Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 22, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | TILE SHOP HOLDINGS, INC. | |
Entity Central Index Key | 1,552,800 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Fiscal Period Focus | Q1 | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Current Fiscal Year End Date | --12-31 | |
Trading Symbol | tts | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding (in shares) | 51,493,590 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 16,405 | $ 10,330 |
Restricted cash | 219 | 219 |
Trade receivables, net | 2,368 | 1,966 |
Inventories | 64,236 | 69,878 |
Prepaid inventory | 378 | 568 |
Income tax receivable | 363 | 735 |
Other current assets, net | 3,188 | 3,557 |
Total Current Assets | 87,157 | 87,253 |
Property, plant and equipment, net | 136,004 | 135,115 |
Deferred tax assets | 20,563 | 20,846 |
Other assets | 1,734 | 1,793 |
Total Assets | 245,458 | 245,007 |
Current liabilities: | ||
Accounts payable | 14,204 | 14,584 |
Current portion of long-term debt | 4,806 | 4,744 |
Income tax payable | 3,583 | 1,101 |
Other accrued liabilities | 23,930 | 19,327 |
Total Current Liabilities | 46,523 | 39,756 |
Long-term debt, net | 36,226 | 51,178 |
Capital lease obligation, net | 775 | 797 |
Deferred rent | 35,812 | 34,983 |
Other long-term liabilities | 2,923 | 3,092 |
Total Liabilities | 122,259 | 129,806 |
Stockholders’ Equity: | ||
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 51,438,973 and 51,437,973 shares, respectively | $ 5 | $ 5 |
Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares | ||
Additional paid-in-capital | $ 181,430 | $ 180,192 |
Accumulated deficit | (58,227) | (64,985) |
Accumulated other comprehensive (loss) income | (9) | (11) |
Total Stockholders' Equity | 123,199 | 115,201 |
Total Liabilities and Stockholders' Equity | $ 245,458 | $ 245,007 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2016 | Dec. 31, 2015 |
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 | 51,438,973 | 51,437,973 |
Common stock, shares outstanding | 51,438,973 | 51,437,973 |
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 | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Consolidated Statements of Operations [Abstract] | ||
Net sales | $ 84,714 | $ 72,963 |
Cost of sales | 25,009 | 21,992 |
Gross profit | 59,705 | 50,971 |
Selling, general and administrative expenses | 47,949 | 43,776 |
Income from operations | 11,756 | 7,195 |
Interest expense | (570) | (803) |
Other income | 31 | 29 |
Income before income taxes | 11,217 | 6,421 |
Provision for income taxes | (4,459) | (2,762) |
Net income | $ 6,758 | $ 3,659 |
Income per common share: | ||
Basic (in dollars per share) | $ 0.13 | $ 0.07 |
Diluted (in dollars per share) | $ 0.13 | $ 0.07 |
Weighted average shares outstanding: | ||
Basic (in shares) | 51,359,167 | 51,125,221 |
Diluted (in shares) | 51,666,432 | 51,163,963 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Consolidated Statements of Comprehensive (Loss) Income [Abstract] | ||
Net income | $ 6,758 | $ 3,659 |
Currency translation adjustment, net of provision for taxes of $1 and $0 | 2 | |
Other comprehensive income | 2 | |
Comprehensive income | $ 6,760 | $ 3,659 |
Consolidated Statements of Com6
Consolidated Statements of Comprehensive (Loss) Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Consolidated Statements of Comprehensive (Loss) Income [Abstract] | ||
Currency translation adjustment, tax | $ 1 | $ 0 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings (Defecit) [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at (in shares) at Dec. 31, 2014 | 51,314,005 | ||||
Balance at at Dec. 31, 2014 | $ 5 | $ 174,371 | $ (80,681) | $ 93,695 | |
Issuance of restricted shares (in shares) | 54,036 | ||||
Stock based compensation | 5,545 | 5,545 | |||
Stock option exercises (in shares) | 69,932 | ||||
Stock option exercises | 276 | 276 | |||
Foreign currency translation adjustments | $ (11) | (11) | |||
Net income | 15,696 | $ 15,696 | |||
Balance at (in shares) at Dec. 31, 2015 | 51,437,973 | 51,437,973 | |||
Balance at at Dec. 31, 2015 | $ 5 | 180,192 | (64,985) | (11) | $ 115,201 |
Stock based compensation | 1,229 | 1,229 | |||
Stock option exercises (in shares) | 1,000 | ||||
Stock option exercises | 9 | 9 | |||
Foreign currency translation adjustments | 2 | 2 | |||
Net income | 6,758 | $ 6,758 | |||
Balance at (in shares) at Mar. 31, 2016 | 51,438,973 | 51,438,973 | |||
Balance at at Mar. 31, 2016 | $ 5 | $ 181,430 | $ (58,227) | $ (9) | $ 123,199 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash Flows From Operating Activities | ||
Net income | $ 6,758 | $ 3,659 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation & amortization | 5,571 | 5,649 |
Amortization of debt issuance costs | 157 | 116 |
Loss on disposals of property, plant and equipment | 70 | 12 |
Deferred rent | 678 | 866 |
Stock based compensation | 1,229 | 1,305 |
Deferred income taxes | 283 | (1,001) |
Changes in operating assets and liabilities: | ||
Trade receivables | (402) | (552) |
Inventories | 5,642 | 5,957 |
Prepaid expenses and other current assets | 576 | (424) |
