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      Destination Maternity Reports Q3 Earnings Higher Than Last Year and Provides Updated Earnings Guidance for Fiscal 2011 and Initial Earnings Guidance for Fiscal 2012

      Company Makes $10 Million Optional Prepayment of Term Loan During Third Quarter and Extends Maturity of Its Credit Facility to January 13, 2013

      - Q3 GAAP Diluted EPS of $0.72, a 7% increase over last year's Q3 Diluted EPS of $0.67. The Company's prior GAAP Diluted EPS guidance was $0.72-$0.83, provided on April 27, 2011, with updated GAAP Diluted EPS guidance of $0.70-$0.72 provided on July 7, 2011.

      - Q3 Non-GAAP Adjusted Diluted EPS of $0.75, a slight increase over last year's Q3 Adjusted Diluted EPS of $0.74. The Company's prior Non-GAAP Diluted EPS guidance was $0.76-$0.87, provided on April 27, 2011.

      - Projected full year Fiscal 2011 GAAP Diluted EPS of $1.73-$1.83, a projected increase of 30% to 38% over Fiscal 2010 full year GAAP Diluted EPS of $1.33, and a decrease compared to prior guidance of $1.90-$2.09.

      - Projected full year Fiscal 2011 Non-GAAP Adjusted Diluted EPS of $1.85-$1.95, a projected increase of 9% to 15% over Fiscal 2010 full year Non-GAAP Adjusted Diluted EPS of $1.70, and a decrease compared to prior guidance of $2.03-$2.22.

      - Projected full year Fiscal 2012 GAAP Diluted EPS growth of 2% to 10% versus Fiscal 2011 GAAP Diluted EPS.

      - Prepaid $10.0 million of its Term Loan during the third quarter of Fiscal 2011.

      - Credit Facility amended to extend maturity from March 13, 2012 to January 13, 2013.

      - Declared regular quarterly cash dividend of $0.175 per share, payable September 28, 2011.

      - All share and per share amounts give effect to two-for-one stock split of March 1, 2011.


      News provided by

      Destination Maternity Corporation

      Jul 27, 2011, 06:00 ET

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      PHILADELPHIA, July 27, 2011 /PRNewswire/ -- Destination Maternity Corporation (Nasdaq: DEST), the world's leading maternity apparel retailer, today announced operating results for the third quarter of fiscal 2011, which ended June 30, 2011, with its third quarter diluted earnings per share exceeding its prior year third quarter earnings results and at the low end of its April 27, 2011 earnings guidance.  Yesterday, the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.175 per share payable September 28, 2011.  Also, today the Company announced that it has extended the maturity of its credit facility from March 13, 2012 to January 13, 2013.

      Third Quarter Fiscal 2011 Financial Results

      • GAAP net income for the third quarter of fiscal 2011 was $9.5 million, or $0.72 per share (diluted), a 9% increase compared to GAAP net income of $8.7 million, or $0.67 per share (diluted) for the third quarter of fiscal 2010.  This third quarter fiscal 2011 GAAP earnings performance was at the low end of the Company's guidance, provided in its April 27, 2011 press release, of GAAP diluted earnings per share of between $0.72 and $0.83.

      • Non-GAAP adjusted net income (before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt) for the third quarter of fiscal 2011 was $10.0 million, or $0.75 per share (diluted), an increase of 5% over the comparably adjusted non-GAAP net income for the third quarter of fiscal 2010 of $9.5 million, or $0.74 per share (diluted).  This third quarter fiscal 2011 non-GAAP adjusted earnings performance was near the low end of the Company's guidance, provided in its April 27, 2011 press release, of non-GAAP adjusted diluted earnings per share of between $0.76 and $0.87.

      • Adjusted EBITDA was $20.0 million for the third quarter of fiscal 2011, an increase of 5% over the $19.0 million of Adjusted EBITDA for the third quarter of fiscal 2010.  Adjusted EBITDA is defined in the financial tables at the end of this press release.

