Tuesday Morning Corporation Announces Second Quarter Fiscal 2013 Results

Tuesday Morning Corporation Announces Second Quarter Fiscal 2013 Results

DALLAS, Jan. 22, 2013 (GLOBE NEWSWIRE) -- Tuesday Morning Corporation
(Nasdaq:TUES), a leading closeout retailer with over 830 stores across the
United States specializing in selling deeply discounted, upscale home
furnishings, housewares, gifts and related items, today announced financial
results for the second quarter and year-to-date period ended December 31,
2012. For the second quarter, the Company's net sales increased 4.5% to $285.3
million, from $273.1 million in the second quarter of fiscal 2012. Including
the impact of non-recurring charges detailed below, the Company reported a net
loss for the quarter of $21.5 million, or $0.51 per share. Excluding these
non-recurring charges, the Company reported non-GAAP adjusted net income of
$15.5 million or $0.37 per share for the second quarter ended December 31,
2012 compared to net income of $15.9 million or $0.37 per share in the same
period last year.

Brady Churches, President and Chief Executive Officer, stated, "We are pleased
with our initial sales progress, which was driven by enthusiastic customer
response across a range of seasonal merchandise and well-received deals during
the second quarter. This does not, however, obscure the challenges ahead,
which includes the need for a major revitalization across every facet of our
operations. While the Company has taken some positive first steps in this
regard, including a difficult but necessary inventory write-down, much work
remains to restore Tuesday Morning's core value proposition."

For the quarter ended December 31, 2012:

  *Comparable stores sales increased by 5.6% compared to the second quarter
    of fiscal 2012 and were comprised of a 5.3% increase in average ticket and
    a 0.3% increase in traffic.
  *Gross profit was $61.6 million and gross margin was 21.6% compared to
    $104.8 million in gross profit and gross margin of 38.4% in the second
    quarter of fiscal 2012, related primarily to a non-cash inventory
    valuation charge of $41.8 million recorded during the second quarter of
    fiscal 2013. This inventory charge was required to devalue certain
    inventory based on a strategic decision to accelerate the sell off of such
    inventory by the end of the 2013 calendar year.
  *Selling, general and administrative expenses (SG&A) increased 6.1% to
    $84.2 million from $79.3 million in the same period last year. The
    increase in SG&A was primarily attributable to $5.3 million in
    non-recurring charges that related to store clean-up, severance costs, and
    consulting, legal and recruitment expenses.
  *Operating loss was $22.6 million as compared to operating income of $25.5
    million in the second quarter of fiscal 2012. The Company's operating
    results were significantly impacted by a non-cash charge of $41.8 million
    for the write-down of inventory and $6.7 million in charges related to
    store clean-up, severance costs, legal, consulting, search and recruitment
    expenses, and a systems impairment.
  *Net loss was $21.5 million or a $0.51 loss per share compared to net
    income of $15.9 million or $0.37 per share in the second quarter of fiscal
    2012. The Company's results were impacted by the effects of the
    non-recurring items described above and a deferred tax asset valuation
    allowance.

For the Six Months ended December 31, 2012:

  *Comparable stores sales increased by 4.0% compared to the six months ended
    December 31, 2011 and were comprised of a 4.7% increase in average ticket
    and a 0.7% decrease in traffic.
  *Gross profit was $126.5 million and gross margin was 27.6% compared to
    $169.8 million in gross profit and gross margin of 38.3% for the six
    months ended December 31, 2011, related primarily to a non-cash inventory
    valuation charge of $41.8 million. This inventory charge was required to
    devalue certain inventory based on a strategic decision to accelerate the
    sell off of such inventory by the end of the 2013 calendar year.
  *Selling, general and administrative expenses (SG&A) increased 4.7% to
    $160.0 million from $152.8 million in the same period last year primarily
    as a result of non-recurring charges. The increase is SG&A was primarily
    attributable to $6.8 million in charges that related primarily to store
    clean-up, severance costs, and consulting, legal and recruitment expenses.
  *Operating loss was $33.5 million as compared to operating income of $17.0
    million for the six months ended December 31, 2011. The Company's
    operating results were significantly impacted by a non-cash charge of
    $41.8 million for the write-down of inventory and $8.2 million in charges
    related to store clean-up, severance costs, legal, consulting, search and
    recruitment expenses, and a systems impairment.
  *Net loss was $28.4 million or $0.68 loss per share compared to net income
    of $10.2 million or $0.23 per share for the six months ended December 31,
    2011. The Company's results were impacted by the effects of the
    non-recurring items described above and a deferred tax asset valuation
    allowance.

