FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended Commission File Number 333-46013
September 30, 2001
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
(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 October 31, 2001: 39,747,353 shares
Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "intend," "anticipate," "believe," "estimate," "plan" and "expect"
and variations of these words and similar expressions are intended to identify
these forward-looking statements. All statements other than statements of
historical facts contained in this report, including statements regarding our
future financial position, business strategy, budgets, projected costs and plans
and objectives of management for future operations, are forward-looking
statements. We express our expectations, beliefs and projections in good faith
and believe our expectations reflected in these forward-looking statements are
based on reasonable assumptions, however, we cannot assure you that these
expectations, beliefs or projections will prove to have been correct. Risks,
uncertainties and assumptions that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
include, among other things: (i) the risks associated with growth; (ii) the
ability to purchase merchandise at attractive prices; (iii) changes in consumer
demand and preferences; (iv) possible declines in comparable store sales; and
(v) the seasonality of our business.
Readers are referred to the caption "Risk Factors" appearing at the end of
Item I of the Company's Annual Report on Form 10-K for the year ended December
31, 2000 for additional factors that may affect our forward-looking statements.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur. We undertake no obligation to
update or revise our forward-looking statements, whether as a result of new
information, future events or otherwise.
PART I - FINANCIAL INFORMATION
Page No.
--------
Item 1 - Financial Statements
Consolidated Balance Sheets as of September 30, 2001 (unaudited),
September 30, 2000 (unaudited) and December 31, 2000 1
Consolidated Statements of Operations for the
Three Months and Nine Months Ended
September 30, 2001 and 2000 (unaudited) 2
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2001 and 2000 (unaudited) 3
Notes to Consolidated Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk 11
Tuesday Morning Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands, except for share data)
Unaudited Unaudited Audited
Sept. 30, Sept. 30, Dec. 31
ASSETS 2001 2000 2000
----------- ----------- -----------
Current assets:
Cash and cash equivalents..................................................... $ 4,923 $ 29,315 $ 20,886
Inventories................................................................... 205,691 242,296 174,813
Prepaid expenses.............................................................. 3,294 2,516 2,458
Income taxes receivable....................................................... 2,146 - -
Other current assets.......................................................... 873 871 1,102
----------- ----------- -----------
Total current assets....................................................... 216,927 274,998 199,259
----------- ----------- -----------
Property and equipment, at cost ................................................. 88,650 80,188 81,038
Less accumulated depreciation ................................................ (47,702) (42,407) (43,552)
----------- ----------- -----------
Net property and equipment................................................. 40,948 37,781 37,486
----------- ----------- -----------
Other assets, at cost:
Due from Officers............................................................. 100 - 356
Deferred financing costs...................................................... 4,445 6,037 5,691
Other assets.................................................................. 475 372 355
----------- ----------- -----------
Total Assets............................................................... $ 262,895 $ 319,188 $ 243,147
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Installments of mortgages..................................................... $ 1,434 $ 1,617 $ 1,671
Revolving credit facility..................................................... 2,960 74,070 -
Installments of notes payable................................................. 21,365 15,966 19,148
Accounts payable.............................................................. 58,571 44,401 43,241
Accrued liabilities:
Sales Tax.................................................................. 2,794 2,856 4,020
Interest................................................................... 2,609 4,149 1,120
Other...................................................................... 12,386 10,639 10,166
Deferred income taxes......................................................... 666 546 666
Income taxes payable.......................................................... - 769 5,455
----------- ----------- -----------
Total current liabilities.................................................. 102,785 155,013 85,487
----------- ----------- -----------
Mortgages on land, buildings and equipment, excluding current portion............ 4,368 5,803 5,385
Notes payable, excluding current portion......................................... 144,126 165,492 160,821
Revolving credit facility, excluding current portion............................. 15,000 15,000 -
Deferred income taxes............................................................ 2,611 2,400 2,611
----------- ----------- -----------
Total Liabilities.......................................................... 268,890 343,708 254,304
----------- ----------- -----------
Shareholders' equity
Common stock par value $.01 per share, authorized 100,000,000 shares; issued
39,706,528 shares at September 30, 2001, 39,548,701 shares at September
30, 2000, and 39,562,547 shares at December 31, 2000....................... 397 395 396
Accumulated other comprehensive income (loss) ................................ (11) - 124
Additional paid-in capital.................................................... 172,037 171,803 171,881
Retained deficit.............................................................. (178,418) (196,718) (183,558)
----------- ----------- -----------
Total Shareholders' Equity................................................. (5,995) (24,520) (11,157)
----------- ----------- -----------
Total Liabilities and Shareholders' Equity....................................... $ 262,895 $ 319,188 $ 243,147
=========== =========== ===========
See accompanying notes to consolidated financial statements.