      • Adjusted EBITDA before restructuring and other charges was $20.2 million for the third quarter of fiscal 2011, an increase of 2% over the $19.8 million of Adjusted EBITDA before restructuring and other charges for the third quarter of fiscal 2010.

      • Net sales for the third quarter of fiscal 2011 increased 3.3% to $146.7 million from $142.0 million for the third quarter of fiscal 2010.  The increase in sales for the third quarter of fiscal 2011 compared to fiscal 2010 resulted primarily from: (1) increased sales due to the expansion of the Company's maternity apparel leased department relationship with Macy's® and (2) increased Internet sales, partially offset by (3) a decrease in comparable store sales and (4) decreased sales related to the Company's continued efforts to close underperforming stores.

      • Comparable retail sales (which consists of comparable store sales and Internet sales) for the third quarter of fiscal 2011 decreased 1.6% versus a comparable retail sales decrease of 3.3% for the third quarter of fiscal 2010.  During the third quarter of fiscal 2011, comparable store sales decreased 2.8%, and Internet sales increased 18.1%.  The comparable store sales decrease of 2.8% during the third quarter of fiscal 2011 was at the low end of the Company's guidance range of down 2.8% to up 1.1% provided in April.  We estimate that the cannibalization impact of our leased department expansion with Macy's in February 2011 hurt our third quarter comparable store sales by between 1 and 2 percentage points.

      First Nine Months of Fiscal 2011 Financial Results

      • GAAP net income for the first nine months of fiscal 2011 was $20.3 million, or $1.55 per share (diluted), a 62% increase compared to GAAP net income of $12.5 million, or $0.99 per share (diluted) for the first nine months of fiscal 2010.

      • Non-GAAP adjusted net income (before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt) for the first nine months of fiscal 2011 was $21.5 million, or $1.64 per share (diluted), an increase of 25% over the comparably adjusted non-GAAP net income for the first nine months of fiscal 2010 of $17.2 million, or $1.36 per share (diluted).

      • Adjusted EBITDA was $45.5 million for the first nine months of fiscal 2011, an increase of 25% over the $36.5 million of Adjusted EBITDA for the first nine months of fiscal 2010.

      • Adjusted EBITDA before restructuring and other charges was $45.7 million for the first nine months of fiscal 2011, an increase of 7% over the $42.6 million of Adjusted EBITDA before restructuring and other charges for the first nine months of fiscal 2010.

      • Net sales for the first nine months of fiscal 2011 increased 2.2% to $416.0 million from $406.9 million for the first nine months of fiscal 2010.  The increase in sales for the first nine months of fiscal 2011 compared to fiscal 2010 resulted primarily from: (1) increased sales due to the expansion of the Company's maternity apparel leased department relationship with Macy's and (2) increased Internet sales, partially offset by (3) decreased sales related to the Company's continued efforts to close underperforming stores.

      • Comparable retail sales for the first nine months of fiscal 2011 increased 0.6% versus a comparable retail sales decrease of 4.1% for the first nine months of fiscal 2010.  During the first nine months of fiscal 2011, comparable store sales decreased 0.6%, and Internet sales increased 17.9%.

      Trailing Twelve Months Financial Results

      • For the trailing twelve months ended June 30, 2011, Adjusted EBITDA was $57.4 million and Adjusted EBITDA before restructuring and other charges was $57.2 million.

      • For the trailing twelve months ended June 30, 2011, GAAP net income was $24.6 million, or $1.89 per share (diluted) and non-GAAP adjusted net income (before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt) was $25.9 million, or $1.98 per share (diluted).

      Financing and Related Activities

      • The Company prepaid $10.0 million of its Term Loan during the third quarter of fiscal 2011, and has prepaid $12.6 million of its Term Loan since the beginning of fiscal 2011, including the $2.6 million prepayment during the first quarter of fiscal 2011 required under the excess cash flow provision of the Term Loan.

