April 29, 2008

Tuesday Morning Corporation Announces Third Quarter Fiscal 2008 Results

DALLAS, April 29 /PRNewswire-FirstCall/ -- Tuesday Morning Corporation (Nasdaq: TUES) today reported that as previously announced, net sales for the third quarter of fiscal 2008 were $178.4 million compared to $189.2 million for the quarter ended March 31, 2007, a decrease of 5.7%. Comparable store sales decreased 8.2% for the quarter. The decrease in comparable store sales was comprised of a 6.6% decrease in traffic and a 1.6% decrease in average ticket. Net loss for the third quarter ended March 31, 2008 was $4.7 million or $0.11 per diluted share, compared to net income of $1.0 million or $0.03 per diluted share last year.

For the nine month period ended March 31, 2008, sales were $688.8 million compared to $704.8 million in for the same period ended March 31, 2007 for a decrease of 2.3%. Comparable store sales decreased by 6.1% for the nine month period. The decrease in comparable store sales was comprised of a 5.2% decrease in traffic and a 0.9% decrease in average ticket. For the nine month period ended March 31, 2008, net income was $17.0 million or $0.41 per diluted share compared to 2007 results of net income of $28.0 million or $0.67 per diluted share.

Kathleen Mason, President and Chief Executive Officer, stated, "We believe the results are indicative of the slump in the home furnishings sector, not a deterioration in the company's execution. The sharp drop in home prices has brought home starts and remodels to a standstill. Record high fuel prices and rising food prices, along with the drop in home values have restricted disposable income, resulting in exceptionally low consumer confidence. The flexibility of our format will enable us to continue generating positive cash flows and long term profitability."

    Guidance for the fiscal year 2008 ending on June 30, 2008 is as follows:
    --  net sales are projected to be in the range of $895 million to
        $910 million;
    --  comparable store sales are projected to be in the negative mid single
        digits; and
    --  diluted earnings per share projected to be in the range of $0.38 to

Tuesday Morning management will review third quarter fiscal 2008 financial results in a teleconference call on April 29, 2008 at 10:00 a.m. Eastern Time.

About Tuesday Morning

Tuesday Morning is a leading closeout retailer of upscale, decorative home accessories, housewares and famous-maker gifts in the United States. The Company opened its first store in 1974 and currently operates 821 stores in 47 states. Tuesday Morning is nationally known for bringing its more than 9.0 million loyal customers a unique treasure hunt of high-end, first quality, brand name merchandise... never seconds or irregulars... at prices well below those of department and specialty stores and catalogues.

This press release contains forward-looking statements within the meaning of the federal securities laws and the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations, estimates and projections. Forward-looking statements typically are identified by the use of terms such as "may," "will," "should," "expect," "anticipate," "believe," "estimate," "intend" and similar words, although some forward- looking statements are expressed differently. You should carefully consider statements that contain these words because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our future results of operations, our future financial positions, and our business outlook or state other "forward-looking" information.

Reference is hereby made to "Item 1A. Risk Factors" of the Company's Transition Report on Form 10-KT for the six month period ended June 30, 2007 and the Company's Quarterly Report on Form 10-Q for the three month period ended December 31, 2007 for examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements. These risks, uncertainties and events also include, but are not limited to, the following: uncertainties regarding our ability to open stores in new and existing markets and operate these stores on a profitable basis; conditions affecting consumer spending; inclement weather; changes in our merchandise mix; timing and type of sales events, promotional activities and other advertising; increased or new competition; loss or departure of one or more members of our senior management, as well as experienced buying and management personnel; an increase in the cost or a disruption in the flow of our products; seasonal and quarterly fluctuations; fluctuations in our comparable store results; our ability to operate information systems and implement new technologies effectively; our ability to generate strong cash flows from our operations; our ability to maintain internal control over financial reporting; and our ability to anticipate and respond in a timely manner to changing consumer demands and preferences. The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. We undertake no obligations to update our forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.