-1-
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------------- ---------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales................................................... $ 128,983 $ 141,352 $ 386,778 $ 364,407
Cost of sales............................................... 86,330 93,168 256,916 236,182
---------- ---------- ---------- ----------
Gross profit.......................................... 42,653 48,184 129,862 128,225
Selling, general and administrative expenses................ 36,809 33,962 107,015 93,108
---------- ---------- ---------- ----------
Operating income...................................... 5,844 14,222 22,847 35,117
Other income (expense):
Interest income.......................................... 9 19 149 51
Interest expense......................................... (4,649) (6,886) (15,083) (17,090)
Other income............................................. 140 66 447 321
---------- ---------- ---------- ----------
(4,500) (6,801) (14,487) (16,718)
---------- ---------- ---------- ----------
Earnings before income taxes.......................... 1,344 7,421 8,360 18,399
Income tax expense.......................................... 538 2,820 3,220 6,992
---------- ---------- ---------- ----------
Net earnings ......................................... $ 806 $ 4,601 $ 5,140 $ 11,407
========== ========== ========== ==========
Earnings Per Share
- ------------------
Net earnings per common share:
Basic.................................................... $ 0.02 $ 0.12 $ 0.13 $ 0.29
========== ========== ========== ==========
Diluted.................................................. $ 0.02 $ 0.11 $ 0.13 $ 0.28
========== ========== ========== ==========
Weighted average number of common shares
and common share equivalents outstanding:
Basic.................................................... 39,694 39,425 39,648 39,183
Diluted.................................................. 40,890 40,546 40,628 40,667
See accompanying notes to consolidated financial statements.
-2-
Tuesday Morning Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Year to Date September 30,
--------------------------
2001 2000
---------- ----------
Net cash flows from operating activities:
Net earnings.............................................................. $ 5,140 $ 11,407
Adjustments to reconcile net earnings to net cash
(used in) operating activities:
Depreciation and amortization............................................ 4,484 3,569
Amortization of financing fees........................................... 1,246 1,022
(Gain) on disposal of fixed assets....................................... - (3)
Change in operating assets and liabilities:
Inventories............................................................ (30,982) (100,762)
Prepaid expenses....................................................... (836) (603)
Other current assets................................................... 198 372
Other assets........................................................... (120) (45)
Accounts payable....................................................... 15,330 4,910
Accrued liabilities.................................................... 2,483 5,377
Income taxes receivable................................................ (7,601) (8,399)
---------- ----------
Total adjustments................................................... (15,798) (94,562)
---------- ----------
Net cash (used in) operating activities................................... (10,658) (83,155)
---------- ----------
Net cash flows from investing activities:
Repayments of loans from officers......................................... 256 -
Proceeds from sale of assets ............................................. 12 8
Capital expenditures...................................................... (7,958) (8,269)
---------- ----------
Net cash (used in) investing activities................................... (7,690) (8,261)
---------- ----------
Net cash flows from financing activities:
Proceeds from revolving credit facility................................... 17,960 89,070
Debt Financing Costs...................................................... - (1,241)
Payment of debt and mortgages............................................. (15,732) 13,086
Proceeds from exercise of common
stock options/stock purchase plan...................................... 157 21
---------- ----------
Net cash provided by financing activities................................. 2,385 100,936
---------- ----------
Net increase/(decrease) in cash and cash equivalents......................... (15,963) 9,520
Cash and cash equivalents at beginning of period............................. 20,886 19,795
---------- ----------
Cash and cash equivalents at end of period................................... $ 4,923 $ 29,315
========== ==========
Non cash items:
Change in accumulated other comprehensive income (loss)................ $ (135) $ -
See accompanying notes to consolidated financial statements.
-3-
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
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States 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 10-K filing for the year ended December 31, 2000.
