Tuesday Morning Corporation (NASDAQ: TUES)
today reported a net loss of $9.6 million, or $0.21 per share, for
the first quarter of fiscal 2020 compared to a net loss of $8.1
million, or $0.18 per share, for the first quarter of fiscal 2019.
Adjusted EBITDA, a non-GAAP measure, was negative $1.5
million for the first quarter of fiscal 2020, compared to negative
$0.1 million for the prior year period. A reconciliation of
GAAP and non-GAAP measures is provided below.
Steve Becker, Chief Executive Officer, stated,
“Total comp performance for the first quarter was modestly
negative, against a 3.8% fiscal first quarter comparable store
sales increase last year, as we deliberately reduced store
relocations and were also impacted by adverse weather, most notably
Hurricane Dorian. Underlying our total comp performance was
continued transaction growth driven by improved merchandising
execution and marketing effectiveness. The changes we are making
have reinvigorated our merchant organization. We expect our new
merchandising leadership team’s heightened focus on more
consistently executing Tuesday Morning’s core off-price model and
delivering compelling values for our customers to drive greater
store productivity as the year progresses. In addition, our
organization is effectively managing costs, including negotiating
meaningful rent and transportation expense reductions. We are
pleased with the progress we are making against our initiatives and
remain committed to driving profitable growth going
forward.”
First Quarter Fiscal 2020 Results of
Operations
- Net sales were $224.4 million, compared to $227.3 million for
the first quarter of fiscal 2019. The Company’s sales comparison to
the prior year is impacted by the net decrease of 12 stores during
the last twelve months.
- Comparable store sales decreased 0.7% compared to the same
period a year ago. Transactions increased 2.4% and average
ticket decreased 3.0%. During the first quarter, one store
was relocated, one store was opened, and eight stores were closed,
for an ending store count of 707 as of September 30, 2019.
- Gross profit was $81.1 million compared to $82.4 million for
the first quarter of fiscal 2019. Gross margin for the first
quarter of fiscal 2020 declined to 36.1% compared to 36.3% last
year. The decrease in gross margin was primarily
a result of higher markdowns which was mainly attributable to
timing, partially offset by a continued improvement in initial
merchandise mark-up along with lower supply chain and
transportation costs.
- As a percentage of net sales, selling, general and
administrative expenses (SG&A) were 40.0% for the first quarter
of fiscal 2020 compared to 39.6% in the same period last
year. However, SG&A dollars decreased slightly to $89.8
million in the first quarter of fiscal 2020, compared to $90.0
million in the same period last year.
- Operating loss for the first quarter of fiscal 2020 was $8.7
million, compared to an operating loss of $7.6 million in the first
quarter of fiscal 2019.
- The Company reported a net loss of $9.6 million, or $0.21 per
share, for the first quarter of fiscal 2020 compared to a net loss
of $8.1 million, or $0.18 per share, for the first quarter of
fiscal 2019.
- EBITDA, a non-GAAP measure, was negative $2.2 million for the
first quarter of fiscal 2020, compared to negative $0.9 million for
the prior year period. Adjusted EBITDA, a non-GAAP measure,
was negative $1.5 million for the first quarter of fiscal 2020,
compared to negative $0.1 million for the prior year period.
A reconciliation of GAAP and non-GAAP measures is provided
below.
The Company ended the first quarter of fiscal
2020 with $5.3 million in cash and cash equivalents and $57.9
million outstanding under its line of credit with availability on
the line of $65.3 million, compared to $12.6 million in cash and
cash equivalents and $55.6 million outstanding under its line of
credit in the prior year. Inventories at the end of the
first quarter of fiscal 2020 were $285.9 million compared to $291.9
million in the prior year. Accounts payable were $113.0
million compared to $131.9 million in the prior
year. The decrease in accounts payable was due to the
inventory decline and the timing of merchandise receipts and the
related payments. The Company expects accounts payable to be
more in line with historical levels at the end of the second
quarter of fiscal 2020. The Company’s inventory turnover for the
trailing five quarters as of September 30, 2019 was 2.6 turns,
consistent with the trailing five quarter turnover as of September
30, 2018 of 2.6 turns.
