on lease liabilities Interest expense 30 40 Variable lease cost (1) SG&A expenses 6,905 6,558 Short term lease cost SG&A expenses 401 482 Net lease cost $ 23,817 $ 23,114 (1) Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities. Six Months Ended Other Information (in thousands) June 30, 2020 June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 13,205 $ 17,311 Operating cash flows from financing leases $ 44 $ 35 Financing cash flows from financing leases $ 122 $ ( 102 ) |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 10: Commitments and Contingencies The Company is, from time to time, party to lawsuits, threatened lawsuits, disputes and other claims arising in the normal course of business. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, the Company does not record an accrual, consistent with applicable accounting guidance. Based on information currently available to the Company, advice of counsel, and available insurance coverage, the Company believes that its established accruals are adequate and the liabilities arising from the legal proceedings will not have a material adverse effect on its consolidated financial condition. However, in light of the inherent uncertainty in legal proceedings, there can be no assurance that the ultimate resolution of a matter will not exceed established accruals. As a result, the outcome of a particular matter or a combination of matters may be material to the Company’s results of operations for a particular period, depending upon the size of the loss or the Company’s income for that particular period. As previously disclosed, the Company is a nominal defendant and certain current and former directors are individual defendants in litigation brought by K-Bar Holdings LLC and Wynnefield Capital, Inc. (“Plaintiffs”), in the Delaware Court of Chancery (the “Action”), in November 2019. Plaintiffs pleaded the Action as a derivative claim on behalf of the Company and also on behalf of a putative class of certain holders of the Company’s common stock as of October 18, 2019 (the “Putative Class”). Plaintiffs alleged breaches of fiduciary duty in connection with, among other things, the Company’s decision to delist from Nasdaq and deregister its common stock under the Securities Exchange Act of 1934, as amended. As previously disclosed, on June 30, 2020, the Company, the individual defendants, and Plaintiffs reached an agreement to settle all claims in the Action (the “Settlement Agreement”), which will be documented in a Stipulation of Settlement. Among other terms, the Settlement Agreement provides for a settlement fund of $ 12.0 million, which will be funded by the Company’s insurers, and which will be distributed to members of the Putative Class pursuant to an allocation and claims distribution process to be proposed by the Plaintiffs and approved by the Court. The Company also expects the Plaintiffs’ counsel to apply to the Court for a $ 2.5 million to $ 3.0 million award of attorney’s fees in connection with the settlement of the derivative claims. The Company’s insurers have agreed to cover this anticipated fee award to the Plaintiffs’ attorneys. The Company recorded a $ 14.5 million other current liability and a $ 14.5 million other current asset in the Consolidated Balance Sheet as of June 30, 2020 to reflect the Company’s obligation to the Putative Class, the low end of the potential range of the attorney fee award and the corresponding receivable from the insurance companies. The Settlement Agreement is subject to both preliminary and final approval by the Court. If approved, the Settlement Agreement will resolve the Action. Additional information regarding the Settlement Agreement also will be disclosed in upcoming public filings in the Court of Chancery, including a disclosure statement approved by the Court. The Company is also, from time to time, subject to claims and disputes arising in the normal course of business. In the opinion of management, while the outcome of such claims and disputes cannot be predicted with certainty, the Company’s ultimate liability in connection with these matters is not expected to have a material adverse effect on the results of operations, financial position, or cash flows. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments | Note 11: Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, the Company uses a three-tier valuation hierarchy based upon observable and non-observable inputs: Level 1 – Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date. Level 2 – Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in non-active markets; Inputs other than quoted prices that are observable for the asset or liability; and Inputs that are derived principally from or corroborated by other observable market data. Level 3 – Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. The following table sets forth by Level within the fair value hierarchy the Company’s financial assets that were accounted for at fair value on a recurring basis at June 30, 2020 and December 31, 2019 according to the valuation techniques the Company uses to determine their fair values. There have been no transfers of assets among the fair value hierarchies presented. Pricing Fair Value at Category June 30, 2020 December 31, 2019 Assets (in thousands) Cash and cash equivalents Level 1 $ 7,936 $ 9,104 Restricted cash Level 1 815 815 The following methods and assumptions were used to estimate the fair value of each class of financial instrument. There have been no changes in the valuation techniques used by the Company to value the Company’s financial instruments. Cash and cash equivalents: Consists of cash on hand and bank deposits. The value was measured using quoted market prices in active markets. The carrying amount approximates fair value. Restricted cash: Consists of cash and cash equivalents held in bank deposit accounts restricted as to withdrawal or that are under the terms of use for current operations. The value was measured using quoted market prices in active markets. The carrying amount approximates fair value. Fair value measurements also apply to certain non-financial assets and liabilities measured at fair value on a nonrecurring basis. Property, plant and equipment and right of use assets are measured at fair value when an impairment is recognized and the related assets are written down to fair value. During the six months ended June 30, 2020, the Company recognized a $ 2.2 million charge in selling, general and administrative expenses to write-down property, plant, and equipment and right of use assets to their estimated fair values. The Company measured the fair value of these assets based on projected cash flows, an estimated risk-adjusted rate of return, and market rental rates for comparable properties. Projected cash flows are considered Level 3 inputs. Market rental rates for comparable properties are considered Level 2 inputs. No impairment charges were recorded during the three or six months ended June 30, 2019 or the three months ended June 30, 2020. The carrying value of the Company’s borrowings under its Credit Agreement approximate fair value based upon Level 2 inputs of the market interest rates available to the Company for debt obligations with similar risks and maturities. |
Equity Incentive Plans
Equity Incentive Plans | 6 Months Ended |
Jun. 30, 2020 | |
Equity Incentive Plans [Abstract] | |
Equity Incentive Plans | Note 12: Equity Incentive Plans Stock options: The Company measures and recognizes compensation expense for all stock based awards at fair value. The financial statements for the three and six months ended June 30, 2020 and 2019 include compensation expense for the portion of outstanding awards that vested during those periods. The Company recognizes stock based compensation expenses on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Total stock based compensation expense related to stock options was $ 0.1 million and $ 0.3 million for the three months ended June 30, 2020 and 2019, respectively. Total stock based compensation expense related to stock options was $ 0.2 million and $ 0.5 million for the six months ended June 30, 2020 and 2019, respectively. Stock based compensation expense pertaining to stock options is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. As of June 30, 2020, the Company had outstanding stock options to purchase 1,153,097 shares of common stock at a weighted average exercise price of $ 11.09 . Restricted stock: The Company awards restricted common shares to selected employees and to non-employee directors. Recipients are not required to provide any consideration upon vesting of the award. Restricted stock awards are subject to certain restrictions on transfer, and all or part of the shares awarded may be subject to forfeiture upon the occurrence of certain events, including employment termination. Certain awards are also subject to forfeiture if the Company fails to attain certain performance