2. The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
3. Notes payable under the terms of the Company's revolving line of credit are
classified between current and long term in accordance with the terms of
the Senior Credit Facility.
4. Certain prior year amounts have been reclassified to conform to the current
period presentation.
5. Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which established accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133, as amended,
requires the recognition of all derivative instruments as either assets or
liabilities in the statement of financial position measured at fair value.
The impact of the adoption of SFAS No. 133 was immaterial to the Company's
financial statements taken as a whole.
The Company enters into foreign currency forward exchange contracts solely
to reduce the effects of fluctuating foreign currency exchange rates on
merchandise purchases between the order and payment dates, approximately 2
to 6 months. The derivative instruments are designated as cash flow hedges.
All foreign currency contracts are issued by one financial institution that
is rated as investment grade by a major rating agency. The Company does not
utilize derivative financial instruments for trading or speculative
purposes.
-4-
The Company documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. The Company also assesses, both at
the hedge's inception and on an ongoing basis, whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes
in cash flows of hedged items. Should it be determined that a derivative is
not highly effective as a hedge or that it has ceased to be a highly
effective hedge, the Company would discontinue hedge accounting
prospectively.
Changes in the fair value of derivatives that are highly effective and that
are designated and qualify as foreign-currency cash flow hedges are
recorded in Accumulated Other Comprehensive Income. These gains and losses
will be reclassified into earnings as the related inventory is sold. The
Company currently has $103 thousand of losses on foreign currency forward
exchange contracts that will be reclassified into inventory, offsetting
gains on foreign currency forward inventory purchase contracts to be
recorded there. Any hedge ineffectiveness and changes in the fair value of
instruments that do not qualify as hedges would be reported in current
period earnings. As of September 30, 2001, the Company had $702 thousand in
foreign currency contracts outstanding.
6. Comprehensive income is defined as the change in equity during a period
from transactions and other events, except those resulting from investments
by and distributions to shareholders. The components of comprehensive
income for the three-month periods ended September 30, 2001 and 2000 are as
follows:
Three Months Ended Nine Months Ended
September 30th September 30th
2001 2000 2001 2000
---- ---- ---- ----
(amounts in thousands)
Net Earnings $ 806 $4,601 $5,140 $11,407
Other comprehensive income (loss):
Unrealized (loss) on
investment securities, net (9) - (32) -
Foreign currency forward
contracts (note 5) 751 - (103) -
------ ------ ------ -------
Total comprehensive income $1,548 $4,601 $5,005 $11,407
====== ====== ====== =======
7. Sales are recorded at the time of sale and conveyance of merchandise to
customers. Sales are net of returns and exclude sales taxes.
-5-
Tuesday Morning Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth certain financial information from the Company's
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.
Quarter Ended Year to date
------------------------------ --------------------------------
September 30 September 30
------------------------------ --------------------------------
2001 2000 2001 2000
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 66.9 65.9 66.4 64.8
----- ----- ----- -----
Gross profit 33.1 34.1 33.6 35.2
Selling, general and administrative expense 28.5 24.0 27.7 25.6
----- ----- ----- -----
Operating income 4.5 10.1 5.9 9.6
Net interest expense and other income (3.5) (4.8) (3.8) (4.6)
----- ----- ----- -----
Earnings before income taxes 1.0 5.3 2.2 5.0
Income tax expense 0.4 2.0 0.8 1.9
----- ----- ----- -----
Net earnings 0.6% 3.3% 1.3% 3.1%
Three Months Ended September 30, 2001
Compared to the Three Months Ended September 30, 2000
During the third quarter of 2001, net sales decreased 8.8% compared to the same
quarter of 2000. This decrease is caused in part by last year's third quarter
sales including the sixth grand opening of the year, which falls in the fourth
quarter this year. Same store sales increased 2% for the fourth and fifth
events beginning August 7, 2001 and ending September 27, 2001. Stores were
considered as part of the fourth and fifth event comparable store sales
calculation if they were open all of the selling days in each of the events
compared. The increase in fourth and fifth event sales is due to comparable
store sales increases of $1.8 million and an additional $10.8 million of new
store sales. Average store sales for the fourth and fifth events increased
slightly from $269 thousand to $270 thousand compared to the same events of the
prior year. The increase in comparable sales was comprised of a 7.1% increase
in the number of transactions and a 5.2% decrease in the average transaction
amount.