    Tuesday Morning Corporation

    Consolidated Statement of Operations
    (In thousands, except per share data)

                       Three Months Ended Mar. 31,  Nine Months Ended Mar. 31,

                           2008          2007       2008           2007
                              (unaudited)                (unaudited)

    Net Sales           $178,446      $189,156     $688,789      $704,835
    Cost of sales        114,447       118,288      434,177       439,318
        Gross profit      63,999        70,868      254,612       265,517

    Selling, general
    and administrative
    expenses              71,357        69,289      224,565       220,959

        Operating income
        (loss)            (7,358)        1,579       30,047        44,558

    Other income
      Interest expense      (455)         (234)      (3,561)       (1,779)
      Interest income          2           143          155           200
      Other income
      (expense), net         209           203          782           826
        Other income
        (expense)           (244)          112       (2,624)         (753)

    Income (loss)
    before income
    taxes                 (7,602)        1,691       27,423        43,805

    Income tax
    expense (benefit)     (2,905)          644       10,429        15,768

    Net income (loss)    $(4,697)    $   1,047      $16,994       $28,037

    Per Share:
    Net income (loss)
     per common share:
      Basic               $(0.11)        $0.03        $0.41         $0.68
      Diluted             $(0.11)        $0.03        $0.41         $0.67

    Weighted average
     number of
     common shares:
      Basic               41,441        41,427       41,439        41,412
      Diluted             41,441        41,650       41,479        41,626

    Tuesday Morning Corporation

    Consolidated Balance Sheets
    (in thousands)                         Mar. 31,  Mar. 31,    June 30,
                                            2008       2007        2007
                                        (unaudited) (unaudited)

    Current assets:
     Cash and cash equivalents             $10,270     $9,563    $10,303
     Inventories                           269,642    280,987    288,791
     Prepaid expenses and other assets       8,392      7,508      5,954
     Deferred income taxes                     -        3,162      1,211
       Total current assets                288,304    301,220    306,259

    Property and Equipment, net             78,578     85,149     83,776

    Other long-term assets:
     Deferred financing costs                  553        471        704
     Other assets                            3,634      3,383      3,582

       Total Assets                       $371,069   $390,223   $394,321

    Liabilities and Stockholders' Equity
    Current liabilities:
     Current portion of long-term debt      $2,000     $  -      $26,500
     Accounts payable                       66,885     89,682     82,453
     Accrued liabilities                    30,679     32,680     31,223
     Deferred income taxes                     666        -          -
     Income taxes payable                      -          540        712
       Total current liabilities           100,230    122,902    140,888

    Revolving credit facility, excl.
     current portion                        30,000     45,500     30,000
    Deferred rent                            4,211      4,629      4,534
    Deferred income taxes                    1,790      4,648      3,459
       Total Liabilities                   136,231    177,679    178,881

    Stockholders' equity                   234,838    212,544    215,440
       Total Liabilities and
        Stockholders' Equity              $371,069   $390,223   $394,321

    Consolidated Statement of Cash Flows
    (in thousands)
                                                    Nine Months Ended Mar. 31,

                                                     2008               2007
    Net cash flows from operating
      Net income                                   $16,994            $28,037
      Adjustments to reconcile net income
       to net cash (used in) operating
      Depreciation and amortization                 13,172             12,999
      Amortization of financing fees                   150                128
      Deferred income taxes                            183                290
      Loss on disposal of fixed assets                 478                409
      Stock compensation expense                     2,663              3,444
      Other non-cash charges                            23               (157)
      Net change in operating assets and
       liabilities                                   2,440            (21,611)

    Net cash provided by operating
     activities                                     36,103             23,539

    Net cash flows from investing
      Capital expenditures                          (8,530)           (11,689)
      Proceeds from sale of assets                      78                  -

    Net cash used in investing
     activities                                     (8,452)           (11,689)

    Net cash flows from financing
      Borrowings -- revolving credit
       facility                                    194,500            153,000
      Repayments-revolving credit
       facility                                   (219,000)          (128,500)
      Change in cash overdraft                      (3,185)                 -
      Payment of cash dividend                           -            (33,144)
      Proceeds from exercise of common
       stock options
       and stock purchase plan purchases                 1                528
      Other                                              -                 63

    Net cash used in financing
     activities                                    (27,684)            (8,053)

    Net decrease in cash and cash
     equivalents                                       (33)             3,797

    Cash and cash equivalents, beginning
     of period                                      10,303              5,766

    Cash and cash equivalents, end of
     period                                        $10,270             $9,563

SOURCE Tuesday Morning Corporation

Stephanie Bowman
Chief Financial Officer

Laurey Peat
for Tuesday Morning Corporation

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Tuesday Morning Corporation's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

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