2014

Maidenform Brands, Inc. Reports Second Quarter 2013 Results

ISELIN, N.J., Aug. 7, 2013 /PRNewswire/ -- Maidenform Brands, Inc. (NYSE: MFB), a global intimate apparel company, today reported second quarter 2013 net sales of $145.4 million and earnings per share of $0.34

On July 23, 2013, Maidenform entered into a definitive agreement with Hanesbrands Inc. pursuant to which Hanesbrands will acquire all of the outstanding shares of Maidenform for $23.50 per share in cash, representing a transaction value of approximately $575 million.  For a more detailed description of the Merger Agreement, please refer to the Current Report on Form 8−K filed by the Company on July 24, 2013.

"Our second quarter results were in line with our expectations," stated Maurice S. Reznik, Chief Executive Officer of Maidenform.

Financial Results for Second Quarter 2013 versus Second Quarter 2012

Net sales for the second quarter of 2013 decreased $12.1 million, or 7.7%, to $145.4 million.  Wholesale segment net sales for the second quarter of 2013 decreased $11.6 million, or 8.2%, to $129.8 million. Retail segment net sales decreased $0.5 million, or 3.1%, to $15.6 million.  

The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.

Wholesale Segment

Department Stores and National Chain Stores
Net sales for the department stores and national chain stores channel decreased $7.9 million, or 11.2%, to $62.5 million for the second quarter of 2013 from softness in the bra and shapewear categories resulting from lower replenishment orders, increased shapewear competition at a chain customer as well as a decrease resulting from the initial shipments for the Jennifer Lopez brand which occurred in 2012.  Somewhat offsetting this decline was improved replenishment at a mid-tier department store customer.

Mass Merchants
Mass merchant channel net sales decreased $0.5 million, or 1.0%, to $47.7 million for the second quarter of 2013 resulting from lower strapless bra replenishment orders and lower replenishment orders on new introductions.  This decrease was predominately offset by increased sales in the bra and shapewear categories at our other mass customers, including shapewear rebranding initiatives at a warehouse club customer.      

Other
Net sales in the other channel decreased $3.2 million, or 14.0%, to $19.6 million for the second quarter of 2013 primarily from sales declines to a specialty retailer, decreased program sales to off-price retailers and lower liquidation sales.       

Total international net sales, which are included in the wholesale segment, increased $0.5 million, or 3.4%, to $15.3 million with growth in significant markets, most notably Canada, Germany and Mexico.  Partially offsetting this increase were sales decreases in other markets, such as the United Kingdom and Russia.   

Retail Segment

Total retail segment net sales decreased $0.5 million, or 3.1%, to $15.6 million.  Same store sales, defined as outlet stores that have been open for more than one year, increased 1.5%.  Internet sales remained unchanged at $2.3 million for the second quarter of 2013.  The retail segment operated 68 outlet stores as of the end of the second quarter 2013 and 75 outlet stores as of the end of the second quarter of 2012.   

Consolidated gross profit decreased $7.1 million, or 13.2%, to $46.5 million for the second quarter of 2013.  As a percentage of net sales, consolidated gross margins were 32.0% for the second quarter of 2013 versus 34.0% for the second quarter of 2012, driven by increased promotional activity to drive inventory productivity and increased inventory clearing costs.             

Consolidated selling, general and administrative expenses (SG&A) decreased $1.3 million, or 3.8%, to $33.3 million for the second quarter of 2013.  This decrease is a result of decreased payroll and related benefits, including lower incentive compensation and lower variable compensation at our North Carolina distribution center, somewhat offset by increased costs associated with our West Coast distribution initiative, and professional fees associated with the definitive agreement with Hanesbrands.   As a percentage of net sales, SG&A increased to 22.9% for the second quarter of 2013 compared to 21.9% for the second quarter of 2012.

Due to all the factors described above, operating income for the second quarter of 2013 was $13.2 million, or 9.1% of net sales, compared to operating income of $19.0 million, or 12.1% of net sales, for the second quarter of 2012.

Net interest expense for the second quarter of 2013 was unchanged at $0.2 million.

The Company recorded income tax expense of $5.1 million and $7.4 million for the three months ended June 29, 2013 and June 30, 2012, respectively.  The Company's effective income tax rate for the second quarter of 2013 was 38.4% compared to 39.1% for the second quarter of 2012.        

