TTSH 10-K & 10-Q changes, risk factors and insider trading
Tile Shop Holdings, Inc. · OTC · Retail-Home Furniture, Furnishings & Equipment Stores · CIK 1552800 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our common stock is no longer listed on Nasdaq and we have terminated the registration of our common stock under Section 12(b) and 12(g) of the Exchange Act and suspended our reporting obligations under Section 15(d) of the Exchange Act, which may have an adverse effect on the liquidity of our common stock and the availability of information about the Company and our business and results of operations.”
Removed heading “Any future expansion will be dependent upon, and limited by, the availability of adequate capital.”
Removed heading “Any failure to maintain effective internal control over financial reporting and disclosure controls and procedures could have a material adverse effect on our business.”
Removed heading “We may be unable to maintain our listing on The Nasdaq Stock Market LLC (“Nasdaq”) and may incur additional costs as a result of our Nasdaq listing.”
Removed heading “The market price of our securities may decline and/or be volatile.”
Largest changes
“We are required to maintain internal control over financial reporting and disclosure controls and procedures in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP (as defined below). We, along with our independent registered public accounting firm, previously identified a material weakness in our internal control over financial reporting that pertained to our information technology general controls, which was remediated as of December 31, 2024. …”see in full comparison
“Our results of operations are sensitive to changes in macroeconomic conditions that affect consumer spending, including discretionary spending, especially as a substantial portion of the products we offer are products that consumers may view as discretionary items rather than necessities. …”see in full comparison
“Our results of operations are sensitive to changes in macroeconomic conditions that affect consumer spending, including discretionary spending, especially as a substantial portion of the products we offer are products that consumers may view as discretionary items rather than necessities. Difficult macroeconomic conditions also affect our customers’ ability to obtain consumer credit. In recent years, high inflation has negatively impacted consumer confidence and discretionary spending; in addition, the U.S. …”see in full comparison
“The U.S. government announced new global trade tariffs on imports to the U.S. during fiscal 2025, including additional tariffs on various countries from which the Company directly or indirectly imports products. In response, several countries have imposed or threatened reciprocal tariffs on imports from the U.S. and other measures. Various modifications to the U.S. tariffs have been announced, and further changes are expected to be made in the future, including in response to litigation. On February 20, 2026, the U.S. …”see in full comparison
“Our common stock is no longer listed on Nasdaq and we have terminated the registration of our common stock under Section 12(b) and 12(g) of the Exchange Act and suspended our reporting obligations under Section 15(d) of the Exchange Act, which may have an adverse effect on the liquidity of our common stock and the availability of information about the Company and our business and results of operations.”see in full comparison
“Our common stock currently trades on Nasdaq. We cannot provide any assurance that we will be able to continue to satisfy Nasdaq’s continued listing requirements and standards to which we are subject. A delisting of our common stock could negatively affect the price and liquidity of our common stock and could impair our ability to raise capital in the future. In addition, we incur costs as a result of compliance with Nasdaq’s rules and requirements, which could adversely affect our results of operations.”see in full comparison
Full comparison: every changed paragraph (44)
The following are material factors known to us that could adversely affect our business, financial condition, or operating results, as well as adversely affect the value of an investment in our common stock. These risks could cause our actual results to differ materially from our historical experience and from results predicted by forward-looking statements. Although the risks are organized by headings and each risk is discussed separately, many are interrelated. All forward-looking statements made by us are qualified by the risks described below. Disclosures of risks should not be interpreted to imply that the risks have not already materialized, and there may be additional risks that are not presently material or known. You should carefully consider each of the following risks and all other information set forth in this report.
The retail tile industry in the United States is highly competitive. Participants in the tile industry compete primarily based on product variety, customer service, store location, and price. There can be no assurance that we will be able to continue to compete favorably with our competitors in these areas. Our store competitors include large national home centers, regional and local specialty retailers of tile, factory-direct stores, privately-owned, single-site stores and online-only competitors. We also compete indirectly with companies that sell other types of floor coverings, including wood floors, carpet, and vinyl sheet. In the past, we have faced periods of heightened competition that materially affected our results of operations. Certain of our competitors have greater name recognition, longer operating histories, more varied product offerings, and substantially greater financial and other resources than us. Accordingly, we may face periods of intense competition in the future that could have a material adverse effect on our planned growth and future results of operations. Moreover, the barriers to entry into the retail tile industry are relatively low. New or existing retailers could enter our markets and increase the competition that we face. In addition, manufacturers and suppliers of tile and related products, including those whose products we currently sell, could enter the United States retail tile market and start directly competing with us. Further, the retail industry in general is subject to rapid technological change, which may increase the amount of capital we spend in the future as we work to sustain and grow our technological infrastructure and digital commerce capabilities in order to remain competitive. Competition in existing and new markets may also prevent or delay our ability to gain relative market share. Any of the developments described above could have a material adverse effect on our planned growth and future results of operations.
Competition in existing and new markets may also prevent or delay our ability to gain relative market share. Any of the developments described above could have a material adverse effect on our planned growth and future results of operations.
Any future expansion will be dependent upon, and limited by, the availability of adequate capital.
Any future expansion strategy will require adequate capital for, among other purposes, opening new stores, distribution centers, and manufacturing facilities, as well as entering new markets. Such expenditures will include researching real estate and consumer markets, leases, inventory, property and equipment costs, integration of new stores and markets into company-wide systems and programs, and other costs associated with new stores and market entry expenses and growth. If cash generated internally is insufficient to fund capital requirements, we will require additional debt or equity financing. Adequate financing may not be available or, if available, may not be available on terms satisfactory to us. In addition, our credit facility may limit the amount of capital expenditures that we may make annually, depending on our ability to satisfy applicable financial and other covenants. If we fail to obtain sufficient additional capital in the future or we are unable to make capital expenditures under our credit facility, we could be forced to curtail our expansion strategies by reducing or delaying capital expenditures relating to new stores and new market entry. As a result, there can be no assurance that we will be able to fund our current plans for the opening of new stores or entry into new markets.
Numerous economic factors, including inflation, trade policy, our exposure to the U.S. housing industry, and an economic recession or downturn, or a downturn in the U.S. housing industry, could adversely affect us.
Our results of operations are sensitive to changes in macroeconomic conditions that affect consumer spending, including discretionary spending, especially as a substantial portion of the products we offer are products that consumers may view as discretionary items rather than necessities. An overall decline in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of high inflation or fluctuating interest rates, tariffs and other trade barriers and restrictions, instability in the global banking system, ongoing supply chain disruptions, unemployment rates, labor shortages, geopolitical instability and/or the possibility of an economic downturn or recession or other macroeconomic factors could adversely impact our business, financial condition and operating results. In addition, difficult macroeconomic conditions also affect our customers’ ability to obtain consumer credit.
The U.S. government announced new global trade tariffs on imports to the U.S. during fiscal 2025, including additional tariffs on various countries from which the Company directly or indirectly imports products. In response, several countries have imposed or threatened reciprocal tariffs on imports from the U.S. and other measures. Various modifications to the U.S. tariffs have been announced, and further changes are expected to be made in the future, including in response to litigation. On February 20, 2026, the U.S. Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. This decision introduces uncertainty regarding potential refund processes and further uncertainty regarding future trade policy actions and could affect the Company’s cost structure and supply chain planning. The ultimate impact of tariffs and other trade policies on the Company’s business will depend on several factors, including future measures implemented by the U.S. government and the governments of other countries, the overall magnitude and duration of these measures, and the Company’s ability to mitigate effects, which could include higher import costs. Accordingly, the Company’s financial position or results of operations may be adversely influenced by political, economic, legal, compliance, social and business conditions in the U.S. and in other countries.
The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, political and social unrest, the introduction of or changes in tariffs or trade barriers, employment rates, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. Additionally, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to spend on the Company’s products and services, or their ability to make payments, which could negatively impact our financial results. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain, and we cannot predict the ultimate impact such factors will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments.
Our results of operations are sensitive to changes in macroeconomic conditions that affect consumer spending, including discretionary spending, especially as a substantial portion of the products we offer are products that consumers may view as discretionary items rather than necessities. Difficult macroeconomic conditions also affect our customers’ ability to obtain consumer credit. In recent years, high inflation has negatively impacted consumer confidence and discretionary spending; in addition, the U.S. Federal Reserve raised interest rates several times in response to concerns about such inflation. Although the Federal Reserve began to reduce interest rates beginning in fall 2024, the inflationary outlook in the United States remains uncertain, and the Federal Reserve may not continue to implement such decreases or may raise interest rates again. The impact of inflation and high interest rates on various areas of our business, including labor, product costs and interest expenses, has negatively impacted our business, financial condition and results of operations, and while we have worked to mitigate such impacts, including increasing our prices, we may not be able to mitigate any future impacts of inflation or high interest rates. In addition, while inflation has recently slowed and further interest rate increases are currently not anticipated, economic uncertainty and the potential for an economic recession remains. We are unable to predict any future trends in the rate of inflation and interest rates, and if (and to the extent that) we are unable to recover higher costs in the event of future increases in inflation or interest rates, such increases could adversely affect our business, financial condition or results of operations.
