<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 March 31, 1999 Commission File Number 333-46013
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., ADDISON, TEXAS 75001-3768
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (972) 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 March 31, 1999: 26,802,251 shares
<PAGE>
TUESDAY MORNING CORPORATION
PART 1 - FINANCIAL INFORMATION
Page No.
Item 1 - Financial Statements
--------
Consolidated Balance Sheets as of March 31, 1999,
March 31, 1998 and December 31, 1998 1
Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Balance Sheets
In Thousands (except for share data)
<TABLE>
<CAPTION>
Unaudited Unaudited Audited
March 31, March 31, Dec. 31,
ASSETS 1999 1998 1998
--------- --------- ---------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 1,206 $ 1,602 $ 20,282
Inventories........................................................................ 145,568 134,124 96,743
Prepaid expenses................................................................... 1,976 1,455 1,114
Other current assets............................................................... 484 480 466
Income taxes receivable............................................................ - 924 -
Deferred income taxes.............................................................. 354 - 354
--------- --------- ---------
Total current assets........................................................... 149,588 138,585 118,959
--------- --------- ---------
Property and equipment, at cost..................................................... 59,958 63,676 60,355
Less accumulated depreciation & amortization....................................... (35,371) (32,303) (36,263)
--------- --------- ---------
Net property and equipment..................................................... 24,587 31,373 24,092
--------- --------- ---------
Other assets, at cost:
Due from officers.................................................................. 3,403 3,215 3,345
Deferred financing costs........................................................... 8,087 9,407 8,452
Other assets....................................................................... 291 290 471
--------- --------- ---------
Total Assets................................................................... $ 185,956 $ 182,870 $ 155,319
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Installments of mortgages.......................................................... $ 1,021 $ 1,021 $ 1,021
Revolving credit facility.......................................................... 11,740 18,001 -
Installments of notes payable...................................................... 4,310 2,700 3,398
Installments of capital lease obligation........................................... 101 330 161
Accounts payable................................................................... 39,105 32,238 23,081
Accrued liabilities
Sales taxes....................................................................... 1,260 977 3,039
Interest expense.................................................................. 3,530 4,977 2,195
Other............................................................................. 3,884 4,812 6,712
Deferred income taxes.............................................................. - 55 -
Income taxes payable............................................................... 1,064 - 8,845
--------- --------- ---------
Total current liabilities...................................................... 66,015 65,111 48,452
--------- --------- ---------
Mortgages on land, buildings and equipment.......................................... 2,297 3,318 2,552
Notes payable, excluding current installments....................................... 195,910 207,300 198,065
Revolving credit facility excluding current portion................................. 15,000 15,000 -
Deferred income taxes............................................................... 2,211 2,771 2,209
Dividends payable on Jr. Preferred.................................................. 9,342 1,798 7,435
--------- --------- ---------
Total Liabilities.............................................................. 290,775 295,298 258,713
--------- --------- ---------
Senior exchangeable redeemable preferred stock,
par value $.01 per share, authorized 1,000,000 shares,
283,891 issued at December 31, 1998; aggregate liquidation preference $28,558;
258,281 issued at March 31, 1998; aggregate liquidation preference $25,828
293,294 issued at March 31, 1999; aggregate liquidation preference $29,502 29,182 25,485 28,231
redeemable preferred stock, par value $.01 per share, authorized
150,000 shares, 85,998 issued at December 31, 1998, March 31, 1998 and
March 31, 1999; aggregate liquidation preference $85,998........................... 85,998 85,998 85,998
Shareholders' equity
Junior perpetual preferred stock, authorized 2,500 shares, 1,930 issued
at December 31, 1998, March 31, 1998 and March 31, 1999; par value $.01 per
share; aggregate liquidation preference $1,930..................................... 1,930 1,930 1,930
Common stock par value $.01 per share, authorized 100,000,000 shares;
issued 26,563,782 shares at December 31, 1998, 26,249,951 shares at
March 31, 1998 and 26,802,251 at March 31,1999 268 262 266
Additional paid-in capital......................................................... 5,469 5,362 5,423
Retained deficit................................................................... (227,666) (231,465) (225,242)
--------- --------- ---------
