UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number
(Exact Name of Registrant as Specified in its Charter)
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(State or Other Jurisdiction of |
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(I.R.S. Employer |
Incorporation or Organization) |
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Identification Number) |
(Address of principal executive offices) (Zip code)
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(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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The |
Securities registered pursuant to Section 12(b) of the Act: None
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
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Outstanding at January 31, 2022 |
Common Stock, par value $0.01 per share |
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Table of Contents
PART I. |
4 |
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ITEM 1. |
4 |
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Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021 |
4 |
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and 2020 |
7 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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ITEM 3. |
29 |
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ITEM 4. |
29 |
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PART II. |
30 |
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ITEM 1. |
30 |
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ITEM 1A. |
30 |
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ITEM 6. |
31 |
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32 |
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2
Forward-Looking Statements
This Form 10-Q 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. These statements may be found throughout this Form 10-Q, particularly under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among others. 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 or words that state other “forward looking” information carefully because they describe our current expectations, plans, strategies and goals and our beliefs concerning future business conditions, future results of operations, future financial positions, and our current business outlook. Forward looking statements also include statements regarding the Company’s strategy, future operations, performance and prospects, sales and growth expectations, our liquidity, capital expenditure plans, future store openings and closings, our inventory management plans and merchandising and marketing strategies.
The terms “Tuesday Morning,” “the Company,” “we,” “us,” and “our” as used in this Form 10-Q refer to Tuesday Morning Corporation and its subsidiaries.
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 most Annual Report on Form 10-K for the fiscal year ended June 30, 2021, 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: the effects and length of the COVID-19 pandemic; 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; increases in the cost or a disruption in the flow of our products, including the extent and duration of the ongoing impacts to domestic and international supply chains from the COVID-19 pandemic; our ability to continuously attract buying opportunities for off-price merchandise and anticipate consumer demand; our ability to obtain merchandise on varying payment terms; our ability to successfully manage our inventory balances profitably; our ability to effectively manage our supply chain operations; loss of, disruption in operations of, or increased costs in the operation of our distribution center facility; 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; 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; increased costs or exposure to fraud or theft resulting from payment card industry related risk and regulations; and our ability to maintain an effective system of internal controls over financial reporting. 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 Form 10-Q 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.
3
PART I — FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Tuesday Morning Corporation
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share data)
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December 31, |
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June 30, |
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2021 |
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2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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— |
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Inventories |
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Prepaid expenses |
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Other current assets |
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Total Current Assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Deferred financing costs |
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Other assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Operating lease liabilities |
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Total Current Liabilities |
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Operating lease liabilities — non current |
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Borrowings under revolving credit facility |
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Long term debt (see Note 3 for amounts due to related parties) |
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Asset retirement obligation — non-current |
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Other liabilities — non-current |
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Total Liabilities |
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— |
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— |
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Stockholders’ equity: |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Retained deficit |
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( |
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Less: |
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( |
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( |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Tuesday Morning Corporation
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share data)
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Three Months Ended |
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Six Months Ended |
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December 31, |
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December 31, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross margin |
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Selling, general and administrative expenses |
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Restructuring, impairment and abandonment charges |
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Operating income/(loss) before interest, reorganization and other income/(expense) |
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( |
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( |
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Other income/(expense): |
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Interest expense |
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( |
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( |
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( |
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( |
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Reorganization items, net |
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( |
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Other income, net |
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( |
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( |
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Other income/(expense) total |
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( |
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( |
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Earnings/(loss) before income taxes |
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( |
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Income tax expense/(benefit) |
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( |
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( |
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Net earnings/(loss) |
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$ |
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$ |
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$ |
( |
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$ |
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Earnings Per Share |
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Net earnings/(loss) per common share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
( |
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$ |
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Weighted average number of common shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Tuesday Morning Corporation
Condensed Consolidated Statements of Stockholders' Equity (unaudited)
(In thousands)
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Common Stock |
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Additional |
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Retained |
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Treasury |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Stock |
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Equity |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Shares issued or canceled in connection with |
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( |
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( |
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— |
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— |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Shares issued or canceled in connection with |
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( |
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— |
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— |
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— |
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— |
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— |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Retained |
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Treasury |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Stock |
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Equity |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Shares issued or canceled in connection with |
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( |
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( |
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— |
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— |
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— |
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Balance at September 30, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Shares issued or canceled in connection with |
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( |
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— |
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— |
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— |
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— |
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— |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Tuesday Morning Corporation
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
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Six Months Ended |
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December 31, |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Net earnings/(loss) |
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$ |
( |
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$ |
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Adjustments to reconcile net earnings/(loss) to net cash used in operating activities: |
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Depreciation and amortization |
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Loss on impairment and abandonment of assets |
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Amortization of financing costs and interest expense |
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(Gain)/loss on disposal of assets |
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( |
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Gain on sale-leaseback |
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— |
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( |
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Share-based compensation |
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Gain on lease terminations |
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— |
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( |
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Deferred income taxes |
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( |
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— |
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Construction allowances from landlords |
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Change in operating assets and liabilities: |
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Inventories |
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( |
) |
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Prepaid and other current assets |
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( |
) |
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( |
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Other assets |
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( |
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— |
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Accounts payable |
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( |
) |
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Accrued liabilities |
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( |
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Operating lease assets and liabilities |
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( |
) |
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( |
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Other liabilities — non-current |
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( |
) |
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Income taxes payable |
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— |
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Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Capital expenditures |
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( |
) |
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( |
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Proceeds from sale-leaseback |
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— |
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Proceeds from sales of assets |
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— |
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Net cash provided by/(used in) investing activities |
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( |
) |
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Cash flows from financing activities: |
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Proceeds from borrowings under revolving credit facility |
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Repayments of borrowings under revolving credit facility |
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( |
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( |
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Proceeds from term loan |
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— |
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Proceeds from exercise of employee stock options |
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— |
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Tax payments related to vested stock awards |
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( |
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— |
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Payments on finance leases |
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( |
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( |
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Payment of financing fees |
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— |
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( |
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Net cash provided by financing activities |
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Net increase/(decrease) in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Tuesday Morning Corporation
Notes to Condensed Consolidated Financial Statements (unaudited)
The terms “Tuesday Morning,” the “Company,” “we,” “us” and “our” as used in this Quarterly Report on Form 10-Q refer to Tuesday Morning Corporation and its subsidiaries. Other than as disclosed in this document, please refer to our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for our critical accounting policies.
1. Nature of Operations and Significant Accounting Policies
Basis of presentation — The unaudited interim condensed consolidated financial statements herein include the accounts of Tuesday Morning Corporation and its subsidiaries (the "Company") and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted. We believe the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal recurring adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented. We do not present a condensed consolidated statement of comprehensive income as there are no other comprehensive income items in either the current or prior fiscal periods.
Our business results historically have fluctuated throughout the year and, as a result, the operating results of the interim periods presented are not necessarily indicative of the results that may be achieved for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2021. The condensed consolidated balance sheet at June 30, 2021 has been derived from the audited consolidated financial statements at that date. The preparation of the condensed consolidated financial statements is in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual amounts could differ from those estimates.
Our fiscal year ends on June 30 and we operate our business as a single operating segment.
(A) Cash and Cash Equivalents—Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. At December 31, 2021 and June 30, 2021, credit card receivables from third party consumer credit card providers were $
(B) Restricted Cash—Restricted cash was $
Emergence from Chapter 11 Bankruptcy Proceedings
In response to the impacts of the COVID-19 pandemic, on
In early June 2020, in accordance with orders of the Bankruptcy Court, we commenced the process to close
On November 16, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Revised Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Amended Plan”) and a proposed Amended Disclosure Statement (the “Amended Disclosure Statement”) in support of the Amended Plan describing the Amended Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. The Amended Plan and the Amended Disclosure Statement contemplated the debt financing transactions described in Note 3 below under the caption “Post-Emergence Debt Financing Arrangements,” the exchange and Rights Offering (defined in Note 12 below) and the sale-leaseback transactions described in Note 8 below.
8
On December 23, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Amended Plan, with certain modifications described in the Confirmation Order (as modified and confirmed, the “Plan of Reorganization”). On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and the Company completed the debt financing and sale-leaseback contemplated in the Plan of Reorganization. However, the closing of the Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of ASC 852 – Reorganizations until that transaction closed on February 9, 2021.
In accordance with the Plan of Reorganization, effective December 31, 2020 (the “Effective Date”), the Company’s board of directors was comprised of
Pursuant to the Plan of Reorganization, each outstanding share of the Company’s common stock as of the close of business on January 4, 2021 was exchanged for (1)
On September 29, 2021, the U.S. Bankruptcy Court issued a final decree (the “Final Decree”) closing the Chapter 11 Cases of the Company and its subsidiaries. While the Company emerged from bankruptcy proceedings on December 31, 2020, the Chapter 11 Cases remained opened pending final resolution of all claims of general unsecured creditors. The Company was able to resolve all of the claims for approximately $
See Note 2 regarding Bankruptcy Accounting for further discussion.
Listing
During the pendency of our bankruptcy proceedings, the Company’s common stock was delisted by the Nasdaq Stock Market, LLC (“Nasdaq”) and began trading on the OTC Pink marketplace under the symbol “TUESQ”. In January 2021, following our emergence from bankruptcy, the Company’s common stock began trading on the OTCQX market under the ticker symbol “TUEM.”
On May 24, 2021, Nasdaq approved our application for the relisting of the Company's common stock on the Nasdaq Capital Market. The Company's common stock was relisted and commenced trading on the Nasdaq Capital Market at the opening of the market on May 25, 2021, under the ticker symbol "TUEM."
9
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has had an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. On March 25, 2020, we temporarily closed all of our
Future impacts from the COVID-19 pandemic will depend on the potential further geographic spread and duration of the ongoing pandemic, the timing and extent of recovery in traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, availability and cost of products, the production and administration of effective medical treatments and vaccines, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.
Accounting Pronouncement Recently Adopted
In March 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). This update is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange and is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. We
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We
Recent Accounting Pronouncement Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This guidance, which became effective on March 12, 2020, and can be applied through December 31, 2022. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of December 31, 2021, we continue to monitor our contracts and transactions for potential application of this ASU.
10
2. Bankruptcy Accounting
Reorganizations require that the condensed consolidated financial statements, for periods subsequent to the filing of the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. During the pendency of the Chapter 11 Cases until we qualified for emergence under ASC 852, the condensed consolidated financial statements were prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business and reflect the application of ASC 852. Accordingly, certain expenses, gains and losses that were realized or incurred in the bankruptcy proceedings were recorded in Reorganization items, net in our Condensed Consolidated Statements of Operations.
Pursuant to the Plan of Reorganization, an escrow account (the “Unsecured Creditor Claim Fund”) was established for the benefit of holders of allowed general unsecured claims. Upon the closing of the sale and leaseback of the Corporate Office and the Dallas Distribution Center properties and the issuance of the Term Loan (as defined in Note 3 below), net proceeds of $
Our Plan of Reorganization was confirmed on December 23, 2020, and all listed material conditions precedent were resolved by the December 31, 2020 legal effective date of emergence as governed by the Bankruptcy Court. However, the closing of our Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of ASC 852 until that transaction closed on February 9, 2021.