Accounts payable | (703) | (1,144) |
Income tax receivable/ payable | 2,852 | 6,931 |
Accrued expenses and other liabilities | 4,762 | 4,752 |
Net cash provided by operating activities | 27,473 | 26,126 |
Cash Flows From Investing Activities | ||
Purchases of property, plant and equipment | (6,375) | (4,575) |
Net cash used in investing activities | (6,375) | (4,575) |
Cash Flows From Financing Activities | ||
Payments of long-term debt and capital lease obligations | (15,031) | (23,360) |
Advances on line of credit | 5,000 | |
Proceeds from exercise of stock options | 9 | 10 |
Security deposits | (3) | (1) |
Net cash used in financing activities | (15,025) | (18,351) |
Effect of exchange rate changes on cash | 2 | |
Net change in cash | 6,075 | 3,200 |
Cash and cash equivalents beginning of period | 10,330 | 5,759 |
Cash and cash equivalents end of period | 16,405 | 8,959 |
Supplemental disclosure of cash flow information | ||
Purchases of property, plant and equipment included in accounts payable and accrued expenses | 1,052 | 467 |
Cash paid for interest | 673 | 776 |
Cash paid (received) for income taxes, net of refunds | $ 1,607 | $ (4,168) |
Background
Background | 3 Months Ended |
Mar. 31, 2016 | |
Background [Abstract] | |
Background | No te 1: Background The Tile Shop, LLC (“The Tile Shop”) was formed on December 30, 2002, as a Delaware limited liability company and began operations on January 1, 2003. Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company”) was incorporated under the laws of the state of Delaware in June 2012 to become the parent company of The Tile Shop, LLC. The Company is engaged in the sale of tile, stone, glass, and other flooring products. The Company also manufactures setting and maintenance materials in Michigan, Virginia, Oklahoma and Wisconsin. The Company’s primary market is retail sales to consumers, contractors, designers and home builders. As of March 31, 2016 , the Company had 115 stores in 31 states and an on-line retail operation. The Company also has distribution centers located in Michigan, Virginia, Oklahoma 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 months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016 . These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 . 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. Certain prior year amounts have been reclassified to conform to current year presentation. Change in Accounting Principle In April 2015, the Financial Accounting Standards Board (FASB) issued a standard that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The Company historically presented debt issuance costs, or fees paid to third party advisors related to directly issuing debt, as assets on the Consolidated Balance Sheet. The guidance simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding liability, consistent with debt discounts. This guidance gives entities the ability to make a policy election regarding the classification of debt issuance costs associated with revolving line of credit agreements. The Company has elected to present the unamortized debt issuance costs associated with its revolving line of credit as other assets in the Consolidated Balance Sheet. Unamortized deferred financing costs attributable to the new market tax credit program are also classified as other assets in the Consolidated Balance Sheet. The Company has applied this guidance retrospectively to the prior period Consolidated Balance Sheet. The reclassification did not impact net income previously reported or any prior amounts reported on the Consolidated Statements of Operations. The following table presents the effect of the retrospective application of this change in accounting principle on the Company’s Consolidated Balance Sheet as of December 31, 2015 : (in thousands) As Reported Effect of Change As Adjusted December 31, in Accounting December 31, 2015 Principle 2015 Assets Current assets: Other current assets, net $ 3,656 $ (99) $ 3,557 Total Current Assets 87,352 (99) 87,253 Noncurrent assets: Other assets 2,122 (329) 1,793 Total Assets $ 245,435 $ (428) $ 245,007 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 5,095 $ (351) $ 4,744 Long-term Liabilities: Long-term debt, net 51,255 (77) 51,178 Total Liabilities 130,234 (428) 129,806 Total Liabilities and Stockholders' Equity $ 245,435 $ (428) $ 245,007 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2016 | |
Inventories [Abstract] | |
Inventories | Note 2: Inventories Inventories are stated at the lower of cost (determined on the weighted average cost method) or market. Inventories consist primarily of merchandise held for sale. Inventories were comprised of the following as of March 31, 2016 and December 31, 2015 : (in thousands) March 31, December 31, 2016 2015 Finished goods $ 57,199 $ 59,503 Raw materials 2,687 2,681 Finished goods in transit 4,350 7,694 Total $ 64,236 $ 69,878 The Company records 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. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Taxes [Abstract] | |