Net income for the second quarter of 2013 and 2012 was $7.9 million and $11.4 million, respectively, and EPS was $0.34 and $0.49, respectively.           

Financial Results for Year-To-Date 2013 versus Year-To-Date 2012

Net sales for the first six months of 2013 decreased $38.4 million, or 12.2%, to $276.6 million.  Wholesale segment net sales, on a year-to-date basis, decreased $37.7 million, or 13.2%, to $248.5 million resulting from the reasons mentioned above. Total international net sales decreased $0.5 million, or 1.6%, to $30.8 million.  This decrease was driven by lower sales in the United Kingdom and Russia.  Partially offsetting these decreases were sales increases in other markets, such as Mexico and South Korea.  Retail segment net sales for the first six months of 2013 decreased $0.7 million, or 2.4%, to $28.1 million.  Same store sales, defined as outlet stores that have been open for more than one year, increased 2.7%.  Internet sales decreased $0.2 million, or 4.3%, to $4.4 million.  The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.

Consolidated gross margins on a year-to-date basis were 27.9% versus 30.6% for the same period in 2012.  The decrease in gross margin was a result of increased promotional activity to drive inventory productivity and increased inventory clearing costs.  Slightly offsetting this decrease was a favorable mix of sales.     

Consolidated SG&A decreased $1.9 million, or 2.8%, to $65.8 million for the first six months of 2013.  This decrease is primarily due to the same drivers sighted above for the second quarter of 2013.  As a percentage of net sales, SG&A increased to 23.8% for the first six months of 2013 compared to 21.5% for the same period of 2012.         

Year-to-date operating income for 2013 was $11.3 million, or 4.1% of net sales.  Year-to-date operating income for 2012 was $28.8 million, or 9.1% of net sales. 

The Company's effective income tax rate for the first six months of 2013 was 37.4% compared to 39.1% for the same period of 2012. 

Net income for the first six months of 2013 and 2012 was $6.7 million and $17.2 million, respectively, and EPS was $0.29 and $0.74, respectively. 

Total cash and cash equivalents as of June 29, 2013 were $54.5 million compared to $59.1 million as of June 30, 2012.  The Company's outstanding debt was $67.4 million as of June 29, 2013 versus $68.5 million as of June 30, 2012.          

Conference Call Information
In light of the pending transaction with Hanesbrands, Maidenform will not be hosting a quarterly conference call.  Investors and other interested parties may access the press release by visiting ir.maidenform.com and clicking on News Releases.

About Maidenform Brands, Inc.
Maidenform Brands, Inc. is a global intimate apparel company with a portfolio of established, well-known brands, top-selling products and an iconic heritage. Maidenform designs, sources and markets an extensive range of intimate apparel products, including bras, panties and shapewear.  Maidenform sells its products under some of the most recognized brands in the intimate apparel industry, including Maidenform®, Control It!®, Fat Free Dressing®, Flexees®, Lilyette®, Bodymates®, Inspirations®, Self Expressions® and Sweet Nothings®. Maidenform products are currently distributed in approximately 63 countries and territories outside the United States.

IMPORTANT INFORMATION FOR INVESTORS AND STOCKHOLDERS:

This press release does not constitute a solicitation of any vote or approval. On July 24, 2013, Maidenform announced that it had entered into a definitive agreement with Hanesbrands pursuant to which Hanesbrands will acquire Maidenform by merger. In connection with the proposed merger, Maidenform will file a proxy statement with the Securities and Exchange Commission (the "SEC"). INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors may obtain a free copy of the proxy statement (when available) and any other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov. In addition, investors will be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) at Maidenform's website at ir.Maidenform.com or by contacting Maidenform's investor relations department by telephone at (732) 621-2300 or via e-mail at ir@maidenform.com.

Forward Looking Statement: This press release contains forward-looking statements relating to future events and the Company's future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects" or similar words or phrases, although not all forward-looking statements contain such identifying words.  All forward-looking statements included in this press release are based on information available to the Company on the date hereof.  It is routine for the Company's internal projections and expectations to change as the year or each quarter in the year progress, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of each quarter or the year.  Although these expectations may change, we assume no obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events or otherwise. Actual events or results may differ materially from those contained in the projections or forward-looking statements.