targets. The restricted stock is valued at its grant date fair value and expensed over the requisite service period or the vesting term of the awards. The Company adjusts the cumulative expense recognized on awards with performance conditions based on the probability of achieving the performance condition. Total stock based compensation expense related to restricted stock was $ 0.4 million and $ 0.5 million for the three months ended June 30, 2020 and 2019, respectively. Total stock based compensation expense related to restricted stock was $ 0.9 million and $ 1.0 million for the six months ended June 30, 2020 and 2019, respectively. Stock based compensation expense pertaining to restricted stock awards is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. As of June 30, 2020, the Company had 1,436,688 outstanding restricted common shares. |
New Markets Tax Credit
New Markets Tax Credit | 6 Months Ended |
Jun. 30, 2020 | |
New Markets Tax Credit [Abstract] | |
New Markets Tax Credit | Note 13: New Markets Tax Credit 2016 New Markets Tax Credit In December 2016, the Company entered into a financing transaction with U.S. Bank Community, LLC (“U.S. Bank”) related to a $ 9.2 million expansion of the Company’s facility in Durant, Oklahoma. U.S. Bank made a capital contribution to, and Tile Shop Lending, Inc. (“Tile Shop Lending”) made a loan to, Twain Investment Fund 192 LLC (the “Investment Fund”) under a qualified New Markets Tax Credit (“NMTC”) program. The NMTC program was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) and is intended to induce capital investment in qualified lower income communities. The Act permits taxpayers to claim credits against their federal income taxes for up to 39% of qualified investments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that are certified to make qualified low-income community investments. In this transaction, Tile Shop Lending loaned $ 6.7 million to the Investment Fund at an interest rate of 1.37 % per year and with a maturity date of December 31, 2046. The Investment Fund then contributed the loan to a CDE, which, in turn, loaned the funds on similar terms to Tile Shop of Oklahoma, LLC, an indirect, wholly-owned subsidiary of Holdings. The proceeds of the loans from the CDEs (including loans representing the capital contribution made by U.S. Bank, net of syndication fees) were used to partially fund the distribution center project. In December 2016, U.S. Bank also contributed $ 3.2 million to the Investment Fund and, by virtue of such contribution, is entitled to substantially all of the tax benefits derived from the NMTC, while the Company effectively received net loan proceeds equal to U.S. Bank’s contributions to the Investment Fund. This transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase U.S. Bank’s interest. The Company believes that U.S. Bank will exercise the put option in December 2023 at the end of the recapture period. The value attributed to the put/call is de minimis. The NMTC is subject to 100% recapture for a period of seven years as provided in the Internal Revenue Code. The Company is required to be in compliance with various regulations and contractual provisions that apply to the NMTC arrangement. Non-compliance with applicable requirements could result in projected tax benefits not being realized and, therefore, could require the Company to indemnify U.S. Bank for any loss or recapture of NMTCs related to the financing until such time as the obligation to deliver tax benefits is relieved. The Company does not anticipate any credit recaptures will be required in connection with this arrangement. The Company has determined that the financing arrangement with the Investment Fund and CDEs contains a variable interest entity (“VIE”). The ongoing activities of the Investment Fund – collecting and remitting interest and fees and NMTC compliance – were all considered in the initial design and are not expected to significantly affect economic performance throughout the life of the Investment Fund. Management considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees to the structure; U.S. Bank’s lack of a material interest in the underlying economics of the project; and the fact that the Company is obligated to absorb losses of the Investment Fund. The Company concluded that it is the primary beneficiary of the VIE and consolidated the Investment Fund, as a VIE, in accordance with the accounting standards for consolidation. In 