Income Taxes | Note 3: Income taxes The Company's effective tax rate on net income before income taxes for the three months ended March 31, 2016 and 2015 was 39.8% and 43.0% , respectively. During the three months ended March 31, 2015, the Company recognized an increase in tax expense in connection with certain state income tax changes enacted during the quarter. State tax rate changes did not have a significant impact on the effective tax rate during the three months ended March 31, 2016. For the three months ended March 31, 2016 and 2015 , the Company recorded a provision for income taxes of $4.5 million and $2.8 million, respectively. The Company records interest and penalties relating to uncertain tax positions in income tax expense. As of March 31, 2016 and 2015 , the Company has not recognized any liabilities for uncertain tax positions nor have interest and penalties related to uncertain tax positions been accrued. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 4: Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income 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 per share were calculated as follows: (dollars in thousands) For the three months ended March 31, 2016 2015 Net income $ 6,758 $ 3,659 Weighted average basic shares outstanding 51,359,167 51,125,221 Effect of dilutive securities attributable to stock-based awards 307,265 38,742 Weighted average diluted shares outstanding 51,666,432 51,163,963 Income per common share: Basic $ 0.13 $ 0.07 Dilutive $ 0.13 $ 0.07 Anti-dilutive securities excluded from EPS calculation 303,008 1,750,735 |
Other Accrued Liabilities
Other Accrued Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Other Accrued Liabilities [Abstract] | |
Other Accrued Liabilities | Note 5: Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) March 31, December 31, 2016 2015 Customer deposits $ 8,481 $ 6,026 Accrued wages and salaries 5,120 4,336 Sales return reserve 3,156 2,781 Taxes 3,960 3,043 Other accrued liabilities 3,213 3,141 Total other accrued liabilities $ 23,930 $ 19,327 |
Long-term Debt
Long-term Debt | 3 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Long-term Debt | Note 6: Long-term Debt On June 2, 2015, the Company and its operating subsidiary, The Tile Shop, LLC, entered into a credit agreement with Fifth Third Bank, Bank of America, N.A., and Huntington National Bank (the “Credit Agreement”). The Credit Agreement provides the Company with a $125.0 million senior secured credit facility, comprised of a five -year $50.0 million term loan and a $75.0 million revolving line of credit. 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. Borrowings pursuant to the Credit Agreement bear interest at either a base rate or a LIBOR-based rate, at the option of the Company. The LIBOR-based rate will range from LIBOR plus 1.50% to 2.00% , depending on The Tile Shop’s leverage ratio. The base rate is equal to the greatest of: (a) the Federal funds rate plus 0.50% , (b) the Fifth Third Bank “prime rate,” and (c) the Eurodollar rate plus 1.00% , in each case plus 0.50% to 1.00% depending on The Tile Shop’s leverage ratio. At March 31, 2016 the base interest rate was 4.25% and the LIBOR-based interest rate was 2.19% . Borrowings outstanding consisted of $40.5 million on the term loan as of March 31, 2016 . The Company can elect to prepay the term loan without incurring a penalty. Additional borrowings pursuant to the Credit Agreement may be used to support the Company’s growth and for working capital purposes. The Company incurred $1.0 million of debt issuance costs in connection with the Credit Agreement and will be amortized over the five-year life of the Credit Agreement. Debt issuance costs attributable to the term loan are classified as a reduction of debt in the Consolidated Balance Sheet. Debt issuance costs attributable to the revolving line of credit are classified as assets in the Consolidated Balance Sheet. The term loan requires quarterly principal payments as follows (in thousands): Period June 30, 2016 to June 30, 2017 $ 1,250 September 30, 2017 to June 30, 2018 1,875 September 30, 2018 to March 31, 2020 2,500 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, make investments, or enter into transactions with affiliates on other than terms that could be obtained in an arm’s length transaction. The Credit Agreement also includes financial and other covenants including covenants to maintain certain fixed charge coverage ratios and rent adjusted leverage ratios. In addition, except with respect to pro rata payments made by The Tile Shop or other subsidiaries to Holdings or any other equity owner of such entity, the Credit Agreement prohibits the payments of cash dividends. The Company was in compliance with the covenants as of March 31, 2016 . Long-term debt consists of the following at March 31, 2016 and December 31, 2015 (in thousands): March 31, 2016 December 31, 2015 Unamortized Unamortized Debt Issuance Debt Issuance Principal Costs Principal Costs Term note payable - interest at 2.19% and 2.18% at March 31, 2016 and December 31, 2015, respectively $ 40,450 $ (317) $ 47,450 $ (428) Commercial bank credit facility - - 8,000 - Variable interest rate bonds ( 0.35% at both March 