WeIn addition, we believe that our tile sales are affected by the strength of the U.S. housing industry, and downturns in the U.S. housing industry could have a material adverse effect on our financial results, business, and prospects. The housing industry depends on a number of factors that are beyond our control, including interest rates, inflation, tax policy, trade policy, employment levels, consumer confidence, credit availability, real estate prices, home-price appreciation, existing home sales, demographic trends, weather conditions, natural disasters and general economic conditions. Any one or a combination of these factors could result in decreased demand for our products, reduce spending on homebuilding or remodeling of existing homes or cause purchases of new and existing homes to decline, which could adversely affect our business, financial condition, and operating results.
We entered into a revolving credit facility with JPMorgan Chase Bank, N.A. on September 30, 2022. As of December 31, 2024,2025, we had no borrowings outstanding of $25.0 million on our revolving line of credit and had $73.8$48.8 million available for future borrowings. The terms of our credit facility could limit our ability to obtain additional financing to fund our working capital, capital expenditures, debt service requirements, expansion strategy, or other needs, which could increase our vulnerability to, and reduce our flexibility in planning for, adverse changes in economic, industry, and competitive conditions.
Our credit facility contains negative covenants that limit our ability to engage in specified types of transactions, including, among other things, our ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. A breach of any of these covenants (not otherwise waived or amended) could result in an event of default under our credit facility, which would allow the lender to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit or seek amendments to our debt agreements that would provide for terms more favorable to our lenders, which we may have to accept under the circumstances.
The threat or occurrence of one or more natural disasters or other extreme weather events, the nature, frequency and severity of which may be negatively impacted by climate change, and the threat or outbreak of terrorism such as attacks on cargo ships in the Suez Canal,terrorism, civil unrest, banking instability, tariffs and other trade barriers or restrictions, political instability, a public health crisis, or other adverse events could materially adversely affect our financial performance. Such events have in the past, and may in the future, disrupt supply chains, resulting in increased costs and shipping delays, increase costs of energy and raw materials, and result in damage to, or destruction or closure of, our stores, distribution centers and other properties or those of our suppliers, customers and other business partners, as well as injuries or loss of life. Such events can also adversely affect our work force and prevent employees and customers from reaching our stores and other properties, can modify consumer purchasing patterns and decrease disposable income, and can disrupt or disable portions of our supply chain and distribution network.
Focus by stakeholders on environmental, social and governanceSustainability policies and practices could result in additional costs, and could adversely impact our reputation, consumer perception, employee retention, and willingness of third parties to do business with us.
There has been increased focus from our stakeholders, including investors, consumers and employees, on our environmental, social and governance policies and practices, including corporate citizenship and sustainability. Additionally, public interest and legislative pressure related to public companies’ environmental, social and governance practices continues to grow. If our environmental, social and governancesustainability policies and practices fail to meet regulatory requirements or stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, human capital management, employee health and safety practices, corporate governance and transparency and employing sustainability strategies in our operations, our brand, reputation and employee retention may be negatively impacted, and customers and suppliers may be unwilling to do business with us. At the same time, there also exists anti-environmental, social and governance, including anti-diversity, equity and inclusion, sentiment among certain stakeholders and government institutions, and we may face scrutiny, reputational risk, lawsuits or market access restrictions from these parties. The effects of climate change and increased focus by stakeholders on sustainability matters could have short- and long-term impacts on our business, operations and reputation. Inconsistency of legislation and regulations among jurisdictions, including anti-environmental, social and governance policies or legislation, and any additional regulations may also affect the costs of compliance with such laws and regulations. Any assessment of the potential impact of future sustainability-related legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change where we operate.
We source the products that we stock and sell from approximately 200 domestic and international suppliers. We source a large number of those products from foreign manufacturers, including 44%43.3% of our products from a group of ten suppliers located in Asia, Europe and the United States.States during 2025. Our largest supplier accounted for approximately 11%12.7% of our total purchases in 2024.2025. We generally take title to these products sourced from foreign suppliers overseas and are responsible for arranging shipment to our distribution centers.
Our success is due in part to our ability to deliver products quickly to our customers, which requires successful planning and distribution infrastructure, including ordering, transportation and receipt processing, and the ability of suppliers to meet distribution requirements. Our ability to maintain this success depends on the continued identification and implementation of improvements to our planning processes, distribution infrastructure, and supply chain. We also need to ensure that our distribution infrastructure and supply chain keep pace with our anticipated growth and increased number of stores. The cost of these enhanced processes could be significant, and any failure to maintain, grow, or improve them could adversely affect our operating results. Our business has been, and could continue to be, adversely affected as a result of delays in product shipments due to freight difficulties, strikes, or other difficulties at our suppliers’ principal transport providers, or otherwise, including as a result of ongoing supply chain disruptions and labor shortages.shortages and tariffs and other trade barriers and restrictions.
Any failure to maintain effective internal control over financial reporting and disclosure controls and procedures could have a material adverse effect on our business.
We are required to maintain internal control over financial reporting and disclosure controls and procedures in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with GAAP (as defined below). We, along with our independent registered public accounting firm, previously identified a material weakness in our internal control over financial reporting that pertained to our information technology general controls, which was remediated as of December 31, 2024. See further discussion regarding controls implemented to remediate our material weakness in Item 9A – Controls and Procedures included in this report. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses could adversely impact our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC. While we have taken meaningful steps to enhance our disclosure controls and procedures and our internal control over financial reporting by strengthening our financial reporting and accounting functions, we cannot provide any assurance that we will continue to be able to maintain adequate controls over our financial processes and reporting or that we will not identify significant deficiencies and material weaknesses in our internal control over financial reporting in the future. Any failure of our internal controls could result in material misstatements in our consolidated financial statements, significant deficiencies, material weaknesses, costs, failure to timely meet our periodic reporting obligations and erosion of investor confidence. Such failure could also negatively affect the market price and trading liquidity of our common stock, subject us to civil and criminal investigations and penalties and could have a material adverse effect on our business, financial condition, results of operations or cash flow.
We are involved in legal proceedings from time to time and, while we cannot predict the outcomes of such proceedings and other contingencies with certainty, some of these outcomes could adversely affect our business, financial condition and results of operations.
We also incur costs in order to comply with cybersecurity or data privacy regulations or with requirements imposed by business partners. Data privacy and cybersecurity laws in the United States and internationally are constantly changing, and the implementation of these laws has become more complex. For instance, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data, and the SEC requires disclosure of material cybersecurity incidents.data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures. Any security breach, whether successful or not, would harm our reputation and could damage our competitive position and cause the loss of customers. In addition, any such breach, or any material failure on our part to comply with applicable laws, could subject us to litigation, government investigation or enforcement actions or other regulatory sanctions, regulatory penalties or fines, or costly response measures. Any such occurrence could have a material adverse effect on us. Furthermore, in order to comply with current or newly enacted laws, we may be subject to increased costs as a result of continually evaluating our policies and processes and adapting to new requirements that are or become applicable to us. In addition, the implementation of technology changes and upgrades to maintain current and integrate new systems incurs additional costs and may cause service interruptions or system conversion delays and may cause us to fail to comply with applicable laws, all of which could have a material adverse effect on our business.
In order to better manage our business, we have invested in, and expect to continue to invest in, our information systems. In doing so, we mustwork to select the correct investments and implement them in an efficient manner.manner, but may be unable to do so effectively or at all. The costs, potential problems and interruptions associated with implementing technology initiatives could disrupt or reduce the efficiency of our operations. For instance, we may experience occasional system interruptions and delays, as a result of routine maintenance, periodic updates, implementation of new technology or other factors, that make our information systems unavailable or slow to respond, including the interaction of our information systems with those of third parties. Furthermore, these initiatives might not provide the anticipated benefits or provide them in a delayed or unexpectedly costly manner. Accordingly, issues relating to our selection and implementation of information technology initiatives may negatively impact our business and operating results.
Our common stock is no longer listed on Nasdaq and we have terminated the registration of our common stock under Section 12(b) and 12(g) of the Exchange Act and suspended our reporting obligations under Section 15(d) of the Exchange Act, which may have an adverse effect on the liquidity of our common stock and the availability of information about the Company and our business and results of operations.