2016, U.S. Bank’s contributions of $ 3.2 million, net of syndication fees, were included in cash, restricted cash, other accrued liabilities and other long-term liabilities in the consolidated balance sheet. The Company incurred $ 1.3 million of syndication fees in connection with this transaction, which were classified as other current assets and other non-current assets in the consolidated balance sheet. The Company is recognizing the benefit of this net $ 1.9 million contribution over the seven-year compliance period as it is being earned through the on-going compliance with the conditions of the NMTC program. As of June 30, 2020, the balance of the contribution liability was $ 1.6 million, of which $ 0.5 million was classified as other accrued liabilities on the Consolidated Balance Sheet and $ 1.1 million was classified as other long-term liabilities on the Consolidated Balance Sheet. The Company is able to request reimbursement for certain expenditures made in connection with the expansion of the distribution center in Durant, Oklahoma from the Investment Fund. Expenditures that qualify for reimbursement include building costs, equipment purchases, and other expenditures tied to the expansion of the facility. As of June 30, 2020, the balance in the Investment Fund available for reimbursement to the Company was $ 0.8 million. 2013 New Markets Tax Credit In July 2013, the Company entered into a financing transaction with U.S. Bank and Chase Community Equity (“Chase”, and collectively with U.S. Bank, the “investors”) related to the $ 19.1 million acquisition, rehabilitation, and construction of the Company’s distribution center and manufacturing facilities in Durant, Oklahoma. In this transaction, Tile Shop Lending loaned $ 13.5 million to the Tile Shop Investment Fund LLC. The investors contributed $ 5.6 million to the Tile Shop Investment Fund LLC. The investors were entitled to the tax benefits derived from the NMTC by virtue of their contribution while the Company received the proceeds, net of syndication fees, to apply toward the construction project. This transaction included a put/call provision whereby the Company may have been obligated or entitled to repurchase the investors’ interest. The value attributed to the put/call prior to the exercise of the put option was de minimis. The NMTC was subject to 100% recapture for a period of seven years as provided in the Internal Revenue Code. The Company was required to be in compliance with various regulations and contractual provisions that applied to the NMTC arrangement. Non-compliance with applicable requirements could have resulted in projected tax benefits not being realized and, therefore, could have required the Company to indemnify the investors for any loss or recapture of NMTCs related to the financing until such time as the obligation to deliver tax benefits was relieved. No credit recaptures were required in connection with this arrangement. The Company determined that this financing arrangement contained a VIE. The ongoing activities of the Tile Shop Investment Fund LLC – collecting and remitting interest and fees and NMTC compliance – were all considered in the initial design and are not expected to significantly affect economic performance throughout the life of the Tile Shop Investment Fund LLC. Management considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees to the structure; the investors’ lack of a material interest in the underlying economics of the project; and the fact that the Company is obligated to absorb losses of The Tile Shop Investment Fund LLC. The Company concluded that it is the primary beneficiary of the VIE and consolidated the Tile Shop Investment Fund LLC, as a VIE, in accordance with the accounting standards for consolidation. In 2013, the investors’ contributions, of $ 5.6 million, net of syndication fees, were included in cash, restricted cash, other accrued liabilities and other long-term liabilities in the consolidated balance sheet. The Company incurred $ 1.2 million of syndication fees in connection with this transaction which were classified as other current assets and other non-current assets in the consolidated balance sheet. The Company recognized the benefit of this net $ 4.4 million contribution over the seven-year compliance period as it was earned through the on-going compliance with the conditions of the NMTC program. As of June 30, 2020, the balance of the contribution liability was $ 0.1 million, all of which was classified as other accrued liabilities on the Consolidated Balance Sheet. In July 2020, the investors exercised the put option to purchase the investors’ interest in the Investment Fund at the end of the tax credit recapture period. This transaction did not have a significant impact on the Company’s financial position, results of operations, or cash flows. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 14: Related Party Transactions On July 9, 2018, Fumitake Nishi, a former Company employee and the brother-in-law of Robert A. Rucker, our former Interim Chief Executive Officer and President, and former member of the Company’s Board of Directors, from which he resigned on February 12, 2020, informed the Company he had reacquired a majority of the equity of one of its key vendors, Nanyang Helin Stone Co. Ltd (“Nanyang”). Nanyang supplies the Company with natural stone products including hand-crafted mosaics, listellos and other accessories. During the twelve months ended December 31, 2019, the Company purchased $ 5.1 million of products from Nanyang. During the three and six months ended June 30, 2020, the Company purchased $ 0.9 million and $ 2.9 million of products from Nanyang, respectively. Mr. Nishi’s employment with the Company was terminated on January 1, 2014 as a result of several violations of the Company’s code of business conduct and ethics policy. Certain of those violations involved his undisclosed ownership of Nanyang at that time. Management and the Audit Committee have evaluated the relationship and determined that it would be in the Company’s best interests to continue purchasing products from Nanyang. The Company believes Nanyang provides an important combination of quality, product availability and pricing, and relying solely on other vendors to supply similar product to the Company would not be in the Company’s best interests. The Company and the Audit Committee have and will continue to review future purchases from Nanyang and compare the pricing for products purchased from Nanyang to the pricing of same or similar products purchased from unrelated vendors. |
Revenues (Tables)
Revenues (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenues [Abstract] | |
Schedule of Revenues Disaggregated by Product Category | For the three months ended For the six months ended June 30, June 30, 2020 2019 2020 2019 Man-made tiles 47 % 47 % 46 % 47 % Natural stone tiles 28 29 29 29 Setting and maintenance materials 14 13 14 13 Accessories 9 10 9 10 Delivery service 2 1 2 1 Total 100 % 100 % 100 % 100 % |
Schedule of Components of Returns Reserve | (in thousands) June 30, December 31, 2020 2019 Other current (accrued) liabilities $ 4,989 $ 5,434 Other current assets 1,471 1,659 Sales returns reserve, net $ 3,518 $ 3,775 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Inventories [Abstract] | |
Schedule of Inventories | (in thousands) June 30, December 31, 2020 2019 Finished goods $ 77,170 $ 95,435 Raw materials 1,883 2,185 Total $ 79,053 $ 97,620 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Earnings (Loss) Per Share [Abstract] | |
Schedule of Earnings (Loss) Per Share | (all amounts in thousands except share and per share data) For the three months ended For the six months ended June 30, June 30, 2020 2019 2020 2019 Net (loss) income $ ( 760 ) $ ( 154 ) $ 2,742 $ 1,166 Weighted average shares outstanding - basic 49,926,267 50,999,341 49,884,169 51,476,442 Effect of dilutive securities attributable to stock based awards - - 168,821 96,968 Weighted average shares outstanding - diluted 49,926,267 50,999,341 50,052,990 51,573,410 (Loss) income per common share: Basic $ ( 0.02 ) $ ( 0.00 ) $ 0.05 $ 0.02 Diluted $ ( 0.02 ) $ ( 0.00 ) $ 0.05 $ 0.02 Anti-dilutive securities excluded from earnings per share calculation 2,585,401 2,835,890 1,903,737 2,047,585 |
Other Accrued Liabilities (Tabl
Other Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Other Accrued Liabilities [Abstract] | |
Schedule of Other Accrued Liabilities | (in thousands) June 30, December 31, 2020 2019 Legal settlement accrual $ 14,500 $ - Customer deposits 9,715 7,727 Sales returns reserve 4,989 5,434 Accrued wages and salaries 4,083 4,064 Payroll and sales taxes 4,085 2,764 Other current liabilities 5,348 4,600 Total other accrued liabilities $ 42,720 $ 24,589 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of Lease Assets and Liabilities | Leases (in thousands) Classification June 30, 2020 December 31, 2019 Assets Operating lease assets Right of use asset $ 130,397 $ 137,737 Financing lease assets Property, plant and equipment, net of accumulated depreciation 89 113 Total leased assets $ 130,486 $ 137,850 Liabilities Current Operating Current portion of lease liability $ 32,270 $ 26,993 Financing Other accrued liabilities 174 162 Noncurrent Operating Long-term lease liability, net 122,682 131,451 Financing Financing lease obligation, net 184 274 Total lease liabilities $ 155,310 $ 158,880 |