Fiscal Year 2020 OutlookThe Company reaffirms
its financial guidance previously given for fiscal 2020.
The Company expects comparable store sales for
fiscal 2020 to increase in the low single digits. The Company also
expects to achieve improvement in gross margin driven by improved
initial merchandise mark-up and lower supply chain expenses.
Selling, general and administrative expenses are expected to be
relatively flat on a rate basis. For fiscal year 2020, the Company
expects meaningful EBITDA improvement.
The Company plans to open approximately three
new stores, relocate five stores, and close 25 to 35 stores in
fiscal 2020. Capital expenditures for fiscal 2020 are expected to
be in the range of approximately $25 million to $27 million. The
increased level of capital spend from prior year reflects the
investment in the Company’s strategic initiative to retrofit its
Dallas distribution center, as well as an increase in investments
in information technology, partially offset by fewer relocations
and new stores. The Company expects to fund its capital investments
primarily through a combination of cash from operations and a
potential sale of certain non-core real estate distribution assets,
and if necessary, borrowings on its credit facility.
About Tuesday MorningTuesday Morning Corporation
(NASDAQ: TUES) is one of the original off-price retailers
specializing in name-brand, high-quality products for the home,
including upscale home textiles, home furnishings, housewares,
gourmet food, toys and seasonal décor, at prices generally below
those found in boutique, specialty and department stores, catalogs
and on-line retailers. Based in Dallas, Texas, the Company
opened its first store in 1974 and currently operates over 700
stores in 39 states. More information and a list of store
locations may be found on the Company’s website at
www.tuesdaymorning.com.
Conference Call InformationTuesday Morning
Corporation’s management will hold a conference call to review
first quarter fiscal 2020 financial results and provide a general
business update today, November 5, 2019, at 8:00 a.m. Central
Time. A live webcast of the conference call will be available
in the Investor Relations section of the Company’s website at
www.tuesdaymorning.com, or you may dial into the conference call at
(877) 312-5376 (no access code required) approximately ten minutes
prior to the start of the call. A replay of the webcast will
be accessible through the Company’s website for 90 days. A
replay of the conference call will be available from 11:00 a.m.,
Central Time, November 5, 2019 through 10:59 a.m., Central Time,
Friday, November 8, 2019 by dialing (855) 859-2056 or (404)
537-3406 and entering conference ID number 9767416.
Non-GAAP Financial MeasuresThis press release
includes financial measures that are presented both in accordance
with U.S. generally accepted accounting principles (“GAAP”) and
using certain non-GAAP financial measures, EBITDA and Adjusted
EBITDA. For more information regarding the Company’s use of
non-GAAP financial measures, including the definition of EBITDA and
Adjusted EBITDA, and a reconciliation to net income/(loss), the
most directly comparable GAAP measure, see “Non-GAAP Financial
Measures” within this press release.
Cautionary Statement Regarding Forward-Looking
StatementsThis press release contains forward-looking statements,
which are based on management’s current expectations, estimates and
projections. Forward-looking statements typically are
identified by the use of terms such as “may,” “will,” “should,”
“expect,” “anticipate,” “believe,” “estimate,” “intend” and similar
words, although some forward-looking statements are expressed
differently. You should consider statements that contain
these words carefully because they provide forward-looking
information, including management’s current expectations, plans,
strategies and goals and management’s current beliefs concerning
future business conditions, future results of operations and future
financial position. Forward-looking statements also include,
but are not limited to, statements of management’s current plans
and expectations in the “Fiscal Year 2020 Outlook” section of this
press release. Forward-looking statements also include
statements regarding management’s sales and growth expectations,
EBITDA and Adjusted EBITDA projections, liquidity, capital
expenditure plans, inventory management plans, productivity of the
Company’s store base, real estate strategy, projections regarding
gross margin improvement related to the distribution retrofit
project and other supply chain initiatives and their merchandising
and marketing strategies.
