Tile Shop Holdings, Inc. (NASDAQ: TTS) (the “Company”), a specialty
retailer of manufactured and natural stone tiles, setting and
maintenance materials, and related accessories, today announced results
for its first quarter ended March 31, 2013.
Net sales increased 23.9% to $56.8 million for the quarter ended March
31, 2013 compared with $45.9 million for the first quarter last year.
The $11.0 million increase in sales was driven by an increase in
comparable store sales of 10.4% or $4.8 million, and incremental net
sales of $6.2 million from stores not included in the comparable stores
base. For the quarter, Adjusted EBITDA grew 17.9% to $16.4 million,
compared to $13.9 million in the same period of the prior year. Adjusted
EBITDA as a percentage of sales was 28.8%.
“Steady growth and strong financial performance continues at The Tile
Shop as evidenced by our results for the first quarter 2013,” stated
Robert Rucker, Chief Executive Officer. “Our results for the quarter
were driven by a 10.4% increase in same store sales, an impressive
improvement over the strong 9.9% same store sales growth in the first
quarter of last year and the 9.8% increase achieved in the fourth
quarter of 2012. This level of sales growth clearly demonstrate that our
store layout and broad product assortment is providing a much needed
solution to the needs of our customers. This unique ‘in-store
experience’ is made possible by our operating model, which enables us to
source distinctive products directly from quarries throughout the world.
Our customer-focused store presentation, together with our direct
sourcing capabilities, allows us to operate at high margins and drive
value for all our stakeholders.”
During the first quarter, the Company opened three new stores in: Natick
Massachusetts, Vienna Virginia, and Langhorne Pennsylvania. With the
opening of a fourth store in April 2013, located in Warwick, Rhode
Island, the Company now operates 72 stores in 23 states.
“We continue to be pleased with the performance of the new stores that
have opened in the past year,” stated Mr. Rucker. Our stores continue to
produce consistent financial performance starting in the first year of
operation, whether it is in a new market or in an existing market.”
Income from operations was $12.0 million and as percentage of sales was
21.1% in the first quarter 2013, compared to $10.5 million and 22.8%,
respectively, in the quarter ended March 31, 2012. The Company generated
$18.3 million of operating cash flow in the first quarter of 2013.
The following is a reconciliation of net income to Adjusted EBITDA. See
also the “Non-GAAP Financial Measures” section below.
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Adjusted EBITDA
($ in thousands)
(Unaudited)
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|
Three months ended
March 31,
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2013
|
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2012
|
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|
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|
|
|
|
|
|
|
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|
|
|
|
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Net income (loss)
|
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$
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(44,717
|
)
|
|
|
|
$
|
10,133
|
|
|
|
|
|
Interest expense
|
|
|
|
594
|
|
|
|
|
|
90
|
|
|
|
|
|
Income taxes
|
|
|
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4,264
|
|
|
|
|
|
248
|
|
|
|
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|
Change in fair value of warrants
|
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51,845
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|
|
|
|
|
-
|
|
|
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Depreciation and amortization
|
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3,044
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|
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2,242
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Deferred compensation expense
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-
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|
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1,160
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Warrant related fees
|
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240
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-
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Stock-based compensation
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1,092
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-
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Adjusted EBITDA
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$
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16,362
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$
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13,873
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Pro-Forma Non-GAAP Information
The Company presents pro–forma non-GAAP net income to provide useful
information to investors regarding the Company’s normal operating
performance. Pro-forma non-GAAP net income adds back the non-cash
expense related to the change in warrant liability, non-recurring
warrant related transaction costs, and includes a pro-forma adjustment
for income tax expense as if the Company had been a "C" corporation at
the beginning of each period (at an assumed combined effective tax rate
of 40%).
On a pro-forma non-GAAP basis, net income for the quarter would have
been $7.0 million, compared to $6.2 million in the comparable prior year
period. Pro-forma non-GAAP earnings per diluted share for the quarter
ended March 31, 2013 would have been $0.14, based on 50.6 million
weighted average diluted shares. Pro-forma non-GAAP earnings per diluted
share for the quarter ended March 31, 2012 would have been $0.12 per
share. See the “Pro-forma Non-GAAP Net Income” table and the “Non-GAAP
Financial Measures” section below for a reconciliation of non-GAAP to
GAAP earnings.