The following factors, among others, could cause the Company's actual results to differ materially from those expressed in any forward-looking statements: the worldwide apparel industry may be harmed by a global economic downturn, the conditions in the financial and credit markets may affect the availability and cost of our funding, the Company's growth cannot be assured and any growth may be unprofitable; potential fluctuations in our results of operations or rate of growth; our dependence on a limited number of customers; the Company has larger competitors with greater resources; retail trends in the intimate apparel industry, including consolidation and continued growth in the development of private brands, resulting in downward pressure on prices, reduced floor space and other harmful changes; failure to anticipate, identify or promptly react to changing trends, styles, or consumer preferences; the Company's credit agreement could limit growth opportunities; external events that disrupt the Company's supply chain, result in increased cost of goods or an inability to deliver its products; events which result in difficulty in procuring or producing products on a cost-effective basis; disputes with third parties for infringement or misappropriation of their proprietary rights or other litigation; increases in the prices of raw materials; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; foreign currency exposure; and the sufficiency of cash to fund operations and capital expenditures; and Maidenform's and Hanesbrands' ability to complete the proposed merger on a timely basis or at all.

This list is intended to identify only certain of the principal factors that could cause actual results to differ from those discussed in the forward-looking statements.  Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements.

 

 

MAIDENFORM BRANDS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS




(in thousands, except share and per share amounts)




(unaudited)







June 29, 


December 29,




2013


2012

Assets




Current assets




    Cash and cash equivalents

$           54,521


$           83,747

    Accounts receivable, net

84,551


72,538

    Inventories

125,137


119,015

    Deferred income taxes

15,081


15,081

    Prepaid expenses and other current assets

21,548


15,089

          Total current assets

300,838


305,470

Property and equipment, net

30,538


31,347

Goodwill 

7,162


7,162

Intangible assets, net

91,235


91,789

Other non-current assets

138


183

          Total assets

$         429,911


$         435,951







Liabilities and stockholders' equity




Current liabilities




    Current portion of long-term debt

$           67,400


$            1,100

    Accounts payable

39,788


53,050

    Accrued expenses and other current liabilities

21,439


21,882

          Total current liabilities

128,627


76,032

Long-term debt 

-


67,125

Deferred income taxes

28,530


26,927

Other non-current liabilities

11,020


11,583

          Total liabilities

168,177


181,667



















Stockholders' equity




    Preferred stock -  $0.01 par value; 10,000,000 shares authorized




         and none issued and outstanding

-


-

    Common stock - $0.01 par value; 100,000,000 shares authorized;




       24,399,732 shares issued and 22,910,581 outstanding at June 29, 2013




       and 24,399,732 shares issued and 22,754,212 outstanding at December 29, 2012

244


244

    Additional paid-in capital                         

79,552


80,628

    Retained earnings

218,865


213,423

    Accumulated other comprehensive loss

(8,609)


(8,647)

    Treasury stock, at cost (1,489,151 shares at June 29, 2013 and




        1,645,520 shares at December 29, 2012)

(28,318)


(31,364)

            Total stockholders' equity

261,734


254,284

            Total liabilities and stockholders' equity

$         429,911


$         435,951

 

 

MAIDENFORM BRANDS, INC. AND SUBSIDIARIES







CONDENSED CONSOLIDATED STATEMENTS OF INCOME





(in thousands, except share and per share amounts)







(unaudited)




















Three Months Ended


Six Months Ended



June 29,


June 30,


June 29,


June 30,



2013


2012


2013


2012










Net sales


$         145,450


$         157,485


$         276,606


$         315,031

Cost of sales


98,908


103,927


199,502


218,566

          Gross profit


46,542


53,558


77,104


96,465

Selling, general and









administrative expenses


33,335


34,570


65,790


67,638

          Operating income


13,207


18,988


11,314


28,827










Interest expense, net


277


296


548


549

          Income before provision 









             for income taxes


12,930


18,692


10,766


28,278

Income tax expense


4,960


7,308


4,030


11,049

         Net income


$            7,970


$          11,384


$            6,736


$          17,229

Basic earnings per common share


$              0.35


$              0.49


$              0.29


$              0.75

Diluted earnings per common share 


$              0.34


$              0.49


$              0.29


$              0.74

Basic weighted average number of









      shares outstanding


22,902,895


23,052,429


22,842,848


22,995,539

Diluted weighted average number of 









      shares outstanding


23,102,664


23,399,367


23,115,724


23,389,694

 

 

MAIDENFORM BRANDS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)



(in thousands)









(unaudited)




