      • On July 25, 2011, the Company amended its credit facility to extend the maturity from March 13, 2012 to January 13, 2013.  The amendment also reduced the maximum available for borrowings from $65 million to $55 million, due to the Company's current and historical low level of utilization of the facility, and increased the interest rate on outstanding borrowings, if any, by approximately 0.75% per annum.

      • Yesterday the Company announced that its Board of Directors declared a regular quarterly cash dividend of $0.175 per share, payable September 28, 2011 to stockholders of record at the close of business on September 7, 2011.

      • On March 1, 2011, the Company effected a two-for-one stock split in the form of a stock dividend.  All share and per share amounts included in this third quarter fiscal 2011 earnings release give effect to the stock split and have been adjusted retroactively for all periods presented.  

      Restructuring and Other Charges

      • Beginning in late fiscal 2008, the Company implemented a significant restructuring and cost reduction program, with the objectives of simplifying its merchandise brand and store nameplate structure, improving and simplifying critical processes, and reducing its expense structure.  The Company has substantially completed the planned activities of the initiative and incurred $3.9 million of pretax expense related to this initiative in fiscal 2010, of which $0.3 million was incurred in the third quarter of fiscal 2010 and the full $3.9 million was incurred in the first nine months of fiscal 2010.  This initiative resulted in pretax savings of approximately $12 million in fiscal 2009, with incremental pretax savings of approximately $11 million in fiscal 2010.  The Company projects total annualized pretax savings of approximately $29 million in fiscal 2011 as a result of this initiative, which includes the savings realized in fiscal 2009 and fiscal 2010.

      • In addition, the Company recorded pretax charges of $0.2 million in the first nine months of fiscal 2011, all of which was incurred in the third quarter, associated with the hiring of the Company's President in June 2011, and the Company recorded pretax charges of $2.2 million in the first nine months of fiscal 2010, of which $0.5 million was incurred in the third quarter, primarily associated with the retirement of the Company's former President and Chief Creative Officer in September 2010 and the retirement of the Company's former non-executive Chairman of the Board in January 2010.

      Retail Locations

      The table below summarizes store opening and closing activity for the third quarter and first nine months of fiscal 2011 and 2010, as well as the Company's store, total retail location and total international franchised location count at the end of each fiscal period.  The increase in leased department locations at June 30, 2011 versus June 30, 2010 predominantly reflects the opening of 516 leased department locations in January and February 2011 for the Company's Macy's expansion, and an additional 217 Sears and Kmart leased department locations in September and October 2010.



      Third Quarter Ended


      Nine Months Ended


      06/30/11


      06/30/10


      06/30/11


      06/30/10







      Store Openings (1)














      Total


      3



      2




      7



      8


      Multi-Brand Store Openings


      2



      2




      5



      7
















      Store Closings (1)














      Total


      12



      9




      42



      30


      Closings Related to Multi-Brand Store Openings


      2



      3




      9



      16
















      Period End Retail Location Count (1)














      Stores


      663



      702




      663



      702


      Leased Department Locations


      1,697



      976




      1,697



      976


      Total Retail Locations (1)


      2,360



      1,678




      2,360



      1,678



      (1) Excludes international franchised locations.





      Third Quarter Ended


      Nine Months Ended


      06/30/11


      06/30/10


      06/30/11


      06/30/10







      International Franchised Location Openings














      Stores


      2



      4




      4



      7


      Shop-in-Shop Locations


      4



      5




      23



      9


      Total International Franchised Location Openings


      6



      9




      27



      16
















      International Franchised Location Closings














      Stores


      -



      -




      -



      -


      Shop-in-Shop Locations


      1



      -




      1



      -


      Total International Franchised Location Closings


      1



      -




      1



      -
















      Period End International Franchised Location Count














      Stores


      12



      8




      12



      8


      Shop-in-Shop Locations


      45



      16




      45



      16


      Total International Franchised Locations


      57



      24




      57



      24





      The Company also announced that it will discontinue offering maternity apparel in leased departments in Kmart locations by the end of calendar year 2011.  In October 2009 the Company began offering its Two Hearts Maternity by Destination Maternity® collection on a test basis at 100 Kmart locations in connection with the re-launch of the Two Hearts collection at over 520 Sears stores in the United States.  In September and October 2010, the Company expanded its maternity apparel leased departments to a total of 298 Kmart locations.  However, Kmart has informed the Company that it has decided to discontinue carrying maternity apparel in its stores at this time.  Kmart represents only a small portion of the overall sales generated by the Company's leased department relationship with Sears and Kmart through the Company's agreement with Sears Holdings Corporation.  The Company will continue to operate leased departments in 528 Sears stores throughout the United States.