Summary of Lease Cost | Three Months Ended Lease cost (in thousands) Classification June 30, 2020 June 30, 2019 Operating lease cost SG&A expenses $ 8,236 $ 7,998 Financing lease cost Amortization of leased assets Depreciation and amortization 12 12 Interest on lease liabilities Interest expense 14 19 Variable lease cost (1) SG&A expenses 3,507 3,333 Short term lease cost SG&A expenses 153 218 Net lease cost $ 11,922 $ 11,580 Six Months Ended Lease cost (in thousands) Classification June 30, 2020 June 30, 2019 Operating lease cost SG&A expenses $ 16,457 $ 16,010 Financing lease cost Amortization of leased assets Depreciation and amortization 24 24 Interest on lease liabilities Interest expense 30 40 Variable lease cost (1) SG&A expenses 6,905 6,558 Short term lease cost SG&A expenses 401 482 Net lease cost $ 23,817 $ 23,114 (1) Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities. |
Summary of Other Lease Information | Six Months Ended Other Information (in thousands) June 30, 2020 June 30, 2019 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 13,205 $ 17,311 Operating cash flows from financing leases $ 44 $ 35 Financing cash flows from financing leases $ 122 $ ( 102 ) |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value of Financial Instruments [Abstract] | |
Summary of Fair Value of Financial Assets Measured on a Recurring Basis | Pricing Fair Value at Category June 30, 2020 December 31, 2019 Assets (in thousands) Cash and cash equivalents Level 1 $ 7,936 $ 9,104 Restricted cash Level 1 815 815 |
Background (Narrative) (Details
Background (Narrative) (Details) | Jun. 30, 2020ft²storestate |
Background [Abstract] | |
Number of stores | store | 142 |
Number of states in which entity operates | state | 31 |
Area of stores | ft² | 20,000 |
Impact of the COVID-19 Pandem_2
Impact of the COVID-19 Pandemic (Narrative) (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2020USD ($) | Jun. 30, 2020USD ($) | |
Percentage decrease in sales and traffic | 50.00% | |
Reduction in selling, general and administrative expenses related to COVID response | $ 13.4 | |
Reduction in debt related to COVID response | 15.5 | |
Credit Agreement [Member] | ||
Credit facility, maximum borrowing capacity | 100 | $ 100 |
Credit facility, expiration date | Sep. 18, 2023 | |
Credit facility, amount outstanding | $ 22 | $ 22 |
Revenues (Narrative) (Details)
Revenues (Narrative) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Revenues [Abstract] | ||
Customer deposit balance | $ 9,715 | $ 7,727 |
Customer deposit balance, revenues recognized | 7,500 | |
Accounts receivable | $ 3,225 | $ 3,370 |
Revenues (Schedule of Revenues
Revenues (Schedule of Revenues Disaggregated by Product Category) (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Man-Made Tiles [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 47.00% | 47.00% | 46.00% | 47.00% |
Natural Stone Tiles [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 28.00% | 29.00% | 29.00% | 29.00% |
Setting And Maintenance Materials [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 14.00% | 13.00% | 14.00% | 13.00% |
Accessories [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 9.00% | 10.00% | 9.00% | 10.00% |
Delivery Service [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 2.00% | 1.00% | 2.00% | 1.00% |
Revenues (Schedule of Component
Revenues (Schedule of Components of Returns Reserve) (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Revenues [Abstract] | ||
Other current (accrued) liabilities | $ 4,989 | $ 5,434 |
Other current assets | 1,471 | 1,659 |
Sales returns reserve, net | $ 3,518 | $ 3,775 |
Inventories (Narrative) (Detail
Inventories (Narrative) (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 |
Inventories [Abstract] | ||
Inventory, provision for shrinkage and other | $ 0.7 | $ 0.2 |
Inventories (Schedule of Invent
Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Inventories [Abstract] | ||
Finished goods | $ 77,170 | $ 95,435 |
Raw materials | 1,883 | 2,185 |