The Company ended the second quarter of fiscal 2013 with $48.0 million in cash
and cash equivalents with no borrowings under its line of credit. Inventories
at the end of the second quarter of fiscal 2013 were $208.3 million compared
to $239.2 million at the end of the second quarter of fiscal 2012, down $30.9
million or 12.9%.

About Tuesday Morning

Tuesday Morning is a leading closeout retailer of upscale, decorative home
accessories, housewares and famous-maker gifts in the United States. The
Company opened its first store in 1974 and currently operates over 830 stores
in 43 states. Tuesday Morning is nationally known for bringing its more than
nine million loyal customers a unique treasure hunt of high-end, first
quality, brand name merchandise...never seconds or irregulars...at prices well
below those of department and specialty stores and catalogues.

Conference Call Information

Tuesday Morning Corporation's management will hold a conference call to review
second quarter 2013 financial results today, January 22, 2013, at 4:00 p.m.
Central Time.The call may also include discussion of company developments,
forward-looking information and other material information about business and
financial matters.A real-time webcast of the 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 at 1-877-312-5376 (no access code
required).A replay of the webcast will also be accessible through the
Company's website or by dialing (855) 859-2056, conference ID number 87252706,
until February 28, 2013.

Non-GAAP Financial Measures

The Company reports and discusses its operating results using financial
measures consistent with accounting principles generally accepted in the
United States ("GAAP").From time to time, in press releases, financial
presentations, earnings conference calls or otherwise, the Company may
disclose certain non-GAAP financial measures.The non-GAAP financial measures
presented in this earnings release should not be viewed as alternatives or
substitutes for the Company's reported GAAP results.A reconciliation of the
most directly comparable GAAP financial measure is set forth in the tables
that accompany this release.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the federal securities laws and the Private Securities Litigation Reform Act
of 1995, which are based on management's current expectations, estimates and
projections.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 carefully consider statements
that contain these words because they describe our expectations, plans,
strategies and goals and our beliefs concerning future business conditions,
our future results of operations, our future financial position, and our
business outlook or state other "forward-looking" information.Forward-looking
statements in this press release include, but are not limited to,statements
or management's plans and expectations in this press release.

Reference is hereby made to the Company's filings with the Securities and
Exchange Commission, including, but not limited to, "Item 1A. Risk Factors" of
the Company's Annual Report on Form 10-K for the year ended June 30, 2012, 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: uncertainties regarding our
ability to open stores in new and existing markets and operate these stores on
a profitable basis; conditions affecting consumer spending and the impact,
depth and duration of current economic conditions; inclement weather; changes
in our merchandise mix; timing and type of sales events, promotional
activities and other advertising; increased or new competition; loss or
departure of one or more members of our senior management or experienced
buying and management personnel; an increase in the cost or a disruption in
the flow of our products; seasonal and quarterly fluctuations; fluctuations in
our comparable store results; our ability to operate in highly competitive
markets and to compete effectively; our ability to operate information systems
and implement new technologies effectively; our ability to generate strong
cash flows from our operations; our ability to anticipate and respond in a
timely manner to changing consumer demands and preferences; our ability to
generate strong holiday season sales; and other factors.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, we undertake no obligations to update our 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
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income:

The following table sets forth a reconciliation of the Company's GAAP net
income (loss) to Non-GAAP adjusted net income for the periods shown (in
thousands):