On September 29, 2021, the U.S. Bankruptcy Court issued a Final Decree closing the Chapter 11 Cases of the Company and its subsidiaries. While the Company emerged from bankruptcy proceedings on December 31, 2020, the Chapter 11 Cases remained opened pending final resolution of all claims of general unsecured creditors. The Company was able to resolve all of these claims for approximately $
Restructuring, Impairment and Abandonment Charges
Restructuring, impairment and abandonment charges for the three and six months ended December 31, 2021 and 2020, respectively are as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
December 31, |
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|
December 31, |
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||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Restructuring costs: |
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|
|
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|
|
|
|
|
|
|
|
||||
Severance and compensation related costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total restructuring costs |
|
$ |
|
|
$ |
|
|
$ |
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|
$ |
|
||||
|
|
|
|
|
|
|
|
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|
||||
Impairment costs: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate long-lived assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
Total impairment costs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
|
|
|
|
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Abandonment costs: |
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|
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|
||||
Accelerated recognition of operating right-of-use assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total abandonment costs |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
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|
|
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|
||||
Total restructuring, impairment and abandonment costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
11
For the three months ended December 31, 2021, restructuring, impairment and abandonment cost related to $
During the three months and six months ended December 31, 2020, restructuring, impairment and abandonment charges primarily related to our permanent store and Phoenix, Arizona distribution center closing plans of $
Reorganization Items
Reorganization items included in our condensed consolidated statement of operations represent amounts directly resulting from the Chapter 11 Cases for the three and six months ended December 31, 2021 and 2020 respectively, are as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Reorganization items, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional and legal fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Claims related costs |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|
Gains on lease terminations, net of estimated claims |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Gain on sale-leaseback |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total reorganization items, net |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
For the three months ended December 31, 2021, reorganization items, net benefit related to $
The leases for store locations related to our permanent store closure plan, as well as the lease for our Phoenix, Arizona distribution center, were rejected and the related lease liabilities were reduced to the amount of estimated claims allowable by the Bankruptcy Court, resulting in the $
3. Debt
Pre-Petition Financing Agreements
Through December 31, 2020, we were party to a credit agreement that provided for an asset-based,
As of December 31, 2020, we had
12
Debtor-In-Possession Financing Agreements
On May 29, 2020, we entered into a Senior Secured Super Priority Debtor-in-Possession Credit Agreement (the “DIP ABL Credit Agreement”) among the Company, JPMorgan Chase Bank, N.A., as administrative agent, for itself and the other lenders, which provided for a super priority secured debtor-in-possession revolving credit facility in an aggregate amount of up to $
Post-Emergence Financing Arrangements
On December 31, 2020, the Company and its subsidiaries entered into a Credit Agreement (the “New ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. (collectively, the “Lenders”) that provides for a revolving credit facility in an aggregate amount of $
Under the terms of the New ABL Credit Agreement, amounts available for advances would be subject to a borrowing base as described in the New ABL Credit Agreement. Under the New ABL Credit Agreement, borrowings will initially bear interest at a rate equal to the adjusted LIBOR rate plus a spread of
The New ABL Facility is secured by a first priority lien on all present and after-acquired tangible and intangible assets of the Company and its subsidiaries other than certain collateral that secures the Term Loan (as defined below). The commitments of the Lenders under the New ABL Facility will terminate and outstanding borrowings under the New ABL Facility will mature on
As of December 31, 2021, we had $
On December 31, 2020, the Company, Alter Domus (US), LLC, as administrative agent, and the lenders named therein including Tensile Capital Partners Master Fund LP and affiliates of Osmium Partners, LLC, entered into a Credit Agreement (the “Term Loan Credit Agreement”) to provide a term loan of $
In accordance with the Plan of Reorganization, on December 31, 2020,
Pursuant to the terms of the Term Loan Credit Agreement, the Term Loan has a maturity date of
The following table provides details on our Term Loan as of December 31, 2021 and June 30, 2021 (in thousands):
Term Loan |
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|||||
|
|
December 31, 2021 |
|
|
June 30, 2021 |
|
||
Loan balance |
|
$ |
|
|
$ |
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Accrued paid-in-kind interest |
|
|
|
|
|
|
||
Loan balance, ending |
|
$ |
|
|
$ |
|
||
13
At December 31, 2021, we are in compliance with covenants in the New ABL Facility and Term Loan.
Interest Expense
Interest expense for the three months ended December 31, 2021 was $
Interest expense for the six months ended December 31, 2021 was $
Fair Value Measurements
The fair value of our Term Loan was determined based on observable market data provided by a third party for similar types of debt which are considered Level 2 inputs within the fair value hierarchy. The carrying value of our Term Loan as of December 31, 2021 and June 30, 2021 was $
4. Revenue recognition
Our revenue is earned from sales of merchandise within our stores and is recorded at the point of sale and conveyance of merchandise to customers. Revenue is measured based on the amount of consideration that we expect to receive, reduced by point of sale discounts and estimates for sales returns, and excludes sales tax. Payment is due at the time of sale. We maintain a reserve for estimated returns, as well as a corresponding returns asset in “Other Assets” in the Condensed Consolidated Balance Sheets, and we use historical customer return behavior to estimate our reserve requirements.
5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
|
|
December 31, |
|
|
June 30, |
|
||
|
|
2021 |
|
|
2021 |
|
||
Sales and use tax |
|
$ |
|
|
$ |
|
||
Self-insurance reserves |
|
|
|
|
|
|
||
Wages, benefits and payroll taxes |
|
|
|
|
|
|
||
Property taxes |
|
|
|
|
|
|
||
Freight and distribution |
|
|
|
|
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|
||
Capital expenditures |
|
|
|
|
|
|
||
Utilities |
|
|
|
|
|
|
||
Gift card liability |
|
|
|
|
|
|
||
Reorganization expenses |
|
|
|
|
|
|
||
Other expenses |
|
|
|
|
|
|
||
Total accrued liabilities |
|
$ |
|
|
$ |
|
||
Self-insurance reserves were primarily comprised of our worker's compensation liability reserve, followed by our medical liability reserve and general liability reserve.
14
6. Common Stock & Share-Based Incentive Plans
For a discussion of the exchange of our common stock and equity financing under the Plan of Reorganization, please see Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Ownership Restrictions
In order to continue to assist the Company in preserving certain tax attributes (the “Tax Benefits”), the Company’s Amended and Restated Certificate of incorporation imposes certain restrictions on the transferability and ownership of the Company’s capital stock (the “Ownership Restrictions”). Subject to certain exceptions, the Ownership Restrictions restrict (i) any transfer that would result in any person acquiring
The Ownership Restrictions will remain in effect until the earliest of (i) the repeal of Section 382 of the Internal Revenue Code or any successor statute if the board of directors determines the Ownership Restrictions are no longer necessary for preservation of the Tax Benefits, (ii) the beginning of a taxable year in which the board of directors determines no Tax Benefits may be carried forward, or (iii) such other date as shall be established by the board of directors.
Share-Based Incentive Plans
For a discussion of our share-based incentive plans, please see Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Restricted Stock Awards/Units
The Tuesday Morning Corporation 2008 Long-Term Incentive Plan (the “2008 Plan”) and the Tuesday Morning Corporation Long-Term Incentive Plan (the “2014 Plan” and together with the 2008 Plan, the “Plans”) authorize the grant of restricted stock awards to directors, officers, key employees and certain other key individuals who perform services for us and our subsidiaries. Equity awards may no longer be granted under the 2008 Plan. Restricted stock awards are not transferable, but bear certain rights of common stock ownership including voting and dividend rights. Shares are valued at the fair market value of our common stock at the date of award. Shares may be subject to time-vesting and/or certain performance requirements. If the time-vesting and/or performance requirements are not met, the restricted shares are forfeited. The 2014 Plan also authorizes the grant of time-vesting and performance-based restricted stock units. Restricted stock units do not provide voting and dividend rights. Shares of common stock are issued upon the vesting of restricted units.
On September 15, 2021, Marc Katz was awarded
The following table summarizes the activity of time-vesting restricted stock units, performance-based restricted stock units, time-vesting restricted stock awards and performance-based restricted stock awards for the six months ended December 30, 2021:
15
|
|
Time and Performance-Based Restricted Stock Units |
|
|
Weighted- |
|
|
Time and Performance-Based Restricted Stock Awards |
|
|
Weighted- |
|
||||
Outstanding at June 30, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted during the year |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Vested during the year |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited during the year |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of December 31, 2021, there were
Cash Settled Awards
We have granted stock-based awards to certain employees, which vest over a period of to
The following table summarizes the activity of cash settled awards based on their initial grant date values for the six months ended December 31, 2021:
|
|
Performance-Based |
|
|
Service-Based |
|
|
Total |
|
|||
Outstanding at June 30, 2021 |
|
|
|
|
|
|
|
|
|
|||
Granted during the year |
|
|
— |
|
|
|
|
|
|
|
||
Vested during the year |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Forfeited during the year |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Outstanding at December 31, 2021 |
|
|
|
|
|
|
|
|
|
|||
The liability associated with the cash settled awards was $
Share-based Compensation Costs
Share-based compensation costs consisted of the following (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Amortization of share-based compensation during the period |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amounts capitalized in ending inventory |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts recognized and charged to cost of sales |
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts charged against income for the period before tax |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
7. Commitments and contingencies
Information related to the Chapter 11 Cases that were filed on May 27, 2020 is included in Notes 1 and 2 above.
Like many retailers, the Company has been named in a potential class or collective actions on behalf of groups alleging violations of federal and state wage and hour and other labor statutes, and other statutes. In the normal course of business, we are also party to representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings including, among others, commercial, product, product safety, employee, customer, intellectual property and other claims. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. In addition, we are involved in legal and governmental proceedings as part of the normal course of our business. Reserves have been established when a loss is considered probable and are based on management’s best estimates of our potential liability in these matters. These estimates have been developed in consultation with internal and external counsel and are based on a combination of litigation and settlement strategies. Management believes that such litigation and claims will be resolved without material effect on our financial position or results of operations.
16
8. Leases
We conduct substantially all operations from leased facilities. Our retail store locations, our corporate office and our distribution center are under operating leases that will expire over the next
In accordance with the Plan of Reorganization, on December 31, 2020, we sold our corporate office and Dallas distribution center properties and leased back those facilities. The lease of the corporate office is for a term of
The
In accordance with ASC 842, we determine whether an agreement contains a lease at inception based on our right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the right-of-use (“ROU”) assets represent our right to use the underlying assets for the respective lease terms.
The operating lease liability is measured as the present value of the unpaid lease payments and the ROU asset is derived from the calculation of the operating lease liability. As our leases do not generally provide an implicit rate, we use our incremental borrowing rate as the discount rate to calculate the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate that would be required to borrow over a similar term, on a collateralized basis in a similar economic environment.
Rent escalations occurring during the term of the leases are included in the calculation of the future minimum lease payments and the rent expense related to these leases is recognized on a straight-line basis over the lease term. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses allocated on a percentage of sales in excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expense in the period incurred. The ROU asset is adjusted to account for previously recorded lease-related expenses such as deferred rent and other lease liabilities.
Our lease agreements do not contain residual value guarantees or significant restrictions or covenants other than those customary in such arrangements.
The components of lease cost are as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
December 31, |
|
|
December 31, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease cost: |
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|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets |
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|
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|
|
|
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|
|
|
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
17
The table below presents additional information related to the Company’s leases:
|
|
As of |
|
|
Weighted average remaining lease term (in years) |
|
|
|
|
Operating leases |
|
|
|
|
Finance leases |
|
|
|
|
Weighted average discount rate |
|
|
|
|
Operating leases |
|
|
||
Finance leases |
|
|
||
Other information related to leases, including supplemental disclosures of cash flow information, is as follows (in thousands):
|
|
Six Months Ended |
|
|
Six Months Ended |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Operating cash flows from finance leases |
|
|
|
|
|
|
||
Financing cash flows from finance leases |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange |
|
|
|
|
|
( |
) |
|
Maturities of lease liabilities were as follows as of December 31, 2021 (in thousands):
|
Operating |
|
|
Finance |
|
|
Total |
|
|||
Fiscal year: |
|
|
|
|
|
|
|
|
|||
2022 (remaining) |
$ |
|
|
$ |
|
|
$ |
|
|||
2023 |
|
|
|
|
— |
|
|
|
|
||
2024 |
|
|
|
|
— |
|
|
|
|
||
2025 |
|
|
|
|
— |
|
|
|
|
||
2026 |
|
|
|
|
— |
|
|
|
|
||
2027 |
|
|
|
|
— |
|
|
|
|
||
Thereafter |
|
|
|
|
— |
|
|
|
|
||
Total lease payments |
$ |
|
|
$ |
|
|
$ |
|
|||
Less: Interest |
|
|
|
|
|
|
|
|
|||
Total lease liabilities |
$ |
|
|
$ |
|
|
$ |
|
|||
Less: Current lease liabilities |
|
|
|
|
|
|
|
|
|||
Non-current lease liabilities |
$ |
|
|
$ |
— |
|
|
$ |
|
||
Current and non-current finance lease liabilities are recorded in “Accrued liabilities” and “Other liabilities – non-current,” respectively, on our condensed consolidated balance sheet. As of December 31, 2021, there were
18
9. Earnings per common share
The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with non-forfeitable rights to dividends or dividend equivalents (referred to as participating securities). Basic EPS is computed using the weighted average number of common shares outstanding during each of the respective years. Diluted EPS is computed using the weighted average number of common and common equivalent shares outstanding during each of the respective years using the more dilutive of either the treasury stock method or two-class method. The difference between basic and diluted shares, if any, largely results from common equivalent shares, which represents the dilutive effect of the assumed exercise of certain outstanding share options and warrants, the assumed vesting of restricted stock granted to employees and directors, or the satisfaction of certain necessary conditions for contingently issuable shares.