31, 2016 and December 31, 2015), which mature April 1, 2023, collateralized by buildings and equipment 900 - 900 - Total debt obligations 41,350 (317) 56,350 (428) Less: current portion 5,095 (289) 5,095 (351) Debt obligations, net of current portion $ 36,255 $ (28) $ 51,255 $ (77) |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments | Note 7: Fair Value of Financial Instruments These consolidated financial statements include the following financial instruments: cash and cash equivalents, trade receivables, accounts payable, accrued expenses, capital leases, notes payable, and debt. At March 31, 2016 and December 31, 2015 , the carrying amount of the Company’s cash and cash equivalents, trade receivables, accounts payable and accrued expenses approximated their fair values due to their short-term maturities. The carrying value of the Company’s borrowings and capital lease obligation approximates fair value based upon the market interest rates available to the Company for debt and capital lease obligations with similar risk and maturities. 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 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. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. |
Equity Incentive Plans
Equity Incentive Plans | 3 Months Ended |
Mar. 31, 2016 | |
Equity Incentive Plans [Abstract] | |
Equity Incentive Plans | Note 8: 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 months ended March 31, 2016 and 2015 include compensation cost for the portion of outstanding awards that vested during those periods. The Company recognizes stock-based compensation costs 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 $1.0 million and $0.8 million for the three months ended March 31, 2016 and 2015 , respectively. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. As of March 31, 2016 , the Company had outstanding stock options to purchase 2,800,945 shares of common stock at a weighted average exercise price of $13.06 . Restricted stock: The Company awards restricted common shares to selected employees, and non-employee directors. Recipients are not required to provide any consideration other than continued service. Restricted share 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. 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. Total stock-based compensation expense related to restricted stock was $0.2 million and $0.5 million for the three months ended March 31, 2016 and 2015 , respectively. Stock-based compensation expense is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Operations. As of March 31, 2016 , the Company had 79,036 outstanding restricted common shares. |
New Market Tax Credit
New Market Tax Credit | 3 Months Ended |
Mar. 31, 2016 | |
New Market Tax Credit [Abstract] | |
New Market Tax Credit | Note 9: New Market Tax Credit In July 2013 the Company entered into a financing transaction with Chase Community Equity (“Chase”), and U.S. Bank Community, LLC (“U.S. Bank”, and, collectively with Chase, the “investors”) related to a $19.1 million acquisition, rehabilitation and construction of the Company’s new distribution and manufacturing center in Durant, Oklahoma. The investors made a capital contribution to, and Tile Shop Lending made a loan to Chase New Market Tax Credit, The Tile Shop of Oklahoma Investment Fund, LLC, and The Tile Shop Investment Fund LLC (the “Investment Funds”) 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 July 2013, Tile Shop Lending loaned $13.5 million to the Investment Funds at an interest rate of 1.35% per year and with a maturity of September 30, 2043. The Investment Funds then contributed the loan to certain CDEs, which, in turn, loaned the funds on similar terms to Tile Shop of Oklahoma, LLC, an indirect, wholly-owned subsidiary of the Company. The proceeds of the loans from the CDEs (including loans representing the capital contribution made by the investors, net of syndication fees) were used to partially fund the new manufacturing and distribution center project. In July 2013, the investors also contributed $5.6 million to the Investment Funds and, by virtue of such contribution, are entitled to substantially all of the tax benefits derived from the NMTCs, while the Company effectively received net loan proceeds equal to the investors’ contributions to the Investment Fund. This transaction includes a put/call provision whereby the Company may be obligated or entitled to repurchase the investors’ interest. The Company believes that the investors will exercise the put option in September 2020 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 the investors 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 Funds and CDEs contains a variable interest entity (“VIE”). The ongoing activities of the Investment Funds – 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 Funds. Management considered the contractual arrangements that obligate the Company to deliver tax benefits and provide various other guarantees to the structure; Chase’s and U.S. Bank’s lack of a material interest in the underling economics of the project; and the fact that the Company is obligated