October 31, 2007

Tuesday Morning Corporation Announces First Quarter Fiscal 2008 Results

DALLAS, Oct. 31 /PRNewswire-FirstCall/ -- Tuesday Morning Corporation (Nasdaq: TUES) today reported that as previously announced, net sales for the first quarter of fiscal 2008 were $201.7 million compared to $194.4 million in previous year, an increase of $7.3 million or 3.7%. The increase is primarily due to an increase in sales from non-comparable stores of $13.8 million offset by a decrease in comparable store sales of 1.5%. The decrease in comparable store sales was comprised of a 0.7% decrease in traffic and a 0.8% decline in average ticket. Net income for the first quarter ended September 30, 2007 was $1.2 million or $0.03 per diluted share, compared to $3.2 million or $0.08 per diluted share last year, a decrease of $2.0 million or $0.05 per diluted share.

Kathleen Mason, President and Chief Executive Officer, stated, "We are positioned to meet our goal to profitably grow sales and produce positive operating cash flow in the second quarter."

Net sales for the fiscal year 2008 (July 1, 2007 through June 30, 2008) are projected to be in the range of $987 million to $997 million. Diluted earnings per share for the same period are projected to be $0.85 to $0.90, with the assumption that comparable store sales are flat to positive 1.5%.

Tuesday Morning management will review first quarter fiscal 2008 financial results in a teleconference call on October 31, 2007 at 10:00 a.m. Eastern Time.

About Tuesday Morning

Tuesday Morning is the 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 818 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 carefully 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 Annual Report on Form 10-KT for the six month period ended June 30, 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 Income
    (In thousands, except per share data)

                                                  Three Months Ended Sept. 30,
                                                      2007           2006
                                                           (unaudited)


    Net Sales                                      $ 201,656       $194,412
    Cost of sales                                    125,947        121,348
        Gross profit                                  75,709         73,064

    Selling, general and administrative expenses      72,544         67,341

        Operating income                               3,165          5,723

    Other income (expense):
      Interest expense                                (1,686)          (792)
      Interest income                                      -              5
      Other income (expense), net                        378            174
        Other income (expense)                        (1,308)          (613)

    Income before income taxes                         1,857          5,110

    Income tax expense                                   701          1,947


    Net income                                       $ 1,156         $3,163

    Earnings Per Share:
    Net income per common share:
        Basic                                          $0.03          $0.08
        Diluted                                        $0.03          $0.08

    Weighted average number of common shares:
        Basic                                         41,440         41,392
        Diluted                                       41,585         41,584



    Consolidated Balance Sheets
    (in thousands)
                                  Sept. 30,       Sept. 30,      June 30,
                                    2007            2006          2007
                                 (unaudited)     (unaudited)
    Assets
    Current assets:
      Cash and cash equivalents    $ 11,918         $ 8,906      $ 10,303
      Inventories                   346,017         302,533       288,791
      Prepaid expenses and
       other assets                   9,991          8,887         5,954
      Deferred income taxes               -           5,071         1,211
        Total current assets        367,926         325,397       306,259

    Property and Equipment, net      82,432          86,888        83,776

    Other long-term assets:
      Deferred financing costs          654             556           704
      Other assets                    3,679           4,781         3,582

        Total Assets              $ 454,691       $ 417,622     $ 394,321

    Liabilities and Stockholders' Equity
    Current liabilities:
      Current portion of
       long-term debt              $ 74,000             $ -      $ 26,500
      Accounts payable               90,334         103,778        82,453
      Accrued liabilities            32,555          31,119        31,223
      Deferred income taxes           1,372               -             -
      Income taxes payable              441           6,199           712
        Total current liabilities   198,702         141,096       140,888

    Revolving credit facility,
     excl. current portion           30,000          47,000        30,000
    Deferred rent                     4,542           4,571         4,534
    Deferred income taxes             3,582           6,267         3,459
        Total Liabilities           236,826         198,934       178,881

    Stockholders' equity            217,865         218,688       215,440
        Total Liabilities and
         Stockholders' Equity     $ 454,691       $ 417,622     $ 394,321



    Consolidated Statement of Cash Flows
    (in thousands)
                                                   Sept. 30,      Sept. 30,
                                                      2007           2006
                                                          (unaudited)

    Net cash flows from operating activities:
      Net income                                     $ 1,156        $ 3,163
      Adjustments to reconcile net income to net
       cash (used in) operating activities:
      Depreciation and amortization                    4,442          4,153
      Amortization of financing fees                      50             43
      Deferred income taxes                            2,706              -
      Amortization of restricted stock compensation       50              -
      Loss on disposal of fixed assets                   169            111
      Stock compensation expense                       1,292            828
      Other non-cash charges                              66             (4)
      Net change in operating assets
       and liabilities                               (55,702)       (27,075)

    Net cash used in operating activities            (45,771)       (18,781)

    Net cash flows from investing activities:
      Capital expenditures                            (3,267)        (4,284)

    Net cash used in investing activities             (3,267)        (4,284)

    Net cash flows from financing activities:
      Borrowings-revolving credit facility            82,500         68,500
      Repayments-revolving credit facility           (35,000)       (42,500)
      Change in cash overdraft                         3,157              -
      Proceeds from exercise of common stock options
       and stock purchase plan purchases                  (4)           205
      Other                                                -              -

    Net cash provided by financing act.               50,653         26,205

    Net decrease in cash and cash equivalents          1,615          3,140

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

    Cash and cash equivalents, end of period        $ 11,918        $ 8,906



SOURCE Tuesday Morning Corporation

/CONTACT: Elizabeth Schroeder, Chief Financial Officer of Tuesday Morning Corporation, +1-972-934-7299; or Laurey Peat of Laurey Peat + Associates, +1-214-871-8787, for Tuesday Morning Corporation/

/Web site: http://www.tuesdaymorning.com /

"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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