Total Shareholders' Equity..................................................... (219,999) (223,911) (217,623)
--------- --------- ---------
Total Liabilities and Shareholders' Equity.......................................... $ 185,956 $ 182,870 $ 155,319
========= ========= =========
</TABLE>
-1-
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Operations
Unaudited In Thousands (Except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
March 31, March 31,
1999 1998
----------- ------------
<S> <C> <C>
Net sales.......................................................................... $ 71,761 $ 58,811
Cost of sales...................................................................... 43,387 36,463
--------- ---------
Gross profit................................................................. 28,374 22,348
Selling, general and administrative expenses....................................... 22,514 18,862
Operating income............................................................. 5,860 3,486
--------- ---------
Other income (expense):
Interest income.................................................................. 87 109
Interest expense................................................................. (5,495) (6,221)
Other income..................................................................... 218 299
--------- ---------
(5,190) (5,813)
--------- ---------
Income (loss) before income taxes............................................ 670 (2,327)
Income tax expense................................................................. 235 (873)
--------- ---------
Net income (loss)............................................................ $ 435 $ (1,454)
Less: Dividends on and accretion of preferred stocks............................... (2,858) (2,583)
--------- ---------
Net (loss) available to common shareholders........................................ $ (2,423) $ (4,037)
========= =========
Net (loss) per common share:
Basic........................................................................ $ (0.09) $ (0.15)
========= =========
Diluted...................................................................... $ (0.09) $ (0.15)
========= =========
Weighted average number of common shares
and common share equivalents outstanding:
Basic........................................................................ 26,799 26,250
Diluted...................................................................... 26,799 26,250
PRO FORMA
- ---------
Net income (loss).................................................................. $ 435 $ (1,454)
Add: Reduction of interest expense from $31 million notes payment, net of tax 577 556
--------- ---------
Pro forma income (loss) available to common shareholders........................... $ 1,012 $ (898)
========= =========
Net income (loss) per common share
Basic........................................................................ $ 0.03 $ (0.02)
========= =========
Diluted...................................................................... $ 0.03 $ (0.02)
========= =========
Weighted average number of common shares
and common share equivalents outstanding:
Basic....................................................................... 38,146 37,596
Diluted...................................................................... 39,842 37,596
</TABLE>
-2-
<PAGE>
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Unaudited In Thousands
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
Net cash flows from operating activities:
Net income (loss) $ 435 $ (1,454)
Depreciation and amortization 1,517 1,331
Amortization of financing fees 365 333
Loss on disposal of fixed assets 5 -
Change in operating assets and liabilities:
Income taxes receivable - (906)
Inventories (48,826) (34,938)
Prepaid expenses (863) (396)
Other current assets (18) 93
Other assets and liabilities 180 384
Accounts payable 16,024 9,986
Accrued liabilities (3,272) (27,278)
Income taxes payable (7,780) -
----------------- -------------
Total adjustments (42,668) (51,391)
----------------- -------------
Net cash (used in) operating activities (42,233) (52,845)
----------------- -------------
Net cash flows from investing activities:
Loans to and (payments from) officers (57) 428
Proceeds from sale of assets 23 -
Capital expenditures (2,039) (2,064)
----------------- -------------
Net cash (used in) investing activities (2,073) (1,636)
----------------- -------------
Net cash flows from financing activities:
Proceeds from revolving credit facility 26,740 33,001
Financing fees - (112)
Payment of debt and mortgages (1,498) (255)
Principal payments under capital lease obligation (60) (53)
Proceeds from exercise of common
stock options/stock purchase plan 48 -
----------------- -------------
Net cash provided by financing activities 25,230 32,581
----------------- -------------
Net change in cash and cash equivalents (19,076) (21,900)
Cash and cash equivalents at beginning of period 20,282 23,502
----------------- -------------
Cash and cash equivalents at end of period $ 1,206 $ 1,602
================= =============
Supplemental cash flow information:
</TABLE>
Our Senior Credit Facility and the Senior Subordinated Notes both limit the
Company's ability to pay cash dividends, accordingly dividends have not been
paid in cash. This statement does not reflect the accrual for 1999 and 1998 of
$1,907 and $1,760 respectively for dividends on the Junior Preferred Stocks or
the accrual of $951 and $824 of additional Senior Preferred Stock in 1999 and
1998 respectively as a dividend to the holders of the Senior Preferred Stock.