Gross profit decreased $5.5 million from $48.2 million for last year's third
quarter to $42.7 million for the third quarter of this year, primarily as a
result of the decreased sales mentioned above. Our gross profit percentage
decreased 1.0% compared with the third quarter of last year. Our initial markup
on product purchased improved slightly, however, this was offset by buying and
distribution expenses, and an increase in reserve for shrink.
-6-
Selling, general and administrative expenses are comprised of store labor, store
occupancy costs, advertising, miscellaneous store operating expenses and home
office costs. The increases in these expenses are attributable to the increase
in the number of stores, general price level increases and increases in variable
expenses due to sales growth in the fourth and fifth events. A substantial
portion of SG&A expenses vary with sales or sales related components. Variable
expenses include: a) payroll and waste expense, which vary due to shipments of
merchandise to the stores; b) rent, which has a variable component due to
percentage rent; c) advertising, which varies based upon sales plans; and d)
other expenses such as credit card fees, which vary in direct proportion to
sales and usage. Selling, general, and administrative expenses increased $2.8
million compared to the third quarter of 2000 due primarily to the addition of
new stores, variable store level expenses, and inflationary increases. Overall,
these expenses increased 8.4% compared to the 11.3% increase in sales for our
4th and 5th events. However, on a per store basis, these expenses were $79.8
thousand this year compared to $81.8 thousand last year. The slight decrease in
average SG&A expenses was attributable to leverage of home office expenses,
advertising and credit card fees, which was caused by reduced sales. These
decreases were offset by higher rent, utilities and waste expense. As a
percentage, these expenses increased to 28.5% of sales from 24.0% of sales due
primarily to the opening of the sixth event in September last year.
Interest expense decreased due to the reduced borrowing needs effected by the
retiming of inventory receipts closer to the date of delivery to the stores for
the third quarter of 2001 and by the reduction in interest rates. Total debt
decreased $88.7 million from September 30, 2000.
The income tax provision for the three-month periods ended September 30, 2001
and 2000 was $0.5 million and $2.8 million, respectively. Those amounts reflect
an effective tax rate of 40.0% and 38.0% respectively.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the third quarter decreased from $15.5 million to $7.4 million due to the
factors mentioned previously/1/.
Nine Months Ended September 30, 2001
Compared to the Nine Months Ended September 30, 2000
During the first nine months of 2001 sales increased 6%. This increase is due
primarily to comparable store sales increases of 3% and $36.6 million of sales
from new stores offset by the move of the sixth grand opening to October in
2001. Annual comparable store sales is the summation of the individual
quarterly results. Average store sales for the nine months increased from $828
thousand to $846 thousand. The increase in comparable sales for the first five
events of the year was comprised primarily of a 5.7% increase in the number of
transactions and a 2.4% decrease in the average transaction amount. The
increase was primarily the result of continued improvement in merchandise
selection, pricing, and mix.
Gross profit increased $1.7 million from $128.2 million to $129.9 million
primarily as a result of the increased sales mentioned above. However, the
gross profit percentage decreased by 1.6% due primarily to increased shrink and
increased buying and distribution expenses.
/1/ EBITDA is earnings before interest, taxes, depreciation and amortization.
Tuesday Morning believes that, in addition to cash flows from operations and net
income, EBITDA is a useful financial performance measure for assessing operating
performances as it provides an additional basis to evaluate the ability of
Tuesday Morning to incur and service debt and to fund capital expenditures. To
evaluate EBITDA, the components of EBITDA such as revenue and operating expenses
and the variability of such components over time should also be considered.
EBITDA should not be construed, however, as an alternative to net income (loss)
as an indicator of the Company's operating performance or to cash flows from
operating activities (as determined in accordance with GAAP) as a measure of
liquidity. Tuesday Morning's method of calculating EBITDA may differ from
methods used by other companies, and as a result, EBITDA measures disclosed
herein may not be comparable to other similarly titled measures used by other
companies.
-7-
Selling, general, and administrative expense increased $13.9 million due to the
addition of new stores and inflationary increases. These expenses as a
percentage of sales increased to 27.7% from 25.6% due to a planned increase in
store labor as well as increased energy and waste costs. In addition, this
increase is partially attributable to the shift of the grand opening of the
sixth event into October 2001.
