<PAGE>
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Quarter Ended June 30, 1996 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 Identification No.)
incorporation or organization)
14621 INWOOD RD., DALLAS, TEXAS 75244
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (214) 387-3562
NONE
(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___X____ No_______
Common stock outstanding as of June 30, 1996: 7,869,086 shares
<PAGE>
TUESDAY MORNING CORPORATION
PART 1 - FINANCIAL INFORMATION
Page No.
Item 1 - Financial Statements ________
<TABLE>
<CAPTION>
<S> <C>
Consolidated Balance Sheets as of June 30, 1996,
June 30, 1995 and December 31, 1995 1
Consolidated Statements of Operations for the
Three Months and Six Months Ended
June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
</TABLE>
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Balance Sheets
Unaudited
<TABLE>
<CAPTION>
June 30, June 30, Dec. 31,
1996 1995 1995
--------- -------- --------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,748 $ 1,841 $ 6,276
Federal income tax receivable....................... 469 1,534 -
Inventories......................................... 91,622 77,265 52,367
Prepaid expenses.................................... 1,274 1,493 993
Other current assets................................ 444 477 458
-------- -------- --------
Total current assets......................... 95,557 82,610 60,094
-------- -------- --------
Property, plant and equipment, at cost:
Land................................................ 8,356 8,356 8,356
Buildings........................................... 13,285 12,943 12,989
Furniture and fixtures.............................. 16,379 15,462 15,584
Equipment........................................... 13,994 12,913 13,433
Leasehold improvements.............................. 2,032 1,842 1,967
54,046 51,516 52,329
Less accumulated depreciation & amortization........ (23,616) (19,656) (21,267)
-------- -------- --------
Net property, plant and equipment............ 30,430 31,860 31,062
-------- -------- -------
Other assets, at cost:
Due from Officer.................................... 2,441 1,881 2,211
Other assets........................................ 762 862 876
-------- -------- --------
Total Assets............................................. $129,190 $117,213 $ 94,243
======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of mortgages................... $ 1,021 $ 936 $ 1,021
Short term notes payable............................ 367 -
Current installments of capital lease obligation.... 795 647 755
Accounts payable.................................... 26,753 17,913 12,707
Accrued expenses
Sales tax........................................ 454 466 1,662
Other............................................ 3,127 1,805 2,467
Deferred income taxes............................... 231 303 231
Due to officer...................................... -
Federal income taxes payable........................ 2,136
--------- --------- --------
Total current liabilities.................... 32,381 22,437 20,979
--------- --------- --------
Mortgages on land, buildings and equipment............... 5,104 6,210 5,615
Long term notes payable.................................. 24,695 27,563 -
Long term capital lease obligation....................... 594 1,459 1,007
Deferred income taxes.................................... 2,994 2,920 2,994
Shareholders' equity:
Preferred stock of $1 par value per share.
Authorized 2,000,000 shares,none issued........... - - -
Common stock of $.01 par value per share.
Authorized 20,000,000 shares; issued
8,143,586 shares at June 30, 1996
8,139,086 shares at June 30, 1995
8,143,586 shares at December 31, 1995............. 81 81 81
Additional paid-in capital.......................... 18,295 18,367 18,277
Retained earnings................................... 47,074 40,343 47,318
Less: treasury stock
274,500 shares at June 30, 1996
299,500 shares at June 30, 1995
274,500 shares at December 31, 1995............... (2,028) (2,167) (2,028)
--------- --------- --------
Total shareholders' equity................... 63,422 56,624 63,648
--------- --------- --------
Total Liabilities and Shareholders' Equity............... $ 129,190 $ 117,213 $ 94,243
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
(1)
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
1996 1995 1996 1995
-------- -------- --------- --------
(In thousands, (In thousands,
except per share data) except per share data)
<S> <C> <C> <C> <C>
Net sales....................................................... $ 54,286 $ 47,977 $ 90,026 $ 77,935
Cost of sales................................................... 36,068 32,050 58,411 51,659
-------- -------- -------- --------
Gross profit............................................ 18,218 15,927 31,615 26,276
Selling, general and administrative expenses.................... 17,094 15,513 31,279 28,615
-------- -------- -------- --------
Operating income (loss)................................. 1,124 414 336 (2,339)
-------- -------- -------- --------
Other income (expense):
Interest income.............................................. 76 46 135 97
Interest expense............................................. (677) (856) (1,154) (1,494)
Other income ................................................ 149 151 299 244
-------- -------- -------- --------
(452) (659) (720) (1,153)
-------- -------- -------- --------
Income (loss) before income taxes....................... 672 (245) (384) (3,492)
Income tax (benefit)............................................ 238 (91) (142) (1,292)
-------- -------- -------- --------
Net income (loss)....................................... $ 434 $ (154) $ (242) $ (2,200)
======== ======== ======== ========
Net income (loss) per share.................................. $ 0.05 $ (0.02) $ (0.03) $ (0.28)