Three Months Ended


Six Months Ended



June 29,


June 30,


June 29,


June 30,



2013


2012


2013


2012










Net income


$             7,970


$           11,384


$             6,736


$           17,229

Other comprehensive income (loss), before tax:









  Foreign currency translation adjustments


115


(724)


(151)


(219)

  Adjustments to benefit plans


158


137


316


274

Other comprehensive income (loss), before tax


273


(587)


165


55

  Income tax expense related to items of 









      other comprehensive income (loss) (1)


63


55


127


110

Other comprehensive income (loss), net of tax


210


(642)


38


(55)

Comprehensive income


$             8,180


$           10,742


$             6,774


$           17,174










(1) Tax expense provided relates to benefit plan deferrals.







 

 

MAIDENFORM BRANDS, INC. AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS




(in thousands)




(unaudited)





Six Months Ended


June 29,


June 30,


2013


2012

Cash flows from operating activities




Net income

$             6,736


$           17,229

Adjustments to reconcile net income to net cash  




   used in operating activities




      Depreciation and amortization

2,978


2,560

      Amortization of intangible assets

554


546

      Amortization of deferred financing costs

87


94

      Stock-based compensation

1,929


2,301

      Deferred income taxes

1,475


1,396

      Excess tax benefits related to stock-based compensation

(495)


(843)

      Bad debt expense

340


277

      Other non-cash items

101


411

      Net changes in operating assets and liabilities




          Accounts receivable

(12,443)


(33,928)

          Inventories

(6,252)


4,251

         Prepaid expenses and other current and




               non-current assets

(3,068)


(454)

              Accounts payable

(13,250)


686

          Accrued expenses and other current and




              non-current liabilities

(680)


1,188

          Income taxes payable

(3,173)


(778)

                      Net cash used in operating activities

(25,161)


(5,064)

Cash flows from investing activities




Capital expenditures

(2,178)


(2,835)

                      Net cash used in investing activities

(2,178)


(2,835)

Cash flows from financing activities




Term loan repayments

(825)


(550)

Proceeds from stock options exercised

56


636

Excess tax benefits related to stock-based compensation

495


843

Payments of employee withholding taxes related to equity awards

(1,578)


(1,566)

Payments of capital lease obligations

(110)


(152)

Financing fees paid

-


(250)

                      Net cash used in financing activities

(1,962)


(1,039)

Effects of exchange rate changes on cash and cash equivalents

75


(35)

                      Net decrease in cash and cash equivalents

(29,226)


(8,973)

Cash and cash equivalents




Beginning of period

83,747


68,041

End of period


$           54,521


$           59,068











Supplementary disclosure of cash flow information




Cash paid during the period




Interest




$                588


$                510

Income taxes


$             5,752


$           10,310











Supplemental schedule of non-cash financing activities




Treasury stock issued related to equity award activity

$            4,624


$            4,483

 

 








Exhibit 1

MAIDENFORM BRANDS, INC. AND SUBSIDIARIES



SALES BY CHANNEL OF DISTRIBUTION AND PRODUCT MIX

(in millions)








(unaudited)

















Three months ended 


June 29,


June 30,


$


%


2013


2012


change


change


(in millions)

Department stores and








national chain stores 

$             62.5


$              70.4


$              (7.9)


(11.2%)

Mass merchants

47.7


48.2


(0.5)


(1.0)

Other

19.6


22.8


(3.2)


(14.0)

Total wholesale

129.8


141.4


(11.6)


(8.2)









Retail

15.6


16.1


(0.5)


(3.1)









Total net sales

$           145.4


$            157.5


$            (12.1)


(7.7%)


















Six months ended 


June 29,


June 30,


$


%


2013


2012


change


change


(in millions)

Department stores and








national chain stores 

$           116.2


$            129.0


$            (12.8)


(9.9%)

Mass merchants

91.2


107.2


(16.0)


(14.9)

Other

41.1


50.0


(8.9)


(17.8)

Total wholesale

248.5


286.2


(37.7)


(13.2)









Retail

28.1


28.8


(0.7)


(2.4)









Total net sales

$           276.6


$            315.0


$            (38.4)


(12.2%)


















Three months ended


Six months ended


June 29,


June 30,


June 29,


June 30,


2013


2012


2013


2012

Bras

58%


59%


59%


57%

Shapewear

34


34


33


36

Panties

8


7


8


7


100%


100%


100%


100%

 

 

SOURCE Maidenform Brands, Inc.



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