Reference is hereby made to the Company’s
filings with the Securities and Exchange Commission, including, but
not limited to, "Cautionary Statement Regarding Forward-Looking
Statements" and "Item 1A. Risk Factors" of the Company's most
recent Annual Report on Form 10-K, 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 ability to identify and respond to changes
in consumer trends and preferences; our ability to mitigate
reductions of customer traffic in shopping centers where our stores
are located; our ability to continuously attract buying
opportunities for off-price merchandise and anticipate consumer
demand; our ability to successfully manage our inventory balances
profitably; our ability to effectively manage our supply chain
operations; loss of, disruption in operations, or increased costs
in the operation of our distribution center facilities; unplanned
loss or departure of one or more members of our senior management
or other key management; increased or new competition; our ability
to maintain and protect our information technology systems and
technologies and related improvements to support our growth;
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; our ability to successfully execute our real estate
strategy; changes in federal tax policy including tariffs; the
success of our marketing, advertising and promotional efforts; our
ability to attract, train and retain quality employees in
appropriate numbers, including key employees and management;
increased variability due to seasonal and quarterly fluctuations;
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 risk to our corporate
reputation from our customers, employees and other third parties;
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; our ability to manage the negative effects of inventory
shrinkage; our ability to manage exposure to unexpected costs
related to our insurance programs; and increased costs or exposure
to fraud or theft resulting from payment card industry related risk
and regulations. The Company’s filings with the SEC are
available at the SEC’s web site at www.sec.gov.
The forward-looking statements made in this
press release relate only to events as of the date on which the
statements were made. Except as may be required by law, the Company
disclaims obligations to update any forward-looking statements to
reflect events and circumstances after the date on which the
statements were made or to reflect the occurrence of unanticipated
events. Investors are cautioned not to place undue reliance
on any forward-looking statements.
Tuesday
Morning Corporation |
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Consolidated Statements of Operations |
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(In thousands,
except per share data) |
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Three Months Ended September 30, |
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2019 |
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2018 |
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(unaudited) |
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Net sales |
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$ |
224,439 |
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$ |
227,313 |
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Cost of sales |
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|
143,307 |
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|
144,895 |
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Gross profit |
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|
81,132 |
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|
82,418 |
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Selling, general
and administrative expenses |
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89,783 |
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|
90,006 |
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Operating
loss |
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(8,651 |
) |
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(7,588 |
) |
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Other
income/(expense): |
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Interest
expense |
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(665 |
) |
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(587 |
) |
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Other income,
net |
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|
67 |
|
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|
190 |
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Loss before income
taxes |
|
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(9,249 |
) |
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(7,985 |
) |
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Income tax
provision |
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|
380 |
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|
124 |
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Net loss |
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$ |
(9,629 |
) |
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$ |
(8,109 |
) |
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Earnings per
share |
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Net loss per
common share: |
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Basic |
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$ |
(0.21 |
) |
|
$ |
(0.18 |
) |
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Diluted |
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$ |
(0.21 |
) |
|
$ |
(0.18 |
) |
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Weighted average
number of common shares: |
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Basic |
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44,955 |
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44,490 |
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Diluted |
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44,955 |
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44,490 |
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Tuesday
Morning Corporation (continued) |
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Consolidated Balance Sheets |
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(in
thousands) |
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September 30, |
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June 30, |
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September 30, |
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2019 |
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2019 |
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2018 |
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(unaudited) |
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(audited) |
|
(unaudited) |
Assets |
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Current
assets: |
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Cash and cash
equivalents |
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$ |
5,273 |
$ |
11,395 |
$ |
12,552 |
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Inventories |
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285,920 |
|
237,895 |
|
291,932 |
|
Prepaid
expenses |
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|
5,435 |
|
5,388 |
|
6,349 |
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Other current