                                                       
                       Three Months Ended               Six Months Ended
                        December 31,                     December 31,
                       2012         2011       2012               2011
Net income (loss), less ($21,466)    $15,857    ($28,427)          $10,166
impact of:
                                                               
Inventory write-down,   (31,796)     --         (31,796)           --
net of tax ^(1)
Store clean-up, net of  (855)        --         (855)              --
tax ^(1)
Severance costs, net of (1,173)      --         (1,282)            --
tax ^(1)
Legal, consulting,
search and recruitment  (2,040)      --         (3,065)            --
fees, net of tax ^(1)
Systems impairment, net (1,055)      --        (1,055)            ---
of tax ^(1)
                                                               
Non-GAAP adjusted net   $15,453      $15,857    $9,626             $10,166
income

(1)The effective tax rate utilized in this non-GAAP adjusted net income
reconciliation is 24%.This rate is inclusive of a deferred tax asset
valuation allowance of $6.3 million recorded during the quarter ended December
31, 2012.

GAAP Net Income (Loss) Per Share to Non-GAAP Adjusted Net Income Per Share:

The following table sets forth a reconciliation of the Company's GAAP net
income (loss) per share to Non-GAAP adjusted net income per share for the
periods shown:

                          Three Months Ended            Six Months Ended
                           December 31,                  December 31,
                          2012         2011     2012              2011
Net income (loss) per
common share, less impact  ($0.51)      $0.37    ($0.68)           $0.23
of:
                                                               
Inventory write-down, net  ($0.75)      --       ($0.76)           --
of tax ^(1)
Store clean-up, net of tax ($0.02)      --       ($0.02)           --
^(1)
Severance costs, net of    ($0.03)      --       ($0.03)           --
tax ^(1)
Legal, consulting, search
and recruitment fees, net  ($0.05)      --       ($0.07)           ---
of tax ^(1)
Systems impairment, net of ($0.03)      --      ($0.03)           ---
tax ^(1)
                                                               
Non-GAAP adjusted net      $0.37        $0.37    $0.23             $0.23
income per share

(1)The effective tax rate utilized in this non-GAAP adjusted net income per
share reconciliation is 24%.This rate is inclusive of a deferred tax asset
valuation allowance of $6.3 million recorded during the quarter ended December
31, 2012.

The Company believes that the Non-GAAP financial measures above provide useful
information to the Company's management, investors, and other interested
parties about the Company's operating performance because they allow them to
understand and compare the Company's operating results during the 2013 fiscal
year to the prior year periods in a more consistent manner.Non-GAAP adjusted
net income, as used in this press release, may not be comparable to similarly
titled measures used by other companies.The Company calculated the tax effect
of non-GAAP adjustments by applying an applicable estimated jurisdictional tax
rate to each specific non-GAAP item.

The Non-GAAP financial measures presented in the tables above should not be
viewed as an alternative or substitute for the Company's reported GAAP
results.

Tuesday Morning Corporation                                      
Consolidated Statement of Income                                 
(In thousands, except per share data)                            
                                                                
                        Three Months Ended Dec. 31, Six Months Ended Dec. 31,
                                                               
                        2012           2011         2012          2011
                        (unaudited)                 (unaudited)
                                                                
Net sales                $285,312      $273,054    $ 458,107    $443,707
Cost of sales            223,711       168,239     331,600      273,919
Gross profit             61,601        104,815     126,507      169,788
                                                               
Selling, general and     84,194        79,330      159,984      152,802
administrative expenses
                                                               
Operating income         (22,593)      25,485      (33,477)     16,986
                                                               
Other income (expense):                                          
Interest expense         (486)         (651)       (908)        (1,448)
Interest income          --           --         --          --
Other income (expense),  (1,267)       108         (1,209)      150
net
Other income (expense)   (1,753)       (543)       (2,117)      (1,298)
                                                               