======== ======== ======== ========
Weighted average common share and share equivalents............. 8,319 7,836 7,852 7,817
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(2)
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION> Six Months Ended
June 30,
-------------------------
1996 1995
--------- --------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers............................................ $ 90,026 $ 77,935
Cash paid to suppliers and employees.................................... (112,921) (104,030)
Interest received....................................................... 135 97
Interest paid........................................................... (1,154) (1,494)
Income taxes paid....................................................... (2,463) (1,230)
--------- --------
Net cash used by operating activities................................... (26,377) (28,722)
--------- --------
Cash flows from investing activities:
Loans to officers....................................................... (230) (82)
Capital expenditures.................................................... (1,750) (1,141)
--------- --------
Net cash used by investing activities................................... (1,980) (1,223)
--------- --------
Cash flows from financing activities:
Proceeds from short and long term borrowings............................ 24,695 27,563
Payment of short-term borrowings........................................ - 367
Payment of mortgages.................................................... (511) (553)
Principal payments under capital lease obligation....................... (373) (322)
Proceeds from common stock offering..................................... - -
Proceeds from exercise of common
stock options/stock purchase plan.................................. 18 196
--------- --------
Net cash provided by financing activities............................... 23,829 27,251
--------- --------
Net decrease in cash and cash equivalents................................... (4,528) (2,694)
Cash and cash equivalents at beginning of period............................ 6,276 4,535
Cash and cash equivalents at end of period.................................. $ 1,748 $ 1,841
========= ========
Reconciliation of net loss to net cash
used by operating activities:
Net loss.................................................................... $ (242) $ (2,200)
--------- --------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization........................................ 2,382 2,234
Change in operating assets and liabilities:
Increase in federal income taxes receivable........................ (469) (1,534)
Increase in inventories............................................ (39,255) (30,451)
Increase (decrease) in prepaid expense............................. (281) 181
Decrease in other current assets................................... 14 172
Decrease in other assets and liabilities........................... 112 116
Increase in accounts payable....................................... 14,046 4,997
Decrease in accrued expenses....................................... (548) (1,249)
Decrease in federal income taxes payable........................... (2,136) (988)
--------- --------
Total adjustments................................................ (26,135) (26,522)
--------- --------
Net cash used by operating activities....................................... $ (26,377) $(28,722)
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. The consolidated interim financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These unaudited 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 Company for the interim periods presented and should be
read in conjunction with the consolidated financial statements and notes
thereto in the Company's 1995 Annual Report.
2. Net income/(Loss) per share amounts are based on the weighted average number
of shares and dilutive share equivalents outstanding during the period.
3. The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
4. Notes payable under the terms of the Company's revolving line of credit
agreement are classified between current and long term in accordance with the
terms of the agreement. This agreement is discussed in more detail in
Liquidity and Capital Resources on the next page.
(4)
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal liquidity need is for inventory purchases. The
Company's two principal sources of liquidity have been its operating cash flow
and borrowings under bank lines of credit. The Company entered into a three year
$45 million revolving line of credit agreement with a new bank on July 15, 1994.
This agreement is secured by a pledge of the Company's assets. Borrowings
available under the agreement were limited to the lesser of $45 million or 50%
(60% for up to 120 days during each year) of eligible inventory, as defined.
The availability was further reduced by the aggregate undrawn amount of
outstanding letters of credit. This agreement was amended on June 25, 1996 to
increase the amount to $55 million from July 1 to October 31 of each year,
extend the maturity date to July, 1999 and lower the interest rate by 1/2%.
Based on the line of credit agreement, the Company had the ability to utilize
$40.5 million in borrowings and letters of credit at June 30, 1996. On June 30,
1996, the Company had $24.7 million of long term borrowings from banks. On the
same date, the outstanding letters of credit totaled approximately $9.5 million.
The agreement requires the Company and its subsidiaries to comply with various
financial and other covenants, including the maintenance of certain operating
and financial ratios, and they contain substantial limitations on dividends,
indebtedness, liens, capital expenditures, asset sales and certain other items.