assets |
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|
1,499 |
|
1,822 |
|
1,976 |
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Total Current
Assets |
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|
298,127 |
|
256,500 |
|
312,809 |
Property and
equipment, net |
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|
108,990 |
|
110,146 |
|
118,934 |
Operating lease
right-of-use assets |
|
351,755 |
|
— |
|
— |
Deferred financing
costs |
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|
|
947 |
|
994 |
|
592 |
Other assets |
|
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|
2,882 |
|
2,881 |
|
3,225 |
|
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Total Assets |
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$ |
762,701 |
$ |
370,521 |
$ |
435,560 |
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Liabilities and Stockholders' Equity |
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Current
liabilities: |
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Accounts
payable |
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$ |
113,036 |
$ |
91,251 |
$ |
131,950 |
|
Accrued
liabilities |
|
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|
47,721 |
|
45,923 |
|
48,116 |
|
Operating lease
liabilities |
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|
66,914 |
|
— |
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— |
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Total Current
Liabilities |
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|
227,671 |
|
137,174 |
|
180,066 |
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Operating lease
liabilities — non-current |
|
311,114 |
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— |
|
— |
Borrowings under
revolving credit facility |
|
57,900 |
|
34,650 |
|
55,600 |
Deferred rent |
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— |
|
23,551 |
|
23,254 |
Asset retirement
obligation — non-current |
|
3,002 |
|
3,002 |
|
2,967 |
Other liabilities
— non-current |
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|
1,215 |
|
835 |
|
757 |
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Total
Liabilities |
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|
600,902 |
|
199,212 |
|
262,644 |
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Stockholders'
equity |
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|
161,799 |
|
171,309 |
|
172,916 |
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Total Liabilities
and Stockholders' Equity |
$ |
762,701 |
$ |
370,521 |
$ |
435,560 |
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Tuesday
Morning Corporation (continued) |
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Consolidated Statements of Cash Flows |
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(in
thousands) |
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Three Months Ended September 30, |
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2019 |
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2018 |
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(unaudited) |
Cash flows from
operating activities: |
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Net loss |
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|
$ |
(9,629 |
) |
$ |
(8,109 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
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Depreciation and
amortization |
|
|
6,383 |
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|
6,554 |
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Amortization of
financing costs |
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54 |
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|
79 |
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(Gain)/loss on
disposal of assets |
|
133 |
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|
(9 |
) |
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Share-based
compensation |
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|
705 |
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|
724 |
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Construction
allowances from landlords |
|
247 |
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|
542 |
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Change in
operating assets and liabilities: |
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Inventories |
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|
(48,010 |
) |
|
(57,520 |
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Prepaid and other
assets |
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|
273 |
|
|
(696 |
) |
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Accounts
payable |
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|
21,093 |
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|
33,630 |
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Accrued
liabilities |
|
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|
3,422 |
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|
6,570 |
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Operating lease
assets and liabilities |
|
(490 |
) |
|
— |
|
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Deferred rent |
|
|
|
— |
|
|
(172 |
) |
|
Income taxes
payable |
|
|
|
470 |
|
|
174 |
|
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Other liabilities
— non-current |
|
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|
97 |
|
|
(132 |
) |
Net cash used in
operating activities |
|
(25,252 |
) |
|
(18,365 |
) |
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Cash flows from
investing activities: |
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Capital
expenditures |
|
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|
(4,744 |
) |
|
(4,831 |
) |
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Purchase of
intellectual property |
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|
— |
|
|
(262 |
) |
|
Proceeds from sale
of assets |
|
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|
10 |
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|
12 |
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Net cash used in
investing activities |
|
(4,734 |
) |
|
(5,081 |
) |
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Cash flows from
financing activities: |
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Proceeds under
revolving credit facility |
|
90,700 |
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|
38,300 |
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Repayments under
revolving credit facility |
|
(67,450 |
) |
|
(21,180 |
) |
|
Change in cash
overdraft |
|
|
|
692 |
|
|
9,408 |
|
|
Payments on
capital leases |
|
|
|
(71 |
) |
|
(40 |
) |
|
Payment of
financing costs |
|
|
|
(7 |
) |
|
— |
|
Net cash provided
by financing activities |
|
23,864 |
|
|
26,488 |
|
|
|
|
|
|
|
|
|
|
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Net
increase/(decrease) in cash and cash equivalents |
|
(6,122 |
) |
|
3,042 |
|
Cash and cash
equivalents, beginning of period |
|
11,395 |
|
|
9,510 |
|
Cash and cash
equivalents, end of period |
$ |
5,273 |
|
$ |
12,552 |
|
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TUESDAY MORNING
CORPORATION NON-GAAP FINANCIAL
MEASURES (Unaudited)
The Company defines EBITDA as net income or net loss before
interest, income taxes, depreciation, and amortization.