Following the Transaction, we voluntarily delisted our common stock from Nasdaq and terminated its registration under Sections 12(b) and 12(g) of the Exchange Act and suspended our duty to file reports thereunder. As a result:
Except for filing this Annual Report on Form 10-K, we have ceased filing annual, quarterly, current, and other reports and documents with the SEC, and our stockholders will have significantly less information about us and our business, operations, and financial performance than they previously had. While we currently intend to make financial information available to our stockholders on a voluntary basis, there is no assurance that we will continue to do so in the future. We will continue to hold stockholder meetings as required under Delaware law, including annual meetings, but we will no longer have to comply with proxy solicitation rules and related disclosure requirements under the Exchange Act.
The common stock is no longer listed on Nasdaq, which may have an adverse effect on the liquidity of our common stock. Effective December 29, 2025, our common stock is quoted on The OTC Markets Pink Limited (the “OTC”). Any trading in our common stock will only occur in privately negotiated sales and on the OTC, but only if one or more brokers choose to make a market for our common stock on the OTC and comply with applicable regulatory requirements. This may adversely affect the liquidity of our common stock, result in a significantly increased spread between the bid and asked prices of our common stock, and there is no guarantee that a broker will continue to make a market in our common stock or that trading of our common stock will continue on the OTC or otherwise. The price of our common stock may experience extensive volatility. Additionally, the overall price of our stock may be significantly reduced due to the potential that investors may view the investment as inherently riskier given the fact that publicly available information about us will be significantly more limited, as well as due to possible limited liquidity of our common stock.
We are no longer be subject to the reporting requirements under the Exchange Act or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act of 2022 and the listing standards of any national securities exchange.
Our executive officers, directors, and 10% stockholders are no longer required to file reports relating to their transactions in our common stock with the SEC. In addition, our executive officers, directors, and 10% stockholders are no longer subject to the recovery of profits provision of the Exchange Act, and persons acquiring 5% of our common stock will no longer be required to report their beneficial ownership under the Exchange Act.
We have no ability to access the public capital markets or to use public securities in attracting and retaining executives and other employees, and we will have a decreased ability to use stock to acquire other companies.
We may be unable to maintain our listing on The Nasdaq Stock Market LLC (“Nasdaq”) and may incur additional costs as a result of our Nasdaq listing.
Our common stock currently trades on Nasdaq. We cannot provide any assurance that we will be able to continue to satisfy Nasdaq’s continued listing requirements and standards to which we are subject. A delisting of our common stock could negatively affect the price and liquidity of our common stock and could impair our ability to raise capital in the future. In addition, we incur costs as a result of compliance with Nasdaq’s rules and requirements, which could adversely affect our results of operations.
The market price of our securities may decline and/or be volatile.
The market price of our common stock has fluctuated significantly in the past and may continue to fluctuate in the future. Future fluctuations could be based on various factors in addition to those otherwise described in this report, including:
our operating performance and the performance of our competitors;
the public’s reaction to our filings with the SEC, our press releases and other public announcements;
the degree of trading liquidity in our common stock, including our ability to remain listed on Nasdaq;
changes in recommendations or earnings estimates by research analysts who follow us or other companies in our industry;
variations in general economic conditions, including the impact of inflation, decreases in consumer spending, geopolitical conditions and the possibility of an economic downturn or recession;
actions of our current stockholders, including transactions in our common stock by our directors and executive officers;
the arrival or departure of key personnel; and
other developments affecting us, our industry or our competitors.
In addition, the stock market may experience significant price and volume fluctuations, which may be unrelated to the operating performance of particular companies but could cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with our Company or its performance.
We have, from time to time, paid special dividends and engaged in stock repurchases. Any future determination with respect to the payment of dividends or stock repurchases is at the discretion of our Board and is dependent upon our financial condition, results of operations, capital requirements, general business conditions, tax treatment of dividends and issuer stock repurchases in the United States, potential future contractual restrictions contained in credit agreements and other agreements and other factors deemed relevant by our Board of Directors. We can provide no assurance that we will pay any dividends to our stockholders in the future, or as to the amount of any such dividends, or that we will engage in additional stock repurchases. Our election not to pay a quarterly dividend or repurchase stock may negatively impact our reputation, our stock price, and investor confidence in us.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
New heading “Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024”
Removed heading “Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022”
Largest changes
You should read the following discussion and analysis together with our consolidated financial statements and related notes included elsewhere in this report. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the financial data than is included in the following discussion. This report contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “depend,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “target,” “will,” “will likely result,” “would,” and similar expressions or variations, although some forward-looking statements are expressed differently. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this report relate to, among other things, statements about the perceived benefits of the Company’s delisting and deregistration, including our ability to realize the anticipated benefits of the Transaction; our business strengths, marketing strategies, competitive advantages and role in our industry and markets; an overall decline in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of high inflation or fluctuating interest rates, tariffs and other trade barriers and restrictions, instability in the global banking system, geopolitical instability, or the possibility of an economic downturn or recession or other macroeconomic factors; the impact of ongoing supply chain disruptions (including tariffs) and inflationary cost pressures, including increased materials, labor, energy, and transportation costs and decreased discretionary consumer spending; our ability to successfully implement and realize the anticipated benefits of our strategic plan; our ability to successfully anticipate consumer trends; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; the effectiveness of our marketing strategy; potential fluctuations in our comparable store sales; our expectations regarding our and our customers’ financing arrangements and our ability to obtain additional capital, including potential difficulties of obtaining financing due to market conditions resulting from geopoliticalsee in full comparisonconditionsconditions, including the impacts of tariffs and other trade barriers and restrictions and resulting volatility in the financial, capital and bond markets, and other economic factors; supply costs and expectations, including the continued availability of sufficient products from our suppliers, risks related to relying on foreign suppliers, and the potential impact of theRussia-UkraineRussia-Ukraine, Israel/Hamas and other geopolitical conflicts on, among other things, product availability and pricing and timing and cost of deliveries; thepotentialimpact of U.S. trade tensions, including increased tariffs and retaliatory measures imposed by foreign governments; our expectations with respect to ongoing compliance with the terms of the credit facility, including fluctuating interest rates; our ability to provide timely delivery to our customers; the effect of regulations on us and our industry, and our suppliers’ compliance with such regulations, including any environmentalor climate change-relatedrequirements; the impact of corporate citizenshipand environmental, social and governance matters; labor shortages and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our business; tax-related risks; the potential impact of cybersecurity breaches or disruptions to our management information systems or to third-party information technology systems upon which we rely; widespread outages, interruptions or other failures of operational, communication or other systems; our ability to successfully implement our information technology and other digital initiatives; our ability to effectively manage our online sales; costs and adequacy of insurance; the potential impact of naturaldisasters, which may worsen or increase due to the effects of climate change,disasters and other catastrophic events; risks inherent in operating as a holding company; our ability to maintain effective internal control over financial reporting; the potential outcome of any legal proceedings; and risks related to ownership of our common stock.
“In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. …”see in full comparison
“In light of ongoing changes to U.S. trade policy, including the imposition of elevated tariffs on certain imported goods, the threat of new tariffs, and ongoing negotiations between the U.S. and other countries regarding trade arrangements and tariff levels, the Company is evaluating a range of strategic options to manage the anticipated cost pressures including sourcing adjustments and pricing strategies. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. On February 20, 2026, the U.S. …”see in full comparison
“Selling, General and Administrative Expenses – Selling, general and administrative expenses decreased $3.5 million, or 1.6%, in 2025 compared to 2024. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. …”see in full comparison
“Selling, general and administrative expenses decreased by $3.5 million, or 1.6%, from $224.4 million in 2024 to $220.8 million in 2025. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. …”see in full comparison
“The Stock Splits had the effect of reducing the number of record holders of the Company’s common stock to a number below 300 (i.e., the level at or above which the Company is required to file reports with the SEC under the Exchange Act). …”see in full comparison
Full comparison: every changed paragraph (47)
You should read the following discussion and analysis together with our consolidated financial statements and related notes included elsewhere in this report. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the financial data than is included in the following discussion. This report contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “depend,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “target,” “will,” “will likely result,” “would,” and similar expressions or variations, although some forward-looking statements are expressed differently. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this report relate to, among other things, statements about the perceived benefits of the Company’s delisting and deregistration, including our ability to realize the anticipated benefits of the Transaction; our business strengths, marketing strategies, competitive advantages and role in our industry and markets; an overall decline in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of high inflation or fluctuating interest rates, tariffs and other trade barriers and restrictions, instability in the global banking system, geopolitical instability, or the possibility of an economic downturn or recession or other macroeconomic factors; the impact of ongoing supply chain disruptions (including tariffs) and inflationary cost pressures, including increased materials, labor, energy, and transportation costs and decreased discretionary consumer spending; our ability to successfully implement and realize the anticipated benefits of our strategic plan; our ability to successfully anticipate consumer trends; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; the effectiveness of our marketing strategy; potential fluctuations in our comparable store sales; our expectations regarding our and our customers’ financing arrangements and our ability to obtain additional capital, including potential difficulties of obtaining financing due to market conditions resulting from geopolitical conditionsconditions, including the impacts of tariffs and other trade barriers and restrictions and resulting volatility in the financial, capital and bond markets, and other economic factors; supply costs and expectations, including the continued availability of sufficient products from our suppliers, risks related to relying on foreign suppliers, and the potential impact of the Russia-UkraineRussia-Ukraine, Israel/Hamas and other geopolitical conflicts on, among other things, product availability and pricing and timing and cost of deliveries; the potential impact of U.S. trade tensions, including increased tariffs and retaliatory measures imposed by foreign governments; our expectations with respect to ongoing compliance with the terms of the credit facility, including fluctuating interest rates; our ability to provide timely delivery to our customers; the effect of regulations on us and our industry, and our suppliers’ compliance with such regulations, including any environmental or climate change-related requirements; the impact of corporate citizenship and environmental, social and governance matters; labor shortages and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our business; tax-related risks; the potential impact of cybersecurity breaches or disruptions to our management information systems or to third-party information technology systems upon which we rely; widespread outages, interruptions or other failures of operational, communication or other systems; our ability to successfully implement our information technology and other digital initiatives; our ability to effectively manage our online sales; costs and adequacy of insurance; the potential impact of natural disasters, which may worsen or increase due to the effects of climate change,disasters and other catastrophic events; risks inherent in operating as a holding company; our ability to maintain effective internal control over financial reporting; the potential outcome of any legal proceedings; and risks related to ownership of our common stock.
