tues-10q_20151231.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2015

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM          TO         

Commission File Number 0-19658

 

TUESDAY MORNING CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

75-2398532

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

6250 LBJ Freeway

Dallas, Texas 75240

(Address of principal executive offices) (Zip code)

(972) 387-3562

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  T    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  T    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 T

 

Accelerated filer

 ¨

 

 

 

 

 

Non-accelerated filer

 ¨

(Do not check if a smaller reporting company)

Smaller reporting company

 ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  T

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding at January 27, 2016

Common Stock, par value $0.01 per share

 

44,350,673

 

 

 

 


Table of Contents

 

 

PART I.

 

FINANCIAL INFORMATION

 

3

 

 

 

 

 

ITEM 1.

 

Financial Statements (Unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets as of December 31, 2015 and June 30, 2015

 

3

 

 

 

 

 

 

 

Consolidated Statements of Income for the Three Months and Six Months Ended December 31, 2015 and 2014

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2015 and 2014

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

 

 

 

 

 

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

9

 

 

 

 

 

ITEM 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

15

 

 

 

 

 

ITEM 4.

 

Controls and Procedures

 

15

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

16

 

 

 

 

 

ITEM 1.

 

Legal Proceedings

 

16

 

 

 

 

 

ITEM 1A.

 

Risk Factors

 

16

 

 

 

 

 

ITEM 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

16

 

 

 

 

 

ITEM 6.

 

Exhibits

 

17

 

2


PART I — FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

Tuesday Morning Corporation

Consolidated Balance Sheets

December 31, 2015 (unaudited) and June 30, 2015

(In thousands, except share and per share data)

 

 

 

December 31,

 

 

June 30,

 

 

 

2015

 

 

2015

 

 

 

 

 

 

 

As adjusted

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,339

 

 

$

44,788

 

Inventories

 

 

232,803

 

 

 

209,984

 

Prepaid expenses

 

 

7,248

 

 

 

6,978

 

Other current assets

 

 

157

 

 

 

823

 

Total Current Assets

 

 

275,547

 

 

 

262,573

 

Property and equipment, net

 

 

82,755

 

 

 

70,447

 

Deferred financing costs

 

 

1,446

 

 

 

871

 

Other assets

 

 

948

 

 

 

984

 

Total Assets

 

$

360,696

 

 

$

334,875

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

73,579

 

 

$

74,242

 

Accrued liabilities

 

 

44,653

 

 

 

35,751

 

Income taxes payable

 

 

911

 

 

 

 

Total Current Liabilities

 

 

119,143

 

 

 

109,993

 

Deferred rent

 

 

4,506

 

 

 

3,072

 

Asset retirement obligation

 

 

2,634

 

 

 

1,163

 

Income tax payable — non-current

 

 

342

 

 

 

358

 

Total Liabilities

 

 

126,625

 

 

 

114,586

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, par value $0.01 per share, authorized 10,000,000 shares;

   none issued or outstanding

 

 

 

 

 

 

Common stock, par value $0.01 per share, authorized 100,000,000 shares;

   46,147,518 shares issued and 44,382,562 shares outstanding at December 31, 2015 and 45,830,244 shares issued and 44,069,092 shares outstanding

   at June 30, 2015

 

 

461

 

 

 

458

 

Additional paid-in capital

 

 

228,083

 

 

 

227,085

 

Retained earnings/(deficit)

 

 

12,211

 

 

 

(593

)

Less: 1,764,956 common shares in treasury, at cost, at December 31, 2015

   and 1,761,152 common shares in treasury, at cost, at June 30, 2015

 

 

(6,684

)

 

 

(6,661

)

Total Stockholders’ Equity

 

 

234,071

 

 

 

220,289

 

Total Liabilities and Stockholders’ Equity

 

$

360,696

 

 

$

334,875

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

3


Tuesday Morning Corporation

Consolidated Statements of Income (unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net sales

 

$

319,876

 

 

$

301,401

 

 

$

522,204

 

 

$

503,609

 

Cost of sales

 

 

207,197

 

 

 

192,355

 

 

 

336,851

 

 

 

322,629

 

Gross profit

 

 

112,679

 

 

 

109,046

 

 

 

185,353

 

 

 

180,980

 

Selling, general and administrative expenses

 

 

92,108

 

 

 

84,824

 

 

 

170,738

 

 

 

162,512

 

Operating income

 

 

20,571

 

 

 

24,222

 

 

 

14,615

 

 

 

18,468

 

Other income/(expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(215

)

 

 

(364

)

 

 

(649

)

 

 

(729

)

Other income/(expense), net

 

 

(335

)

 

 

58

 

 

 

(150

)

 

 

24

 

Other expense, net

 

 

(550

)

 

 

(306

)

 

 

(799

)

 

 

(705

)

Income before income taxes

 

 

20,021

 

 

 

23,916

 

 

 

13,816

 

 

 

17,763

 

Income tax provision

 

 

1,077

 

 

 

258

 

 

 

1,012

 

 

 

334

 

Net income

 

$

18,944

 

 

$

23,658

 

 

$

12,804

 

 

$

17,429

 

Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.43

 

 

$

0.54

 

 

$

0.29

 

 

$

0.40

 

Diluted

 

$

0.43

 

 

$

0.54

 

 

$

0.29

 

 

$

0.40

 

Weighted average number of common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,666

 

 

 

43,416

 

 

 

43,652

 

 

 

43,370

 

Diluted

 

 

43,691

 

 

 

43,777

 

 

 

43,685

 

 

 

43,691

 

Dividends per common share

 

$

 

 

$

 

 

$

 

 

$

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

4


Tuesday Morning Corporation

Consolidated Statements of Cash Flows (unaudited)

(In thousands)

 

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

2015

 

 

2014

 

Net cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

12,804

 

 

$

17,429

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

7,477

 

 

 

6,113

 

Amortization of financing fees

 

 

320

 

 

 

298

 

Loss on disposal of assets

 

 

522

 

 

 

408

 

Share-based compensation

 

 

942

 

 

 

2,600

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Inventories

 