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net earnings/(loss) |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Less: Income to participating securities |
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net earnings/(loss) attributable to common shares |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Weighted average number of common shares |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive stock equivalents |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Weighted average number of common shares |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net earnings/(loss) per common share — basic |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Net earnings/(loss) per common share — diluted |
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
For the three and six months ended December 31, 2021,
10. Property and equipment, net
Accumulated depreciation of owned property and equipment as of December 31, 2021 and June 30, 2021 was $
19
11. Income taxes
The Company or
On March 27, 2020, in an effort to mitigate the economic impact of the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act includes certain corporate income tax provisions, which among other things, included a five-year carryback of net operating losses and acceleration of the corporate alternative minimum tax credit. The Company has evaluated the CARES Act and it is not expected to have a material impact on the income tax provision. The CARES Act also contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the pandemic. As a result of the CARES Act, we had deferred qualified payroll taxes through December 31, 2020. As of December 31, 2021, we have $
The effective tax rate for the quarter ended December 31, 2021 and 2020 were (
20
12. Related Party
On November 16, 2020, following approval of the Bankruptcy Court, the Company and Osmium Partners LLC (“Osmium Partners”) entered into a backstop commitment agreement (the “Backstop Commitment Agreement”), pursuant to which Osmium Partners agreed that Osmium Partners or an affiliate would serve as the backstop party (the “Backstop Party”) and purchase all unsubscribed shares for a price of $
In accordance with the Plan of Reorganization and the Commitment Letter, on December 31, 2020, the Company, Alter Domus (US), LLC, as administrative agent, and the lenders named therein, including TCM and an affiliate of Osmium, entered into the Term Loan Credit Agreement described in Note 3 above which provided for the $
In accordance with the Plan of Reorganization and the Backstop Commitment Agreement, on December 31, 2020, the Company, Osmium Partners and Larkspur SPV (Osmium Partners and Larkspur SPV together, the “Osmium Group”) entered into an agreement pursuant to which the Osmium Group is entitled to appoint
On February 9, 2021, the Company received proceeds of approximately $
Based on Schedule 13D filings made by Osmium Partners and TCM, and their respective affiliates, on February 19, 2021, Osmium Partners and TCM each are deemed to beneficially own the
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We encourage you to read this "Management's Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") in conjunction with the corresponding section included in our Annual Report on Form 10-K for the year ended June 30, 2021.
Background
We are one of the original off-price retailers and a leading destination for unique home and lifestyle goods, selling high-quality products at prices generally below those found in boutique, specialty and department stores, catalogs and on-line retailers. Our customers come to us for an ever-changing, exceptional assortment of brand names at great prices. Our strong value proposition has established a loyal customer base, who we engage regularly with social media, email and digital media.
The COVID-19 pandemic has had an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. On March 25, 2020, we temporarily closed all of our 687 stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. As allowed by state and local jurisdictions, 685 of our stores gradually reopened as of the end of June 2020 and two stores were permanently closed during the quarter. In accordance with our bankruptcy Plan of Reorganization, described below, we completed the permanent closure of 197 stores in the first quarter of 2021 and the closure of our Phoenix, Arizona distribution center ("Phoenix distribution center") in the second quarter of 2021. In addition, as part of our restructuring, we secured financing to pay the creditors in accordance with the plan of reorganization and to fund planned operations and expenditures.
Future impacts from the COVID-19 pandemic will depend on the potential further geographic spread and duration of the ongoing pandemic, the timing and extent of recovery in traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, availability and cost of products, the production and administration of effective medical treatments and vaccines, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.
Emergence from Chapter 11 Bankruptcy Proceedings
22
Key Metrics for the Three and Six Months Ended December 31, 2021
Key operating metrics for continuing operations for the three months and six months ended December 31, 2021 include:
23
Key balance sheet and liquidity metrics for the six months ended December 31, 2021 include:
Store Data
The following table presents information with respect to our stores in operation during each of the fiscal periods:
.
|
|
Store Openings/Closings |
|
|||||||||||||||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|
Fiscal Year Ended June 30, 2021 |
|
|||||
Open at beginning of period |
|
489 |
|
|
490 |
|
|
|
490 |
|
|
|
685 |
|
|
|
685 |
|
||
Opened |
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
2 |
|
|
|
2 |
|
|
Closed |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(197 |
) |
|
|
(197 |
) |
Open at end of period |
|
|
492 |
|
|
|
490 |
|
|
|
492 |
|
|
|
490 |
|
|
|
490 |
|
New stores are included in the same store sales calculation starting with the sixteenth month following the date of the store opening. A store that relocates within the same geographic market or modifies its available retail space is generally considered the same store for purposes of this computation. Stores that are closed are included in the computation of comparable store sales until the month of closure.
Results of Operations
Our business is highly seasonal, with a significant portion of our net sales and most of our operating income generated in the quarter ending December 31.
There can be no assurance that the trends in sales or operating results will continue in the future.
Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020
Net sales for the three months ended December 31, 2021 were $251.4 million, an increase of 26.6%, compared to $198.6 million for the same period last year, primarily driven by an increase in comparable store sales of 26.1%. The increase in comparable store sales was due to an 11.7% increase in average ticket and a 12.9% increase in customer transactions. Non-comparable store sales increased by a total of $1.6 million primarily due to the effect of sales from new stores.
Gross margin for the three months ended December 31, 2021 was $71.5 million, an increase of 19.1% compared to $60.1 million for the same period last year. As a percentage of net sales, gross margin decreased to 28.5% in the second quarter fiscal 2022 compared with 30.2% in the second quarter of fiscal 2021. The decrease in gross margin as a percentage of net sales was primarily a result of higher supply chain and transportation costs recognized in the three months ended December 31, 2021.
SG&A increased $4.4 million to $67.7 million in the three months ended December 31, 2021, compared to $63.3 million in the same period last year primarily due to higher store payroll costs and share-based compensation. As a percentage of net sales, SG&A decreased 500 basis points to 26.9% for the three months ended December 31, 2021, compared to 31.9% in the same period last year, leveraging from increased net sales.
24
Restructuring, impairment and abandonment charges were $0.4 million during the three months ended December 31, 2021, compared to $1.0 million during the three months ended December 31, 2020. During the three months ended December 31, 2021, adjustments include a $0.4 million in employee retention cost. During the three months ended December 31, 2020, adjustments include restructuring, impairment and abandonment charges of $1.0 million primarily related to in our permanent store and Phoenix distribution center closing plans as well as $0.2 million in severance and employee retention cost. Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021.
Our operating income was $3.4 million for the three months ended December 31, 2021 as compared to an operating loss of $4.3 million for the three months ended December 31, 2020, an improvement of $7.7 million. The operating income in the current year was primarily the result of higher sales and lower restructuring, impairment and abandonment charges as discussed above.
Interest expense decreased $0.6 million to $1.9 million for the three months ended December 31, 2021 compared to $2.5 million in the same period last year. Interest expense for the three months ended December 31, 2021 was primarily due to the interest and amortization of financing fees incurred on our New ABL facility and accrued interest on our Term loan. Interest expense for the three months ended December 31, 2020 was due to amortization of financing fees incurred for the DIP financing. See Note 3 to our unaudited condensed consolidated financial statements herein for additional information.
Reorganization items, net were a net benefit of $0.2 million for the three months ended December 31, 2021 compared to a net benefit of $48.1 million in the three months ended December 31, 2020, related to $0.3 million gain on claims related cost, offset by $0.1 million of professional and legal fees related to our reorganization. The net benefit of $48.1 million in the three months ended December 31, 2020, was due to an $18.8 million net gain from store lease terminations and the termination of our Phoenix distribution center lease under our permanent closure plan and a $49.6 million gain due from the sale-leaseback transactions pursuant to the Plan of Reorganization, partially offset by $20.3 million in professional and legal fees related to our reorganization.
Income tax benefit for the three months ended December 31, 2021 was $9,000 compared to an income tax expense of $0.8 million in the three months ended December 31, 2020. The effective tax rates for the three months ended December 31, 2021 and 2020 were (0.5%) and 1.9%, respectively. We currently believe the expected effects on future year effective tax rates to continue to be nominal until the cumulative losses and valuation allowance are fully utilized.
Our net earnings for the three months ended December 31, 2021 was $1.9 million, or diluted net earnings per share of $0.02 compared to a net earnings for the three months ended December 31, 2020 of $40.3 million, or diluted net earnings per share of $0.88.
Six Months Ended December 31, 2021 Compared to the Six Months Ended December 31, 2020
Net sales for the six months ended December 31, 2021 were $428.3 million, an increase of 18.9%, compared to $360.2 million for the same period last year, primarily driven by an increase in comparable store sales of 26.3%, partially offset by the completion of our permanent store closing plans approved through bankruptcy proceedings of 197 stores during the six months ended December 31, 2020. The increase in comparable store sales was due to a 12.2% increase in average ticket and a 12.5% increase in customer transactions. Non-comparable store sales decreased by a total of $20.5 million primarily due to the permanent closure of 197 stores since the first six months of fiscal 2021. Non-comparable store sales include the net effect of sales from new stores and sales from stores that have closed.
Gross margin for the six months ended December 31, 2021 was $122.6 million, an increase of 10.3% compared to $111.1 million for the same period last year. As a percentage of net sales, gross margin decreased to 28.6% in the six months ended December 31, 2021 compared with 30.9% in the six months ended December 31, 2020. The decrease in gross margin as a percentage of net sales was primarily a result of higher supply chain and transportation costs recognized in the six months ended December 31, 2021.
SG&A increased slightly by $2.5 million to $127.9 million in the six months ended December 31, 2021, compared to $125.4 million in the same period last year. As a percentage of net sales, SG&A decreased 490 basis points to 29.9% for the six months ended December 31, 2021, compared to 34.8% for the same period last year. The decrease in SG&A, as a percentage of net sales, was primarily due to lower store expenses on a smaller store base, including a significant decrease in store rents from both closed stores and renegotiated rents for the ongoing store base. Subsequent to the filing of the Chapter 11 Cases, we commenced negotiations with our landlords on substantially all of our ongoing leases, resulting in significant modifications and reduced lease costs.
Restructuring, impairment and abandonment charges were $2.9 million during the six months ended December 31, 2021, compared to $6.5 million during the six months ended December 31, 2020. During the six months ended December 31, 2021, charges include a software impairment charge of $2.1 million as well as $0.8 million in severance and employee retention cost. During the six months ended December 31, 2020, charges include restructuring, impairment and abandonment charges of $5.6 million primarily related to in our permanent store and Phoenix, Arizona distribution center closing plans as well as $0.9 million in severance and employee retention cost. Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021.
25
Our operating loss was $8.2 million for the six months ended December 31, 2021 as compared to an operating loss of $20.8 million for the same period last year, an improvement of $12.6 million. The operating loss in the current year was primarily the result of increased sales, lower restructuring, impairment and abandonment charges, offset by lower margins from higher supply chain and transportation costs as discussed above.
Interest expense decreased $1.7 million to $3.6 million for the six months ended December 31, 2021 compared to $5.3 million in the same period last year. Interest expense for the six months ended December 31, 2021 was primarily due to the interest and amortization of financing fees incurred on our New ABL facility and accrued interest on our Term loan. Interest expense for the six months ended December 31, 2020 was due to amortization of financing fees incurred for the DIP financing. See Note 3 to our unaudited condensed consolidated financial statements herein for additional information.
Reorganization items, net were $1.1 million for the six months ended December 31, 2021 compared to a net benefit of $85.8 million in the same period last year, related to $0.8 million loss of claims related cost and $0.3 million of professional and legal fees related to our reorganization. The net benefit of $85.8 million in the six months ended December 31, 2020, was due to a net gain of $66.2 million resulting from store lease terminations and the termination of our Phoenix distribution center lease under our permanent closure plan and sale-leaseback transactions pursuant to the Plan of Reorganization, partially offset by $30.1 million in professional and legal fees related to our reorganization.
Income tax benefit for the six months ended December 31, 2021 was $0.1 million compared to an income tax expense of $0.5 million in the quarter ended December 31, 2020. The effective tax rates for the six months ended December 31, 2021 and 2020 were 0.5% and 0.9%, respectively. We currently believe the expected effects on future year effective tax rates to continue to be nominal until the cumulative losses and valuation allowance are fully utilized.
Our net loss for the six months ended December 31, 2021 was $12.7 million, or diluted net loss per share of $0.15 compared to a net earnings for the six months ended December 31, 2020 of $59.0 million, or diluted net earnings per share of $1.29.