Recent Developments
On December 3, 2025, the Company held the Special Meeting. At the Special Meeting the holders of the Company’s issued and outstanding shares of the common stock, entitled to vote approved, by a majority of the votes cast at the Special Meeting, an amendment to the Certificate of Incorporation to effect the Reverse Stock Split, followed immediately by the Forward Stock Split. The Board determined to effectuate (i) the Reverse Stock Split at a ratio of 1-for-3,000 and (ii) the Forward Stock Split at a ratio of 3,000-for-1. At the direction of the Board, on December 15, 2025, the Company filed the certificates of amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split at 5:01 p.m., followed immediately by the Forward Stock Split at 5:02 p.m., respectively, on that day.
As a result of the Reverse Stock Split, each share of common stock held by a Cashed-Out Stockholder was converted into the right to receive $6.60 in cash, without interest, per whole share and such stockholders are no longer stockholders of the Company. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time of the Reverse Stock Split were not entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which immediately followed the Reverse Stock Split, reconverted whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of the common stock held by such Continuing Stockholders immediately prior to the effective time. As a result of the Forward Stock Split, the total number of shares of common stock held by a Continuing Stockholder did not change. Following the completion of the Reverse Stock Split, the Company paid an aggregate of approximately $32.2 million to the Cashed-Out Stockholders, including stockholders who held fewer than 3,000 shares of common stock through banks and brokers.
On December 17, 2025, the Company filed a Form 25 Notification of Removal from Listing and/or Registration, in order to voluntarily withdraw its common stock from listing on the Nasdaq and to deregister the common stock under Section 12(b) of the Exchange Act. Upon delisting from Nasdaq, on January 2, 2026, the Company filed a Form 15 with the SEC to deregister the common stock under Section 15(d) of the Exchange Act.
The Stock Splits had the effect of reducing the number of record holders of the Company’s common stock to a number below 300 (i.e., the level at or above which the Company is required to file reports with the SEC under the Exchange Act). The Stock Splits were undertaken as part of the Company’s plan to give effect to the Transaction (i.e., the actions the Company has taken to suspend, and events that occur as a result of such actions that have the effect of suspending, the Company’s reporting obligations under the Exchange Act, including effectuating the Stock Splits, delisting the Company’s common stock from trading on Nasdaq, terminating the registration of the Company’s common stock under Sections 12(b) and 12(g) of the Exchange Act and suspending the Company’s reporting obligations under Section 15(d) of the Exchange Act).
As a result of the Transaction, the Company will no longer be subject to the reporting requirements under the Exchange Act or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act of 2002 and the listing standards of any national securities exchange. Following the filing of this Annual Report on Form 10-K for the year ended December 31, 2025, therefore, the Company will cease to file annual, quarterly, current, and other reports and documents with the SEC.
Introduction
In light of ongoing changes to U.S. trade policy, including the imposition of elevated tariffs on certain imported goods, the threat of new tariffs, and ongoing negotiations between the U.S. and other countries regarding trade arrangements and tariff levels, the Company is evaluating a range of strategic options to manage the anticipated cost pressures including sourcing adjustments and pricing strategies. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. On February 20, 2026, the U.S. Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. This decision introduces uncertainty regarding potential refund processes and further uncertainty regarding future trade policy actions and could affect our cost structure and supply chain planning. We continue to monitor developments around the Supreme Court’s decision and evaluate its potential impact on our future financial results and business.
These tariffs, any resulting retaliatory tariffs and any related supply-chain disruptions could have a significant impact on the Company’s consolidated statement of operations and statement of cash flows. In response to currently applicable and potential future tariffs, we are continuing to evaluate actions we can take that are intended to minimize the impact of the tariffs on our financial position and results of operations. While we believe that these actions and policies will mitigate a substantial portion of the impact of the tariffs, we cannot provide any assurances that the tariffs or any resulting impediments to trade will not have a material effect on our consolidated statement of operations and statement of cash flows.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. Additionally, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to spend on the Company’s products and services, or their ability to make payments, which could negatively impact our financial results. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain, and we cannot predict the ultimate impact such factors will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments.
The table below sets forth information about our net sales, operating (loss) income and stores opened from 20222023 to 2024.2025.
We serve customers who seek to undertake a wide range of projects; however, many end customers choose to work with us when they choose to remodel their home. Historically, we have monitored existing home sales trends as a leading indicator of demand in our industry.industry, Thewhich latestremained estimateschallenged ofduring 2024 existing home sales levels made by the National Association of REALTORs suggest that housing turnover decreased by nearly 35% between 2021 and 2024. We believe the decrease in existing home sales resulted in softening demand for remodel projects and had an adverse impact on our business.2025. For the year ended December 31, 2024,2025, our comparable store sales decreased by 7.8%2.8% due to lower levels of traffic, partially offset by an increase in average ticket value.
Our operating results are heavily dependent upon the prices paid to acquire man-made and natural stone products from our suppliers around the world. Cost increases from our suppliers as well as increases in tariffs paid to import tile products into the United States contributed to a 190 basis points decrease in our gross margin rate from 65.7% in 2024 to 63.8% in 2025.
Selling, general and administrative expenses decreased by $3.5 million, or 1.6%, from $224.4 million in 2024 to $220.8 million in 2025. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. Excluding the impact of the New Jersey and Wisconsin distribution center closures, variable expenses decreased by $1.5 million and depreciation expense decreased by an additional $1.3 million, which were partially offset by a $1.1 million increase due to costs incurred in connection with the delisting process as well as an increase in other legal expenses, a $0.7 million increase in shipping, a $0.5 million increase in IT, a $0.5 million increase in operating supplies and a $0.4 million increase in marketing.
Our operating results are heavily dependent upon the prices paid to acquire man-made and natural stone products from our suppliers around the world. Our gross margin rate improved by 130 basis points from 64.4% in 2023 to 65.7% in 2024 against the backdrop of an easing inflationary environment. Over the last two years, international freight rates have stabilized, and we have been able to identify alternative sources of supply for high quality products that we are able to offer at competitive price points while maintaining a strong margin profile. We have generally maintained our pricing, which helped contribute to the improvement in gross margin rates between 2023 and 2024.
Selling, general and administrative expenses decreased by $2.5 million or 1.1% to $224.4 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The decrease was largely driven by a $3.5 million decrease in depreciation expenses, a $3.4 million decrease in variable compensation expenses and a $0.8 million decrease in marketing expenses that were partially offset by a $3.2 million increase in occupancy costs, a $0.9 million increase in IT expenses, a $0.6 million increase in transportation costs and a $0.5 million increase in audit and accounting expenses.
In response to the challenges faced in our industry and continued pressure on our topline results, during 2024,2025, we took steps to close our distribution center located in Dayton,Spring NewValley, Jersey,Wisconsin, reduce staffing levels at our corporate office and closeclosed ourtwo tradingstore company office located in Beijing, China.locations. We did not incur any material asset impairment or severance costs in connection with these actions. WeIn areFebruary actively working to sublease2026, the Company sold its distribution center spacein Wisconsin for a total cash consideration of $1.2 million. The distribution center was classified as held for sale within other current assets, net in Dayton,the Newconsolidated Jersey.balance Oursheet leaseas of theDecember distribution31, space2025, with a net book value of $0.4 million. The sale resulted in Dayton,a Newgain Jerseyof expires$0.8 million, which will be recognized in Septemberthe first quarter of 2026. We anticipate the annualized benefit from these actions will reduce selling, general and expenses by $2.8 million to $4.1 million. Going into 2025, we do not currently plan to open any new stores and intend to close two unprofitable stores during the year.