to absorb losses of the Investment Fund. The Company concluded that they are the primary beneficiary of the VIE and consolidated the Investment Funds, as a VIE, in accordance with the accounting standards for consolidation. Chase’s and U.S. Bank’s contributions of $4.4 million, net of syndication fees, are included in cash and other long-term liabilities in the accompanying Consolidated Balance Sheet. The benefit of this net $4.4 million contribution is recognized as a decrease in depreciation expense as the Company amortizes the contribution liability 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 March 31, 2016 , the balance of the contribution liability was $2.9 million and is classified as other long-term liabilities on the Consolidated Balance Sheet. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 10: Commitments and Contingencies The Company, two of its former executive officers, five of its outside directors, and certain companies affiliated with the directors, are defendants in a consolidated class action brought under the federal securities laws and now pending in the United States District Court for the District of Minnesota under the caption Beaver County Employees’ Retirement Fund, et al. v. Tile Shop Holdings, Inc., et al. Several related actions were filed in 2013, and then consolidated. The plaintiffs are three investors who seek to represent a class or classes consisting of (1) all purchasers of Tile Shop common stock between August 22, 2012 and January 28, 2014 (the “alleged class period”), seeking to pursue remedies under the Securities Exchange Act of 1934; and (2) all purchasers of Tile Shop common stock pursuant and/or traceable to the Company’s December 2012 registration statements, seeking to pursue remedies under the Securities Act of 1933. Six firms who were underwriters in the December 2012 secondary public offering are also named as defendants. In their consolidated amended complaint (the “complaint”), the plaintiffs allege that during the alleged class period, certain defendants made false or misleading statements of material fact in press releases and SEC filings about the Company’s relationships with its vendors, its gross margins, and its supply chain and producer relationships, and that defendants failed to disclose certain related party transactions. The complaint asserts claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, and under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. In addition to attorney’s fees and costs, the plaintiffs seek to recover damages on behalf of the members of the purported classes. The defendants are vigorously defending the matter. The matter is now in discovery. The Company also is a Defendant in a consolidated action brought derivatively on behalf of the Company by two shareholders of the Company. One action was first filed in the United States District Court for the District of Minnesota, and then voluntarily dismissed and re-filed in the Court of Chancery for the State of Delaware (“Delaware Chancery Court”). The second action was filed in Delaware Chancery Court. The two actions have since been consolidated by the Delaware Chancery Court under the caption In re Tile Shop Holdings, Inc. Stockholder Derivative Litigation. On July 31, 2015, the plaintiff-shareholders filed their Verified Consolidated Stockholder Derivative Complaint (“complaint”). The complaint names as defendants six members of the Company’s Board of Directors, and a former employee of the Company. The complaint tracks many of the same factual allegations as have been made in the above-described federal securities class action. It alleges that the defendant-directors breached their fiduciary duties by failing to adopt adequate internal controls for the Company, by approving false and misleading statements issued by the Company, by causing the Company to violate generally accepted accounting principles and SEC regulations, by engaging in or approving alleged insider trading, and by permitting the Company’s primary product to contain illegal amounts of lead. The complaint also alleges claims for insider trading and unjust enrichment. The complaint seeks damages, disgorgement, an award of attorneys’ fees and other expenses, and an order compelling changes to the Company’s corporate governance and internal procedures. On November 2, 2015, defendants filed a motion to dismiss the derivative action, or in the alternative, to stay it pending resolution of the Beaver County Employees’ Retirement Fund action described above. Subsequently, the parties entered into a stipulation, and the Court entered an Order, staying the derivative action until resolution of the Beaver County Employees’ Retirement Fund action described above, or until a mutually agreeable resolution of the derivative action. Given the uncertainty of litigation and the preliminary stage of these cases, the Company cannot reasonably estimate the possible loss or range of loss that may result from these actions. The Company maintains directors and officers liability insurance policies that may reduce the Company’s exposure, if any. In the event the Company incurs a loss, the Company will pursue recoveries to the maximum extent available under these policies. 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. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements [Abstract] | |