Non-GAAP Financial Measures
We define EBITDA as net earnings 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 we believe are not representative of our 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 earnings or loss as a measure of operating performance. In addition, EBITDA and Adjusted EBITDA are not presented as, and should not be considered as a measure of liquidity. EBITDA and Adjusted EBITDA should not be considered in isolation, or as substitutes for analysis of our results as reported under GAAP and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by such adjustments. We believe it is useful for investors to see these EBITDA and Adjusted EBITDA measures that management uses to evaluate our operating performance. These non-GAAP financial measures are included to supplement our financial information presented in accordance with GAAP and because we use these measures to monitor and evaluate the performance of our business as a supplement to GAAP measures and we believe the presentation of these non-GAAP measures enhances investors’ ability to analyze trends in our business and evaluate our performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. The non-GAAP measures presented may not be comparable to similarly titled measures used by other companies.
26
The following table reconciles net earnings/(loss), the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA, each of which is a non-GAAP financial measure (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net earnings/(loss) (GAAP) |
$ |
1,894 |
|
|
$ |
40,339 |
|
|
$ |
(12,709 |
) |
|
$ |
58,963 |
|
Depreciation and amortization |
|
3,409 |
|
|
|
3,922 |
|
|
|
6,806 |
|
|
|
8,306 |
|
Interest expense, net |
|
1,885 |
|
|
|
2,514 |
|
|
|
3,601 |
|
|
|
5,267 |
|
Income tax provision/(benefit) |
|
(9 |
) |
|
|
779 |
|
|
|
(58 |
) |
|
|
543 |
|
EBITDA (non-GAAP) |
$ |
7,179 |
|
|
$ |
47,554 |
|
|
$ |
(2,360 |
) |
|
$ |
73,079 |
|
Share based compensation expense (1) |
|
1,872 |
|
|
|
382 |
|
|
|
3,045 |
|
|
|
964 |
|
Restructuring, impairment and abandonment charges (2) |
|
436 |
|
|
|
1,018 |
|
|
|
2,866 |
|
|
|
6,507 |
|
Reorganization items, net (3) |
|
(241 |
) |
|
|
(48,142 |
) |
|
|
1,051 |
|
|
|
(85,766 |
) |
Other (4) |
|
63 |
|
|
|
— |
|
|
|
(954 |
) |
|
|
— |
|
Adjusted EBITDA (non-GAAP) |
$ |
9,309 |
|
|
$ |
812 |
|
|
$ |
3,648 |
|
|
$ |
(5,216 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1) Adjustment includes charges related to share-based compensation programs, which vary from period to period depending on volume, timing and vesting of awards. We adjust for these charges to facilitate comparisons from period to period. |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
(2) For the three months ended December 31, 2021, adjustments included restructuring, impairment and abandonment charges related to employee retention cost. For the six months ended December 31, 2021, adjustments related to software impairment charges and employee retention cost. For the three and six months ended December 31, 2020, adjustments include restructuring, impairment and abandonment charges primarily related to our permanent store and Phoenix, Arizona distribution center closing plans as well as severance and employee retention cost. Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021. See note 2 to our unaudited condensed consolidated financial statements herein for further discussion. |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
(3) For the three and six months ended December 31, 2021, adjustments included benefit from claims related cost as well as professional and legal fees related to our reorganization. For the three and six months ended December 31, 2020, adjustments included a gain resulting from store lease termination and Phoenix distribution center under our permanent closure plan, sale-leaseback transactions pursuant to the Plan of Reorganization, offset by professional and legal fees related to our reorganization. See note 2 to our unaudited condensed consolidated financial statements herein for further discussion |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
(4) For the three and six months ended December 31, 2021, adjustments included non-cash expense (benefit) recognized related to cash settled awards in our long-term incentive plan. |
|
||||||||||||||
Liquidity and Capital Resources
Cash Flows for the Six Months Ended December 31, 2021
Cash Flows from Operating Activities
In the six months ended December 31, 2021, net cash used in operating activities was $27.2 million, compared to cash used in operating activities of $10.6 million in the same period last year. Net cash used in operating activities in the six months ended December 31, 2021 was primarily driven by the inventory purchases and payments for bankruptcy court approved pre-petition claims, legal and professional fees. Net cash used in operating activities in the six months ended December 31, 2020 was primarily driven by cash paid on reorganization expenses and prepaid expenses.
Cash Flows from Investing Activities
Net cash used in investing activities for the six months ended December 31, 2021 of $3.5 million related primarily to capital expenditures in enhancements to our store fleet and new stores, as well as investments in technology. Net cash provided by investing activities for the six months ended December 31, 2020 of $69.1 million related primarily to $68.6 million from sale-leaseback transactions, $1.9 million of proceeds from the sale of property and equipment at the 197 stores that we permanently closed, and was partially offset by $1.4 million of capital expenditures.
Cash Flows from Financing Activities
Net cash provided by financing activities of $6.2 million for the six months ended December 31, 2021 related primarily to net borrowings under our New ABL Facility. Net cash provided by financing activities of $21.6 million for the six months ended December 31, 2020 related primarily to $25.0 million in proceeds from the term loan, offset by $3.2 million from payments of financing fees.
27
Liquidity
Historically, we have financed our operations with funds generated from operating activities, available cash and cash equivalents, and borrowings under an asset-based, senior secured revolving credit facility.
On December 31, 2020, as contemplated by our Plan of Reorganization, the Company and its subsidiaries entered into a Credit Agreement (the “New ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. that provides for a revolving credit facility in an aggregate amount of $110.0 million (the “New ABL Facility”). The New ABL Credit Agreement includes conditions to borrowings, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The New ABL Credit Agreement requires the Company to maintain a minimum fixed charge coverage ratio if borrowing availability falls below certain minimum levels, after the first anniversary of the agreement. For additional information regarding the New ABL Facility, see Note 3 to our unaudited condensed consolidated financial statements herein.
Pursuant to the terms of the Term Loan Credit Agreement, the Term Loan has a maturity date of December 31, 2024 and bears interest at a rate of 14% per annum, with interest payable in-kind. Under the terms of the Term Loan Credit Agreement, the Term Loan is secured by a second lien on the collateral securing the New ABL Facility and a first lien on certain other assets of the Company as described in the Term Loan Credit Agreement. The Term Loan is subject to optional prepayment after the first anniversary of the date of issuance at prepayment price equal to the greater of (1) the original principal amount of the Term Loan plus accrued interest thereon, and (2) 125% of the original principal amount of the Term Loan. The Term Loan is subject to mandatory prepayment in connection with a change of control of the Company as described in the Term Loan Credit Agreement. The Term Loan Credit Agreement also includes customary covenants and events of default. As of December 31, 2021, the outstanding principal balance of the Term Loan was $27.4 million, net of debt issuance costs. For additional information regarding the Term Loan, see Note 3 to our unaudited condensed consolidated financial statements herein.
At December 31, 2021 we are in compliance with covenants in the New ABL Facility and Term Loan.
Going forward, we expect to fund our operations with funds generated from operating activities, available cash and cash equivalents, and borrowings under the New ABL Facility.
As of December 31, 2021, we had $17.9 million of borrowings outstanding under our New ABL Facility and, $14.7 million of letters of credit outstanding. We currently have borrowing availability of $58.0 million under our New ABL Facility, as of December 31, 2021.
Liquidity, defined as cash and cash equivalents plus the $58.0 million availability for borrowing under our New ABL Facility, was $62.3 million as of December 31, 2021.
We incurred capital expenditures, net of construction allowances received from landlords, of approximately $3.1 million in the first six months of fiscal 2022. Capital expenditures are anticipated to be $9.1 million total for fiscal year 2022. The amounts include the expected costs to open approximately eight stores, costs to enhance our store fleet, investment in technology as well as our Dallas distribution center.
We do not presently have any plans to pay dividends or repurchase shares of our common stock. Under the terms of the our New ABL Credit Agreement and the Term Loan, we are subject to restrictions on our ability to pay dividends or repurchase shares of our common stock. Under the terms of our New ABL Credit Agreement, we must maintain certain minimum levels of borrowing availability, and under the Term Loan any amounts paid for these purposes may not exceed $2 million.
Off-Balance Sheet Arrangements and Contractual Obligations
We had no off-balance sheet arrangements as of December 31, 2021.
There have been no material changes to our contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
28
Critical Accounting Policies
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited interim condensed consolidated financial statements, which have been prepared pursuant to the rules and regulations of the SEC. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities. On a recurring basis, we evaluate our significant estimates which are based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ materially from these estimates.
Other than as described in Note 1 of our unaudited condensed consolidated financial statements herein, as of December 31, 2021, there were no changes to our critical accounting policies from those listed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Under the retail inventory method, permanent markdowns result in cost reductions in inventory at the time the markdowns are taken. We also utilize promotional markdowns for specific marketing efforts used to drive higher sales volume and customer transactions for a specified period of time. Promotional markdowns do not impact the value of unsold inventory and thus do not impact cost of sales until the merchandise is sold. Markdowns and damages during the second quarter of fiscal 2022 were 2.6% of sales compared to 3.6% of sales for the same period last year. Markdowns and damages during the first six months of fiscal 2022 were 3.3% of sales compared to 3.8% of sales for the same period last year. If our sales forecasts are not achieved, we may be required to record additional markdowns that could exceed historical levels. The effect of a 0.5% markdown in the value of our inventory at December 31, 2021 would result in a decline in gross margin and diluted earnings per share for the second quarter of fiscal 2022 of $0.8 million and $0.01, respectively.
For a further discussion of the judgments we make in applying our accounting policies, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Recent Accounting Pronouncements
Please refer to Note 1 of our unaudited condensed consolidated financial statements herein for a summary of recent accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's principal executive officer ("CEO") and principal financial officer ("CFO"), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that, as of the end of such period, the Company's disclosure controls and procedures were effective to ensure information that is required to be disclosed by the Company in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information related to the Chapter 11 Cases that were filed on May 27, 2020 is included in Note 1 and Note 2 to our unaudited condensed consolidated financial statements herein.
See Note 7 to our unaudited condensed consolidated financial statements herein for additional information.
Item 1A. Risk Factors
We believe there have been no material changes from our risk factors previously disclosed in Part 1, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
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Item 6. Exhibits
Exhibit |
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Description |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* The certifications attached hereto as Exhibit 32.1 and Exhibit 32.2 are furnished with this Quarterly Report on Form 10-Q and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
31
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.
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TUESDAY MORNING CORPORATION |
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(Registrant) |
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DATE: February 3, 2022 |
By: |
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/s/ Jennifer N. Robinson |
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Jennifer N. Robinson Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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32
EXHIBIT 31.1
CERTIFICATION
I, Fred Hand, certify that:
Date: February 3, 2022 |
By: |
/s/ Fred Hand |
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Fred Hand |
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Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Jennifer N. Robinson, certify that:
Date: February 3, 2022 |
By: |
/s/ Jennifer N. Robinson |
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Jennifer N. Robinson |
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Executive Vice President and Chief Financial Officer
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EXHIBIT 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER OF TUESDAY MORNING CORPORATION PURSUANT TO
18 U.S.C. §1350
I, Fred Hand, the Chief Executive Officer of Tuesday Morning Corporation, hereby certify that to the best of my knowledge and belief:
Date: February 3, 2022 |
By: |
/s/ Fred Hand |
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Fred Hand |
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Chief Executive Officer
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EXHIBIT 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER OF TUESDAY MORNING CORPORATION PURSUANT TO
18 U.S.C. §1350
I, Jennifer N. Robinson, the Chief Financial Officer of Tuesday Morning Corporation, hereby certify that to the best of my knowledge and belief:
Date: February 3, 2022 |
By: |
/s/ Jennifer N. Robinson |
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Jennifer N. Robinson |
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Executive Vice President and Chief Financial Officer
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2021 |
Jun. 30, 2021 |
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| Stockholders’ equity: | ||
| Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 87,549,090 | 87,988,233 |
| Common stock, shares outstanding | 85,765,429 | 86,204,572 |
| Treasury stock, shares | 1,783,661 | 1,783,661 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
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| Income Statement [Abstract] | ||||
| Net sales | $ 251,382 | $ 198,625 | $ 428,254 | $ 360,171 |
| Cost of sales | 179,838 | 138,571 | 305,696 | 249,047 |
| Gross margin | 71,544 | 60,054 | 122,558 | 111,124 |
| Selling, general and administrative expenses | 67,662 | 63,348 | 127,939 | 125,418 |
| Restructuring, impairment and abandonment charges | 436 | 1,018 | 2,866 | 6,507 |
| Operating income/(loss) before interest, reorganization and other income/(expense) | 3,446 | (4,312) | (8,247) | (20,801) |
| Other income/(expense): | ||||
| Interest expense | (1,885) | (2,514) | (3,601) | (5,267) |
| Reorganization items, net | 241 | 48,142 | (1,051) | 85,766 |
| Other income, net | 83 | (198) | 132 | (192) |
| Other income/(expense) total | (1,561) | 45,430 | (4,520) | 80,307 |
| Earnings/(loss) before income taxes | 1,885 | 41,118 | (12,767) | 59,506 |
| Income tax expense/(benefit) | (9) | 779 | (58) | 543 |
| Net earnings/(loss) | $ 1,894 | $ 40,339 | $ (12,709) | $ 58,963 |
| Net earnings/(loss) per common share: | ||||
| Basic | $ 0.02 | $ 0.88 | $ (0.15) | $ 1.29 |
| Diluted | $ 0.02 | $ 0.88 | $ (0.15) | $ 1.29 |
| Weighted average number of common shares: | ||||
| Basic | 84,677 | 45,511 | 84,494 | 45,460 |
| Diluted | 89,398 | 45,511 | 84,494 | 45,460 |
Nature of Operations and Significant Accounting Policies |
6 Months Ended |
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Dec. 31, 2021 | |
| Accounting Policies [Abstract] | |
| Nature of Operations and Summary of Significant Accounting Policies |
1. Nature of Operations and Significant Accounting Policies
Basis of presentation — The unaudited interim condensed consolidated financial statements herein include the accounts of Tuesday Morning Corporation and its subsidiaries (the "Company") and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted. We believe the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal recurring adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented. We do not present a condensed consolidated statement of comprehensive income as there are no other comprehensive income items in either the current or prior fiscal periods.