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Pro-forma Non-GAAP Net Income
($ in thousands, except per share data)
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Three months ended
March 31,
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2013
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2012
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Reported income (loss) before income taxes
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$
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(40,453
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)
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$
|
10,381
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Change in fair value of warrants
|
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51,845
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|
|
|
|
|
-
|
|
|
|
|
|
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Warrant related fees
|
|
|
|
240
|
|
|
|
|
|
-
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Pro-forma non-GAAP net income before taxes
|
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11,632
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|
|
|
|
|
10,381
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|
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Pro forma benefit (provision) for income taxes
|
|
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(4,653
|
)
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|
|
|
(4,152
|
)
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Pro-forma non-GAAP net income
|
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|
$
|
6,979
|
|
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|
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$
|
6,229
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Pro-forma non-GAAP net income margin
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12.3
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%
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13.6
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%
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Weighted average basic shares outstanding
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44,855,000
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44,855,000
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Weighted average diluted shares outstanding
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50,628,000
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50,628,000
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Pro forma basic earnings per share
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$
|
0.16
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$
|
0.14
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Pro forma diluted earnings per share
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$
|
0.14
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$
|
0.12
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Warrant Update
As previously announced, on April 12, 2013, the Company instructed its
transfer agent to notify holders of all remaining outstanding warrants
to purchase shares of the Company’s common stock that the Company had
satisfied the conditions necessary to exercise its right to call for the
early exercise of all remaining warrants, on a cashless basis.
Prior to the issuance of the notice to redeem the warrants, the Company
had received instructions to exercise 7,514,320 warrants in exchange for
payment of the warrant exercise price, which in the aggregate totaled
$86.4 million. The Company has also completed (or expects to complete)
the exercise of 6,739,009 warrants on a cashless basis. Further, on
March 27, 2013 the Company repurchased 3,580,004 warrants. As a result,
the Company has issued an aggregate of 10,308,157 shares of common stock
in exchange for the 17.8 million warrants that were originally
outstanding. As of today, the Company has 53,138,041 shares of common
stock outstanding.
Regarding the disposition of the $86.4 million in warrant exercise
proceeds, the Company utilized $30.1 million from the warrant exercises
to effect the warrant repurchases described above, and plans on
utilizing $10.0 million for general corporate purposes, leaving $46.3
million. The Board is evaluating the most efficient way of utilizing the
$46.3 million in a manner that is most beneficial to the Company’s
shareholders.
Webcast and Conference Call
The Company will host a conference call via live webcast for investors
and other interested parties beginning at 5:00 p.m. Eastern Time on
Wednesday, May 1, 2013. Participants may access the live webcast by
visiting the Company’s investor relations website at www.tileshop.com.
The call can also be accessed by dialing (877) 941-3982, or (201)
493-6780 for international participants. The replay of the call will be
available from approximately 8:00 p.m. Eastern Time on May 1, 2013
through midnight Eastern Time on May 15, 2013. To access the replay, the
domestic dial-in number is (877) 870-5176, the international dial-in
number is (858) 384-5517, and the passcode is 413152. The archive of the
webcast will be available on the Company’s Web site for a limited time.
Additional details can be located in the filing at www.tileshop.com
under the Financials – SEC Filings section of its Legal/Investors –
Investor Relations page.
About Tile Shop Holdings and The Tile Shop
The Tile Shop is a specialty retailer of manufactured and natural stone
tiles, setting and maintenance materials, and related accessories in the
United States. The Tile Shop offers a wide selection of products,
attractive prices, and exceptional customer service in an extensive
showroom setting. The Tile Shop operates 72 stores in 23 states, with an
average size of 23,000 square feet. The Tile Shop also sells its
products on its website, www.tileshop.com.
Non-GAAP Financial Measures
We calculate Adjusted EBITDA by taking net income calculated in
accordance with GAAP, and adding interest expense, income taxes,
depreciation and amortization, non-cash change in warrant liability,
non-recurring warrant related transaction costs, deferred compensation
expense, and stock-based compensation expense. Adjusted EBITDA margin is
equal to Adjusted EBITDA divided by net sales. Pro-forma non-GAAP net
income is determined by adding back the non-cash change in warrant
liability, and non-recurring warrant related transaction costs to income
before taxes calculated in accordance with GAAP and subtracting from
this an estimate for income taxes as if the Company had been a “C”
Corporation for all periods.
