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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

Commission file number 0-19658

TUESDAY MORNING CORPORATION
(Exact Name of Registrant as Specified in its Charter)

14621 Inwood Road
Addison, Texas 75001
(Address, including zip code, of principal executive offices)

(972) 387-3562
(Registrant's telephone number, including area code)

NONE
(Former name, former address and former fiscal year, if changed since last report)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Forward Looking Statements

        This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws and Private Securities Litigation Reform Act of 1995. 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 carefully because they describe our expectations, plans, strategies and goals and our beliefs concerning future business conditions, our results of operations, financial position, and our business outlook or state other "forward-looking" information based on currently available information.

        Readers are referred to the caption "Risk Factors" appearing at the end of Item I of the Company's Annual Report on Form 10-K for the year ended December 31, 2001 for additional factors that may affect our forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.

        The terms "Tuesday Morning," "we," "us" and "our" as used in this Quarterly Report on Form 10-Q refer to Tuesday Morning Corporation and its subsidiaries.

PART I—FINANCIAL INFORMATION

Tuesday Morning Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except for share data)

See accompanying notes to consolidated financial statements.

1

Tuesday Morning Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except per share data)
(Unaudited)

See accompanying notes to consolidated financial statements.

2

Tuesday Morning Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

See accompanying notes to consolidated financial statements.

3

Tuesday Morning Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1.

The consolidated interim financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These unaudited financial statements include all adjustments, consisting only of those of a normal recurring nature, which, in the opinion of management, are necessary to present fairly the results of the Company for the interim periods presented and should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Form 10-K filing for the year ended December 31, 2001. Because of the seasonal nature of our business, the results of operations for the quarter and nine months ended September 30, 2002 are not indicative of the results to be expected for the entire year.

2.

Comprehensive income is defined as the change in equity during a period from transactions and other events, except those resulting from investments by and distributions to stockholders. The components of comprehensive income for the three-month and nine-month periods ended September 30, 2002 and 2001 are as follows:

3.

Sales are recorded at the time of sale and conveyance of merchandise to customers. Sales are net of returns and exclude sales taxes.

4.

Legal proceedings—During 2001 and 2002, Tuesday Morning was named as a defendant in three complaints filed in the Superior Court of the State of California in and for the County of Los Angeles. The plaintiffs are seeking to certify a statewide class made up of some of the Company's current and former employees, which they claim are owed compensation for overtime wages, penalties and interest. The plaintiffs are also seeking attorney's fees and costs. The Company intends to vigorously defend these actions. The Company does not believe this or any other legal proceedings pending or threatened against it would have a material adverse effect on our financial condition or results of operations.

4

5.

Earnings Per Common Share (unaudited)

6.

On March 19, 2002, the Company filed a Form S-3 registration statement with the Securities and Exchange Commission for the sale of common stock by a shareholder and the Company. This sale, including an over allotment, occurred in April 2002, with the shareholder selling 6,750,000 shares and the Company selling 150,000 shares at a price of $23 per common share. The Company used a portion of its net proceeds to pay down some of its debt obligations.

7.

Revolving Credit Facility—On September 27, 2002, the Company entered into a new Senior Credit Agreement and terminated our senior credit facility and related revolver and Term A and B loans with a total balance outstanding of $63.1 million This new facility consists of a $135 million revolving credit facility and is for a period of 42 months expiring in March 2006. At September 30, 2002 the Company had a total of $71.4 million outstanding under the new revolver, of which, $35.0 million was considered long-term.

Availability under the revolving credit facility was $35.2 million at September 30, 2002 based on eligible inventory. For 15 consecutive days between December 1 and January 31 of each calendar year, beginning in December 2002, the aggregate principal amount of loans outstanding under the revolving credit facility and any swing loans may not exceed $35 million for the period December 2002 through January 2003 and $20 million for all similar annual periods thereafter.

The Company's indebtedness under the credit facility is secured by a lien on its inventory, tangible personal property and a second mortgage on its owned real property, as well as a pledge of its ownership interests in all of its subsidiaries.

8.

Recently issued accounting standards—In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (SFAS No. 146), "Accounting for Costs Associated with Exit or Disposal Activities", which is effective for exit or disposal activities that are initiated after December 31, 2002. SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Company is currently reviewing this statement but does not expect it to have a material impact on future financial statements or results of operations.

5

9.

Risks and uncertainties—

On September 30, 2002, the Pacific Maritime Association, a group representing West Coast port operators and international shipping lines, initiated a lockout at 29 West Coast ports of members of the International Longshore and Warehouse Union, effectively bringing port operations to a halt. On October 8, 2002, a federal court issued a temporary restraining order effective until October 16, 2002 ending the lockout. The court imposed an 80-day cooling off period at that time as required by the Taft Hartley Act. The Company has assessed the probable impact of the temporary loss of use of these ports and has determined that any negative effects on our results of operations will not be material. Although port operations may not return to normal for several weeks, the Company expects no significant adverse effects on current operations since almost all seasonal merchandise purchased for the holiday selling season has already been received into stores and distribution centers, as has other merchandise in sufficient quantities to support promotional events and regular sales through the fourth quarter of 2002 and into the first quarter of 2003. Future disruptions may have a significant impact on our ability to obtain merchandise.

6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

The following table sets forth certain financial information from our consolidated statements of operations expressed as a percentage of net sales. There can be no assurance that the trends in sales growth or operating results will continue in the future.