Adjusted EBITDA reflects further adjustments to EBITDA to eliminate
the impact of certain items, including certain non-cash items and
other items that the Company believes are not representative of its
core operating performance. These measures are not
presentations made in accordance with GAAP. EBITDA and
Adjusted EBITDA should not be considered as alternatives to net
income or loss as a measure of operating performance. In
addition, EBITDA and Adjusted EBITDA are not presented as, and
should not be considered as, alternatives to cash flows as a
measure of liquidity. EBITDA and Adjusted EBITDA should not
be considered in isolation, or as substitutes for analysis of the
Company’s results as reported under GAAP and Adjusted EBITDA should
not be construed as an inference that the Company’s future results
will be unaffected by such adjustments. The Company believes
it is useful for investors to see these EBITDA and Adjusted EBITDA
measures that management uses to evaluate the Company’s operating
performance. These non-GAAP financial measures are included
to supplement the Company’s financial information presented in
accordance with GAAP and because the Company uses these measures to
monitor and evaluate the performance of its business as a
supplement to GAAP measures and believes the presentation of these
non-GAAP measures enhances investors’ ability to analyze trends in
the Company’s business and evaluate the Company’s
performance. EBITDA and Adjusted EBITDA are also frequently
used by analysts, investors and other interested parties to
evaluate companies in the Company’s industry. The non-GAAP
measures presented in this press release may not be comparable to
similarly titled measures used by other companies.
Reconciliation of GAAP Net Loss to Non-GAAP EBITDA and
Adjusted EBITDA:
The following table reconciles net loss, the most directly
comparable GAAP financial measure, to EBITDA and Adjusted EBITDA,
both of which are non-GAAP financial measures:
(unaudited - in thousands) |
|
Three Months Ended September 30, |
|
|
|
2019 |
|
2018 |
|
Net loss (GAAP) |
|
$ |
(9,629 |
) |
$ |
(8,109 |
) |
Depreciation and
amortization |
|
6,383 |
|
6,554 |
|
Interest expense, net |
|
663 |
|
575 |
|
Income tax provision |
|
380 |
|
124 |
|
EBITDA (non-GAAP) |
|
$ |
(2,203 |
) |
$ |
(856 |
) |
Share-based compensation
expense (1) |
|
705 |
|
724 |
|
Cease-use rent expense
(2) |
|
— |
|
65 |
|
Adjusted EBITDA
(non-GAAP) |
|
$ |
(1,498 |
) |
$ |
(67 |
) |
|
|
|
|
|
|
|
|
(1) Adjustment includes charges related to share-based
compensation programs, which vary from period to period depending
on volume, timing, and vesting of awards. The Company adjusts
for these charges to facilitate comparisons from period to period.
(2) Adjustment includes accelerated rent expense recognized in
relation to closing stores prior to lease termination. While
accelerated rent expense may occur in future periods, the amount
and timing of such expenses will vary from period to period.
INVESTOR RELATIONS: Farah Soi / Caitlin
ChurchillICR203-682-8200Farah.Soi@icrinc.comCaitlin.Churchill@icrinc.com
MEDIA: Jonathan MorganPERRY STREET
COMMUNICATIONS214-965-9955JMorgan@perryst.com
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