      Commentary

      Ed Krell, Chief Executive Officer of Destination Maternity Corporation, noted, "Despite weaker than planned sales during the third quarter, we were able to deliver earnings which were at the low end of our April guidance and were higher than last year's third quarter earnings.  Although we saw improvement in our comparable retail sales performance for June 2011 compared to May 2011, our sales for the third quarter were still lower than planned, even with price promotional activity and additional markdowns taken to spur sales and manage inventory levels.  Our continued tight management of expenses enabled us to achieve third quarter earnings at the low end of our guidance range, even with sales and gross margin being below plan.  Our GAAP diluted earnings per share for the third quarter was $0.72 per share, at the low end of our earnings guidance range of $0.72 to $0.83 per share that we provided in our April 27, 2011 press release, and higher than last year's third quarter GAAP diluted earnings of $0.67 per share.  

      "Our total sales of $146.7 million for the third quarter were below the low end of our sales guidance range of $149.0 to $154.5 million, provided in our April 27 press release, driven largely by the comparable store sales decrease of 2.8%, which was at the low end of our guidance range of between a decrease of 2.8% and an increase of 1.1%, and a slower than planned ramp up of sales from our Macy's expansion.  We recognize the continued difficult overall economic environment for the consumer, especially the moderate-priced consumer, although we remain focused on the things that we can control, not on external factors that we cannot control.  Our key focus continues to be on turning around our sales performance through initiatives to enhance our merchandise assortments, merchandise presentation and customer experience.  The slower than planned ramp up of sales from our Macy's expansion does not dampen either our enthusiasm or our view of the sales potential for this expanded Macy's initiative.  

      "On June 1, Chris Daniel joined us as our President.  As we previously announced, Chris has significant experience leading women's fashion apparel brands and has had great experience in serving a niche customer demographic in a specialty retailing environment through his Torrid leadership position.  Chris brings to Destination Maternity a great skill set as a customer-focused retail executive with deep merchandising experience.  We are confident that Chris's talent, experience, creativity and energy will help us drive improved sales performance and help us achieve our mission of becoming an even stronger global leader in the maternity apparel business."

      Financing and Related Activities

      "During the third quarter of fiscal 2011 we made a $10 million optional prepayment on our Term Loan and we paid our second regular quarterly cash dividend, after having initiated this regular quarterly cash dividend in the second quarter of fiscal 2011.  Our debt prepayment and regular quarterly dividend payments demonstrate our confidence in the Company's financial strength, cash flow generation, and prospects for the future, and highlight our commitment to continue to drive shareholder value.

      "Over the past several years, we have used our free cash flow predominantly to pre-pay debt and, as a result, we have significantly reduced our financial leverage and our interest expense, as reflected by our total debt decreasing from $128.9 million at the end of fiscal 2005 to $31.7 million at the end of the third quarter of fiscal 2011, and our interest expense decreasing from $15.3 million in fiscal 2005 to a projected level of approximately $2.2 million in fiscal 2011.  With this significant reduction in our financial leverage and interest expense, during the second quarter of fiscal 2011 we decided it was appropriate to begin to use a portion of our earnings and cash flow to return cash to our stockholders through a regular quarterly cash dividend, in order to enhance the total return to our stockholders, while also potentially broadening our investor base.

      "In July 2011, we also amended our credit facility to extend its maturity from March 13, 2012 to January 13, 2013 to align it more closely with the March 13, 2013 maturity of our Term Loan.  The credit facility amendment provides us flexibility as we evaluate future financing arrangement alternatives for the Company."