-3-
<PAGE>
TUESDAY MORNING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. On December 29, 1997, Madison Dearborn Capital Partners II, L.P., certain
members of management and certain unaffiliated investors acquired all of the
outstanding capital stock of the Company. This transaction has been
accounted for as a recapitalization and, as such, has no impact on the
historical basis of assets and liabilities.
Refer to the consolidated financial statements and notes thereto for the
fiscal year ended December 31, 1998 for more details of the transaction.
2. 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 Form 10K filing.
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 page six.
5. Certain prior year amounts have been reclassed to conform to the current
period presentation.
6. On March 12, 1999, the Company filed a Form S-1 registration statement with
the Securities and Exchange Commission for the sale of shares of common
stock, which occurred on April 22, 1999. The Company intends to use the net
proceeds of $76.9 million to redeem $31.0 million of our Senior Subordinated
Notes, (plus $3.4 million of prepayment premium), all of the outstanding
shares of Senior Preferred Stock and $7.4 million of the Junior Preferred
Stocks. Also, in conjunction with the stock offering, all of the remaining
shares of junior preferred stock will be converted into common stock. In
connection with the redemption of a portion of the Senior Subordinated
Notes, the Company expects to incur an extraordinary charge, net of income
taxes, of approximately $3.3 million in the second quarter of 1999.
-4-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with our
consolidated financial statements for the year ended December 31, 1998.
RESULTS OF OPERATIONS
The following table sets forth certain financial information from our
consolidated statements of operations expressed as a percentage of net sales.
There can be no assurance that the trends in sales growth or operating results
will continue in the future.
<TABLE>
<CAPTION>
Quarter Ended March 31
----------------------
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 60.5 62.0
----- -----
Gross profit 39.5 38.0
Selling, general and administrative expense 31.4 32.1
----- -----
Operating income 8.1 5.9
Net interest and other income <7.2> <9.9>
----- -----
Income (loss) before income taxes 0.9 <4.0>
Income taxes 0.3 <1.5>
----- -----
Net income (loss) 0.6% <2.5>%
===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999
COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998
During the first quarter of 1999, sales increased 22.0% due primarily to
comparable store sales increases of 13.1% and $6.2 million of sales from new
stores. Average store sales for the quarter increased from $182 thousand to
$203 thousand. We believe our unique niche in the retail industry and the
breadth of experience of our buying organization have allowed us to offer
tremendous values to our customers which has been the primary factor in our
strong comparable store sales growth.
Gross profit increased $6.0 million from $22.3 million to $28.4 million which
resulted from the increased sales mentioned above and an increase in the gross
profit percentage of 1.5%. The gross profit percentage increased due to a
reduction in markdowns as compared to 1998. In 1998, markdown expenses were
higher than those of 1999 primarily due to the liquidation of our fine jewelry
inventory in conjunction with our decision to exit this product category.
-5-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, general, and administrative expense benefited from leverage of our
store level and home office expenses which did not increase as rapidly as our
sales increased. These expenses increased $3.7 million primarily due to new
stores as well as to expenses associated with the additional through-put of
product. These expenses as a percentage of sales decreased to 31.4% from 32.1%
due to the leverage discussed above.