We believe that these non-GAAP measures of financial results provide
useful information to management and investors regarding certain
financial and business trends relating to our financial condition and
results of operations. Our management uses these non-GAAP measures to
compare our performance to that of prior periods for trend analyses, for
purposes of determining management incentive compensation, and for
budgeting and planning purposes. These measures are used in monthly
financial reports prepared for management and our board of directors. We
believe that the use of these non-GAAP financial measures provide an
additional tool for investors to use in evaluating ongoing operating
results and trends and in comparing our financial measures with other
specialty retailers, many of which present similar non-GAAP financial
measures to investors.
Our management does not consider these non-GAAP measures in isolation or
as an alternative to financial measures determined in accordance with
GAAP. The principal limitations of these non-GAAP financial measures are
that they exclude significant expenses and income that are required by
GAAP to be recorded in our consolidated financial statements. In
addition, they are subject to inherent limitations as they reflect the
exercise of judgments by management about which expenses and income are
excluded or included in determining these non-GAAP financial measures.
In order to compensate for these limitations, management presents
non-GAAP financial measures in connection with GAAP results. We urge
investors to review the reconciliation of our non-GAAP financial
measures to the comparable GAAP financial measures and not to rely on
any single financial measure to evaluate our business.
FORWARD LOOKING STATEMENTS
This press release includes “forward looking statements” within the
meaning of the “safe harbor” provisions of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking statements may
be identified by the use of words such as “anticipate”, “believe”,
“expect”, “estimate”, “plan”, “outlook”, and “project” and other similar
expressions that predict or indicate future events or trends or that are
not statements of historical matters. These forward looking statements
include any statements regarding the Company’s strategic and operational
plans, expected financial performance of new stores, and the benefits of
the Company’s operating model. Forward looking statements should not be
read as a guarantee of future performance or results, and will not
necessarily be accurate indications of the times at, or by, which such
performance or results will be achieved. Forward looking statements are
based on information available at the time those statements are made
and/or management’s good faith belief as of that time with respect to
future events, and are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those
expressed in or suggested by the forward looking statements, including
but not limited to unforeseen events that may affect the retail market
or the performance of the Company’s stores. The Company does not intend,
and undertakes no duty, to update this information to reflect future
events or circumstances. Investors are referred to the most recent
reports filed with the SEC by the Company.
|
Tile Shop Holdings Inc and Subsidiaries
|
Condensed Consolidated Statements of Income
|
($ in thousands)
|
(Unaudited)
|
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|
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|
|
Three months ended
March 31,
|
|
|
|
2013
|
|
|
|
2012
|
Net sales
|
|
|
$
|
56,835
|
|
|
|
|
$
|
45,861
|
|
Cost of sales
|
|
|
|
16,462
|
|
|
|
|
|
12,173
|
|
Gross profit
|
|
|
|
40,373
|
|
|
|
|
|
33,688
|
|
Selling, general and administrative expenses
|
|
|
|
28,354
|
|
|
|
|
|
22,064
|
|
