May 1, 2007

Tuesday Morning Corporation Announces First Quarter 2007 Results

DALLAS, May 1, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Tuesday Morning Corporation (Nasdaq: TUES) today reported that as previously announced, net sales for the first quarter of 2007 were $189.2 million compared to $187.8 million in 2006, an increase of 0.7%. The increase is primarily due to $11.4 million in sales from non-comparable stores offset by a decrease of 5.4% in comparable store sales. The decrease in comparable store sales was comprised of a 5.6% decline in traffic and a 0.2% increase in average ticket.

"Our flexibility in product categories, inventory allocation, real estate locations and in-store layout allow us to remain a strong performer despite the on-going challenges in the home furnishings sector," said Kathleen Mason, President and Chief Executive Officer. "The dividend declared by our Board and the banking syndicates approval of our credit facility amendment both reflect the strength of our balance sheet, our ability to generate positive cash flow and the continued execution of our operating plan by management."

Net income for the first quarter ended March 31, 2007 was $1.0 million or $0.03 per diluted share, compared to $6.5 million or $0.16 per diluted share for the first quarter of 2006, a decrease of $5.5 million or $0.13 per diluted share.

    Guidance
    Guidance for the fiscal year 2007 is as follows:
     * net sales are projected to be in the range of $975 to $985 million;
     * comparable store sales are projected to be flat to negative 2.0%; and
     * diluted earnings per share projected to be in the range of $0.85 to
       $0.90.

Tuesday Morning management will review first quarter financial results in a teleconference call on May 1, 2007 at 10:00 a.m. Eastern Time.

About Tuesday Morning

Tuesday Morning is the leading closeout retailer of upscale home furnishings, housewares and famous-maker gifts in the United States. The Company opened its first store in 1974 and currently operates 799 stores in 47 states during periodic "sale events." Tuesday Morning is nationally known for bringing its more than 8.0 million loyal customers a treasure hunt of high- end, first quality, brand name merchandise at prices 50% to 80% below 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-K for the year ended December 31, 2006 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 Mar. 31,
                                                     2007              2006
                                                          (unaudited)

    Net Sales                                   $   189,156      $   187,759
    Cost of sales                                   118,288          114,168
      Gross profit                                   70,868           73,591

    Selling, general and administrative expenses     69,289           63,163

      Operating income                                1,579           10,428

    Other income (expense):
      Interest expense                                 (234)            (186)
      Interest income                                   143               99
      Other income (expense), net                       203              133
        Other income (expense)                          112               46

    Income before income taxes                        1,691           10,474

    Income tax expense                                  644            3,934

    Net income                                  $     1,047      $     6,540

    Earnings Per Share:
    Net income per common share:
      Basic                                     $      0.03      $      0.16
      Diluted                                   $      0.03      $      0.16

    Weighted average number of common shares:
      Basic                                          41,427           41,376
      Diluted                                        41,650           41,674



    Tuesday Morning Corporation (continued)

    Consolidated Balance Sheets
    (in thousands)                             Mar 31,     Mar 31,     Dec 31,
                                                2007        2006        2006
                                            (unaudited)  (unaudited)
    Assets
    Current assets:
      Cash and cash equivalents             $    9,563  $    5,330  $   49,633
      Inventories                              280,987     252,723     242,674
      Prepaid expenses and other assets          7,508       8,370       5,617
      Deferred income taxes                      3,162       5,071       3,162

        Total current assets                   301,220     271,494     301,086

    Property and Equipment, net                 85,149      86,164      86,397

    Other long-term assets:
      Deferred financing costs                     471         642         514
      Other assets                               3,383       4,628       5,137

        Total Assets                        $  390,223  $  362,928  $  393,134
    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                      $   89,682  $   79,547  $   88,514
      Accrued liabilities                       32,680      30,747      35,934
      Income taxes payable                         540       3,831      15,543
        Total current liabilities              122,902     114,125     139,991

      Revolving credit facility, excl.
       current portion                          45,500      28,000         ---
      Deferred rent                              4,629       4,486       4,618
      Deferred income taxes                      4,648       6,267       4,648
        Total Liabilities                      177,679     152,878     149,257

      Stockholders' equity                     212,544     210,050     243,877
        Total Liabilities and Stockholders'
         Equity                             $  390,223  $  362,928  $  393,134



    Consolidated Statement of Cash Flows
    (in thousands)                                       Mar 31,       Mar 31,
                                                          2007          2006
                                                             (unaudited)
    Net cash flows from operating activities:
      Net income                                       $  1,047      $  6,540
      Adjustments to reconcile net income to net
        cash (used in) operating activities:
      Depreciation and amortization                       4,363         4,007
      Amortization of financing fees                         43            43
      Loss on disposal of fixed assets                      289           ---
      Stock compensation expense                          1,033           809
      Other non-cash charges                               (140)           52
      Net change in operating assets and liabilities    (55,656)      (42,229)

    Net cash used in operating activities               (49,021)      (30,778)

    Net cash flows from investing activities:
      Capital expenditures                               (3,404)       (2,385)

    Net cash used in investing activities                (3,404)       (2,385)

    Net cash flows from financing activities:
      Net borrowings-revolving credit facility           45,500        28,000
      Payment of cash dividend                          (33,144)      (33,102)
      Proceeds from exercise of common stock options
       and stock purchase plan purchases                     (1)           48
      Other                                                 ---           ---
    Net cash provided by (used in) financing act.        12,355        (5,054)
    Net decrease in cash and cash equivalents           (40,070)      (38,217)
    Cash and cash equivalents, beginning of period       49,633        43,547
    Cash and cash equivalents, end of period           $  9,563     $   5,330

SOURCE Tuesday Morning Corporation

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

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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