 

(22,761

)

 

 

(705

)

Prepaid and other current assets

 

 

432

 

 

 

(315

)

Accounts payable

 

 

(663

)

 

 

(19,170

)

Accrued liabilities

 

 

10,920

 

 

 

2,329

 

Deferred rent

 

 

1,434

 

 

 

(621

)

Income taxes payable

 

 

896

 

 

 

451

 

Net cash provided by operating activities

 

 

12,323

 

 

 

8,817

 

Net cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of assets

 

 

35

 

 

 

 

Capital expenditures

 

 

(20,882

)

 

 

(4,215

)

Net cash used in investing activities

 

 

(20,847

)

 

 

(4,215

)

Net cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayments under revolving credit facility

 

 

 

 

 

(1,500

)

Proceeds under revolving credit facility

 

 

 

 

 

1,500

 

Payment of financing fees

 

 

(902

)

 

 

 

Purchase of treasury stock

 

 

(23

)

 

 

(98

)

Proceeds from the exercise of employee stock options

 

 

 

 

 

652

 

Net cash provided by/(used in) financing activities

 

 

(925

)

 

 

554

 

Net increase/(decrease)  in cash and cash equivalents

 

 

(9,449

)

 

 

5,156

 

Cash and cash equivalents, beginning of period

 

 

44,788

 

 

 

49,686

 

Cash and cash equivalents, end of period

 

$

35,339

 

 

$

54,842

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

5


Tuesday Morning Corporation

Notes to Condensed Consolidated Financial Statements (unaudited)

The terms “Tuesday Morning,” the “Company,” “we,” “us” and “our” as used in this Quarterly Report on Form 10-Q refer to Tuesday Morning Corporation and its subsidiaries.

 

 

1.      Basis of presentation — The unaudited interim consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.  These financial statements include all adjustments, consisting only of those of a normal recurring nature, which, in the opinion of management, are necessary to present fairly the results of the interim periods presented and should be read in conjunction with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.  The consolidated balance sheet at June 30, 2015 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statements.  For further information, refer to the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.  The results of operations for the three and six month periods ended December 31, 2015 are not necessarily indicative of the results to be expected for the full fiscal year ending June 30, 2016, which we refer to as fiscal 2016.

The Company no longer presents a consolidated statement of comprehensive income as there are no other comprehensive income items in either the current or prior fiscal periods.

The preparation of unaudited interim consolidated financial statements, in conformity with GAAP, requires us to make assumptions and use estimates that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The most significant estimates relate to:  inventory valuation under the retail method and estimation of reserves and valuation allowances specifically related to insurance, income taxes and litigation.  Actual results could differ from these estimates.  Our fiscal year ends on June 30 and we operate our business as a single operating segment.

Certain reclassifications were made to prior period amounts to conform to the current period presentation.  None of the reclassifications affected our net income in any period.

 

 

2.      Share-based incentive plans — Stock Option Awards.   We have established the Tuesday Morning Corporation 1997 Long-Term Equity Incentive Plan, as amended (the “1997 Plan”), the Tuesday Morning Corporation 2004 Long-Term Equity Incentive Plan, as amended (the “2004 Plan”), the Tuesday Morning Corporation 2008 Long-Term Equity Incentive Plan (the “2008 Plan”) and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (the “2014 Plan”), which allow for the granting of stock options to directors, officers and key employees of the Company, and certain other key individuals who perform services for us and our subsidiaries.  Equity awards may no longer be granted under the 1997 Plan, the 2004 Plan, or the 2008 Plan, but equity awards granted under the 1997 Plan, the 2004 Plan and the 2008 Plan are still outstanding.

Stock options were awarded with a strike price at a fair market value equal to the average of the high and low trading prices of our common stock on the date of grant under the 1997 Plan and the 2004 Plan.  Stock options were awarded with a strike price at a fair market value equal to the closing price of our common stock on the date of the grant under the 2008 Plan and the 2014 Plan.

Options granted under the 1997 Plan and the 2004 Plan typically vest over periods of one to five years and expire ten years from the date of grant, while options granted under the 2008 Plan and the 2014 Plan typically vest over periods of one to four years and expire ten years from the date of grant.  The exercise prices of stock options outstanding on December 31, 2015, range between $1.24 per share and $21.86 per share.  The 1997 Plan and the 2004 Plan terminated pursuant to their terms as of December 29, 2007 and May 17, 2014, respectively, and we terminated the 2008 Plan as of November 12, 2014 in connection with the approval of the 2014 Plan.  There were approximately 3.4 million shares available for grant under the 2014 Plan at December 31, 2015.

Restricted Stock Awards.   The 1997 Plan, the 2004 Plan, the 2008 Plan, and the 2014 Plan authorize the grant of restricted stock awards to directors, officers, key employees and certain other key individuals who perform services for us and our subsidiaries.  Equity awards may no longer be granted under the 1997 Plan, the 2004 Plan, and the 2008 Plan, but restricted stock awards granted under the 2004 Plan and the 2008 Plan are still outstanding.  Restricted stock awards are not transferable, but bear certain rights of common stock ownership, including voting and dividend rights.  Shares are valued at the fair market value of our common stock at the date of award.  Shares may be subject to certain performance requirements.  If the performance requirements are not met, the restricted shares are forfeited.  At December 31, 2007, all shares under the 1997 Plan had been granted and the 1997 Plan terminated pursuant to its terms as of December 29, 2007.  Under the 2004 Plan, the 2008 Plan and the 2014 Plan, as of December 31,

6


2015, there were 702,594 shares of restricted stock outstanding, both performance-based and other, with award vesting periods of one to four years and a weighted average grant date fair value of $10.37 per share.

Performance-Based Restricted Stock Awards and Performance-Based Stock Option Awards.    As of December 31, 2015 there were 55,294 performance-based restricted stock awards and performance-based stock option awards outstanding under the 2008 Plan and the 2014 Plan.  