Total | $ 79,053 | $ 97,620 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2018 | |
Income Taxes [Abstract] | |||||
Effective income tax rate | 67.70% | (7.70%) | 551.70% | 34.80% | |
Federal statutory rate | 21.00% | 35.00% | |||
Provision (benefit) for income taxes | $ (1,593,000) | $ 11,000 | $ (3,349,000) | $ 622,000 | |
Liability for uncertain tax positions | $ 0 | $ 0 | 0 | 0 | |
Income tax interest and penalties related to uncertain tax positions | $ 0 | $ 0 |
Earnings (Loss) Per Share (Sche
Earnings (Loss) Per Share (Schedule of Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Earnings (Loss) Per Share [Abstract] | ||||
Net (loss) income | $ (760) | $ (154) | $ 2,742 | $ 1,166 |
Weighted average shares outstanding - basic | 49,926,267 | 50,999,341 | 49,884,169 | 51,476,442 |
Effect of dilutive securities attributable to stock based awards | 168,821 | 96,968 | ||
Weighted average shares outstanding - diluted | 49,926,267 | 50,999,341 | 50,052,990 | 51,573,410 |
(Loss) income per common share: Basic | $ (0.02) | $ 0 | $ 0.05 | $ 0.02 |
(Loss) income per common share: Diluted | $ (0.02) | $ 0 | $ 0.05 | $ 0.02 |
Anti-dilutive securities excluded from earnings per share calculation | 2,585,401 | 2,835,890 | 1,903,737 | 2,047,585 |
Other Accrued Liabilities (Sche
Other Accrued Liabilities (Schedule of Other Accrued Liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Other Accrued Liabilities [Abstract] | ||
Legal settlement accrual | $ 14,500 | |
Customer deposits | 9,715 | $ 7,727 |
Sales return reserve | 4,989 | 5,434 |
Accrued wages and salaries | 4,083 | 4,064 |
Payroll and sales taxes | 4,085 | 2,764 |
Other current liabilities | 5,348 | 4,600 |
Total other accrued liabilities | $ 42,720 | $ 24,589 |
Long-term Debt (Narrative) (Det
Long-term Debt (Narrative) (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
London Interbank Offered Rate (LIBOR) [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility effective interest rate | 2.16% | |
Base Rate [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility effective interest rate | 4.25% | |
Credit Agreement [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, initiation date | Sep. 18, 2018 | |
Credit facility, maximum borrowing capacity | $ 100 | |
Credit facility, expiration date | Sep. 18, 2023 | |
Credit facility, amount outstanding | $ 22 | |
Credit facility, available borrowing capacity | $ 76.7 | |
Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 1.50% | |
Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 2.25% | |
Credit Agreement [Member] | Base Rate [Member] | Minimum [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 0.50% | |
Credit Agreement [Member] | Base Rate [Member] | Maximum [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 1.25% | |
Credit Agreement [Member] | Base Rate - Federal Funds [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 0.50% | |
Credit Agreement [Member] | Base Rate - Eurodollar [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, spread on variable interest rate | 1.00% | |
Credit Agreement [Member] | Letter of Credit [Member] | ||
Debt Instrument [Line Items] | ||
Credit facility, amount outstanding | $ 1.3 | $ 1.3 |
Leases (Narrative) (Details)
Leases (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2020 | Jun. 30, 2020 | |
Lessee, Lease, Description [Line Items] | ||
COVID related rent abatement concessions | $ 0.1 | |
COVID related deferred rent payments | $ 4.9 | |
Minimum [Member] | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 10 years | |
Maximum [Member] | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 15 years |
Leases (Schedule of Lease Asset
Leases (Schedule of Lease Assets and Liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Operating lease assets | $ 130,397 | $ 137,737 |
Financing lease assets | 89 | 113 |
Total leased assets | 130,486 | 137,850 |
Current operating lease liabilities | 32,270 | 26,993 |
Current finance lease liabilities | 174 | 162 |
Noncurrent operating lease liabilities | 122,682 | 131,451 |
Noncurrent finance lease liabilities | 184 | 274 |
Total lease liabilities | $ 155,310 | $ 158,880 |
Leases (Summary of Lease Cost)
Leases (Summary of Lease Cost) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Leases [Abstract] | ||||
Operating lease cost | $ 8,236 | $ 7,998 | $ 16,457 | $ 16,010 |
Financing lease cost, Amortization of leased assets | 12 | 12 | 24 | 24 |
Financing lease, Interest on lease liabilities | 14 | 19 | 30 | 40 |