Interest expense decreased due to the reduced borrowing needs effected by the
retiming of inventory receipts closer to the date due in our stores and by the
reduction of interest rates.
The income tax provision for the nine-month periods ended September 30, 2001 and
2000 was $3.2 million and $7.0 million, respectively, reflecting an effective
tax rate of 38.5% and 38.0% respectively.
EBITDA decreased from $39.1 million to $27.9 million due to the factors
mentioned above1.
Liquidity and Capital Resources
We have historically financed our operations with funds generated from operating
activities and borrowings under our revolving credit facilities. In July 2000,
however, the Term A Loan tranche of the Senior Credit Facility was increased
$25.0 million. These additional funds were used to help finance our operations.
Net cash used in operating activities for the nine months ended September 2001
and 2000, was $10.7 million and $83.2 million, respectively, representing a
$72.5 million decrease in 2001. Inventory levels decreased due to the re-timing
of the receipt of merchandise from vendors to more closely match the processing
schedule and event start dates. The retiming of inventory receipts also
affected the Accounts Payable balances, which increased $15.3 million. Cash and
cash equivalents as of September 30, 2001 and 2000 were $4.9 million and $29.3
million, respectively. This decrease of $24.4 million resulted from the shift
of the sixth event from September in 2000 to October for 2001.
Capital expenditures, principally associated with new store openings and
warehouse equipment, were $8.0 million and $8.3 million for the nine months
ending September 2001 and 2000, respectively. We expect to spend approximately
$1.0 million for capital expenditures for the remainder of 2001.
As part of the 1997 recapitalization, discussed in detail in the Company's Form
10-K filing for the year ended December 31, 2000, the Company entered into the
Senior Credit Facility, which was originally 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 could be increased by $25.0
million to accommodate future growth and for certain other purposes. The Term A
Loans and the Revolving Credit Facility loans mature December 2002, and the Term
B Loans mature December 2004. For 30 consecutive days during each twelve-month
period, beginning April 1998, the
-8-
aggregate principal amount of loans outstanding under the Revolving Credit
Facility is not to exceed $15.0 million. On July 5, 2000, the Company amended
and restated its Senior Credit Facility by increasing the Term A loan
commitments by $25.0 million and the availability under the Revolving Credit
Facility by $35.0 million (from $90.0 million to $125.0 million.) The remaining
terms of the indebtedness did not change, however, new financial covenants were
established and interest rates were adjusted to reflect market rates. At
September 30, 2001, the Company had $96.5 million outstanding under the Term
Loans and $18.0 million outstanding under the Revolving Credit Facility, with
$84.8 million of remaining availability thereunder.
The Senior Subordinated Notes ("Notes") bear interest at 11.0% and are due on
December 15, 2007. The Notes are subordinated to any amounts outstanding under
the Senior Credit Facility. Interest is payable on June 15 and December 15 of
each year.
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 principle
payments and interest on the loans under the Senior Credit Facility are 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 the Company's indebtedness, including the Senior
Credit Facility and the Indenture for the Notes, 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 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. The Company was in compliance with all
debt covenants on September 30, 2001.
Inventory
The Company's inventory decreased from $242.3 million at September 30, 2000 to
$205.7 million at September 30, 2001, representing a decrease of $36.6 million.
The decrease in inventory is comprised of a $4.2 million decrease in store
inventory and a $32.4 million decrease in warehouse inventory. At September 30,
2001, 55.2% of our total inventory was in the stores versus 48.6% at September
30, 2000.
As reflected in the following charts, warehouse inventory increased $1.3 million
from the prior year-end. Inventory aging of product in the stores remains at
historical or better levels even though store inventory levels increased $29.6
million. The increase in store level inventory is the result of better product
flows to the stores as we have re-timed inventory shipments to our stores for a
more consistent delivery schedule. This also reduced warehouse space
requirements.