Share-based Compensation Costs.   Share-based compensation costs were recognized as follows (in thousands):

 

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Amortization of share-based compensation during the

   period

 

$

916

 

 

$

1,333

 

 

$

1,000

 

 

$

2,687

 

Amounts capitalized in ending inventory

 

 

(474

)

 

 

(365

)

 

 

(656

)

 

 

(748

)

Amounts recognized and charged to cost of sales

 

 

436

 

 

 

420

 

 

 

598

 

 

 

661

 

Amounts charged against income for the period before tax

 

$

878

 

 

$

1,388

 

 

$

942

 

 

$

2,600

 

 

 

 

3.      Commitments and contingencies — From time to time, the Company is involved in litigation which is incidental to its business.  In the Company’s opinion, no litigation to which the Company is currently a party is likely to have a material adverse effect on the Company’s consolidated financial condition, results of operations, or cash flows.

 

 

 

4.      Income per common share — The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share amounts):

 

 

 

Three Months Ended

December 31,

 

 

Six Months Ended

December 31,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net income

 

$

18,944

 

 

$

23,658

 

 

$

12,804

 

 

$

17,429

 

Less: Income to participating securities

 

 

(50

)

 

 

(200

)

 

 

(99

)

 

 

(147

)

Net income attributable to common shares

 

$

18,894

 

 

$

23,458

 

 

$

12,705

 

 

$

17,282

 

Weighted average number of common shares

   outstanding basic

 

 

43,666

 

 

 

43,416

 

 

 

43,652

 

 

 

43,370

 

Effect of dilutive stock equivalents

 

 

25

 

 

 

361

 

 

 

33

 

 

 

321

 

Weighted average number of common shares

   outstanding diluted

 

 

43,691

 

 

 

43,777

 

 

 

43,685

 

 

 

43,691

 

Net income per common share basic

 

$

0.43

 

 

$

0.54

 

 

$

0.29

 

 

$

0.40

 

Net income per common share diluted

 

$

0.43

 

 

$

0.54

 

 

$

0.29

 

 

$

0.40

 

 

For the quarters ended December 31, 2015 and December 31, 2014, options representing rights to purchase approximately 2.3 million weighted average shares and 86,517 weighted average shares, respectively, were not included in the diluted income per share calculation, because the assumed exercise of such options would have been anti-dilutive.  For the six months ended December 31, 2015 and December 31, 2014, options representing rights to purchase approximately 2.0 million weighted average shares and 223,015 weighted average shares, respectively, were not included in the diluted income per share calculation, because the assumed exercise of such options would have been anti-dilutive.

 

 

5.      Revolving credit facility — New Revolving Credit Facility.  On August 18, 2015, we entered into a new credit agreement providing for an asset-based, five-year senior secured revolving credit facility in the amount of up to $180.0 million which matures on August 18, 2020 (the “New Revolving Credit Facility”), and which replaced our previous revolving credit facility.  The availability of funds under the New Revolving Credit Facility is limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitments under the New Revolving Credit Facility. Our indebtedness under the New Revolving Credit Facility is secured by a lien on substantially all of our assets. The New Revolving Credit Facility contains certain restrictive covenants, which affect, among others, our ability to incur liens or incur additional indebtedness, change the nature of our business, sell assets or merge or consolidate with any other entity, or make investments or acquisitions unless they meet certain requirements. The New Revolving Credit Facility requires that we satisfy a fixed charge coverage ratio at any time that our availability is less than the greater of 10% of our calculated borrowing base or, $12.5 million. Our New Revolving Credit Facility may, in some instances, limit our ability to pay cash dividends and repurchase our common stock. In order for the borrower under the New Revolving Credit Facility, our subsidiary, to make a restricted payment to us for the payment of a dividend or a repurchase of shares, we must, among other things, maintain availability of

7


20% of the lesser of our calculated borrowing base or our lenders’ aggregate commitments under the New Revolving Credit Facility on a pro forma basis for a specified period prior to and immediately following the restricted payment.  As of December 31, 2015, we were in compliance with all of the New Revolving Credit Facility covenants.  

At December 31, 2015, we had no amounts outstanding under the New Revolving Credit Facility, $5.8 million of outstanding letters of credit and availability of $132.8 million under the New Revolving Credit Facility.  Letters of credit under the New Revolving Credit Facility are primarily for self-insurance purposes.  We incur commitment fees of up to 0.25% on the unused portion of the New Revolving Credit Facility.  Any borrowing under the New Revolving Credit Facility incurs interest at LIBOR or the prime rate, plus an applicable margin, at our election (except with respect to swing loans, which incur interest solely at the prime rate plus the applicable margin).  These rates are increased or reduced as our average daily availability changes.  Interest expense for the second quarter of the current fiscal year of $0.2 million was comprised of commitment fees of $0.1 million and the amortization of financing fees of $0.1 million.  Interest expense for the second quarter of the prior fiscal year of $0.4 million was comprised of commitment fees of $0.2 million and the amortization of financing fees of $0.2 million.  Interest expense for the six months ended December 31, 2015 of $0.6 million was comprised of commitment fees of $0.3 million and the amortization of financing fees of $0.3 million.   Interest expense for the six months ended December 31, 2014 of $0.7 million was comprised of commitment fees of $0.4 million and the amortization of financing fees of $0.3 million.  

Prior Revolving Credit Facility.  Prior to entering into the New Revolving Credit Facility on August 18, 2015, we were party to a credit agreement providing for an asset based, five year senior secured revolving credit facility in the amount of up to $180.0 million maturing on November 17, 2016. We incurred commitment fees of up to 0.375% on the unused portion of the prior facility. Any borrowing under the prior facility incurred interest at LIBOR or the prime rate, plus an applicable margin, at our election (except with respect to swing loans, which incurred interest solely at the prime rate plus the applicable margin). These rates increased or reduced as our average daily availability changed.

 

 

6.      Depreciation — Accumulated depreciation of owned equipment and property at December 31, 2015 and June 30, 2015 was $125.4 million and $122.1 million, respectively.