Interest expense decreased due to principle payments totaling $9.8 million and
reduced borrowing needs. The income tax rate decreased from 37.5% in 1998 to
35.1% in 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations with funds generated from operating
activities and borrowings under the revolving credit facilities.
Net cash used by operating activities for the quarters ended March, 1998 and
1999 was $52.8 million, and $42.2 million respectively. These amounts were due
to the seasonal buildup of inventory, the payment of fees and expenses related
to the Recapitalization in 1998, and in 1999, income taxes payable. Cash and
cash equivalents as of March 31, 1998 and 1999 were $1.6 million and $1.2
million respectively.
Capital expenditures, principally associated with new store openings and
warehouse equipment were $2.0 million and $2.1 million for the first quarter of
1999 and 1998, respectively. We expect to spend approximately $12 million for
capital expenditures in 1999, including approximately $6.5 million related to
the anticipated purchase of a warehouse we are currently leasing.
As part of the Recapitalization, discussed in detail in the December 31, 1998
financial statements, we entered into the Senior Credit Facility, which is
comprised of the $110.0 million Term Loans and the $90.0 million Revolving
Credit Facility. Subject to compliance with the terms of the Senior Credit
Facility and the Indenture, borrowings under the Revolving Credit Facility may
be increased by $25.0 million to accommodate future growth and for certain other
purposes. At March 31, 1999, we had $100.2 million outstanding under the Term
Loans and $26.7 million outstanding under the Revolving Credit Facility, with
$28.8 million of remaining availability thereunder. The Term Loan A loans and
the Revolving Credit Facility loans mature on the fifth anniversary of the
Closing, and the Term Loan B loans will mature on the seventh anniversary of the
Closing. For 30 consecutive days during each twelve month period, beginning
April 1998, the aggregate principal amount of loans outstanding under the
Revolving Credit Facility may not exceed $15.0 million.
-6-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Also, as part of the Recapitalization, we issued 250,000 shares of Senior
Exchangeable Preferred stock, 293,294 at March 31, 1999, including cumulative
dividends at 13.25%. We also issued 85,998 shares of Junior Redeemable
Preferred stock and 1,930 shares of Junior Perpetual Preferred stock which earn
cumulative dividends at 8% annually. At March 31, 1999, the accrued dividends
for the Junior Preferred stocks totaled $9,342. We may redeem the Junior
Preferred stocks without penalty; the Senior Exchangeable Preferred stock may be
redeemed at various premiums over the next six years.
See Initial Public Offering on page 9 for a discussion on the paydown of the
notes and the redemption of preferred stock, which occurred subsequent to March
31, 1999.
Upon consummation of the Recapitalization, our total debt and interest charges
increased significantly. Interest payments on the Notes, under the Senior
Credit Facility and on the Exchange Debentures, represent significant liquidity
requirements. The Notes require semi-annual interest payments, and interest on
the loans under the Senior Credit Facility is due quarterly. We anticipate that
cash flow generated from operations and borrowings under the Senior Credit
Facility will be sufficient to fund our working capital needs, planned capital
expenditures and scheduled interest payments (including interest payments on the
Notes and amounts outstanding under the Senior Credit Facility).
The instruments governing our indebtedness and the Senior Exchangeable Preferred
Stock, including the Certificate of Designation, the Exchange Indenture, the
Senior Credit Facility and the Indenture contain financial and other covenants
that restrict, among other things, the ability of the Company and its
subsidiaries to incur additional indebtedness, incur liens, pay dividends or
make certain other restricted payments, consummate certain asset sales, enter
into certain transactions with affiliates, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company. Such limitations, together with
our highly leveraged nature could limit corporate and operating activities,
including our ability to invest in opening new stores.
INVENTORY:
Inventory increased from $96.7 million at year end to $145.5 million at March
31, 1999, for an increase of $48.8 million from December 31, 1998. As reflected
on the chart on page 12, the increase in warehouse inventory is predominately
attributed to normal seasonal fluctuations in inventory levels. Inventory levels
typically increase during the year from the year end low point.