Cash balances increaseddecreased by $12.4$10.9 million from $8.6 million on December 31, 2023 to $21.0 million on December 31, 2024.2024 to $10.1 million on December 31, 2025. The increasedecrease in cash was primarily due to $27.1cash disbursements of $32.0 million ofto operatingfund cashflowshares partiallyrepurchased offsetin by2025 $14.5in connection with the Transaction and $9.6 million used to purchase property, plant and equipment duringthat 2024.were partially offset by $5.8 million of operating cash flow and $25.0 million of borrowings on our line of credit. Borrowings outstanding on our revolving line of credit were $25.0 million as of December 31, 2025. As of both December 31, 2023 and 2024, we had no borrowings outstanding on our revolving line of credit.
(2)We calculate Adjusted EBITDA by taking net (loss) income calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) and adjusting for interest expense, income taxes, depreciation and amortization, and stock based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. For more information about Adjusted EBITDA and Adjusted EBITDA margin, see “Non-GAAP Measures” below.
(4)Operating (loss) income margin is equal to (loss) income from operations divided by net sales.
(5)Comparable store sales growth (decline) growth is the percentage change in sales of comparable stores period-over-period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales growth calculation. Comparable store sales growth (decline) growth amounts include total charges to customers less any actual returns. We include the change in the allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing our results to those of other businesses. Company management believes the comparable store sales growth (decline) growth metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.
Key Components of our Consolidated Statements of IncomeOperations
Comparable store sales (decline) growth is the percentage change in sales of comparable stores period-over-period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales (decline) growth calculation. Comparable store sales (decline) growth amounts include total charges to customers less any actual returns. We include the change in allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing our results to those of other businesses. Company management believes the comparable store sales growth (decline) growth metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.
Pre-opening Costs – Our pre-opening costs are those typically associated with the opening of a new store and generally include rent expense, compensation costs and promotional costs. We expense pre-opening costs as incurred and include these costs in selling, general and administrative expenses.
Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
Net Sales – Net sales decreased $10.3 million, or 3.0%, in 2025 compared to 2024. Sales at comparable stores decreased by 2.8% during 2025. The decrease in annual sales was primarily due to a decrease in traffic that was partially offset by a modest improvement in average order value.
Gross Profit – Gross profit decreased $12.9 million, or 5.6%, in 2025 compared to 2024. The gross margin rate was 63.8% and 65.7% for 2025 and 2024, respectively. The decrease in gross margin rate was primarily due to an increase in product costs, partially attributable to an increase in tariffs, an increase in customer delivery expenses and higher levels of discounting in 2025.
Selling, General and Administrative Expenses – Selling, general and administrative expenses decreased $3.5 million, or 1.6%, in 2025 compared to 2024. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. Excluding the impact of the New Jersey and Wisconsin distribution center closures, variable expenses decreased by $1.5 million and depreciation expense decreased by an additional $1.3 million, which were partially offset by a $1.1 million increase due to costs incurred in connection with the delisting process as well as an increase in other legal expenses, a $0.7 million increase in shipping, a $0.5 million increase in IT, a $0.5 million increase in operating supplies and a $0.4 million increase in marketing.
Provision for Income Taxes – The benefit (provision) for income taxes for 2025 and 2024 was $1.4 million and ($0.9) million, respectively. The change in the provision for income taxes was primarily due to taxable income in 2024 and a pretax loss in 2025. Our effective tax rate was 23.2% in 2025 and 28.4% in 2024. The decrease in effective tax rate was largely due to the impact of permanent differences relative to the pretax income or pretax loss generated in each period.
Net Sales – Net sales decreased $30.1 million, or 8.0%, in 2024 compared to 2023. Sales at comparable stores decreased by 7.8% during 2024. The decrease in annual sales was primarily due to a decrease in traffic that was partially offset by a modest improvement in average order value.
Gross Profit – Gross profit decreased $15.2 million, or 6.2%, in 2024 compared to 2023. The gross margin rate was 65.7% and 64.4% for 2024 and 2023, respectively. The improvement in gross margin rate was due to lower international freight rates and steps taken to work with the Company’s suppliers to reduce prices on the items carried in the Company’s assortment that were partially offset by an increase in inventory write-offs associated with assortment transitions.
Selling, General and Administrative Expenses – Selling, general and administrative expenses decreased $2.5 million, or 1.1%, in 2024 compared to 2023. The decrease was largely driven by a $3.5 million decrease in depreciation expenses, a $3.4 million decrease in variable compensation expenses and a $0.8 million decrease in marketing expenses that were partially offset by a $3.2 million increase in occupancy costs, a $0.9 million increase in IT expenses, a $0.6 million increase in transportation costs and a $0.5 million increase in audit and accounting expenses.
Interest Expense – Interest expense decreased $1.9 million in 2024 compared to 2023. The decrease in interest expense was primarily due to a decrease in average debt levels outstanding during 2024 when compared to 2023.
Provision for Income Taxes – The provision for income taxes decreased $3.0 million for 2024 compared to 2023 due to a decrease in pretax income. Our effective tax rate was 28.4% in 2024 and 28.0% in 2023. The increase in the effective tax rate was largely due to a decrease in pretax income and a disproportionate impact of certain permanent items.
Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022
We calculate Adjusted EBITDA by taking net (loss) income calculated in accordance with GAAP and adjusting for interest expense, income taxes, depreciation and amortization, and stock-based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. We calculate pretax return on capital employed by taking (loss) income from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and pretax return on capital employed differently, limiting the usefulness of these measures for comparative purposes.
The reconciliation of Adjusted EBITDA to net (loss) income for the years ended December 31, 20202021 through December 31, 20242025 is as follows:
On September 30, 2022, Holdings and its operating subsidiary, The Tile Shop, and certain subsidiaries of each entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto, including Fifth Third Bank (as amended, the “Credit Agreement”). The Credit Agreement provides us with a senior credit facility consisting of a $75.0 million revolving line of credit through September 30, 2027. Borrowings pursuant to the Credit Agreement initially bear interest at a rate per annum equal to: (i) Adjusted Term SOFR Rate (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; (ii) Adjusted Daily Simple SOFR (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; or (iii) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.25% to 0.75%. The margin is determined based on the Rent Adjusted Leverage Ratio (as defined in the Credit Agreement). Borrowings outstanding as of December 31, 2025 were SOFR-based interest rate loans. The SOFR-based interest rate was 5.72% on December 31, 2025.
The Credit Agreement is secured by virtually all of our assets, including but not limited to, inventory, accounts receivable, equipment and general intangibles. The Credit Agreement contains customary events of default, conditions to borrowing and restrictive covenants, including restrictions on our ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.20 to 1.00 and a Rent Adjusted Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.50 to 1.00. WeThe wereCompany was not in compliance with the covenants as of December 31, 2024.2025 but received a waiver by the lenders January 28, 2026, which put the Company in compliance with the covenants.
We had no borrowingsBorrowings outstanding consisted of $25.0 million on our line of credit as of December 31, 2024.2025. We have standby letters of credit outstanding related to our workers’ compensation and medical insurance policies. As of December 31, 2024,2025, standby letters of credit totaled $1.2 million, leaving $73.8$48.8 million available for borrowing on the revolving line of credit, which may be used for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.
On December 15, 2025, the Company effected the Reverse Stock Split. As a result of the Reverse Stock Split, each stockholder of record owning fewer than 3,000 shares of common stock immediately prior to the effective time of the Reverse Stock Split became entitled to receive $6.60, without interest, in cash for each whole share of Common Stock held by such stockholder at the effective time of the Reverse Stock Split (the “Cashed-Out Stockholders”). Following the completion of the Reverse Stock Split, the Company paid an aggregate of approximately $32.2 million to the Cashed-Out Stockholders, including to stockholders holding through banks and brokers, of which $32.0 million was paid in the fourth quarter of 2025, with the remainder paid during the first quarter of 2026, using a combination of cash on hand and borrowings under the Company’s line of credit.