Our business results historically have fluctuated throughout the year and, as a result, the operating results of the interim periods presented are not necessarily indicative of the results that may be achieved for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2021. The condensed consolidated balance sheet at June 30, 2021 has been derived from the audited consolidated financial statements at that date. The preparation of the condensed consolidated financial statements is in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual amounts could differ from those estimates.
Our fiscal year ends on June 30 and we operate our business as a single operating segment.
(A) Cash and Cash Equivalents—Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. At December 31, 2021 and June 30, 2021, credit card receivables from third party consumer credit card providers were $2.7 million and $3.2 million, respectively. Such receivables generally are collected within one week of the balance sheet date.
(B) Restricted Cash—Restricted cash was $22.3 million, as of June 30, 2021, which was held in the Unsecured Creditor Claims Fund (defined below in Note 2).
Emergence from Chapter 11 Bankruptcy Proceedings
In response to the impacts of the COVID-19 pandemic, on May 27, 2020 (the “Petition Date”), we filed voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division (the “Bankruptcy Court”). The Chapter 11 Cases were jointly administered for procedural purposes. During the pendency of the Chapter 11 Cases, we continued to operate our businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. In accordance with orders of the Bankruptcy Court, we entered into certain debtor-in-possession financing arrangements to provide financing during the pendency of the Chapter 11 Cases. See Note 3 “Debt” below for additional information regarding these debtor-in-possession financing arrangements.
In early June 2020, in accordance with orders of the Bankruptcy Court, we commenced the process to close 132 store locations. By the end of July 2020, all of these stores were permanently closed. In mid-July 2020, we began the process to close an additional 65 stores following negotiations with our landlords, and those store closures were completed in August 2020. In total, we permanently closed 197 stores during the first quarter of fiscal 2021. In addition, we closed our Phoenix, Arizona distribution center (“Phoenix distribution center”) in the second quarter of fiscal 2021.
On November 16, 2020, the Company and its subsidiaries filed with the Bankruptcy Court a proposed Revised Second Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code (the “Amended Plan”) and a proposed Amended Disclosure Statement (the “Amended Disclosure Statement”) in support of the Amended Plan describing the Amended Plan and the solicitation of votes to approve the same from certain of the Debtors’ creditors with respect to the Chapter 11 Cases. The Amended Plan and the Amended Disclosure Statement contemplated the debt financing transactions described in Note 3 below under the caption “Post-Emergence Debt Financing Arrangements,” the exchange and Rights Offering (defined in Note 12 below) and the sale-leaseback transactions described in Note 8 below.
On December 23, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Amended Plan, with certain modifications described in the Confirmation Order (as modified and confirmed, the “Plan of Reorganization”). On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and the Company completed the debt financing and sale-leaseback contemplated in the Plan of Reorganization. However, the closing of the Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of ASC 852 – Reorganizations until that transaction closed on February 9, 2021.
In accordance with the Plan of Reorganization, effective December 31, 2020 (the “Effective Date”), the Company’s board of directors was comprised of nine members, including five continuing directors of the Company, three new directors appointed by the Backstop Party (as defined in Note 12 below) and one director appointed by the equity committee in the Chapter 11 Cases.
Pursuant to the Plan of Reorganization, each outstanding share of the Company’s common stock as of the close of business on January 4, 2021 was exchanged for (1) one new share of the Company’s stock and (2) a share purchase right entitling the holder to purchase its pro rata portion of shares available to eligible holders in the Rights Offering described under the caption “Equity Financing under the Plan of Reorganization” in Note 7 to the condensed consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. On February 9, 2021, the Company completed the equity financing contemplated by the Plan of Reorganization.
On September 29, 2021, the U.S. Bankruptcy Court issued a final decree (the “Final Decree”) closing the Chapter 11 Cases of the Company and its subsidiaries. While the Company emerged from bankruptcy proceedings on December 31, 2020, the Chapter 11 Cases remained opened pending final resolution of all claims of general unsecured creditors. The Company was able to resolve all of the claims for approximately $14 million less than the amounts reserved and retained in the Unsecured Creditor Claim Fund. Upon entry of the Final Decree, the approximately $14 million remaining in the escrow account was returned to the Company to make a repayment on its ABL credit facility and the Chapter 11 Cases are now final.
See Note 2 regarding Bankruptcy Accounting for further discussion.
Listing
During the pendency of our bankruptcy proceedings, the Company’s common stock was delisted by the Nasdaq Stock Market, LLC (“Nasdaq”) and began trading on the OTC Pink marketplace under the symbol “TUESQ”. In January 2021, following our emergence from bankruptcy, the Company’s common stock began trading on the OTCQX market under the ticker symbol “TUEM.”
On May 24, 2021, Nasdaq approved our application for the relisting of the Company's common stock on the Nasdaq Capital Market. The Company's common stock was relisted and commenced trading on the Nasdaq Capital Market at the opening of the market on May 25, 2021, under the ticker symbol "TUEM."
Impact of the COVID-19 Pandemic
The COVID-19 pandemic has had an adverse effect on our business operations, store traffic, employee availability, financial conditions, results of operations, liquidity and cash flow. On March 25, 2020, we temporarily closed all of our 687 stores nationwide, severely reducing revenues, resulting in significant operating losses and the elimination of substantially all operating cash flow. As allowed by state and local jurisdictions, 685 of our stores gradually reopened as of the end of June 2020, and two were permanently closed during the quarter. In accordance with our bankruptcy plan of reorganization, described below, we completed the permanent closure of 197 stores in the first quarter of fiscal 2021 and the closure of our Phoenix distribution center in second quarter of fiscal 2021. In addition, as part of our restructuring, we secured financing to pay creditors in accordance with the plan of reorganization and to fund planned operations and expenditures.
Future impacts from the COVID-19 pandemic will depend on the potential further geographic spread and duration of the ongoing pandemic, the timing and extent of recovery in traffic and consumer spending in our stores, the extent and duration of ongoing impacts to domestic and international supply chains and the related impacts on the flow, availability and cost of products, the production and administration of effective medical treatments and vaccines, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.
Accounting Pronouncement Recently Adopted
In March 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). This update is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange and is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. We adopted this standard in the first quarter of fiscal 2022 and it did not result in a material impact to the Company’s condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarter of fiscal 2022 and it did not result in a material impact to the Company’s condensed consolidated financial statements.
Recent Accounting Pronouncement Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This guidance, which became effective on March 12, 2020, and can be applied through December 31, 2022. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of December 31, 2021, we continue to monitor our contracts and transactions for potential application of this ASU. |
Bankruptcy Accounting |
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| Reorganizations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bankruptcy Accounting | 2. Bankruptcy Accounting
Reorganizations require that the condensed consolidated financial statements, for periods subsequent to the filing of the Chapter 11 Cases, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. During the pendency of the Chapter 11 Cases until we qualified for emergence under ASC 852, the condensed consolidated financial statements were prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business and reflect the application of ASC 852. Accordingly, certain expenses, gains and losses that were realized or incurred in the bankruptcy proceedings were recorded in Reorganization items, net in our Condensed Consolidated Statements of Operations.
Pursuant to the Plan of Reorganization, an escrow account (the “Unsecured Creditor Claim Fund”) was established for the benefit of holders of allowed general unsecured claims. Upon the closing of the sale and leaseback of the Corporate Office and the Dallas Distribution Center properties and the issuance of the Term Loan (as defined in Note 3 below), net proceeds of $67.5 million, after payment of property taxes, and $18.8 million, respectively, were deposited directly into the Unsecured Creditor Claim Fund that was administered by an independent unsecured claims disbursing agent. The remaining proceeds from the Term Loan that were not deposited into the Unsecured Creditor Claim Fund were deposited into our operating account. In addition, $14.2 million of additional cash was deposited into a segregated bank account at Wells Fargo Bank and was restricted for use in paying compensation for services rendered by professionals on or after the Petition date and prior to the approval date of our Plan of Reorganization by the court (“Effective Date”) (“Wells Fargo Restricted Fund”). The closing of the Rights Offering described in Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 provided approximately $40.0 million of cash that was deposited to the Unsecured Creditor Claim Fund and recorded as restricted cash. During the fiscal 2021, all services rendered by professionals were paid and the Wells Fargo Restricted Fund account was closed with all of the applicable funds disbursed. Net cash remaining of $1.9 million was deposited directly into our unrestricted cash account during the fourth quarter of fiscal 2021.
Our Plan of Reorganization was confirmed on December 23, 2020, and all listed material conditions precedent were resolved by the December 31, 2020 legal effective date of emergence as governed by the Bankruptcy Court. However, the closing of our Rights Offering was considered a critical component to the execution of our confirmed Plan of Reorganization, therefore, we continued to apply the requirements of ASC 852 until that transaction closed on February 9, 2021.
On September 29, 2021, the U.S. Bankruptcy Court issued a Final Decree closing the Chapter 11 Cases of the Company and its subsidiaries. While the Company emerged from bankruptcy proceedings on December 31, 2020, the Chapter 11 Cases remained opened pending final resolution of all claims of general unsecured creditors. The Company was able to resolve all of these claims for approximately $14 million less than the amounts reserved and retained in the Unsecured Creditor Claim Fund. Upon entry of the Final Decree, the approximately $14 million remaining in the Unsecured Creditor Claim Fund was returned to the Company to make a repayment on its ABL credit facility and the Chapter 11 Cases are now final.
Restructuring, Impairment and Abandonment Charges
Restructuring, impairment and abandonment charges for the three and six months ended December 31, 2021 and 2020, respectively are as follows (in thousands):
For the three months ended December 31, 2021, restructuring, impairment and abandonment cost related to $0.4 million of employee retention costs. During the six months ended December 31, 2021, restructuring, impairment and abandonment charges of $2.1 million primarily related to software abandonment charges as well as $0.8 million in severance and employee retention cost.
During the three months and six months ended December 31, 2020, restructuring, impairment and abandonment charges primarily related to our permanent store and Phoenix, Arizona distribution center closing plans of $0.8 million and $5.6 million as well as severance and employee retention cost of $0.2 million and $0.9 million, respectively. Decisions regarding store closures and the Phoenix distribution center were made in the fourth quarter of fiscal 2020, prior to filing the Chapter 11 Cases; however, the closure of the Phoenix distribution center was not completed until the second quarter of fiscal 2021.
Reorganization Items
Reorganization items included in our condensed consolidated statement of operations represent amounts directly resulting from the Chapter 11 Cases for the three and six months ended December 31, 2021 and 2020 respectively, are as follows (in thousands):
For the three months ended December 31, 2021, reorganization items, net benefit related to $0.3 million benefit in claims related cost, offset by and $0.1 million in professional and legal fees. For the six months ended December 31, 2021, reorganization items, net charges related to $0.8 million in claims related cost and $0.3 million in professional and legal fees.