-7-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The decrease in inventory at the stores from March 31, 1998 to March 31, 1999 is
the result of sales for the quarter in excess of shipments and improved sell
through of fourth quarter and first quarter merchandise. Store level inventory
in excess of six months old is consistent for each year.
YEAR 2000
We recognize that our business could be adversely affected by hardware and
software errors arising from calculations using the Year 2000 and beyond
("Y2K"). Y2K could adversely affect our ability to obtain, distribute and
process merchandise, run our stores, deal with our customers and handle daily
business functions, and receive payment from our customers and utilize these
funds in our business.
We have taken various steps in each of these areas to minimize the risk that our
business will be adversely affected. Our ability to obtain merchandise is
dependent on vendors, freight companies, ports of entry and U.S. Customs. We
have informally polled our largest vendors and, based on the information we have
obtained, believe that their systems are, or will be, Y2K compliant. In
addition, we have contacted our primary freight companies and, based on the
information we have obtained, believe that their systems are also Y2K compliant.
U.S. Customs has stated on its website that its systems are Y2K compliant.
In order to determine that our internal operations are Y2K compliant we have
taken an inventory of all computer software programs and hardware. We have
determined that our merchandise purchasing, inventory management, shipping and
receiving, sales reporting, financial reporting and cash management systems are
Y2K compliant. Our remaining system upgrade requirements have been identified,
tested and scheduled for installation or completion by August 1, 1999. One of
our four file servers has been updated, and the remaining three will be updated
by July 15, 1999. A third party vendor will upgrade our point-of-sale software
to the latest version by August 1, 1999 and we will update point-of-sale
hardware by July 31, 1999. Direct expenditures and internal costs for these
upgrades and updates have been and are expected to remain immaterial to our
operations. We have evaluated our non-information technology systems, such as
our general office security systems, store security systems, corporate access
systems, environmental systems and phone systems. We have found that they are
Y2K compliant with the exception of the corporate access system. This system
will be upgraded by July 31, 1999.
Our ability to receive payment from our customers and utilize these funds in our
business is dependent on credit card processing companies and banks. We have
contacted these companies and have been assured that their systems are, or will
be, Y2K compliant.
We recognize that our failure to resolve internal Y2K issues could result, in
the worst case, in our inability to distribute merchandise to our stores and to
process our daily business for some period
-8-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
of time. However, we presently believe that scenario is unlikely based on our
Y2K remediation plan. The failure of one or more of our third party service
providers to resolve Y2K issues could also result in a business interruption. In
addition, the failure of one or more of our merchandise suppliers to resolve
their own Y2K issues could negatively affect us. The lost revenue, if any,
resulting from a worst case scenario would depend on the length of time during
which such failure goes uncorrected and on how widespread the impact.
Our Y2K exposure is mitigated by the following factors: (1) no vendor accounts
for more than 5% of our purchases; (2) we will receive substantially all of our
merchandise for the first sale event of 2000 before January 1, 2000; (3) our
first sales event of 2000 is scheduled to begin six weeks after January 1, 2000;
and (4) there is neither a contractual nor business reason for us to buy a
specific product from a specific vendor.
In order to further mitigate any business interruption caused by third parties,
we believe that we can easily change vendors, freight companies or ports of
entry if we find that we are unable to receive merchandise from specific
vendors. We plan to test credit card processing in January 2000 and will change
processors if necessary. Our cash management is handled by several banks and if
necessary can be shifted if one or more of these banks will not permit us to
access our funds.
Although Y2K issues or unanticipated or undiscovered Y2K compliance problems
could impact our operations, we believe that it is unlikely that Y2K issues or
problems will significantly adversely affect us. Our Y2K compliance costs have
totalled $110,000 (excluding scheduled upgrades).