 

 

7.      Income taxes — Tuesday Morning Corporation or one of its subsidiaries files income tax returns in the U.S. federal, state and local taxing jurisdictions.  With a few exceptions, Tuesday Morning Corporation and its subsidiaries are no longer subject to state and local income tax examinations for years on or before June 30, 2010.  The U.S. federal income tax statute of limitations has expired for all taxable years ended on or before June 30, 2011.

 

The effective tax rates for the quarters ended December 31, 2015 and December 31, 2014 were 5.4% and 1.1%, respectively. The effective tax rates for the six months ended December 31, 2015 and December 31, 2014 were 7.3% and 1.9%, respectively.  A full valuation allowance is currently recorded against the Company’s deferred tax assets as the Company was in a three year cumulative loss position as of June 30, 2015 and June 30, 2014.  A deviation from the customary relationship between income tax expense and pretax income results from utilization of the valuation allowance.

 

 

8.      Cash and cash equivalents — Cash and cash equivalents are comprised of cash, credit card receivables and all highly liquid instruments with original maturities of three months or less.  Cash equivalents are carried at cost, which approximates fair value.  At December 31, 2015 and June 30, 2015, credit card receivables from third party consumer credit card providers were $3.8 million and $3.7 million, respectively.  Such receivables are generally collected within one week of the balance sheet date.

 

 

9.       Recent accounting pronouncements — In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified balance sheet.  Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet.  ASU 2015-17 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2016, with early adoption permitted.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  The Company has adopted ASU 2015-17 early as of the second quarter of fiscal 2016 on a retrospective basis.   Adoption did not have a material impact on the Company’s consolidated results of operations or financial position.

 

 

 

8


Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our unaudited interim consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.

Business Overview

 

·

We are a leading off‑price retailer specializing in selling deeply discounted, upscale decorative home accessories, housewares, seasonal goods and famous‑maker gifts. We are nationally known for providing a fresh selection of brand name, high-quality merchandise – never seconds or irregulars – at prices generally below those of department and specialty stores, catalogues and online retailers. We opened our first store in 1974 and operated 764 stores in 40 states as of December 31, 2015 and 792 stores in 41 states as of December 31, 2014. Our strong everyday value proposition is also supported with periodic circulars and direct mail that keep customers familiar with Tuesday Morning.

 

·

Net sales for the second quarter of fiscal 2016 were $319.9 million, an increase of $18.5 million, from $301.4 million for the same period last year.  Comparable store sales for the quarter ended December 31, 2015 increased by 8.4%, compared to the same period last year, which was due to an 8.5% increase in customer transactions, partially offset by a 0.1% decrease in average ticket.  Net sales for the first six months of fiscal 2016 were $522.2 million, an increase of $18.6 million, from $503.6 million for the same period last year.  Comparable store sales for the six months ended December 31, 2015 increased by 6.5%, compared to the same period last year, which was due to a 7.3% increase in customer transactions, partially offset by a 0.8% decrease in average ticket.

 

·

Cost of sales, as a percentage of net sales, for the second quarter of fiscal 2016 was 64.8%, compared to 63.8% for the same period last year.  Cost of sales, as a percentage of net sales, for the first six months of fiscal 2016 was 64.5%, compared to 64.1% for the same period last year. 

 

·

For the second quarter of fiscal 2016, selling, general and administrative expenses increased $7.3 million to $92.1 million, from $84.8 million for the same quarter last year. For the first six months of fiscal 2016, selling, general and administrative expenses increased $8.2 million to $170.7 million, from $162.5 million for the same period last year. 

 

·

We generated net income of $18.9 million and net income per share of $0.43 for the quarter ended December 31, 2015, compared to net income of $23.7 million and net income per share of $0.54 for the same period last year.  We generated net income of $12.8 million and net income per share of $0.29 for the six months ended December 31, 2015, compared to net income of $17.4 million and net income per share of $0.40 for the same period last year. 

 

·

Inventory levels at December 31, 2015 increased $22.8 million to $232.8 million from $210.0 million at June 30, 2015. Compared to the same date last year, inventories increased $24.3 million from $208.5 million at December 31, 2014.  Inventory turnover for the trailing five quarters was 2.6 turns, compared to the trailing five quarters as of December 31, 2014 of 2.7 turns.  

 

·

Cash and cash equivalents at December 31, 2015 decreased $9.5 million to $35.3 million from $44.8 million at June 30, 2015.  Compared to the same date last year, cash and cash equivalents decreased $19.5 million from $54.8 million at December 31, 2014.

Results of Operations

Our business is highly seasonal, with a significant portion of our net sales and most of our operating income generated in the quarter ending December 31. 

There can be no assurance that the trends in sales or operating results will continue in the future.

9


 

 Three Months Ended December 31, 2015

Compared to the Three Months Ended December 31, 2014

Net sales for the second quarter of fiscal 2016 were $319.9 million, an increase of $18.5 million from $301.4 million for the same period last year.  Comparable store sales for the second quarter of fiscal 2016 increased by 8.4% compared to the second quarter of fiscal 2015.  Stores are included in the same store sales calculation at the beginning of the quarter following the anniversary date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation.  The increase in comparable store sales for the second quarter of fiscal 2016 was comprised of an 8.5% increase in customer transactions, partially offset by a 0.1% decrease in average ticket. Our comparable store sales increase was partially offset by a decrease in our non-comparable store sales, which decreased a total of $5.7 million, resulting in a 190 basis point negative impact on our increase in net sales. Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed.  The non-comparable store sales decrease is driven by 43 store closures, partially offset by 15 store openings, which have occurred since the end of the second quarter of fiscal 2015.

                                                                                                                                        Store Openings/Closings

 

 

 

Three Months

Ended

December 31,

2015

 

 

Three Months

Ended

December 31,

2014

 

 

Fiscal Year

Ended

June 30,

2015

 

Stores open at beginning of period

 

 

757

 

 

 

801

 

 

 

810

 

Stores opened during the period

 

 

8

 

 

 

1

 

 

 

6

 

Stores closed during the period

 

 

(1

)

 

 

(10

)

 

 

(47

)

Stores open at end of period

 

 

764

 

 

 

792

 

 

 

769

 

 

We ended the second quarter of fiscal 2016 with 764 stores, compared to 792 stores at the end of the second quarter of the prior year.  We relocated seven existing stores during the second quarter of fiscal 2016 and five stores in the second quarter of the prior fiscal year.