The leases for store locations related to our permanent store closure plan, as well as the lease for our Phoenix, Arizona distribution center, were rejected and the related lease liabilities were reduced to the amount of estimated claims allowable by the Bankruptcy Court, resulting in the $18.8 million and $66.2 million gains for the three and six months ended December 31, 2020, respectively. During the three months ended December 31, 2020, we executed a sale-leaseback agreement on our owned real estate as part of our Plan of Reorganization, recognizing a gain of $49.6 million (see Note 1 and Note 8), the proceeds of which, along with other sources of financing, were utilized to satisfy allowed claims and are thus categorized as a reorganization item. These gains were partially offset by professional and legal fees of $20.3 million and $30.1 million for the three months and six months ended December 31, 2020, respectively. |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | 3. Debt
Pre-Petition Financing Agreements
Through December 31, 2020, we were party to a credit agreement that provided for an asset-based, five-year senior secured revolving credit facility in the original amount of up to $180.0 million which was scheduled to mature on January 29, 2024 (the “Pre-Petition ABL Credit Agreement”). The availability of funds under the Pre-Petition ABL Credit Agreement was limited to the lesser of a calculated borrowing base and the lenders’ aggregate commitments under the Pre-Petition ABL Credit Agreement. Our indebtedness under the Pre-Petition ABL Credit Agreement was secured by a lien on substantially all of our assets.
As of December 31, 2020, we had no amounts outstanding under the Pre-Petition ABL Credit Agreement, and that agreement was terminated in connection with our legal emergence from bankruptcy.
Debtor-In-Possession Financing Agreements
On May 29, 2020, we entered into a Senior Secured Super Priority Debtor-in-Possession Credit Agreement (the “DIP ABL Credit Agreement”) among the Company, JPMorgan Chase Bank, N.A., as administrative agent, for itself and the other lenders, which provided for a super priority secured debtor-in-possession revolving credit facility in an aggregate amount of up to $100.0 million. On July 10, 2020, we entered into a Senior Secured Super Priority Debtor-In-Possession Delayed Draw Term Loan Agreement (the “DIP DDTL Agreement”) with the Franchise Group, Inc., which provided for delayed draw term loans in an amount not to exceed $25.0 million. We made no borrowings under the DIP ABL Credit Agreement or the DIP DDTL Agreement. On December 31, 2020, the DIP ABL Credit Agreement and the DIP DDTL Agreement were terminated in connection with our legal emergence from bankruptcy.
Post-Emergence Financing Arrangements
On December 31, 2020, the Company and its subsidiaries entered into a Credit Agreement (the “New ABL Credit Agreement”) with JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. (collectively, the “Lenders”) that provides for a revolving credit facility in an aggregate amount of $110.0 million (the “New ABL Facility”). The New ABL Credit Agreement includes conditions to borrowings, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size. The New ABL Credit Agreement requires the Company to maintain a minimum fixed charge coverage ratio if borrowing availability falls below certain minimum levels, after the first anniversary of the agreement. We are not required to be compliant per the lender agreement until after the first anniversary of the agreement.
Under the terms of the New ABL Credit Agreement, amounts available for advances would be subject to a borrowing base as described in the New ABL Credit Agreement. Under the New ABL Credit Agreement, borrowings will initially bear interest at a rate equal to the adjusted LIBOR rate plus a spread of 2.75% or the Commercial Bank Floating Bank rate plus a spread of 1.75%.
The New ABL Facility is secured by a first priority lien on all present and after-acquired tangible and intangible assets of the Company and its subsidiaries other than certain collateral that secures the Term Loan (as defined below). The commitments of the Lenders under the New ABL Facility will terminate and outstanding borrowings under the New ABL Facility will mature on December 31, 2023.
As of December 31, 2021, we had $17.9 million of borrowings outstanding under the New ABL Facility and, $14.7 million of letters of credit outstanding. We have borrowing availability of $58.0 million under the New ABL Facility, as of December 31, 2021.
On December 31, 2020, the Company, Alter Domus (US), LLC, as administrative agent, and the lenders named therein including Tensile Capital Partners Master Fund LP and affiliates of Osmium Partners, LLC, entered into a Credit Agreement (the “Term Loan Credit Agreement”) to provide a term loan of $25.0 million to the Company (the “Term Loan”).
In accordance with the Plan of Reorganization, on December 31, 2020, three new directors were selected for membership on the Board of Directors by Osmium Partners (Larkspur SPV), LP, an affiliate of Tensile Capital Partners Master Fund LP (“Tensile”) and Osmium Partners, LLC (“Osmium”). Pursuant to the Term Loan Credit Agreement, Tensile Capital Partners Master Fund, LP and affiliates of Osmium Partners, LLC., held $19.0 million and $1.0 million, respectively, of the $25.0 million outstanding Term Loan. Representatives of Osmium and Tensile both hold seats on the board and therefore Osmium and Tensile are related parties to the Company.
Pursuant to the terms of the Term Loan Credit Agreement, the Term Loan has a maturity date of December 31, 2024 and bears interest at a rate of 14% per annum, with interest payable in-kind (“PIK”). Under the terms of the Term Loan Credit Agreement, the Term Loan is secured by a second lien on the collateral securing the New ABL Facility and a first lien on certain other assets of the Company as described in the Term Loan Credit Agreement. The Term Loan is subject to optional prepayment after the first anniversary of the date of issuance at prepayment price equal to the greater of (1) the original principal amount of the Term Loan plus accrued interest thereon, and (2) 125% of the original principal amount of the Term Loan. The Term Loan is subject to mandatory prepayment in connection with a change of control of the Company as described in the Term Loan Credit Agreement. The Term Loan Credit Agreement also includes customary covenants and events of default.
The following table provides details on our Term Loan as of December 31, 2021 and June 30, 2021 (in thousands):
At December 31, 2021, we are in compliance with covenants in the New ABL Facility and Term Loan.
Interest Expense
Interest expense for the three months ended December 31, 2021 was $1.9 million, and was comprised of $1.0 million in interest on the New ABL Facility and PIK interest on the Term Loan, $0.3 million amortization of financing fees, and $0.6 million commitment fees. Interest expense for the three months ended December 31, 2020 was $2.5 million from the DIP ABL Credit Agreement and the DIP Term Facility, and was comprised of $2.3 million amortization of financing fees and $0.2 million of commitment fees.
Interest expense for the six months ended December 31, 2021 was $3.6 million, and was comprised of $2.0 million in interest on the New ABL Facility and PIK interest on the Term Loan, $0.6 million amortization of financing fees, and $1.0 million commitment fees. Interest expense for the six months ended December 31, 2020 was $5.3 million from the DIP ABL Credit Agreement and the DIP Term Facility, and was comprised of $4.9 million amortization of financing fees and $0.4 million of commitment fees.
Fair Value Measurements
The fair value of our Term Loan was determined based on observable market data provided by a third party for similar types of debt which are considered Level 2 inputs within the fair value hierarchy. The carrying value of our Term Loan as of December 31, 2021 and June 30, 2021 was $28.4 million and $26.4 million, respectively. The fair value of our Term Loan as of December 31, 2021 and June 30, 2021 was $29.9 million and $29.6 million, respectively. |
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Revenue Recognition |
6 Months Ended |
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Dec. 31, 2021 | |
| Revenue From Contract With Customer [Abstract] | |
| Revenue Recognition | 4. Revenue recognition
Our revenue is earned from sales of merchandise within our stores and is recorded at the point of sale and conveyance of merchandise to customers. Revenue is measured based on the amount of consideration that we expect to receive, reduced by point of sale discounts and estimates for sales returns, and excludes sales tax. Payment is due at the time of sale. We maintain a reserve for estimated returns, as well as a corresponding returns asset in “Other Assets” in the Condensed Consolidated Balance Sheets, and we use historical customer return behavior to estimate our reserve requirements. No impairment of the returns asset was identified or recorded as of December 31, 2021. Gift cards are sold to customers in our stores and we issue gift cards for merchandise returns in our stores. Revenue from sales of gift cards and issuances of merchandise credits is recognized when the gift card is redeemed by the customer, or if the likelihood of the gift card being redeemed by the customer is remote (gift card breakage). The gift card breakage rate is determined based upon historical redemption patterns. An estimate of the rate of gift card breakage is applied over the period of estimated performance and the breakage amounts are included in net sales in the Condensed Consolidated Statement of Operations. Breakage income recognized was $0.2 million and $0.1 million for the three months ended December 31, 2021 and 2020, respectively. Breakage income recognized was $0.3 million and $0.1 million for the six months ended for the six months ended December 31, 2021 and 2020, respectively. The gift card liability is included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets. We will continue to evaluate whether and how store closures may affect customer behavior with respect to sales returns and gift card redemption and related breakage. |
Accrued Liabilities |
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| Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Liabilities | 5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
Self-insurance reserves were primarily comprised of our worker's compensation liability reserve, followed by our medical liability reserve and general liability reserve. |
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Common Stock & Share-Based Incentive Plans |
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| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock & Share-Based Incentive Plans | 6. Common Stock & Share-Based Incentive Plans
For a discussion of the exchange of our common stock and equity financing under the Plan of Reorganization, please see Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Ownership Restrictions
In order to continue to assist the Company in preserving certain tax attributes (the “Tax Benefits”), the Company’s Amended and Restated Certificate of incorporation imposes certain restrictions on the transferability and ownership of the Company’s capital stock (the “Ownership Restrictions”). Subject to certain exceptions, the Ownership Restrictions restrict (i) any transfer that would result in any person acquiring 4.5% or more of our Common Stock, (ii) any transfer that would result in an increase of the ownership percentage of any person already owning 4.5% or more of our Common Stock, or (iii) any transfer during the five-year period following December 31, 2020 that would result in a decrease of the ownership percentage of any person already owning 4.5% or more of our Common Stock. Pursuant to the Company’s Amended and Restated Certificate of Incorporation, any transferee receiving shares of our Common Stock that would result in a violation of the Ownership Restrictions will not be recognized as a stockholder of the Company or entitled to any rights of stockholders. The Company’s Amended and Restated Certificate of Incorporation allows the Ownership Restrictions to be waived by the Company’s board of directors on a case by case basis. The Board of Directors has taken action to waive the restrictions with respect to sales of shares acquired in the Rights Offering by the Backstop Party.
The Ownership Restrictions will remain in effect until the earliest of (i) the repeal of Section 382 of the Internal Revenue Code or any successor statute if the board of directors determines the Ownership Restrictions are no longer necessary for preservation of the Tax Benefits, (ii) the beginning of a taxable year in which the board of directors determines no Tax Benefits may be carried forward, or (iii) such other date as shall be established by the board of directors.
Share-Based Incentive Plans
For a discussion of our share-based incentive plans, please see Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Restricted Stock Awards/Units
The Tuesday Morning Corporation 2008 Long-Term Incentive Plan (the “2008 Plan”) and the Tuesday Morning Corporation Long-Term Incentive Plan (the “2014 Plan” and together with the 2008 Plan, the “Plans”) authorize the grant of restricted stock awards to directors, officers, key employees and certain other key individuals who perform services for us and our subsidiaries. Equity awards may no longer be granted under the 2008 Plan. Restricted stock awards are not transferable, but bear certain rights of common stock ownership including voting and dividend rights. Shares are valued at the fair market value of our common stock at the date of award. Shares may be subject to time-vesting and/or certain performance requirements. If the time-vesting and/or performance requirements are not met, the restricted shares are forfeited. The 2014 Plan also authorizes the grant of time-vesting and performance-based restricted stock units. Restricted stock units do not provide voting and dividend rights. Shares of common stock are issued upon the vesting of restricted units.
On September 15, 2021, Marc Katz was awarded 867,052 time-based and 867,052 performance-based restricted stock units as an incentive to become Principal and Chief Operating Officer and Paul Metcalf was awarded 289,017 time-based and 578,035 performance-based restricted stock units to become the Principal and Chief Merchant (the “Inducement Awards”). In addition, during the first quarter of fiscal 2022, the fiscal 2022 long-term incentive awards were approved by the Board of Directors and time-vesting and performance-based restricted stock units were granted under the 2014 Long-Term Incentive Plan. Under the Plans and the Inducement Awards, as of December 31, 2021, there were 1,088,185 shares of restricted stock awards and 8,430,397 restricted stock units outstanding with award vesting periods, both performance-based and service-based, of to five years and a weighted average grant date fair value of $1.62 and $2.42 per share, respectively.
The following table summarizes the activity of time-vesting restricted stock units, performance-based restricted stock units, time-vesting restricted stock awards and performance-based restricted stock awards for the six months ended December 30, 2021:
As of December 31, 2021, there were 6,693,401 unvested performance-based restricted stock awards and performance-based restricted stock units to be settled in stock.
Cash Settled Awards
We have granted stock-based awards to certain employees, which vest over a period of to four years, and will be settled in cash (“cash settled awards”). Both performance-based and time-based awards were granted. Except for the performance based awards which have been deemed unlikely to vest, the fair value of the cash settled awards at each reporting period is based on the price of our common stock. The fair value of the cash settled awards will be re-measured at each reporting period until the awards are settled.