New Accounting Pronouncements | Note 11: New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued a final standard on revenue from contracts with customers. The new standard sets forth a single comprehensive model for recognizing and reporting revenue. The new standard is effective for the Company in fiscal year 2018, and permits the use of either a retrospective or a cumulative effect transition method. The Company is currently assessing the impact of implementing the new guidance on its consolidated financial statements. In August 2014, the FASB issued a standard requiring an entity’s management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern within one year after the date of the financial statements. The guidance also sets forth a series of disclosures that are required in the event the entity’s management concludes that there is substantial doubt about the entity’s ability to continue as a going concern. The new standard becomes effective for the Company in fiscal 2016 and requires an ongoing evaluation at each interim and annual period thereafter. The Company is currently assessing the effect the new standard will have on its consolidated financial statements. In April 2015, the FASB issued a standard that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The Company adopted the provisions of this statement in the first quarter of 2016 and prior periods have been retrospectively adjusted (see “Note 1 to the Consolidated Financial Statements”). In February 2015, the FASB issued a new accounting standard that will modify current consolidation guidance. The standard makes changes to both the variable interest entity model and the voting interest entity model, including modifying the evaluation of whether limited partnerships or similar legal entities are VIEs or voting interest entities and amending the guidance for assessing how relationships of related parties affect the consolidation analysis of VIEs. The standard is effective for the Company in fiscal 2016. The adoption of this new standard did not have a material effect on the Company’s financial statements. In July 2015, the FASB issued a standard which simplifies the subsequent measurement of inventory. Currently, an entity is required to measure inventory at the lower of cost or market, whereby market can be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The changes require that inventory be measured at the lower of cost and net realizable value, thereby eliminating the use of the other two market methodologies. Net realizable value is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Currently, the Company applies the net realizable value market option to measure inventories at the lower of cost or market. These changes become effective for the Company in fiscal 2017. The Company is currently assessing the effect the new standard will have on its consolidated financial statements. In February 2016, the FASB issued a standard that primarily requires organizations that lease assets to recognize the rights and obligations created by those leases on the balance sheet. The standard is effective in 2019, with early adoption permitted. The Company is currently assessing the effect the new standard will have on its consolidated financial statements. In March 2016, the FASB issued a standard that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital tax pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The guidance is effective in 2017 with early adoption permitted. The Company is currently assessing the effect the new standard will have on its consolidated financial statements. |
Background (Tables)
Background (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Background [Abstract] | |
Schedule of Retrospective Application Of Change in Accounting Principle | (in thousands) As Reported Effect of Change As Adjusted December 31, in Accounting December 31, 2015 Principle 2015 Assets Current assets: Other current assets, net $ 3,656 $ (99) $ 3,557 Total Current Assets 87,352 (99) 87,253 Noncurrent assets: Other assets 2,122 (329) 1,793 Total Assets $ 245,435 $ (428) $ 245,007 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 5,095 $ (351) $ 4,744 Long-term Liabilities: Long-term debt, net 51,255 (77) 51,178 Total Liabilities 130,234 (428) 129,806 Total Liabilities and Stockholders' Equity $ 245,435 $ (428) $ 245,007 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Inventories [Abstract] | |
Schedule of Inventories | (in thousands) March 31, December 31, 2016 2015 Finished goods $ 57,199 $ 59,503 Raw materials 2,687 2,681 Finished goods in transit 4,350 7,694 Total $ 64,236 $ 69,878 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | (dollars in thousands) For the three months ended March 31, 2016 2015 Net income $ 6,758 $ 3,659 Weighted average basic shares outstanding 51,359,167 51,125,221 Effect of dilutive securities attributable to stock-based awards 307,265 38,742 Weighted average diluted shares outstanding 51,666,432 51,163,963 Income per common share: Basic $ 0.13 $ 0.07 Dilutive $ 0.13 $ 0.07 Anti-dilutive securities excluded from EPS calculation 303,008 1,750,735 |