Gross profit for the second quarter of fiscal 2016 was $112.7 million, an increase of 3.4% compared to $109.0 million in gross profit for the second quarter of fiscal 2015.  Gross profit as a percentage of net sales was 35.2% for the second quarter of fiscal 2016, compared to 36.2% for the second quarter of fiscal 2015.  The decrease in gross margin was primarily due to an increase in markdowns, including the acceleration of certain markdowns, an increase in supply chain and buying costs and slightly lower initial merchandise mark-up, partially offset by favorability in other costs.

Selling, general and administrative expenses increased $7.3 million for the second quarter of fiscal 2016 to $92.1 million, compared to $84.8 million for the second quarter of last year due to costs for our new Phoenix distribution center, increased advertising, higher store rent and depreciation, which were due in part to our strategy to improve store real estate, higher store labor costs, and higher corporate employee and recruiting costs, partially offset by favorable share based compensation expense in the current quarter as compared to the same quarter in the prior year due to executive vacancies in the current quarter.  As a percentage of net sales, selling, general and administrative expenses increased to 28.8% for the second quarter of fiscal 2016 from 28.1% for the second quarter of fiscal 2015.

Our operating income was $20.6 million for the second quarter of fiscal 2016 as compared to operating income of $24.2 million for the second quarter of fiscal 2015.

Income tax expense for the second quarter of fiscal 2016 was $1.1 million compared to $0.3 million for the same period last year.  The effective tax rates for the second quarter of fiscal 2016 and fiscal 2015 were 5.4% and 1.1%, respectively.  A full valuation allowance is currently recorded against the Company’s deferred tax assets, as the Company was in a three year cumulative loss position as of June 30, 2015 and June 30, 2014.  A deviation from the customary relationship between income tax expense and pretax income results from utilization of the valuation allowance.

We had net income of $18.9 million, or $0.43 per share, for the second quarter of fiscal 2016 compared to net income of $23.7 million, or $0.54 per share, for the second quarter of fiscal 2015. 

 

10


 Six Months Ended December 31, 2015

Compared to the Six Months Ended December 31, 2014

Net sales for the first six months of fiscal 2016 were $522.2 million, an increase of $18.6 million from $503.6 million for the same period last year.  Comparable store sales for the first six months of fiscal 2016 increased by 6.5% compared to the same period in fiscal 2015.  Stores are included in the same store sales calculation at the beginning of the quarter following the anniversary date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation.  The increase in comparable store sales for the first six months of fiscal 2016 was comprised of a 7.3% increase in customer transactions, partially offset by a 0.8% decrease in average ticket.  Our comparable store sales increase was partially offset by a decrease in our non-comparable store sales, which decreased a total of $12.6 million, resulting in a 250 basis point negative impact on our increase in net sales. Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed.  The non-comparable store sales decrease is driven by 62 store closures, partially offset by 16 store openings, which have occurred since the beginning of the prior fiscal year.

 

                                                                                                                                                 Store Openings/Closings

 

 

Six Months

Ended

December 31,

2015

 

 

Six Months

Ended

December 31,

2014

 

 

Fiscal Year

Ended

June 30,

2015

 

Stores open at beginning of period

 

 

769

 

 

 

810

 

 

 

810

 

Stores opened during the period

 

 

10

 

 

 

1

 

 

 

6

 

Stores closed during the period

 

 

(15

)

 

 

(19

)

 

 

(47

)

Stores open at end of period

 

 

764

 

 

 

792

 

 

 

769

 

 

 

We ended the first six months of fiscal 2016 with 764 stores, compared to 792 stores at the end of the first six months of the prior year.  We relocated 21 existing stores during the first six months of fiscal 2016 and 15 stores in the first six months of the prior fiscal year.

Gross profit for the first six months of fiscal 2016 was $185.4 million, an increase of 2.4% compared to $181.0 million in gross profit for the same period in fiscal 2015.  Gross profit as a percentage of net sales was 35.5% for the first six months of fiscal 2016, compared to 35.9% for the same period in fiscal 2015.  The decrease in gross margin was primarily due to an increase in markdowns, including the acceleration of certain markdowns, an increase in supply chain and buying costs, partially offset by slightly higher initial merchandise mark-up and favorability in other costs.

Selling, general and administrative expenses increased $8.2 million for the first six months of fiscal 2016 to $170.7 million, compared to $162.5 million for the same period in fiscal 2015 due to costs for our new Phoenix distribution center, higher store rent and depreciation, which were due in part to our strategy to improve store real estate, increased advertising, and higher corporate employee and recruiting costs, partially offset by favorable share based compensation expense in the current period as compared to the same period in the prior year due to executive vacancies in the current period.  As a percentage of net sales, selling, general and administrative expenses increased to 32.7% for the first six months of fiscal 2016 from 32.3% for the first six months of fiscal 2015.

Our operating income was $14.6 million for the first six months of fiscal 2016 as compared to operating income of $18.5 million for the same period in fiscal 2015.

Income tax expense for the first six months of fiscal 2016 was $1.0 million compared to $0.3 million for the same period last year.  The effective tax rates for the six months ended December 31, 2015 and December 31, 2014 were 7.3% and 1.9%, respectively.  A full valuation allowance is currently recorded against the Company’s deferred tax assets, as the Company was in a three year cumulative loss position as of June 30, 2015 and June 30, 2014.  A deviation from the customary relationship between income tax expense and pretax income results from utilization of the valuation allowance.

We had net income of $12.8 million, or $0.29 per share, for the first six months of fiscal 2016 compared to net income of $17.4 million, or $0.40 per share, for the first six months of fiscal 2015. 