During 2025,2026, we expect to use cash for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes. Additionally, as described further in Note 6 of the Notes to the Consolidated Financial Statements, as of December 31, 2024,2025, our lease liability under operating leases totaled $142.6$134.8 million. Contractual lease payments range from $16.5$13.9 million to $40.0$39.6 million on an annual basis over the next five years. We are also obligated to fund certain self-insured employee benefits, including our medical and workers’ compensation plans. As of December 31, 2024,2025, accrual balances related to our estimated workers’ compensation claims and medical claims totaled $1.4 million and $1.1$0.6 million, respectively. Additionally, we have contractual obligations related to software service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at December 31, 20242025 for purchase obligations were $8.7$2.7 million. Amounts due under these arrangements in 2025, 2026, 20272027, and 2028 total $6.5$1.2 million, $1.0 million, $0.7$1.1 million, and $0.3$0.4 million, respectively.
Cash flows from operating activities provide us with a significant source of liquidity. Net cash provided by operating activities was $27.1$5.8 million, $62.1$27.1 million, and $2.7$62.1 million in 2024,2025, 20232024 and 2022,2023, respectively. The decrease in operating cash flows in 20242025 compared to 20232024 was primarily due to thean decelerationincrease in theinventory levelin of2025 compared to a decrease in inventory reductionsin between 2023 and 2024 as well as2024, a decrease in net income between 2023income, and 2024.a decrease in depreciation expense.
Net cash used in investing activities was $9.4 million, $14.3 million,million and $15.3 million and $14.0 million in 2024,2025, 20232024 and 2022,2023, respectively. The decrease in investing activities in 20242025 was due to lower levels of capital expenditures during 20242025 to invest in new stores, store remodels, store merchandising, distribution, and internal fleet and information technology assets.fleet.
Net cash used in financing activities was $7.3 million, $0.5 million and $45.9 million in 2025, 2024 and 2023, respectively. The increase in cash used in financing activities was attributable to $32.0 million paid to repurchase shares during 2025 that was partially offset by $25.0 million of borrowings on our revolving line of credit.
Net cash (used in) provided by financing activities was $(0.5) million, $(45.9) million and $9.1 million in 2024, 2023 and 2022, respectively. Cash used in financing activities during 2024 included $0.5 million of employee taxes paid for shares withheld in connection with restricted share award vestings. Prior year financing activities include advances and payments on our line of credit of $45.4 million net payments during 2023, and $40.4 million net advances during 2022. As of December 31, 2024, we had no balance outstanding on our line of credit.
What changed in the latest 10-Q
Risk Factors
New heading “Subject to stockholder approval at the Special Meeting, the Board has approved a plan to effectuate a reverse/forward stock split to reduce the number of record holders of the Company’s common stock and to delist and terminate the registration of the Company’s common stock under the Exchange Act.”
Largest changes
“Subject to stockholder approval at the Special Meeting, the Board has approved a plan to effectuate a reverse/forward stock split to reduce the number of record holders of the Company’s common stock and to delist and terminate the registration of the Company’s common stock under the Exchange Act.”see in full comparison
“If the proposed reverse/forward stock split is effected, the Company intends to delist and terminate the registration of its common stock under the Exchange Act. Following deregistration, the Company will no longer file annual reports on Form 10-K, quarterly reports on Form 10-Q, o current reports on Form 8-K. Accordingly, there will be significantly less information regarding the Company available to stockholders and potential investors. …”see in full comparison
see in full comparisonThereItemhave1A.been no material changes from the risk factors previously disclosed inof our Annual Report on Form 10-K for the year ended December 31, 2024,otherincludesthanawithdiscussionrespectoftoour risk factors. Except as set forth below, there have been no material changes in the riskfactorfactorsdiscusseddescribedbelow.in such report.
Full comparison: every changed paragraph (3)
ThereItem have1A. been no material changes from the risk factors previously disclosed inof our Annual Report on Form 10-K for the year ended December 31, 2024, otherincludes thana withdiscussion respectof toour risk factors. Except as set forth below, there have been no material changes in the risk factorfactors discusseddescribed below.in such report.
Subject to stockholder approval at the Special Meeting, the Board has approved a plan to effectuate a reverse/forward stock split to reduce the number of record holders of the Company’s common stock and to delist and terminate the registration of the Company’s common stock under the Exchange Act.
If the proposed reverse/forward stock split is effected, the Company intends to delist and terminate the registration of its common stock under the Exchange Act. Following deregistration, the Company will no longer file annual reports on Form 10-K, quarterly reports on Form 10-Q, o current reports on Form 8-K. Accordingly, there will be significantly less information regarding the Company available to stockholders and potential investors. In addition, the Company will no longer be subject to the provisions of the Sarbanes-Oxley Act and certain of the liability provisions of the Exchange Act, although the Company will still be subject to the antifraud provisions of the Exchange Act and any applicable state securities laws. Following deregistration, the Company’s executive officers, directors and 10% stockholders will no longer be required to file reports relating to their transactions in the common stock with the SEC. In addition, the Company’s executive officers, directors and 10% stockholders will no longer be subject to the recovery of short-swing profits provision of the Exchange Act, and persons acquiring 5% of the common stock will no longer be required to report their beneficial ownership under the Exchange Act. In addition, as soon as practicable following the effective time of the reverse/forward stock split, the Company plans to delist its common stock from the Nasdaq Stock Market LLC. Any trading in our common stock after the delisting and deregistration would only occur in privately negotiated sales or potentially on the OTC Pink Market, if one or more brokers chooses to make a market for our common stock there and complies with applicable regulatory requirements; however, there can be no assurances regarding any such trading. The lack of public information and increased illiquidity will make trading in our shares of common stock more difficult, which may cause the value of our common stock to decrease.
Management's Discussion & Analysis (MD&A)
New heading “Recent Developments”
Largest changes
“As previously disclosed, the Independent Transaction Committee (the “Transaction Committee”) of the Board of Directors of the Company (the “Board”) comprised of independent directors has recommended, and the Board has approved, a plan to delist its shares of common stock from trading on the Nasdaq Stock Market LLC, suspend its duty to file periodic reports and other information with the U.S. …”see in full comparison
Selling, general and administrative expenses decreasedsee in full comparison$2.1$1.7 million, or3.6%,3.1%, from$58.5$56.0 million in thesecondthird quarter of 2024 to$56.4$54.2 million in thesecondthird quarter of 2025. The decrease wasprimarilydue to a$0.8 million decrease in asset impairment, a $0.7$1.0 million reduction inSG&Aselling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distributioncenter,centers, a$0.7$0.6 million decrease inmarketingwagescostsassociated with a reduction in staffing levels at our corporate offices and a$0.4$0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciationthatexpense decreased an additional $0.5 million. These factors were partially offset by a$0.4$0.6 millionwrite-offincrease in professional service expenses associated with the proposed delisting and deregistration ofdisplaythesupplies.Company as well as other legal expenses.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreasedsee in full comparison$2.1$1.7 million, or3.6%,3.1%, from$58.5$56.0 million in thesecondthird quarter of 2024 to$56.4$54.2 million in thesecondthird quarter of 2025. The decrease wasprimarilydue to a$0.8 million decrease in asset impairment, a $0.7$1.0 million reduction inSG&Aselling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distributioncenter,centers, a$0.7$0.6 million decrease inmarketingwagescostsassociated with a reduction in staffing levels at our corporate offices and a$0.4$0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciationthatexpense decreased an additional $0.5 million. These factors were partially offset by a$0.4$0.6 millionwrite-offincrease in professional service expenses associated with the proposed delisting and deregistration ofdisplaythesupplies.Company as well as other legal expenses.
“In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. …”see in full comparison
Selling, General, and Administrative Expenses Selling, general, and administrative expenses for thesee in full comparisonsixnine months endedJuneSeptember 30, 2025, decreased$2.2$4.0 million, or1.9%,2.3%, compared with thesixnine months endedJuneSeptember 30, 2024. The decrease wasprimarilydue to a$1.3$1.7 milliondecreasereduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distributioncenter during the third quarter of 2024,centers, a$1.1$1.4 million decrease indepreciationwages associated with a reduction in staffing levels at our corporate offices, and a$0.8$1.2 million decrease inassetmedicalimpairment.expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation expense decreased an additional $1.8 million. These factors were partially offset by a$0.5$0.8 million increase in professional services, a $0.6 million increase in IT costs and a$0.4$0.5 millionwrite-offincreaseofin displaysupplies.supply expenses.