Deferred compensation expense
|
|
|
|
-
|
|
|
|
|
|
1,160
|
|
Income from operations
|
|
|
|
12,019
|
|
|
|
|
|
10,464
|
|
Interest expense
|
|
|
|
594
|
|
|
|
|
|
90
|
|
Change in value of warrants
|
|
|
|
51,845
|
|
|
|
|
|
-
|
|
Other income (expense)
|
|
|
|
(33
|
)
|
|
|
|
|
7
|
|
Income (loss) before income taxes
|
|
|
|
(40,453
|
)
|
|
|
|
|
10,381
|
|
Benefit (provision) for income taxes
|
|
|
|
(4,264
|
)
|
|
|
|
|
(248
|
)
|
Net income (loss)
|
|
|
$
|
(44,717
|
)
|
|
|
|
$
|
10,133
|
|
|
|
|
|
|
|
|
|
Weighted average basic and diluted shares outstanding
|
|
|
|
44,854,988
|
|
|
|
|
|
32,000,000
|
|
Basic and diluted income (loss) earnings per share
|
|
|
$
|
(1.00
|
)
|
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
Pro forma computation related to conversion to C Corporation
|
|
|
|
for income tax purposes (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical income (loss) before income taxes
|
|
|
$
|
-
|
|
|
|
|
$
|
10,381
|
|
Pro forma benefit (provision) for income taxes
|
|
|
|
-
|
|
|
|
|
|
(4,152
|
)
|
Pro forma net income (loss)
|
|
|
$
|
-
|
|
|
|
|
$
|
6,229
|
|
|
|
|
|
|
|
|
|
Pro forma weighted average basic and diluted shares outstanding
|
|
|
|
-
|
|
|
|
|
|
42,534,884
|
|
Pro forma basis and diluted income (loss) earnings per share
|
|
|
$
|
-
|
|
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
(1) Company converted to C Corporation in August, 2012
|
|
|
Tile Shop Holdings Inc and Subsidiaries
|
Condensed Consolidated Balance Sheets
|
($ in thousands, except share data)
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
|
(unaudited)
|
|
|
(audited)
|
ASSETS
|
|
|
|
|
|
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|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
15,763
|
|
|
|
$
|
2,987
|
|
Trade receivables, net
|
|
|
|
1,281
|
|
|
|
|
1,009
|
|
Inventories
|
|
|
|
49,080
|
|
|
|
|
46,890
|
|
Prepaid inventory
|
|
|
|
6,875
|
|
|
|
|
6,051
|
|
Prepaid expenses and other
|
|
|
|
2,169
|
|
|
|
|
2,017
|
|
Income tax receivable
|
|
|
|
-
|
|
|
|
|
2,529
|
|
Deferred tax asset
|
|
|
|
9,364
|
|
|
|
|
9,364
|
|
Other current assets
|
|
|
|
3,862
|
|
|
|
|
966
|
|
Total current assets
|
|
|
|
88,394
|
|
|
|
|
71,813
|
|
Property, plant and equipment, net
|
|
|
|
91,588
|
|
|
|
|
82,080
|
|
Deferred tax asset
|
|
|
|
21,146
|
|
|
|
|
20,865
|
|
Other assets
|
|
|
|
1,313
|
|
|
|
|
1,316
|
|
TOTAL ASSETS
|
|
|
$
|
202,441
|
|
|
|
$
|
176,074
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
16,868
|
|
|
|
$
|
14,968
|
|
Current portion of long term debt, net
|
|
|
|
3,860
|
|
|
|
|
3,860
|
|
Accrued wages and salaries
|
|
|
|
3,672
|
|
|
|
|
2,912
|
|
Other accrued liabilities
|
|
|
|
10,719
|
|
|
|
|
7,734
|
|
Income tax payable
|
|
|
|
1,682
|
|
|
|
|
-
|
|
Current portion of capital lease obligation
|
|
|
|
245
|
|
|
|
|
234
|
|
Deferred compensation
|
|
|
|
6,171
|
|
|
|
|
6,171
|
|
Total current liabilities
|
|
|
|
43,217
|
|
|
|
|
35,879
|
|
Long-term debt, net
|
|
|
|
63,310
|
|
|
|
|
69,310
|
|
Capital lease obligation, net
|
|
|
|
1,352
|
|
|
|
|
1,420
|
|
Deferred rent
|
|
|
|
20,414
|
|
|
|
|
18,583
|
|
Warrant liability
|
|
|
|
37,489
|
|
|
|
|
95,645
|
|
TOTAL LIABILITIES
|
|
|
|
165,782
|
|
|
|
|
220,837
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
Common stock, par value 0.0001; authorized: 100,000,000 shares;
|
|
|
|
|
|
|
issued: 48,036,241 and 43,177,822 shares
|
|
|
|
5
|
|
|
|
|
4
|
|
Preferred stock, par value $.0001; authorized: 10,000,000 shares; 0
issued shares
|
|
|
|
-
|
|
|
|
|
-
|
|
Additional paid-in-capital
|
|
|
|
135,572
|
|
|
|
|
9,434
|
|
Retained earnings (deficit)
|
|
|
|
(98,918
|
)
|
|
|
|
(54,201
|
)
|
Total stockholders’ equity
|
|
|
|
36,659
|
|
|
|
|
(44,763
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
$
|
202,441
|
|
|
|
$
|
176,074
|
|