Tile Shop investigation finds no wrongdoing in supplier relationship

Minneapolis – An internal investigation conducted by Dorsey & Whitney LLP, independent counsel to the Audit Committee of Tile Shop Holdings, Inc. has found no wrongdoing in Tile Shop’s relationship with Beijing Pingxiu, a Chinese export trading company formerly utilized by the company and some of its Chinese vendors.

The findings of the investigation concluded that while certain previously undisclosed related party relationships existed, there is no evidence that the company’s historical financial results have been misstated or that Tile Shop applied any improper accounting treatment with respect to its historical financial statements.

On Nov. 14, 2013, a report was published that alleged that Tile Shop had greatly exaggerated its true financial performance, failed to disclose Beijing Pingxiu as a material related party supplier, used Beijing Pingxiu to overstate inventories, understate cost of sales and overstate gross profits, purchased goods from Beijing Pingxiu at or near cost to achieve an artificial cost advantage, and overstated earnings. At least one class action suit was filed on behalf of shareholders following the report.

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