Full comparison: every changed paragraph (41)
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “depend,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “target,” “will,” “will likely result,” “would,” and similar expressions or variations, although some forward-looking statements are expressed differently. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations and assumptions that are subject to risks and uncertainties, many of which are difficult to predict and are outside of our control, that may cause our actual results, performance, or achievements to differ materially from any expected future results, performance, or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the Going Dark Transaction, including the timing and stockholder approval of the Reverse Stock Split and our ability to realize the anticipated benefits (as defined below); our business strengths, marketing strategies, competitive advantages and role in our industry and markets; an overall decline in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of high inflation or fluctuating interest rates, tariffs and other trade barriers and restrictions, instability in the global banking system, a prolonged shutdown of the U.S. federal government, geopolitical instability or the possibility of an economic downturn or recession or other macroeconomic factors; the impact of ongoing supply chain disruptions (including tariffs) and inflationary cost pressures, including increased materials, labor, energy, and transportation costs and decreased discretionary consumer spending; our ability to successfully implement and realize the anticipated benefits of our strategic plan; our ability to successfully anticipate consumer trends; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; the effectiveness of our marketing strategy; potential fluctuations in our comparable store sales; our expectations regarding our and our customers’ financing arrangements and our ability to obtain additional capital, including potential difficulties of obtaining financing due to market conditions resulting from geopolitical conditions, including the impacts of tariffs and other trade barriers and restrictions and resulting volatility in the financial, capital and bond markets, and other economic factors; supply costs and expectations, including the continued availability of sufficient products from our suppliers, risks related to relying on foreign suppliers, and the potential impact of the Russia-Ukraine, Israel/Hamas and other geopolitical conflicts on, among other things, product availability and pricing and timing and cost of deliveries; the impact of U.S. trade tensions, including increased tariffs and retaliatory measures imposed by foreign governments; our expectations with respect to ongoing compliance with the terms of the Credit Agreement (as defined below), including fluctuating interest rates; our ability to provide timely delivery to our customers; the effect of regulations on us and our industry, and our suppliers’ compliance with such regulations, including any environmental requirements; the impact of corporate citizenship; labor shortages and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our business; tax-related risks; the potential impact of cybersecurity breaches or disruptions to our management information systems or to third-party information technology systems upon which we rely; widespread outages, interruptions or other failures of operational, communication, or other systems; our ability to successfully implement our information technology and other digital initiatives; our ability to effectively manage our online sales; costs and adequacy of insurance; the potential impact of natural disasters and other catastrophic events; risks inherent in operating as a holding company; our ability to maintain effective internal control over financial reporting; the potential outcome of any legal proceedings; risks related to ownership of our common stock; and those factors set forth in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.2024 and in this Quarterly Report on Form 10-Q.
Recent Developments
As previously disclosed, the Independent Transaction Committee (the “Transaction Committee”) of the Board of Directors of the Company (the “Board”) comprised of independent directors has recommended, and the Board has approved, a plan to delist its shares of common stock from trading on the Nasdaq Stock Market LLC, suspend its duty to file periodic reports and other information with the U.S. Securities and Exchange Commission (the “SEC”), and to terminate the registration of its common stock under the federal securities laws following the completion of a proposed reverse stock split, immediately followed by a forward stock split, subject to obtaining the requisite approval of the Company’s stockholders at a special meeting of the Company’s stockholders (the “Special Meeting”), which is expected to be held in December 2025.
Specifically, the Transaction Committee recommended and the Board approved a transaction (the “Going Dark Transaction”) whereby the Company would effect a reverse stock split of the common stock at a ratio not less than 1-for-2,000 and not greater than 1-for-4,000 (the “Reverse Stock Split”), followed immediately by a forward stock split of the common stock at the same ratio but inverse (i.e., if the Reverse Stock Split were 1-for-3,000, then the Forward Stock Split would be 3,000-for-1) (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Split”). As a result of the Reverse Stock Split, each share of common stock held by a stockholder of record owning immediately prior to the effective time fewer than the minimum number of shares, which, depending on the Stock Split ratio chosen by the Board, would be between 2,000 and 4,000 shares (the “Minimum Number”), would be converted into the right to receive $6.60 in cash (the “Cash-Out Price”), without interest, and such stockholders would no longer be stockholders of the Company. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time of the Reverse Stock Split (the “Continuing Stockholders”) would not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which would immediately follow the Reverse Stock Split, would reconvert whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of the common stock held by such Continuing Stockholders immediately before the effective time of the Reverse Stock Split. As a result of the Forward Stock Split, the total number of shares of common stock held by a Continuing Stockholder would not change as a result of the Reverse Stock Split. The Company estimates that as of October 22, 2025, based on a mid-point Reverse Stock Split ratio of 1-for-3,000, approximately 1,307,000 shares of common stock would be cashed out in the Reverse Stock Split and the aggregate cost to the Company of the Going Dark Transaction would be approximately $8.6 million, plus transaction expenses, which are estimated to be approximately $523,000. The Company expects to use cash on hand together with borrowings under its line of credit under the Credit Agreement, if necessary, to fund the Cash-Out Price.
The primary purpose of the Reverse Stock Split is to enable the Company to reduce to and maintain the number of its record holders of common stock below 300. The Company is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus the Company's resources on enhancing long-term stockholder value. The Company anticipates savings of approximately $2.4 million on an annual basis as a result of the Going Dark Transaction.
The Board has determined the Going Dark Transaction is in the best interests of all the Company’s stockholders. The Company currently realizes none of the traditional benefits of public company status yet incurs all the significant annual expenses and indirect costs associated with being a public company. Without its public company status, the Company would have an ongoing cost structure befitting its current and foreseeable scale of operations and its management would be able to have an increased focus on core operations.
The Company filed a preliminary proxy statement on Schedule 14A on October 6, 2025. The Company intends to file a definitive proxy statement as soon as practicable. Subject to stockholder approval of the Reverse Stock Split at the Special Meeting, it is anticipated that the Reverse Stock Split would become effective shortly after the Special Meeting. Subject to receiving such stockholder approval, as soon as practicable after the Special Meeting, the Company expects to terminate the registration of its common stock with the SEC and de-list its common stock from the Nasdaq Stock Market LLC. As a result, at such time, (i) the Company would cease to file annual, quarterly, current, and other reports and documents with the SEC and (ii) our common stock would no longer be listed on the Nasdaq Stock Market LLC.
Even if the Stock Split is approved by stockholders at the Special Meeting, the Board may determine not to implement the Reverse Stock Split and complete the Going Dark Transaction if subsequently it determines that the Going Dark Transaction is not in the best interests of the Company and its stockholders.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. Additionally, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to spend on the Company’s products and services, or their ability to make payments, which could negatively impact our financial results. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain, and we cannot predict the ultimate impact such factors will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain.
We are a specialty retailer of man-made and natural stone tiles, luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. We offer a wide selection of high-quality products, exclusive designs, knowledgeable staff and exceptional customer service, in an extensive showroom environment with up to 50 full-room tiled displays. As of JuneSeptember 30, 2025, we operated 141140 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet.
We serve customers who seek to undertake a wide range of projects; however, many end customers choose to work with us when they choose to remodel their home. Historically, we have monitored existing home sales trends as a leading indicator of demand in our industry. While existing home sales trends have moderated in recent quarters, the level of existing home sales remains at historically low levels. We believe this has resulted in lower levels of demand for home improvement products and has affected our store traffic. Our comparable store sales decreased by 3.5%1.4% and 3.8%3.0% during the three and sixnine months ended JuneSeptember 30, 2025, respectively, due to lower levels of traffic in our stores.
Our gross margin rate decreased by (160360) basis points to 64.4%62.9% during the secondthird quarter of 2025 as compared to 66.0%66.5% during the secondthird quarter of 2024. The decrease in gross margin rate was primarily due to an increase in product costs, an increase in customer delivery expenses and higher levels of discounting during the secondthird quarter of 2025 combined with an increase in product costs.2025.
Selling, general and administrative expenses decreased $2.1$1.7 million, or 3.6%,3.1%, from $58.5$56.0 million in the secondthird quarter of 2024 to $56.4$54.2 million in the secondthird quarter of 2025. The decrease was primarily due to a $0.8 million decrease in asset impairment, a $0.7$1.0 million reduction in SG&Aselling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution center,centers, a $0.7$0.6 million decrease in marketingwages costsassociated with a reduction in staffing levels at our corporate offices and a $0.4$0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation thatexpense decreased an additional $0.5 million. These factors were partially offset by a $0.4$0.6 million write-offincrease in professional service expenses associated with the proposed delisting and deregistration of displaythe supplies.Company as well as other legal expenses.
In addition, we closed one store during the second quarter of 2025 and a second store during the third quarter of 2025 at the end of itseach store’s lease term. We did not incur any material asset impairment or severance costs in connection with this closure. Additionally, we closed a secondthe store during the third quarter at the end of its lease term.closures.
On July 4, 2025, the President signed H.R. 1, the OBBBA into law. The OBBBA permanently extends several provisions of the TCJA that were previously scheduled to expire, including, but not limited to, the immediate expensing of qualified property under bonus depreciation. In addition, the OBBBA introduces modifications to various U.S. corporate tax provisions, such as changes to interest expense limitations, the treatment of research and development expenditures, and the international tax regime. The Company has completed an evaluation of the OBBBA and determined that the enacted changes do not have a material impact on the Company’s income tax provision for the quarter ended September 30, 2025. The Company will continue to monitor future regulatory guidance and assess the potential impact of any subsequent developments related to the OBBBA.