-9-
Total Inventory Levels by Location
(millions)
9/30/01 9/30/00 9/30/99 12/31/00 12/31/99
-------- -------- -------- --------- ---------
Stores $ 113.6 $ 117.8 $ 105.4 $ 84.0 $ 72.8
Warehouse 92.1 124.5 89.1 90.8 68.7
-------- -------- -------- --------- ---------
Total $ 205.7 $ 242.3 $ 194.5 $ 174.8 $ 141.5
======== ======== ======== ========= =========
Per Store Inventory Levels by Location
(thousands)
9/30/01 9/30/00 9/30/99 12/31/00 12/31/99
-------- -------- -------- --------- ---------
Stores $ 246 $ 284 $ 287 $ 195 $ 191
Warehouse 200 300 242 211 180
-------- -------- -------- --------- ---------
Total $ 446 $ 584 $ 529 $ 406 $ 371
======== ======== ======== ========= =========
Store Openings/Closings
Nine Months Nine Months Twelve Months
Ending Ending Ending
9/30/01 9/30/00 12/31/00
------- ------- --------
Stores Open at
Beginning of Period 431 382 382
Stores Opened 34 38 54
Stores Closed (4) (5) (5)
------- ------- --------
Stores Open at End
Of Period 461 415 431
======= ======= ========
Earnings Per Common Share
(unaudited)
Three Months Ended Nine Months Ended Sept 30,
Sept 30,
2001 2000 2001 2000
---- ---- ---- ----
Earnings Per Common Share:
Basic earnings per share:
Net earnings available to common shareholders $ 806 $ 4,601 $ 5,140 $ 11,407
=========== ============ ============ ===========
Earnings per common share $ 0.02 $ 0.12 $ 0.13 $ 0.29
=========== ============ ============ ===========
Diluted earnings per share:
Net earnings available to common shareholders $ 806 $ 4,601 $ 5,140 $ 11,407
=========== ============ ============ ===========
Effect of dilutive securities:
Weighted average common equivalent shares from
stock options 1,196 1,121 980 1,484
Weighted average common shares outstanding 39,694 39,425 39,648 39,183
----------- ------------ ------------ -----------
Weighted average common shares and common
share equivalents outstanding 40,890 40,546 40,628 40,667
=========== ============ ============ ===========
Earnings per common share $ 0.02 $ 0.11 $ 0.13 $ 0.28
=========== ============ ============ ===========
-10-
Quantitative and Qualitative Disclosures about Market Risk
The market risk of the Company's financial instruments as of September 30, 2001
has not materially changed since December 31, 2000.
The table below provides information about the Company's debt obligations that
are sensitive to changes in interest rates:
Expected Maturity
(In thousands)
Three
Months
Ended Year Ended
----------------------------------------------------------------------------------------------
12/31/01 2002 2003 2004 2005 Thereafter Total
----------------------------------------------------------------------------------------------
Long Term Debt
Variable Rate $ 5,088 $33,837 $ 1,269 $59,175 $ 650 $ 2,275 $102,295
Avg Interest Rate 5.40%/2/ 8.27%/3/ 8.27%/3/ 8.27%/3/ 9.10%/3/ 9.10%/3/
Fixed Rate $ - $ - $ - $ - $ - $69,000 $ 69,000
Avg Interest Rate 11.00% 11.00% 11.00% 11.00% 11.00% 11.00%
The table below provides information about the Company's derivative financial
instruments that are sensitive to foreign currency exchange rates and presents
such information in U.S. dollar equivalents because that is the Company's
reporting currency.
Expected Maturity
(USD equivalent in thousands)
Forward Exchange Agreements
Wtd. Average
Contract Contract Fair
Currency Amount Exchange Rate Value
-------- -------- ------------- -----
EUR $690 0.8850 $688
GBP $ 12 1.4647 $ 12
The Company generally enters into foreign currency contracts with maturity dates
of six months or less.
PART II - OTHER INFORMATION
Exhibits:
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10.1 Amendment No. 1 to the First Amended and Restated Credit Agreement
/2/ The source of the average interest rate is based upon average third quarter
rates.
/3/ The source of the average interest rate is based upon average rates provided
by Fleet Boston Financial.
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10.2 Consent Agreement for the loan agreement between Tuesday Morning
Corporation and Compass Bank dated June 3, 1999.
10.3 Consent and Modification Agreement for the loan agreement between
Tuesday Morning Corporation and Compass Bank dated December 29, 1997.
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: November 9, 2001 /s/ Mark E. Jarvis
--------------------------
Mark E. Jarvis, Executive
Vice President
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