11


Liquidity and Capital Resources

Cash Flows from Operating Activities

Net cash provided by operating activities for the six months ended December 31, 2015 and 2014 was $12.3 million and $8.8 million, respectively.  The $12.3 million of cash provided by operating activities for the six months ended December 31, 2015 was primarily due to net income of $12.8 million adjusted for non-cash items, including depreciation and amortization of $7.8 million, an increase in accrued liabilities of $10.9 million, along with increased deferred rent of $1.4 million, income taxes payable of $0.9 million and share based compensation of $0.9 million, partially offset by a decrease in accounts payable of $0.7 million and an increase in inventory of $22.8 million due to seasonal buying levels and an increased inventory position in preparation for the spring selling season. There were no significant changes to our vendor payment policy during the six months ended December 31, 2015.  The $8.8 million of cash provided by operating activities for the six months ended December 31, 2014 was primarily due to net income of $17.4 million adjusted for non-cash items, including depreciation and amortization of $6.4 million and increased accrued liabilities of $2.3 million, offset by a decrease in accounts payable of $19.2 million.

Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended December 31, 2015 and 2014 relates to capital expenditures.  Capital expenditures are primarily associated with store relocations and expansions, new store openings, capital improvements to existing stores, enhancements to our distribution center facilities, equipment, and systems along with improvements related to our corporate office and equipment.  Cash used in investing activities totaled $20.8 million and $4.2 million for the six months ended December 31, 2015 and 2014, respectively.  The increase in capital expenditures in the current year period as compared to the prior year period is primarily driven by $10.1 million of spending on our new Phoenix distribution center and related information technology and $3.9 million of spending on new, relocated, and expanded stores.

Cash Flows from Financing Activities

Net cash used in financing activities was $0.9 million for the six months ended December 31, 2015, compared to net cash provided by financing activities of $0.6 million for the six months ended December 31, 2014.  The cash used in the current year period for financing activities relates to the payment of financing costs for our new revolving credit facility.  The cash provided by financing activities in the prior year period was due to stock option exercises.

New Revolving Credit Facility

On August 18, 2015 we entered into a new credit agreement providing for an asset-based, five-year senior secured revolving credit facility in the amount of up to $180.0 million which matures on August 18, 2020 (the “New Revolving Credit Facility”), and which replaced our previous revolving credit facility.  The availability of funds under the New Revolving Credit Facility is limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitments under the New Revolving Credit Facility. Our indebtedness under the New Revolving Credit Facility is secured by a lien on substantially all of our assets. The New Revolving Credit Facility contains certain restrictive covenants, which affect, among others, our ability to incur liens or incur additional indebtedness, change the nature of our business, sell assets or merge or consolidate with any other entity, or make investments or acquisitions unless they meet certain requirements. The New Revolving Credit Facility requires that we satisfy a fixed charge coverage ratio at any time that our availability is less than the greater of 10% of our calculated borrowing base or, $12.5 million. Our New Revolving Credit Facility may, in some instances, limit our ability to pay cash dividends and repurchase our common stock. In order for the borrower under the New Revolving Credit Facility, our subsidiary, to make a restricted payment to us for the payment of a dividend or a repurchase of shares, we must, among other things, maintain availability of 20% of the lesser of our calculated borrowing base or our lenders’ aggregate commitments under the New Revolving Credit Facility on a pro forma basis for a specified period prior to and immediately following the restricted payment. As of December 31, 2015, we were in compliance with all of the New Revolving Credit Facility covenants.

At December 31, 2015, we had no amounts outstanding under the New Revolving Credit Facility, $5.8 million of outstanding letters of credit and availability of $132.8 million under the New Revolving Credit Facility.  Letters of credit under the New Revolving Credit Facility are primarily for self-insurance purposes.  We incur commitment fees of up to 0.25% on the unused portion of the New Revolving Credit Facility.  Any borrowing under the New Revolving Credit Facility incurs interest at LIBOR or the prime rate, plus an applicable margin, at our election (except with respect to swing loans, which incur interest solely at the prime rate plus the applicable margin).  These rates are increased or reduced as our average daily availability changes.  Interest expense for the second quarter of the current fiscal year of $0.2 million was comprised of commitment fees of $0.1 million and the amortization of financing fees of $0.1 million.  Interest expense for the second quarter of the prior fiscal year of $0.4 million was comprised of commitment fees of $0.2 million and the amortization of financing fees of $0.2 million.  Interest expense for the six months ended December 31, 2015 of $0.6 million was comprised of commitment fees of $0.3 million and the amortization of financing fees of $0.3 million.   Interest expense for the six months ended December 31, 2014 of $0.7 million was comprised of commitment fees of $0.4 million and the amortization of financing fees of $0.3 million.  

12


Liquidity

We finance our operations with funds generated from operating activities, available cash and cash equivalents and borrowings under our revolving credit facility.  Cash and cash equivalents were $35.3 million as of December 31, 2015 and $54.8 million at December 31, 2014.  Our cash flows will continue to be utilized for the operation of our business and the use of any excess cash will be determined by our Board of Directors.  Our borrowings have historically peaked during the second fiscal quarter as we build inventory levels prior to the holiday selling season.  Given the seasonality of our business, the amount of borrowings under our New Revolving Credit Facility may fluctuate materially depending on various factors, including the time of year, our needs and the opportunity to acquire merchandise inventory.  Our primary uses for cash provided by operating activities relate to funding our ongoing business activities and planned capital expenditures.  We may also use available cash to repurchase shares of our common stock. We believe funds generated from our operations, available cash and cash equivalents and borrowings under our New Revolving Credit Facility will be sufficient to fund our operations for the next year.  If our capital resources are not sufficient to fund our operations, we may seek additional debt or equity financing.  However, we can offer no assurances that we will be able to obtain additional debt or equity financing on reasonable terms.

Off-Balance Sheet Arrangements and Contractual Obligations

We had no off-balance sheet arrangements as of December 31, 2015.

As of December 31, 2015, there have been no material changes outside the ordinary course of business from the disclosures relating to contractual obligations contained under “Contractual Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.

Critical Accounting Policies

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our significant estimates which are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates.

There were no changes to our critical accounting policies during the second quarter of fiscal 2016.