The following table summarizes the activity of cash settled awards based on their initial grant date values for the six months ended December 31, 2021:
The liability associated with the cash settled awards was $0.7 million and $1.7 million at December 31, 2021 and June 30, 2021, respectively.
Share-based Compensation Costs
Share-based compensation costs consisted of the following (in thousands):
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Commitments and Contingencies |
6 Months Ended |
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Dec. 31, 2021 | |
| Commitments And Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | 7. Commitments and contingencies
Information related to the Chapter 11 Cases that were filed on May 27, 2020 is included in Notes 1 and 2 above.
Like many retailers, the Company has been named in a potential class or collective actions on behalf of groups alleging violations of federal and state wage and hour and other labor statutes, and other statutes. In the normal course of business, we are also party to representative claims under the California Private Attorneys’ General Act and various other lawsuits and regulatory proceedings including, among others, commercial, product, product safety, employee, customer, intellectual property and other claims. Actions against us are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties. In addition, we are involved in legal and governmental proceedings as part of the normal course of our business. Reserves have been established when a loss is considered probable and are based on management’s best estimates of our potential liability in these matters. These estimates have been developed in consultation with internal and external counsel and are based on a combination of litigation and settlement strategies. Management believes that such litigation and claims will be resolved without material effect on our financial position or results of operations. |
Leases |
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| Leases | 8. Leases
We conduct substantially all operations from leased facilities. Our retail store locations, our corporate office and our distribution center are under operating leases that will expire over the next 1 to 10 years. Many of our leases include options to renew at our discretion. We include the lease renewal option periods in the calculation of our operating lease assets and liabilities when it is reasonably certain that we will renew the lease. We also lease certain equipment under finance leases that generally expire within 4 years.
In accordance with the Plan of Reorganization, on December 31, 2020, we sold our corporate office and Dallas distribution center properties and leased back those facilities. The lease of the corporate office is for a term of 10 years, and the lease of the distribution center is for an initial term of , with an option to extend the distribution center lease for one additional year. We believe it is reasonably certain the option to extend will be exercised. We determined the sale price represented the fair value of the underlying assets sold and have no continuing involvement with the properties sold other than a normal leaseback. The consideration received for the sale, as reduced by the closing and transaction costs, was $68.5 million, and the net book value of the properties sold was $18.9 million, resulting in a $49.6 million gain, which was recognized as of December 31, 2020. Cash proceeds, net of property taxes, were deposited directly into the Unsecured Creditor Claim Fund (See Note 2).
The two leases, associated with the transaction, were recorded as operating leases. As of December 31, 2021, we will pay approximately $8.1 million in fixed rents and in-substance fixed rents, over the remaining lease term for the corporate office and we will pay approximately $11.1 million in fixed rents and in-substance fixed rents for the Dallas distribution center property over the remaining lease term, including the one-year option period as noted above. Fixed rents and in-substance fixed rents for each lease were discounted using the incremental borrowing rate we established for the respective term of each lease.
In accordance with ASC 842, we determine whether an agreement contains a lease at inception based on our right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset. Lease liabilities represent the present value of future lease payments and the right-of-use (“ROU”) assets represent our right to use the underlying assets for the respective lease terms.
The operating lease liability is measured as the present value of the unpaid lease payments and the ROU asset is derived from the calculation of the operating lease liability. As our leases do not generally provide an implicit rate, we use our incremental borrowing rate as the discount rate to calculate the present value of lease payments. The incremental borrowing rate represents an estimate of the interest rate that would be required to borrow over a similar term, on a collateralized basis in a similar economic environment.
Rent escalations occurring during the term of the leases are included in the calculation of the future minimum lease payments and the rent expense related to these leases is recognized on a straight-line basis over the lease term. In addition to minimum lease payments, certain leases require payment of a proportionate share of real estate taxes and certain building operating expenses allocated on a percentage of sales in excess of a specified base. These variable lease costs are not included in the measurement of the ROU asset or lease liability due to unpredictability of the payment amount and are recorded as lease expense in the period incurred. The ROU asset is adjusted to account for previously recorded lease-related expenses such as deferred rent and other lease liabilities.
Our lease agreements do not contain residual value guarantees or significant restrictions or covenants other than those customary in such arrangements.
The components of lease cost are as follows (in thousands):
The table below presents additional information related to the Company’s leases:
Other information related to leases, including supplemental disclosures of cash flow information, is as follows (in thousands):
Maturities of lease liabilities were as follows as of December 31, 2021 (in thousands):
Current and non-current finance lease liabilities are recorded in “Accrued liabilities” and “Other liabilities – non-current,” respectively, on our condensed consolidated balance sheet. As of December 31, 2021, there were no operating lease payments for legally binding minimum lease payments for leases signed but not yet commenced. |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Common Share | 9. Earnings per common share
The Company uses the two-class method of computing basic EPS due to the existence of non-vested restricted stock awards with non-forfeitable rights to dividends or dividend equivalents (referred to as participating securities). Basic EPS is computed using the weighted average number of common shares outstanding during each of the respective years. Diluted EPS is computed using the weighted average number of common and common equivalent shares outstanding during each of the respective years using the more dilutive of either the treasury stock method or two-class method. The difference between basic and diluted shares, if any, largely results from common equivalent shares, which represents the dilutive effect of the assumed exercise of certain outstanding share options and warrants, the assumed vesting of restricted stock granted to employees and directors, or the satisfaction of certain necessary conditions for contingently issuable shares. The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share amounts):
For the three and six months ended December 31, 2021, 5.8 million and 1.8 million anti-dilutive shares of common stock were excluded from the calculation of diluted earnings/(loss) per common share, respectively. For the three and six months ended December 31, 2020, 2.6 million anti-dilutive shares of common stock were excluded from the calculation of diluted earnings/(loss) per common share, respectively. On February 9, 2021, as part of the Rights Offering, the Company issued warrants to purchase 10 million shares of common stock with an exercise price of $1.65 and a five year term, all which remained outstanding as of December 31, 2021. |
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Property and Equipment, Net |
6 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Property Plant And Equipment [Abstract] | |
| Property and Equipment, Net | 10. Property and equipment, net
Accumulated depreciation of owned property and equipment as of December 31, 2021 and June 30, 2021 was $158.5 million and $151.9 million, respectively. As of December 31, 2021, due to the ongoing impact of COVID-19, we performed an interim impairment assessment of our leasehold improvement assets, which included estimated future cash flow assumptions. As a result of this assessment, we determined that no additional store fixed asset impairment was required as the undiscounted projected future cash flows for each store sufficiently recovered the carrying value of the related asset group. Due to the uncertainty around COVID-19, our projected future cash flows may differ materially from actual results. While we believe our estimates and judgments about projected future cash flows are reasonable, future impairment charges may be required if the future cash flows, as projected, do not occur, or if events change requiring us to revise our estimates. |
Income Taxes |
6 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | 11. Income taxes
The Company or one of its subsidiaries files income tax returns in the U.S. federal, state and local taxing jurisdictions. With few exceptions, the Company and its subsidiaries are no longer subject to state and local income tax examinations for years prior to fiscal 2016 and are no longer subject to federal income tax examinations for years prior to fiscal 2013.
On March 27, 2020, in an effort to mitigate the economic impact of the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act includes certain corporate income tax provisions, which among other things, included a five-year carryback of net operating losses and acceleration of the corporate alternative minimum tax credit. The Company has evaluated the CARES Act and it is not expected to have a material impact on the income tax provision. The CARES Act also contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the pandemic. As a result of the CARES Act, we had deferred qualified payroll taxes through December 31, 2020. As of December 31, 2021, we have $2.1 million in current qualified deferred payroll taxes in “Accrued Liabilities in the Condensed Consolidated Balance Sheet, which are due December 31, 2022.
The effective tax rate for the quarter ended December 31, 2021 and 2020 were (0.5%) and 1.9% respectively. The effective tax rate for the six months ended December 31, 2021 and 2020 was 0.5% and 0.9% respectively. A full valuation allowance is currently recorded against substantially all of the Company’s deferred tax assets. A deviation from the customary relationship between income tax expense and (benefit) and pretax income/(loss) results from the effects of the valuation allowance. |
Related Party |
6 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Related Party Transactions [Abstract] | |
| Related Party | 12. Related Party
On November 16, 2020, following approval of the Bankruptcy Court, the Company and Osmium Partners LLC (“Osmium Partners”) entered into a backstop commitment agreement (the “Backstop Commitment Agreement”), pursuant to which Osmium Partners agreed that Osmium Partners or an affiliate would serve as the backstop party (the “Backstop Party”) and purchase all unsubscribed shares for a price of $1.10 per share in a $40 million rights offering (the “Rights Offering”), pursuant to which eligible holders of the Company’s common stock could purchase up to $24 million of shares of the Company’s common stock for a price of $1.10 per share. The Rights Offering is described in more detail in Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended June 30, 2021. Osmium Partners (Larkspur SPV) LP (“Larkspur SPV”), jointly owned by Osmium Partners and Tensile Capital Partners Master Fund LP (“TCM”), was formed to serve as the Backstop Party. In addition, on November 15, 2020, the Company and TCM entered into a commitment letter (the “Commitment Letter”) pursuant to which TCM agreed to provide $25 million in subordinated debt financing to the Company.
In accordance with the Plan of Reorganization and the Commitment Letter, on December 31, 2020, the Company, Alter Domus (US), LLC, as administrative agent, and the lenders named therein, including TCM and an affiliate of Osmium, entered into the Term Loan Credit Agreement described in Note 3 above which provided for the $25 million Term Loan to the Company.
In accordance with the Plan of Reorganization and the Backstop Commitment Agreement, on December 31, 2020, the Company, Osmium Partners and Larkspur SPV (Osmium Partners and Larkspur SPV together, the “Osmium Group”) entered into an agreement pursuant to which the Osmium Group is entitled to appoint three directors to the Company’s Board of Directors (the “Directors Agreement”). Pursuant to the Directors Agreement, Douglas J. Dossey of Tensile Capital Management LP, John H. Lewis of Osmium Partners and W. Paul Jones were appointed as members of the Company’s Board of Directors. The Directors Agreement provides that the Osmium Group may appoint one additional member of the Board of Directors under certain circumstances. As a result of the Company's EBIT (as defined in the Director's Agreement) results over the twelve months period ended December 31, 2021, the Osmium Group is entitled to appoint one additional member to the Board of Directors. The Directors Agreement also specifies various other board-related and voting-related procedures and includes a standstill provision limiting certain actions by the Osmium Group.
On February 9, 2021, the Company received proceeds of approximately $40 million upon the closing of the Rights Offering, as contemplated by the Plan of Reorganization. In accordance with the terms of the Backstop Commitment Agreement, Larkspur SPV purchased 18,340,411 shares of the Company’s common stock in the Rights Offering for an aggregate purchase price of approximately $20.2 million. In addition, in accordance with the Plan of Reorganization and the Backstop Commitment Agreement, Larkspur SPV received (1) 1,818,182 additional shares of the Company’s common stock as payment of the commitment fee for serving as Backstop Party in the Rights Offering, and (2) a warrant to purchase 10 million additional shares of the Company’s common stock at a purchase price of $1.65 per share.
Based on Schedule 13D filings made by Osmium Partners and TCM, and their respective affiliates, on February 19, 2021, Osmium Partners and TCM each are deemed to beneficially own the 30,158,593 shares of the Company’s stock beneficially owned by Larkspur SPV (representing approximately 31.4% of outstanding shares). Based on the Schedule 13D and subsequent filings with the SEC, Osmium Partners beneficially owns an additional 2,026,840 shares of the Company’s common stock. |
Nature of Operations and Significant Accounting Policies (Policies) |
6 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of presentation — The unaudited interim condensed consolidated financial statements herein include the accounts of Tuesday Morning Corporation and its subsidiaries (the "Company") and have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). As applicable under such regulations, certain information and footnote disclosures have been condensed or omitted. We believe the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all elimination entries and normal recurring adjustments which are necessary for a fair presentation of the financial position, results of operations and cash flows at the dates and for the periods presented. We do not present a condensed consolidated statement of comprehensive income as there are no other comprehensive income items in either the current or prior fiscal periods.
Our business results historically have fluctuated throughout the year and, as a result, the operating results of the interim periods presented are not necessarily indicative of the results that may be achieved for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended June 30, 2021. The condensed consolidated balance sheet at June 30, 2021 has been derived from the audited consolidated financial statements at that date. The preparation of the condensed consolidated financial statements is in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and related disclosures. Actual amounts could differ from those estimates.