Income before income     (24,346)      24,942      (35,594)     15,688
taxes
                                                               
Income tax expense       (2,880)       9,085       (7,167)      5,522
                                                               
Net income               $(21,466)     $15,857     $(28,427)    $10,166
                                                               
Earnings Per Share:                                             
Net income per common share:                                     
Basic                    $(0.51)      $0.37      $(0.68)     $0.24
Diluted                  $(0.51)      $0.37      $(0.68)     $0.23
                                                               
Weighted average number of common                                
shares:
Basic                    42,308        42,131      42,036       42,421
Diluted                  42,308        42,673      42,036       42,972

                                                                 
                                                                 
Tuesday Morning Corporation (continued)                           
                                                                
Consolidated Balance Sheets                                       
(in thousands)                             Dec. 31,    Dec. 31,    Jun. 30,
                                          2012        2011        2012
                                          (unaudited) (unaudited) (audited)
Assets                                                           
Current assets:                                                  
Cash and cash equivalents                  $47,983    $57,128    $39,740
Inventories                                208,304    239,161    265,630
Prepaid expenses and other assets         8,084      8,075      11,357
Deferred income taxes                      9,289      1,568      535
Total current assets                       273,660    305,932    317,262
                                                                
Property and equipment, net                73,991     74,730     75,771
                                                                
Other long-term assets:                                          
Deferred financing costs                   2,301      2,861      2,603
Other assets                               1,287      1,329      1,531
                                                                
Total Assets                               $351,239   $384,852   $397,167
                                                                
Liabilities and Stockholders' Equity                              
Current liabilities:                                             
Accounts payable                           $70,137    $71,087    $98,009
Accrued liabilities                        38,505     32,228     30,295
Income taxes payable                       1,105      5,482      19
Total current liabilities                  109,747    108,797    128,323
                                                                
Revolving credit facility                  --        --        --
Deferred rent                              2,936      3,400      3,262
Income tax payable - non-current           482        571        578
Deferred income taxes                      4,395      5,126      4,813
Total Liabilities                          117,560    117,894    136,976
                                                                
Stockholders' equity                       233,679    266,958    260,191
Total Liabilities and Stockholders' Equity $351,239   $384,852   $397,167

                                                                 
                                                                 
Tuesday Morning Corporation (continued)                           
                                                                 
Consolidated Statement of Cash Flows                              
(in thousands)                                                    
                                                    Six Months Ended Dec. 31,
                                                                 
                                                    2012          2011
                                                    (unaudited)
Net cash flows from operating activities:                         
Net income                                           $(28,427)    $10,166
Adjustments to reconcile net income to net cash                   
provided by operating activities:
Depreciation and amortization                        7,130        7,607
Amortization of financing fees                       302          459
Deferred income taxes                                (9,172)      (1,292)
Loss on disposal of fixed assets                     1,503        216
Stock compensation expense                           1,024        993
Other non-cash charges                               56           52
Net change in operating assets and liabilities       41,268       48,833
                                                                 
Net cash provided by operating activities            13,684       67,034
                                                                 
Net cash flows from investing activities:                         
Capital expenditures                                 (6,360)      (5,571)
                                                                 
Net cash used in investing activities                (6,360)      (5,571)
                                                                 
Net cash flows from financing activities:                         
Repayments-revolving credit facility                 (93,655)     (92,338)
Borrowings-revolving credit facility                 93,655       92,338
Change in cash overdraft                             --           (18,791)
Payment of financing fees                            --           (816)
Proceeds from exercise of common stock options and   978          156
stock purchase plan purchases and other
Purchase of treasury shares                          (59)         (4,284)
                                                                 
Net cash provided by (used in) financing activities  919          (23,735)
                                                                 
Net increase in cash and cash equivalents            8,243        37,728
                                                                 
Cash and cash equivalents, beginning of period       39,740       19,400
                                                                 
Cash and cash equivalents, end of period             $47,983      $57,128

CONTACT: Stephanie Bowman
         Chief Financial Officer
         TUESDAY MORNING CORPORATION
         972-934-7251
        
         MEDIA:
         Jonathan Morgan/Jennifer Habicht
         PERRY STREET COMMUNICATIONS
         214-965-9955