Under the retail inventory method, permanent markdowns result in cost reductions in inventory at the time the markdowns are taken.  We also utilize promotional markdowns for specific marketing efforts used to drive higher sales volume and customer transactions for a specified period of time.  Promotional markdowns do not impact the value of unsold inventory and thus do not impact cost of sales until the merchandise is sold.  Markdowns during the second quarter of fiscal 2016 were 4.0% of sales compared to 3.5% of sales for the same period last year.  If our sales forecasts are not achieved, we may be required to record additional markdowns that could exceed historical levels.  The effect of a 0.5% markdown in the value of our inventory at December 31, 2015 would result in a decline in gross profit and net income per share for the second quarter of fiscal 2016 of $1.2 million and $0.03, respectively.

For a further discussion of the judgments we make in applying our accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.

Recent Accounting Pronouncements

 

In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires an entity to classify deferred tax liabilities and assets as noncurrent within a classified balance sheet.  Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet.  ASU 2015-17 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2016, with early adoption permitted.  This update may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.  The Company has adopted ASU 2015-17 early as of the second quarter of fiscal 2016 on a retrospective basis.   Adoption did not have a material impact on the Company’s consolidated results of operations or financial position.

 

13


Forward-Looking Statements

This Quarterly Report on Form 10-Q 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.  These statements may be found throughout this Quarterly Report on Form 10-Q, particularly in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others. 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 consider statements that contain these words carefully because they describe our current expectations, plans, strategies and goals and our current beliefs concerning future business conditions, our future results of operations, our future financial position, and our current business outlook or state other “forward-looking” information.

Readers are referred to Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2015 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:

 

·

our ability to successfully implement our long-term business strategy;

 

·

changes in economic and political conditions which may adversely affect consumer spending;

 

·

our failure to identify and respond to changes in consumer trends and preferences;

 

·

our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand;

 

·

our ability to successfully manage our inventory balances profitably;

 

·

loss of or disruption in our centralized distribution center;

 

·

loss or departure of one or more members of our senior management or other key management employees;

 

·

increased or new competition;

 

·

our ability to successfully execute our strategy of opening new stores and relocating and expanding existing stores;

 

·

increases in fuel prices and changes in transportation industry regulations or conditions;

 

·

our ability to generate strong cash flows from operations and to continue to access credit markets;

 

·

increases in the cost or a disruption in the flow of our imported products;

 

·

the success of our marketing, advertising and promotional efforts;

 

·

our ability to attract, train and retain quality associates in appropriate numbers, including key associates and management;

 

·

seasonal and quarterly fluctuations;

 

·

our ability to maintain and protect our information technology systems and technologies;

 

·

our ability to protect the security of information about our business and our customers, suppliers, business partners and employees;

 

·

our ability to comply with existing, changing, and new government regulations;

 

·

our ability to manage litigation risks from our customers, employees and other third parties;

 

·

our ability to manage risks associated with product liability claims and product recalls;

 

·

the impact of adverse local conditions, natural disasters and other events; and

 

·

our ability to manage the negative effects of inventory shrinkage.

The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made.  Except as may be required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.  Investors are cautioned not to place undue reliance on any forward-looking statements.

 

 

 

14


Item 3.

Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risks as disclosed in our Annual Report on Form 10-K filed for the fiscal year ended June 30, 2015.

 

 

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

Based on our management’s evaluation (with participation of our principal executive officer and our principal financial officer), our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e)  under the Securities Exchange Act of 1934, as amended) were effective as of December 31, 2015 to provide reasonable assurance that information required to be disclosed by us in this quarterly report on Form 10-Q was (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that their objectives are met and, as set forth above, our chief executive officer and chief financial officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that their objectives were met.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

15


PART II - OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

From time to time, the Company is involved in litigation which is incidental to its business.  In the Company’s opinion, no litigation to which the Company is currently a party is likely to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

 

 

Item 1A.

Risk Factors

We believe there have been no material changes from our risk factors previously disclosed in Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2015.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Information regarding our repurchases of equity securities during the three months ended December 31, 2015 is provided in the following table:

 

Period

 

Total Number

of Shares

Repurchased

 

 

Average Price Paid

per Share

 

 

Total Number

of Shares

Purchased as

Part of

Publicly

Announced

Plans or

Programs

 

 

Approximate

Dollar Value of

Shares That May

Yet Be Purchased

Under the Plans or

Programs

(1)

 

October 1 through October 31

 

 

 

 

$

 

 

 

 

 

$

3,339,468

 

November 1 through November 30

 

 

2,893

 

 

$

6.01

 

 

 

2,893

 

 

$

3,322,095

 

December 1 through December 31

 

 

911

 

 

$

6.39

 

 

 

911

 

 

$

3,316,270

 

Total

 

 

3,804

 

 

$

6.10

 

 

 

3,804

 

 

$

3,316,270

 

 

 

(1)

On August 22, 2011, the Company’s Board of Directors adopted a share Repurchase Program pursuant to which the Company is authorized to repurchase from time to time shares of Common Stock, up to a maximum of $5.0 million in aggregate purchase price for all such shares (the “Repurchase Program”).  On January 20, 2012, the Company’s Board of Directors increased the authorization for stock repurchases under the Repurchase Program from $5.0 million to a maximum of $10.0 million.  The Repurchase Program does not have an expiration date and may be amended, suspended or discontinued at any time.  The Board will periodically evaluate the Repurchase Program and there can be no assurances as to the number of shares of Common Stock the Company will repurchase.  During the three months ended December 31, 2015, 3,804 shares were repurchased under the Repurchase Program for a total cost (excluding commissions) of approximately $23,000.

 

 

 

16


Item 6.