On July 4, 2025, the OBBBA was enacted in the U.S. The OBBBA makes permanent the extension of certain provisions of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. Additionally, the OBBBA makes changes to certain U.S. corporate tax provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing the impact of the OBBBA on our consolidated financial statements.
During the sixnine months ended JuneSeptember 30, 2025, we generated $13.5$11.3 million of operating cash flow, which was used to fund $6.5$7.9 million of capital expenditures. Cash and cash equivalents increased by $6.8$3.1 million from $21.0 million on December 31, 2024 to $27.8$24.1 million on JuneSeptember 30, 2025. As of JuneSeptember 30, 2025, we had no borrowings outstanding on our line of credit.
Key Components of our Consolidated Statements of IncomeOperations
Comparison of the three months ended JuneSeptember 30, 2025 to the three months ended JuneSeptember 30, 2024
(1) Amounts do not foot due to rounding.
Net Sales Net sales for the secondthird quarter of 2025 decreased $3.1$1.4 million, or 3.4%,1.7%, compared with the secondthird quarter of 2024. Sales decreased at comparable stores by 3.5%1.4% during the secondthird quarter of 2025 compared to the secondthird quarter of 2024, primarily due to a decrease in traffic.
Gross Profit Gross profit decreased $3.5$3.9 million, or 5.8%,7.0%, in the secondthird quarter of 2025 compared to the secondthird quarter of 2024. The gross margin rate was 64.4%62.9% and 66.0%66.5% during the secondthird quarter of 2025 and 2024, respectively. The decrease in the gross margin rate was primarily due to an increase in product costs, an increase in customer delivery expenses and higher levels of discounting combinedduring withthe increasesthird inquarter productof costs.2025.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreased $2.1$1.7 million, or 3.6%,3.1%, from $58.5$56.0 million in the secondthird quarter of 2024 to $56.4$54.2 million in the secondthird quarter of 2025. The decrease was primarily due to a $0.8 million decrease in asset impairment, a $0.7$1.0 million reduction in SG&Aselling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution center,centers, a $0.7$0.6 million decrease in marketingwages costsassociated with a reduction in staffing levels at our corporate offices and a $0.4$0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation thatexpense decreased an additional $0.5 million. These factors were partially offset by a $0.4$0.6 million write-offincrease in professional service expenses associated with the proposed delisting and deregistration of displaythe supplies.Company as well as other legal expenses.
Provision for Income Taxes The benefit (provision) for income taxes for the secondthird quarter of 2025 and 2024 was $0.1$0.3 million and $0.6($0.1) million, respectively. The decreasechange in the provision for income taxes was primarily due to ataxable decreaseincome in 2024 and a pretax income.loss in 2025. Our effective tax rate was 16.4%17.7% and 32.1%77.0% in the secondthird quarter of 2025 and 2024, respectively. The decrease in the effective tax rate was largely due to a decrease in pretax income and the impact of permanent differences.differences relative to the pretax income or pretax loss generated in each period.
Comparison of the sixnine months ended JuneSeptember 30, 2025 to the sixnine months ended JuneSeptember 30, 2024
Net Sales Net sales for the sixnine months ended JuneSeptember 30, 2025 decreased $6.8$8.3 million, or 3.7%,3.1%, compared with the sixnine months ended JuneSeptember 30, 2024. Sales decreased at comparable stores by 3.8%3.0% during the sixnine months ended JuneSeptember 30, 2025 when compared to the sixnine months ended JuneSeptember 30, 2024, primarily due to a decrease in store traffic.
Gross Profit Gross profit for the sixnine months ended JuneSeptember 30, 2025 decreased $5.7$9.7 million, or 4.8%,5.5%, compared with the sixnine months ended JuneSeptember 30, 2024. The gross margin rate was 65.2%64.5% and 65.9%66.1% for the sixnine months ended JuneSeptember 30, 2025 and 2024, respectively. The decrease in the gross margin rate was primarily due to increasesan increase in product costscosts, an increase in customer delivery expenses and higher levels of discounting.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses for the sixnine months ended JuneSeptember 30, 2025, decreased $2.2$4.0 million, or 1.9%,2.3%, compared with the sixnine months ended JuneSeptember 30, 2024. The decrease was primarily due to a $1.3$1.7 million decreasereduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution center during the third quarter of 2024,centers, a $1.1$1.4 million decrease in depreciationwages associated with a reduction in staffing levels at our corporate offices, and a $0.8$1.2 million decrease in assetmedical impairment.expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation expense decreased an additional $1.8 million. These factors were partially offset by a $0.5$0.8 million increase in professional services, a $0.6 million increase in IT costs and a $0.4$0.5 million write-offincrease ofin display supplies.supply expenses.
Provision for Income Taxes The benefit (provision) for income taxes decreased $0.9$1.4 million for the sixnine months ended JuneSeptember 30, 2025 compared with the sixnine months ended JuneSeptember 30, 2024 due to a decrease in taxable income. Our effective tax rate for the sixnine months ended JuneSeptember 30, 2025 and 2024 was 15.8%18.7% and 25.6%,27.9%, respectively. The decrease in the effective tax rate during the six months ended June 30, 2025 when compared to the six months ended June 30, 2024 was largely due to a decrease in pre-tax income and the impact certainof permanent differences.differences relative to the pretax income or pretax loss generated in each period.
We calculate Adjusted EBITDA by taking net (loss) income calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), and adjusting for interest expense, income taxes, depreciation and amortization, and stock based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. We calculate pretax return on capital employed by taking (loss) income from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and pretax return on capital employed differently, limiting the usefulness of these measures for comparative purposes.
The reconciliation of Adjusted EBITDA to net (loss) income for the three and sixnine months ended JuneSeptember 30, 2025 and 2024 is as follows:
Our principal liquidity requirements have been for working capital and capital expenditures. Our principal sources of liquidity are $27.8$24.1 million of cash and cash equivalents at JuneSeptember 30, 2025, our cash flow from operations, and borrowings available under our Credit Agreement. We expect to use this liquidity for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.
The Credit Agreement is secured by virtually all our assets, including but not limited to inventory, accounts receivable, equipment and general intangibles. The Credit Agreement contains customary events of default, conditions to borrowing and restrictive covenants, including restrictions on our ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.20 to 1.00 and a Rent Adjusted Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.50 to 1.00. We were in compliance with the covenants as of JuneSeptember 30, 2025.
We had no borrowings outstanding on our line of credit as of JuneSeptember 30, 2025. We have standby letters of credit outstanding related to our workers’ compensation and medical insurance policies. As of JuneSeptember 30, 2025, standby letters of credit totaled $1.2 million. As of JuneSeptember 30, 2025, there was $73.8 million available for borrowing on the revolving line of credit, which may be used for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.
Capital expenditures were $6.5$7.9 million and $6.3$11.8 million for the sixnine months ended JuneSeptember 30, 2025 and 2024, respectively. Capital expenditures in 2025 were primarily due to investments in store remodels, merchandising, distribution and information technology assets.
The following table summarizes our cash flow data for the sixnine months ended JuneSeptember 30, 2025 and 2024.
Net cash provided by operating activities during the sixnine months ended JuneSeptember 30, 2025 was $13.5$11.3 million compared with $23.5$28.5 million during the sixnine months ended JuneSeptember 30, 2024. The decrease was primarily attributable to a decrease in net income and other working capital changes.
Net cash used in investing activities totaled $6.4$7.8 million for the sixnine months ended JuneSeptember 30, 2025 compared with $6.3$11.7 million for the sixnine months ended JuneSeptember 30, 2024. Cash used in investing activities during the sixnine months ended JuneSeptember 30, 2025 was primarily due to investments in store remodels, merchandising, distribution and information technology assets.
Net cash used in financing activities was $0.3 million for the sixnine months ended JuneSeptember 30, 2025 compared with $0.5 million for the sixnine months ended JuneSeptember 30, 2024. The decrease in cash outflows for financing activities from the sixnine months ended JuneSeptember 30, 2024 to sixnine months ended JuneSeptember 30, 2025 relates to the impact of employee shares withheld for employee stock award vestings.
Cash and cash equivalents totaled $27.8$24.1 million at JuneSeptember 30, 2025 compared with $21.0 million at December 31, 2024. Working capital was $43.5$43.7 million at JuneSeptember 30, 2025 compared with $41.4 million at December 31, 2024.
TTSH insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding TTSH (13F)
None of the 59 investors we track reported a position in their latest 13F.