At June 30, 1996, the Company was in compliance with these covenants.
Management believes that the agreement will be adequate to meet its needs for
liquidity and growth.
In September 1995, the Company entered into a $7.1 million floating rate
mortgage collateralized by a first lien deed of trust on all of the Company's
owned real estate. This mortgage refinanced and consolidated mortgages which
existed prior to 1995. In connection with this mortgage, the Company is
required to maintain a minimum net worth and to comply with other financial
covenants. At June 30, 1996, the Company was in compliance with these
covenants.
The Company's principal capital requirement has been the funding of the
development of new stores and the resulting increase in inventory requirements.
The Company plans to open 25-30 stores during 1996 and plans to fund these from
operating cash flow.
INVENTORY:
The Company's inventory increased from $52.4 million at year end to $91.6
million at June 30, 1996. This is an increase of $39.2 million from December
31, 1995, and reflects normal seasonal activity. As reflected on the following
chart, store level inventory decreased when compared to December 31, 1995 and to
June 30, 1995. Total inventory increased $14.3 million from June 30, 1995, as a
result of an increase in store count and an increased sales plan for the fall of
1996 compared to 1995.
(5)
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INVENTORY LEVELS BY LOCATION
(IN MILLIONS)
<TABLE>
<CAPTION>
6/30/96 6/30/95 12/31/95
------- ------- --------
<S> <C> <C> <C>
Stores $33.4 $34.9 $36.3
Warehouse 58.2 42.4 16.1
----- ----- -----
$91.6 $77.3 $52.4
===== ===== =====
</TABLE>
STORE OPENINGS/CLOSINGS
<TABLE>
<CAPTION>
Six Months Six Months
Ending Ending FYE
6/30/96 6/30/95 12/31/95
---------- ---------- --------
<S> <C> <C> <C>
Stores Open at
Beginning of Period 260 246 246
Stores Opened 16 16 32
Stores Closed (5) (12) (18)
--- --- ---
Stores Open at End
of Period 271 250 260
=== === ===
</TABLE>
(6)
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1995
The Company's loss of $0.2 million or $0.03 per share for the first half of 1996
is compared to a loss of $2.2 million or $0.28 per share for the first half of
1995. The Company reported a reduced loss for the first half due to the
leverage obtained from increased sales and gross margin improvements while
expenses remained relatively consistent on a per store basis.
During the first half of 1996, comparable store sales increased 8.5%. Total
gross profit increased from $26.3 million to $31.6 million due to increased
sales volume. The gross profit percent increased from 33.7% to 35.1% as a
result of improved product selection and reduced shrinkage. Selling general and
administrative expenses increased 9.3% from $28.6 million to $31.3 million.
This difference is due to an increase in the number of stores and an increase in
advertising expenses. Interest expense decreased from $1.5 million to $1.2
million due to the net impact of reduced borrowings caused by 1995's profits and
lower interest rates, partially offset by increased inventory levels.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
For the quarter ended June 30, 1996, the Company made $0.4 million or $0.05 per
share versus a loss of $0.2 million or $0.02 per share for the same period
during 1995. During the quarter, comparable store sales increased 6.7%. Total
gross profit increased from $15.9 million to $18.2 million due to increased
sales volume. The gross profit percentage increased from 33.2% to 33.6%.
Selling, general and administrative expenses increased from $15.5 to $17.1, and
interest expense decreased from $0.9 to $0.8 for the reasons previously
discussed.
(7)
<PAGE>
TUESDAY MORNING CORPORATION
PART II - OTHER INFORMATION
Not Applicable
SIGNATURES
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: August 1, 1996 /s/ Mark E. Jarvis
-----------------------------------
Mark E. Jarvis, Senior Vice President
(8)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,748
<SECURITIES> 0
<RECEIVABLES> 469
<ALLOWANCES> 0
<INVENTORY> 91,622
<CURRENT-ASSETS> 95,557
<PP&E> 54,046
<DEPRECIATION> 23,616
<TOTAL-ASSETS> 129,190
<CURRENT-LIABILITIES> 32,381
<BONDS> 0
0
0
<COMMON> 81
<OTHER-SE> 63,341
<TOTAL-LIABILITY-AND-EQUITY> 129,190
<SALES> 90,026
<TOTAL-REVENUES> 0
<CGS> 58,411
<TOTAL-COSTS> 31,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,154
<INCOME-PRETAX> (384)
<INCOME-TAX> (142)
<INCOME-CONTINUING> (242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (242)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