Exhibits

 

Exhibit
Number

 

Description

 

 

 

    3.1.1

 

Certificate of Incorporation of Tuesday Morning Corporation (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (File No. 333-46017) as filed with the Securities and Exchange Commission (the “Commission”) on February 10, 1998)

 

 

 

    3.1.2

 

Certificate of Amendment to the Certificate of Incorporation of the Company dated March 25, 1999 (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1/A (File No. 333-74365) as filed with the Commission on March 29, 1999)

 

 

 

    3.1.3

 

Certificate of Amendment to the Certificate of Incorporation of the Company dated May 7, 1999 (incorporated by reference to Exhibit 3.1.3 to the Company’s Form 10-Q (File No. 000-19658) as filed with the Commission on May 2, 2005)

 

 

 

    3.2

 

Amended and Restated Bylaws of the Company dated September  16, 2014 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K (File No. 000-19658) as filed with the Commission on September 19, 2014)

 

 

 

    10.1

 

Employment Agreement, dated December 11, 2015, by and between Steven R. Becker and the Company (the “Becker Employment Agreement”) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

    10.2

 

Form of Nonqualified Stock Option Award Agreement (Time-Based Vesting) under the Becker Employment Agreement and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

    10.3

 

Form of Nonqualified Stock Option Award Agreement (Performance-Based Vesting) under the Becker Employment Agreement and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

 

 

 

    31.1

 

Certification by the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

    31.2

 

Certification by the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

    32.1

 

Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

 

    32.2

 

Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

 

  101.INS

 

XBRL Instance Document

 

 

 

  101.SCH

 

XBRL Taxonomy Schema Document

 

 

 

  101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

 

 

 

  101.DEF

 

XBRL Taxonomy Definition Linkbase Document

 

 

 

  101.LAB

 

XBRL Taxonomy Label Linkbase Document

 

 

 

  101.PRE

 

XBRL Taxonomy Presentation Linkbase Document

 

*

The certifications attached hereto as Exhibit 32.1 and Exhibit 32.2 are furnished with this Quarterly Report on Form 10-Q and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Management contract or compensatory plan or arrangement

 

17


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

TUESDAY MORNING CORPORATION

 

(Registrant)

 

 

 

DATE:    January 29, 2016

By:

 

/s/ Stacie R. Shirley

 

 

 

Stacie R. Shirley

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

 

18


EXHIBIT INDEX

 

Exhibit
Number

 

Description

 

 

 

    3.1.1

 

Certificate of Incorporation of Tuesday Morning Corporation (the “Company”) (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (File No. 333-46017) as filed with the Securities and Exchange Commission (the “Commission”) on February 10, 1998)

 

 

 

    3.1.2

 

Certificate of Amendment to the Certificate of Incorporation of the Company dated March 25, 1999 (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form S-1/A (File No. 333-74365) as filed with the Commission on March 29, 1999)

 

 

 

    3.1.3

 

Certificate of Amendment to the Certificate of Incorporation of the Company dated May 7, 1999 (incorporated by reference to Exhibit 3.1.3 to the Company’s Form 10-Q (File No. 000-19658) as filed with the Commission on May 2, 2005)

 

 

 

    3.2

 

Amended and Restated Bylaws of the Company dated September  16, 2014 (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K (File No. 000-19658) as filed with the Commission on September 19, 2014)

 

 

 

    10.1

 

Employment Agreement, dated December 11, 2015, by and between Steven R. Becker and the Company (the “Becker Employment Agreement”) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

    10.2

 

Form of Nonqualified Stock Option Award Agreement (Time-Based Vesting) under the Becker Employment Agreement and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

    10.3

 

Form of Nonqualified Stock Option Award Agreement (Performance-Based Vesting) under the Becker Employment Agreement and the Tuesday Morning Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K (File No. 000-19658) as filed with the Commission on December 14, 2015)†

 

 

 

 

 

 

    31.1

 

Certification by the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

    31.2

 

Certification by the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

    32.1

 

Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

 

    32.2

 

Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C §1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

 

 

 

  101.INS

 

XBRL Instance Document

 

 

 

  101.SCH

 

XBRL Taxonomy Schema Document

 

 

 

  101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

 

 

 

  101.DEF

 

XBRL Taxonomy Definition Linkbase Document

 

 

 

  101.LAB

 

XBRL Taxonomy Label Linkbase Document

 

 

 

  101.PRE

 

XBRL Taxonomy Presentation Linkbase Document

 

*

The certifications attached hereto as Exhibit 32.1 and Exhibit 32.2 are furnished with this Quarterly Report on Form 10-Q and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Management contract or compensatory plan or arrangement

19

tues-ex311_264.htm

EXHIBIT 31.1

CERTIFICATION

I, Steven R. Becker, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Tuesday Morning Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 29, 2016

By:

/s/ Steven R. Becker

 

 

Steven R. Becker

 

 

Chief Executive Officer

 

tues-ex312_6.htm

EXHIBIT 31.2

CERTIFICATION

I, Stacie R. Shirley, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Tuesday Morning Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: January 29, 2016

By:

/s/ Stacie R. Shirley

 

 

Stacie R. Shirley

 

 

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

 

tues-ex321_12.htm

EXHIBIT 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF TUESDAY MORNING CORPORATION PURSUANT TO

18 U.S.C. §1350

I, Steven R. Becker, the Chief Executive Officer of Tuesday Morning Corporation, hereby certify that to the best of my knowledge and belief:

1.

The quarterly report on Form 10-Q of Tuesday Morning Corporation for the period ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in the above-mentioned report fairly presents, in all material respects, the financial condition and results of operations of Tuesday Morning Corporation.

 

Date: January 29, 2016

By:

/s/ Steven R. Becker

 

 

Steven R. Becker

 

 

Chief Executive Officer

 

 

tues-ex322_8.htm

EXHIBIT 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF TUESDAY MORNING CORPORATION PURSUANT TO

18 U.S.C. §1350

I, Stacie R. Shirley, the Chief Financial Officer of Tuesday Morning Corporation, hereby certify that to the best of my knowledge and belief:

1.

The quarterly report on Form 10-Q of Tuesday Morning Corporation for the period ended December 31, 2015 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.

The information contained in the above-mentioned report fairly presents, in all material respects, the financial condition and results of operations of Tuesday Morning Corporation.

 

Date: January 29, 2016

By:

/s/ Stacie R. Shirley

 

 

Stacie R. Shirley

 

 

Executive Vice President, Chief Financial Officer

and Treasurer

(Principal Financial Officer)