Variable lease cost | 3,507 | 3,333 | 6,905 | 6,558 |
Short-term lease cost | 153 | 218 | 401 | 482 |
Net lease cost | $ 11,922 | $ 11,580 | $ 23,817 | $ 23,114 |
Leases (Summary of Other Lease
Leases (Summary of Other Lease Information) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Leases [Abstract] | ||
Operating cash flows from operating leases | $ 13,205 | $ 17,311 |
Operating cash flows from financing leases | 44 | 35 |
Financing cash flows from financing leases | $ 122 | $ (102) |
Commitments and Contingencies (
Commitments and Contingencies (Narrative) (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Loss Contingencies [Line Items] | |
Settlement accrual | $ 14.5 |
Insurance settlement receivable | 14.5 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | |
Loss Contingencies [Line Items] | |
Settlement amount | 12 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | Minimum [Member] | |
Loss Contingencies [Line Items] | |
Settlement amount, attorney's fees | 2.5 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | Maximum [Member] | |
Loss Contingencies [Line Items] | |
Settlement amount, attorney's fees | $ 3 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Narrative) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Fair Value of Financial Instruments [Abstract] | ||||
Fair value transfers | $ 0 | $ 0 | ||
Asset impairment charges | $ 0 | $ 0 | $ 2,155,000 | $ 0 |
Fair Value of Financial Instr_4
Fair Value of Financial Instruments (Summary of Fair Value of Financial Assets Measured on a Recurring Basis) (Details) - Level 1 [Member] - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 7,936 | $ 9,104 |
Restricted cash | $ 815 | $ 815 |
Equity Incentive Plans (Narrati
Equity Incentive Plans (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Stock Options [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 0.1 | $ 0.3 | $ 0.2 | $ 0.5 |
Stock options outstanding | 1,153,097 | 1,153,097 | ||
Stock options outstanding, weighted average exercise price | $ 11.09 | $ 11.09 | ||
Restricted Stock [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 0.4 | $ 0.5 | $ 0.9 | $ 1 |
Restricted stock outstanding | 1,436,688 | 1,436,688 |
New Markets Tax Credit (Narrati
New Markets Tax Credit (Narrative) (Details) - USD ($) $ in Millions | 1 Months Ended | 6 Months Ended | |
Dec. 31, 2016 | Jul. 31, 2013 | Jun. 30, 2020 | |
New Market Tax Credit Disclosure [Line Items] | |||
Investment fund cash | $ 0.8 | ||
Chase and US Bank [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Contribution to affiliate | $ 5.6 | ||
Twain Investment Fund 192 [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Net proceeds from contribution | $ 1.9 | ||
Contribution liability compliance period | 7 years | ||
Contribution liability | $ 1.6 | ||
Contribution liability, current | 0.5 | ||
Contribution liability, noncurrent | $ 1.1 | ||
Twain Investment Fund 192 [Member] | Tile Shop Holdings [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Syndicate costs | 1.3 | ||
Twain Investment Fund 192 [Member] | Tile Shop Lending [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Loan amount | $ 6.7 | ||
Loan interest rate | 1.37% | ||
Tile Shop Investment Fund [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Contribution to affiliate | 4.4 | ||
Contribution liability compliance period | 7 years | ||
Contribution liability | $ 0.1 | ||
Tile Shop Investment Fund [Member] | Tile Shop Holdings [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Syndicate costs | 1.2 | ||
Tile Shop Investment Fund [Member] | Tile Shop Lending [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Loan amount | 13.5 | ||
Oklahoma [Member] | U.S. Bank Community [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Financing agreement project cost | $ 9.2 | ||
U.S. Bank Community [Member] | Twain Investment Fund 192 [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Contribution to affiliate | $ 3.2 | ||
Chase and US Bank [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Contribution to affiliate | 5.6 | ||
Chase and US Bank [Member] | Oklahoma [Member] | |||
New Market Tax Credit Disclosure [Line Items] | |||
Financing agreement project cost | $ 19.1 |
Related Party Transactions (Nar
Related Party Transactions (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | |
Nanyang Helin Stone Company [Member] | |||
Related Party Transaction [Line Items] | |||
Payments to related party | $ 0.9 | $ 2.9 | $ 5.1 |