INITIAL PUBLIC OFFERING
On March 12, 1999, we filed a Form S-1 registration statement with the
Securities and Exchange Commission for the sale of shares of common stock, which
occurred on April 22, 1999. We intend to use the net proceeds of $76.9 million
to redeem $31.0 million of our Senior Subordinated Notes, (plus $3.4 million of
prepayment premium), all of the outstanding shares of Senior Preferred Stock and
$7.4 million of the Junior Preferred Stocks. Also, in conjunction with the
stock offering, all of the remaining shares of junior preferred stock will be
converted into common stock. In connection with the redemption of a portion of
the Senior Subordinated Notes, we expect to incur an extraordinary charge, net
of income taxes, of approximately $3.3 million in the second quarter of 1999.
-9-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS, WHICH ARE MADE PURSUANT TO
THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995.
ACTUAL RESULTS MAY DIFFER SUBSTANTIALLY FROM SUCH FORWARD-LOOKING STATEMENTS.
FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES INCLUDING, BUT NOT
LIMITED TO, CONTINUED ACCEPTANCE OF THE COMPANY'S PRODUCTS IN THE MARKETPLACE,
THE SUCCESS OF NEW STORE OPENINGS AND THE AVAILABILITY OF NEW STORE LOCATIONS,
COMPETITIVE FACTORS, ACCESS TO MERCHANDISE IN A VARIETY OF FOREIGN COUNTRIES,
ECONOMIC TRENDS, AND OTHER RISKS DETAILED IN THE COMPANY'S PERIODIC REPORT
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
-10-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
March 31, March 31,
1999 1998
---------------- --------------
<S> <C> <C>
Basic EPS:
Net income (loss) $ 435 $ (1,454)
Less:
Junior preferred dividends (1,907) (1,759)
Senior preferred dividends (944) (817)
Senior preferred accretion (7) (7)
----------- ------------
Net (loss) available to common shareholders $ (2,423) $ (4,037)
=========== ============
Weighted average common shares 26,799 26,250 (1)
Net (loss) per common share $ (0.09) $ (0.15)
=========== ============
Diluted EPS:
Net (loss) available to common shareholders $ (2,423) $ (4,037)
=========== ============
Effect of dilutive securities:
Weighted average common equivalent shares from
stock options - - (2)
Weighted average common shares outstanding 26,799 26,250 (1)
----------- ------------
Weighted average number of common shares and
common stock equivalents outstanding 26,799 26,250
=========== ============
Net (loss) per common share $ (0.09) $ (0.15)
=========== ============
</TABLE>
(1) Reflects seven for one stock split effective March 25, 1999
(2) Not included in calculation, because of anti-dilutive effect
-11-
<PAGE>
TUESDAY MORNING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
TOTAL INVENTORY LEVELS BY LOCATION
($ MILLIONS)
3/31/99 3/31/98 12/31/98
-------- -------- ---------
<S> <C> <C> <C>
Stores $ 57.2 $ 61.7 $ 58.8
Warehouse 88.2 72.4 37.9
-------- -------- ---------
Total $ 145.5 $ 134.1 $ 96.7
======== ======== =========
<CAPTION>
PER STORE INVENTORY LEVELS BY LOCATION
($ THOUSANDS)
3/31/99 3/31/98 12/31/98
-------- -------- ---------
<S> <C> <C> <C>
Stores $ 162 $ 191 $ 169
Warehouse 249 224 109
-------- -------- ---------
Total $ 411 $ 415 $ 278
======== ======== =========
Store count 354 323 347
</TABLE>
<TABLE>
<CAPTION>
STORE OPENINGS/CLOSINGS
THREE MONTHS THREE MONTHS
ENDING ENDING
MARCH 31, 1999 MARCH 31, 1998
--------------------- --------------------
<S> <C> <C>
Stores Open at
Beginning of Period 347 315
Stores Opened 12 11
Stores Closed <5> <3>
--- ---
Stores Open at End
of Period 354 323
=== ===
</TABLE>
-12-
<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: May 7, 1999 /s/ Mark E. Jarvis
----------------------------------
Mark E. Jarvis, Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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268
115,180
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