Our fiscal year ends on June 30 and we operate our business as a single operating segment. |
| Cash and Cash Equivalents | (A) Cash and Cash Equivalents—Cash and cash equivalents include credit card receivables and all highly liquid instruments with original maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value. At December 31, 2021 and June 30, 2021, credit card receivables from third party consumer credit card providers were $2.7 million and $3.2 million, respectively. Such receivables generally are collected within one week of the balance sheet date. |
| Restricted Cash | (B) Restricted Cash—Restricted cash was $22.3 million, as of June 30, 2021, which was held in the Unsecured Creditor Claims Fund (defined below in Note 2). |
| Accounting Pronouncement Recently Adopted | Accounting Pronouncement Recently Adopted
In March 2021, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). This update is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange and is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. We adopted this standard in the first quarter of fiscal 2022 and it did not result in a material impact to the Company’s condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, with early adoption permitted. We adopted this standard in the first quarter of fiscal 2022 and it did not result in a material impact to the Company’s condensed consolidated financial statements. |
| Recent Accounting Pronouncement Not Yet Adopted | Recent Accounting Pronouncement Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. This guidance, which became effective on March 12, 2020, and can be applied through December 31, 2022. While there has been no material effect to our financial condition, results of operations, or cash flows from reference rate reform as of December 31, 2021, we continue to monitor our contracts and transactions for potential application of this ASU. |
Bankruptcy Accounting (Tables) |
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| Reorganizations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Restructuring and Abandonment Charges | Restructuring, impairment and abandonment charges for the three and six months ended December 31, 2021 and 2020, respectively are as follows (in thousands):
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| Schedule of Reorganization Items | Reorganization items included in our condensed consolidated statement of operations represent amounts directly resulting from the Chapter 11 Cases for the three and six months ended December 31, 2021 and 2020 respectively, are as follows (in thousands):
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Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Term Loan | The following table provides details on our Term Loan as of December 31, 2021 and June 30, 2021 (in thousands):
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Accrued Liabilities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Payables And Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Liabilities | Accrued liabilities consisted of the following (in thousands):
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Common Stock & Share-Based Incentive Plans (Tables) |
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| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Activity of Time-Vesting and Performance-Based Restricted Stock Units and Restricted Stock Awards | The following table summarizes the activity of time-vesting restricted stock units, performance-based restricted stock units, time-vesting restricted stock awards and performance-based restricted stock awards for the six months ended December 30, 2021:
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| Summary of Activity of Cash Settled Awards | The following table summarizes the activity of cash settled awards based on their initial grant date values for the six months ended December 31, 2021:
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| Schedule of Share Based Compensation Costs | Share-based compensation costs consisted of the following (in thousands):
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Leases (Tables) |
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| Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components of Lease Cost | The components of lease cost are as follows (in thousands):
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| Schedule of Additional Information Related to Leases | The table below presents additional information related to the Company’s leases:
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| Schedule of Other Information Related to Leases Including Supplemental Disclosures of Cash Flow Information | Other information related to leases, including supplemental disclosures of cash flow information, is as follows (in thousands):
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| Schedule of Maturities of Lease Liabilities | Maturities of lease liabilities were as follows as of December 31, 2021 (in thousands):
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Earnings Per Common Share (Tables) |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Computation of Basic and Diluted Earnings Per Common Share | The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share amounts):
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Bankruptcy Accounting - Schedule of Restructuring, Impairment and Abandonment Charges (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
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| Restructuring costs: | ||||
| Severance and compensation related costs | $ 436 | $ 184 | $ 777 | $ 869 |
| Total restructuring costs | 436 | 184 | 777 | 869 |
| Impairment costs: | ||||
| Corporate long-lived assets | 2,089 | |||
| Total impairment costs | 2,089 | |||
| Abandonment costs: | ||||
| Accelerated recognition of operating right-of-use assets | 834 | 5,638 | ||
| Total abandonment costs | 834 | 5,638 | ||
| Total restructuring, impairment and abandonment costs | $ 436 | $ 1,018 | $ 2,866 | $ 6,507 |
Bankruptcy Accounting - Schedule of Reorganization Items (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
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| Reorganization items, net: | ||||
| Professional and legal fees | $ 58 | $ 20,274 | $ 286 | $ 30,120 |
| Claims related costs | (299) | 765 | ||
| Gains on lease terminations, net of estimated claims | (18,777) | (66,247) | ||
| Gain on sale-leaseback | (49,639) | (49,639) | ||
| Total reorganization items, net | $ (241) | $ (48,142) | $ 1,051 | $ (85,766) |
Debt - Summary of Term Loan (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
|---|---|---|
Dec. 31, 2021 |
Jun. 30, 2021 |
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| Line Of Credit Facility [Line Items] | ||
| Loan balance | $ 12,000 | |
| Loan balance, ending | 17,860 | $ 12,000 |
| New ABL Facility and Term Loan | ||
| Line Of Credit Facility [Line Items] | ||
| Loan balance | 25,000 | |
| Debt issuance costs | (319) | |
| Accrued paid-in-kind interest | 3,767 | |
| Loan balance, ending | 28,448 | 25,000 |
| Term Loan Credit Agreement | ||
| Line Of Credit Facility [Line Items] | ||
| Loan balance | 26,374 | 25,000 |
| Debt issuance costs | (432) | |
| Accrued paid-in-kind interest | 1,806 | |
| Loan balance, ending | $ 28,400 | $ 26,374 |
Revenue Recognition - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Disaggregation Of Revenue [Line Items] | ||||
| Impairment charges | $ 2,089,000 | |||
| Returns Asset | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Impairment charges | 0 | |||
| Breakage | ||||
| Disaggregation Of Revenue [Line Items] | ||||
| Breakage income recognized | $ 200,000 | $ 100,000 | $ 300,000 | $ 100,000 |
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Jun. 30, 2021 |
|---|---|---|
| Payables And Accruals [Abstract] | ||
| Sales and use tax | $ 5,429 | $ 2,698 |
| Self-insurance reserves | 9,317 | 9,405 |
| Wages, benefits and payroll taxes | 11,696 | 9,639 |
| Property taxes | 2,435 | 1,510 |
| Freight and distribution | 7,677 | 8,658 |
| Capital expenditures | 176 | 348 |
| Utilities | 964 | 1,466 |
| Gift card liability | 1,273 | 1,045 |
| Reorganization expenses | 82 | 6,337 |
| Other expenses | 6,145 | 5,348 |
| Total accrued liabilities | $ 45,194 | $ 46,454 |
Common Stock & Share-Based Incentive Plans - Summary of Activity of Cash Settled Awards (Details) - Cash Settled Awards |
6 Months Ended |
|---|---|
|
Dec. 31, 2021
shares
| |
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
| Outstanding at the beginning balance | 691,373 |
| Granted during the year | 503,673 |
| Vested during the year | (177,719) |
| Forfeited during the year | (86,905) |
| Outstanding at the ending balance | 930,422 |
| Performance-Based | |
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
| Outstanding at the beginning balance | 143,675 |
| Outstanding at the ending balance | 143,675 |
| Service-Based | |
| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
| Outstanding at the beginning balance | 547,698 |
| Granted during the year | 503,673 |
| Vested during the year | (177,719) |
| Forfeited during the year | (86,905) |
| Outstanding at the ending balance | 786,747 |
Common Stock & Share-Based Incentive Plans - Schedule of Share Based Compensation Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Share-based incentive plans | ||||
| Share-based compensation | $ 1,872 | $ 382 | $ 3,045 | $ 964 |
| Amounts capitalized in ending inventory | (371) | (74) | (610) | (166) |
| Share Based Compensation Amortization | ||||
| Share-based incentive plans | ||||
| Share-based compensation | 1,834 | 315 | 2,989 | 744 |
| Cost of Sales | ||||
| Share-based incentive plans | ||||
| Share-based compensation | $ 409 | $ 141 | $ 666 | $ 386 |
Leases - Components of Lease Cost (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Leases [Abstract] | ||||
| Operating lease cost | $ 17,051 | $ 19,434 | $ 33,579 | $ 34,473 |
| Variable lease cost | 2,426 | 3,022 | 4,698 | 6,978 |
| Amortization of right-of-use assets | 67 | 49 | 100 | 122 |
| Interest on lease liabilities | 1 | 1 | 1 | 7 |
| Total lease cost | $ 19,545 | $ 22,506 | $ 38,378 | $ 41,580 |
Leases - Schedule of Additional Information Related to Leases (Detail) |
Dec. 31, 2021 |
|---|---|
| Weighted average remaining lease term (in years) | |
| Operating leases | 4 years 3 months 18 days |
| Finance leases | 2 months 12 days |
| Operating leases | 8.80% |
| Finance leases | 2.60% |
Leases - Schedule of Other Information Related to Leases Including Supplemental Disclosures of Cash Flow Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Cash paid for amounts included in the measurement of lease liabilities: | ||
| Operating cash flows from operating leases | $ 34,477 | $ 31,218 |
| Operating cash flows from finance leases | 1 | 7 |
| Financing cash flows from finance leases | 100 | 120 |
| Right-of-use assets obtained in exchange for operating lease liabilities | $ 10,111 | $ (106,180) |
Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| Operating Leases Fiscal year: | |
| 2022 (remaining) | $ 35,975 |
| 2023 | 63,638 |
| 2024 | 48,887 |
| 2025 | 33,527 |
| 2026 | 20,836 |
| 2027 | 14,452 |
| Thereafter | 15,353 |
| Total lease payments | 232,668 |
| Less: Interest | 38,649 |
| Total lease liabilities | 194,019 |
| Less: Current lease liabilities | 57,838 |
| Non-current lease liabilities | 136,181 |
| Finance Leases Fiscal year: | |
| 2022 (remaining) | 24 |
| Total lease payments | 24 |
| Less: Interest | 1 |
| Total lease liabilities | 23 |
| Less: Current lease liabilities | 23 |
| Total Fiscal year: | |
| 2022 (remaining) | 35,999 |
| 2023 | 63,638 |
| 2024 | 48,887 |
| 2025 | 33,527 |
| 2026 | 20,836 |
| 2027 | 14,452 |
| Thereafter | 15,353 |
| Total lease payments | 232,692 |
| Less: Interest | 38,650 |
| Total lease liabilities | 194,042 |
| Less: Current lease liabilities | 57,861 |
| Non-current lease liabilities | $ 136,181 |
Earnings Per Common Share - Computation of Basic and Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Dec. 31, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
Sep. 30, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Earnings Per Share [Abstract] | ||||||
| Net earnings/(loss) | $ 1,894 | $ (14,603) | $ 40,339 | $ 18,624 | $ (12,709) | $ 58,963 |
| Less: Income to participating securities | (23) | (137) | (274) | |||
| Net earnings/(loss) attributable to common shares | $ 1,871 | $ 40,202 | $ (12,709) | $ 58,689 | ||
| Weighted average number of common shares outstanding — basic | 84,677 | 45,511 | 84,494 | 45,460 | ||
| Effect of dilutive stock equivalents | 4,721 | |||||
| Weighted average number of common shares outstanding — diluted | 89,398 | 45,511 | 84,494 | 45,460 | ||
| Net earnings/(loss) per common share - basic | $ 0.02 | $ 0.88 | $ (0.15) | $ 1.29 | ||
| Net earnings/(loss) per common share - diluted | $ 0.02 | $ 0.88 | $ (0.15) | $ 1.29 | ||
Earnings Per Common Share - Narrative (Details) - $ / shares shares in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Feb. 09, 2021 |
|
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||||
| Anti-dilutive shares of common stock excluded from calculation of diluted earnings (loss) per common share | 5.8 | 2.6 | 1.8 | 2.6 | |
| Backstop Commitment Agreement | Osmium Partners LLC | Warrant | |||||
| Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items] | |||||
| Warrants to purchase common stock | 10.0 | ||||
| Exercise price of warrant | $ 1.65 | ||||
| Warrants term | 5 years | ||||
Property and Equipment, Net - Narrative (Details) - USD ($) |
6 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Jun. 30, 2021 |
|
| Property Plant And Equipment [Abstract] | ||
| Accumulated depreciation | $ 158,500,000 | $ 151,900,000 |
| Additional asset impairment charges | $ 0 |
Income Taxes - Narrative (Details) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
|
Dec. 31, 2021
USD ($)
Subsidiary
|
Dec. 31, 2020 |
Dec. 31, 2021
USD ($)
Subsidiary
|
Dec. 31, 2020 |
|
| Income Tax Disclosure [Abstract] | ||||
| Number of subsidiaries filing income tax returns in the U.S. federal jurisdiction, and various state jurisdictions | Subsidiary | 1 | 1 | ||
| Effective tax rate | (0.50%) | 1.90% | (0.50%) | 0.90% |
| Current qualified deferred payroll taxes CARES Act | $ | $ 2.1 | $ 2.1 | ||