Other Accrued Liabilities (Tabl
Other Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Other Accrued Liabilities [Abstract] | |
Schedule of Other Accrued Liabilities | (in thousands) March 31, December 31, 2016 2015 Customer deposits $ 8,481 $ 6,026 Accrued wages and salaries 5,120 4,336 Sales return reserve 3,156 2,781 Taxes 3,960 3,043 Other accrued liabilities 3,213 3,141 Total other accrued liabilities $ 23,930 $ 19,327 |
Long-term Debt (Tables)
Long-term Debt (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Long-term Debt [Abstract] | |
Schedule of Principal Payments on Term Loans | Period June 30, 2016 to June 30, 2017 $ 1,250 September 30, 2017 to June 30, 2018 1,875 September 30, 2018 to March 31, 2020 2,500 |
Schedule of Long-Term Debt | March 31, 2016 December 31, 2015 Unamortized Unamortized Debt Issuance Debt Issuance Principal Costs Principal Costs Term note payable - interest at 2.19% and 2.18% at March 31, 2016 and December 31, 2015, respectively $ 40,450 $ (317) $ 47,450 $ (428) Commercial bank credit facility - - 8,000 - Variable interest rate bonds ( 0.35% at both March 31, 2016 and December 31, 2015), which mature April 1, 2023, collateralized by buildings and equipment 900 - 900 - Total debt obligations 41,350 (317) 56,350 (428) Less: current portion 5,095 (289) 5,095 (351) Debt obligations, net of current portion $ 36,255 $ (28) $ 51,255 $ (77) |
Background (Narrative) (Details
Background (Narrative) (Details) | Mar. 31, 2016storestate |
Background [Abstract] | |
Number of stores | store | 115 |
Number of states in which entity operates | state | 31 |
Background (Schedule of Retrosp
Background (Schedule of Retrospective Application Of Change in Accounting Principle) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets, net | $ 3,188 | $ 3,557 |
Total Current Assets | 87,157 | 87,253 |
Other assets | 1,734 | 1,793 |
Total Assets | 245,458 | 245,007 |
Current portion of long-term debt | 4,806 | 4,744 |
Long-term debt, net | 36,226 | 51,178 |
Total Liabilities | 122,259 | 129,806 |
Total Liabilities and Stockholders' Equity | $ 245,458 | 245,007 |
As Reported [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets, net | 3,656 | |
Total Current Assets | 87,352 | |
Other assets | 2,122 | |
Total Assets | 245,435 | |
Current portion of long-term debt | 5,095 | |
Long-term debt, net | 51,255 | |
Total Liabilities | 130,234 | |
Total Liabilities and Stockholders' Equity | 245,435 | |
Effect of Change in Accounting Principle [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other current assets, net | (99) | |
Total Current Assets | (99) | |
Other assets | (329) | |
Total Assets | (428) | |
Current portion of long-term debt | (351) | |
Long-term debt, net | (77) | |
Total Liabilities | (428) | |
Total Liabilities and Stockholders' Equity | $ (428) |
Inventories (Schedule of Invent
Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Inventories [Abstract] | ||
Finished goods | $ 57,199 | $ 59,503 |
Raw materials | 2,687 | 2,681 |
Finished goods in transit | 4,350 | 7,694 |
Total | $ 64,236 | $ 69,878 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Taxes [Abstract] | ||
Effective income tax rate | 39.80% | 43.00% |
Provision for income taxes | $ 4,459,000 | $ 2,762,000 |
Liability for uncertain tax positions | 0 | 0 |
Income tax interest and penalties related to uncertain tax positions | $ 0 | $ 0 |
Earnings Per Share (Schedule of
Earnings Per Share (Schedule of Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Earnings Per Share [Abstract] | |||
Net income | $ 6,758 | $ 3,659 | $ 15,696 |
Weighted average basic shares outstanding | 51,359,167 | 51,125,221 | |
Effect of dilutive securities attributable to stock-based awards (in shares) | 307,265 | 38,742 | |
Weighted average diluted shares outstanding (in shares) | 51,666,432 | 51,163,963 | |
Basic (in dollars per share) | $ 0.13 | $ 0.07 | |
Diluted (in dollars per share) | $ 0.13 | $ 0.07 | |
Anti-dilutive securities excluded from EPS calculation (in shares) | 303,008 | 1,750,735 |
Other Accrued Liabilities (Sche
Other Accrued Liabilities (Schedule of Other Accrued Liabilities) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Other Accrued Liabilities [Abstract] | ||
Customer deposits | $ 8,481 | $ 6,026 |
Accrued wages and salaries | 5,120 | 4,336 |
Sales return reserve | 3,156 | 2,781 |
Taxes | 3,960 | 3,043 |
Other accrued liabilities | 3,213 | 3,141 |
Total other accrued liabilities | $ 23,930 | $ 19,327 |
Long-term Debt (Narrative) (Det
Long-term Debt (Narrative) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Dec. 31, 2015 | Jun. 02, 2015 | |
Debt Instrument [Line Items] | |||
Debt issuance costs | $ 317 | $ 428 | |
Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility effective interest rate | 1.50% | ||
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility effective interest rate | 2.00% | ||
Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, maximum borrowing capacity | $ 75,000 | ||
Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility effective interest rate | 2.19% | 2.18% | |
Debt issuance costs | $ 317 | $ 428 | |
Credit Agreement [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, maximum borrowing capacity | $ 125,000 | ||
Debt issuance costs | $ 1,000 | ||
Credit Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility effective interest rate | 2.19% | ||
Credit Agreement [Member] | Federal Funds Rate [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, spread on variable interst rate | 0.50% | ||
Credit Agreement [Member] | Eurodollar [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, spread on variable interst rate | 1.00% | ||
Credit Agreement [Member] | Base Rate [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility effective interest rate | 4.25% | ||
Credit Agreement [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, interest rate based on leverage ratio | 0.50% | ||
Credit Agreement [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, interest rate based on leverage ratio | 1.00% | ||
Credit Agreement [Member] | Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Credit facility, maximum borrowing capacity | $ 50,000 | ||
Credit facility term | 5 years | ||
Loan payable | $ 40,500 |
Long-term Debt (Schedule of Pri
Long-term Debt (Schedule of Principal Payments on Term Loans) (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
June 30, 2016 to June 30, 2017 [Member] | |
Debt Instrument [Line Items] | |
Quarterly principal payments | $ 1,250 |
September 30, 2017 to June 30, 2018 [Member] | |
Debt Instrument [Line Items] | |
Quarterly principal payments | 1,875 |
September 30, 2018 to March 31, 2020 [Member] | |
Debt Instrument [Line Items] | |
Quarterly principal payments | $ 2,500 |
Long-term Debt (Schedule of Lon
Long-term Debt (Schedule of Long=Term Debt) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Debt Instrument [Line Items] | ||
Principal, Total debt obligations | $ 41,350 | $ 56,350 |
Principal, Less: current portion | 5,095 | 5,095 |
Principal, Debt obligations, net of current poriton | 36,255 | 51,255 |
Unamortized Debt Issuance Costs | (317) | (428) |
Unamortized Debt Issuance Costs, Less: current portion | (289) | (351) |
Unamortized Debt Issuance Costs, Debt obligations, net of current portion | (28) | (77) |
Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Principal, Total debt obligations | 40,450 | 47,450 |
Unamortized Debt Issuance Costs | $ (317) | $ (428) |
Effective interest rate | 2.19% | 2.18% |
Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Principal, Total debt obligations | $ 8,000 | |
Variable Rate Debt [Member] | ||
Debt Instrument [Line Items] | ||
Principal, Total debt obligations | $ 900 | $ 900 |
Effective interest rate | 0.35% | 0.35% |
Equity Incentive Plans (Narrati
Equity Incentive Plans (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 1 | $ 0.8 |
Stock options outstanding | 2,800,945 | |
Stock options outstanding, weighted average exercise price | $ 13.06 | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 0.2 | $ 0.5 |
Restricted stock outstanding | 79,036 |
New Market Tax Credit (Details)
New Market Tax Credit (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |
Jul. 31, 2013 | Mar. 31, 2016 | Dec. 31, 2015 | |
Variable Interest Entity [Line Items] | |||
Debt issuance costs | $ 317 | $ 428 | |
Chase and US Bank [Member] | |||
Variable Interest Entity [Line Items] | |||
Loan receivable | $ 19,100 | ||
Proceeds from contributed capital | 5,600 | ||
Contributed capital net proceeds | 4,400 | ||
Contribution liability compliance period | 7 years | ||
Contribution liability | $ 2,900 | ||
Tile Shop Lending [Member] | |||
Variable Interest Entity [Line Items] | |||
Proceeds from lines of credit | $ 13,500 | ||
Interest rate | 1.35% |
Commitments and Contingencies (
Commitments and Contingencies (Details) | 3 Months Ended |
Mar. 31, 2016plaintiffdefendant | |
Beaver County Employees' Retirement Fund, et al v. Tile Shop Holdings, Inc. [Member] | |
Loss Contingencies [Line Items] | |
Number of plaintiffs | plaintiff | 3 |
Beaver County Employees' Retirement Fund, et al v. Tile Shop Holdings, Inc. [Member] | Executive Officers [Member] | |
Loss Contingencies [Line Items] | |
Number of defendants | 2 |
Beaver County Employees' Retirement Fund, et al v. Tile Shop Holdings, Inc. [Member] | Directors [Member] | |
Loss Contingencies [Line Items] | |
Number of defendants | 5 |
Beaver County Employees' Retirement Fund, et al v. Tile Shop Holdings, Inc. [Member] | Underwriting Firms [Member] | |
Loss Contingencies [Line Items] | |
Number of defendants | 6 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | |
Loss Contingencies [Line Items] | |
Number of plaintiffs | plaintiff | 2 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | Directors [Member] | |
Loss Contingencies [Line Items] | |
Number of defendants | 6 |
Tile Shop Holdings, Inc. Stockholder Derivative Litigation [Member] | Former Employee [Member] | |
Loss Contingencies [Line Items] | |
Number of defendants | 1 |