      Guidance for Fiscal 2011

      "Looking forward, we are confident that we can turn around our sales performance and position our company for continued future growth, by improving our product and customer experience, and continuing to focus on our strategic plan as summarized in our five key goals and strategic objectives discussed later under "Company Strategy."  Given the continued uncertainty as to the timing and extent of a recovery in consumer spending, we continue to plan our sales and inventory conservatively.  

      "Our financial guidance for the full year fiscal 2011 is as follows:

      • Net sales in the $544.5 to $547.5 million range, representing a projected sales increase of between 2.5% and 3.1% versus fiscal 2010 net sales of $531.2 million.  This projected sales range reflects a reduction from our previous guidance of fiscal 2011 net sales in the $555 to $565 million range.  The reduction in projected sales is due to the lower than planned comparable store sales and slower than planned ramp-up of sales from our Macy's expansion, both for actual third quarter sales and projected fourth quarter sales.

      • The following table provides guidance for our projected full year fiscal 2011 comparable retail sales and comparable store sales, both before and after the projected cannibalization impact of the Macy's leased department expansion completed in February 2011.  Included in the guidance range for comparable retail sales (which consists of comparable store sales and Internet sales) is a projected increase in Internet sales of approximately 19% for fiscal 2011.



      Comparable Retail Sales

      Comparable Store Sales

      Including projected

      cannibalization impact of

      leased department expansion

      Down 0.2% to Up 0.4%

      Down 1.4% to Down 0.8%




      Excluding projected

      cannibalization impact of

      leased department expansion

      Up 0.8% to Up 1.4%

      Down 0.4% to Up 0.2%




      • Gross margin for fiscal 2011 is expected to decrease slightly versus fiscal 2010, driven by lower year-over-year gross margin for the second half of fiscal 2011 versus the second half of fiscal 2010, partially offset by improved year-over-year gross margin in the first half of the year.  

      • Total selling, general and administrative (SG&A) expenses are planned to be higher than fiscal 2010 in dollar terms and comparable to fiscal 2010 as a percentage of net sales.  The projected SG&A expense increase for the full year primarily results from additional operating expenses resulting from the Macy's leased department expansion in January and February 2011, partially offset by expense savings from the Company's restructuring and cost reduction initiatives and lower variable incentive compensation expense.

      • Operating income in the $37.7 to $39.8 million range, a projected increase of between 20% and 27% compared to fiscal 2010 operating income of $31.4 million.  Operating income before restructuring and other charges is projected in the $37.9 to $40.0 million range, a projected increase of between 2% and 8% compared to fiscal 2010 operating income, before restructuring and other charges, of $37.1 million.

      • GAAP diluted earnings per share of between $1.73 and $1.83 per share for fiscal 2011, a projected increase of between 30% and 38% compared to earnings of $1.33 per share (diluted) for fiscal 2010.  This guidance range for fiscal 2011 GAAP diluted earnings per share of $1.73 to $1.83 is lower than the prior guidance range of $1.90 to $2.09 provided by the Company in its April 27, 2011 press release.

      • Non-GAAP adjusted diluted earnings per common share (before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt) is projected to be between $1.85 and $1.95 per share for fiscal 2011, a projected increase of between 9% and 15% versus non-GAAP adjusted diluted earnings per share of $1.70 per share for fiscal 2010, and lower than the Company's prior guidance range of $2.03 to $2.22.

      • Adjusted EBITDA in the $54.0 to $56.1 million range, a projected increase of between 12% and 16% compared to the fiscal 2010 Adjusted EBITDA of $48.3 million.  Adjusted EBITDA before restructuring and other charges is projected in the $54.2 to $56.3 million range, a projected increase of between 0% and 4% versus the fiscal 2010 figure of $54.0 million.

      • Open 9 to 10 new stores during the year, including 6 to 7 new multi-brand Destination Maternity stores, and close approximately 47 to 52 stores, with 8 to 10 of these planned store closings related to openings of new Destination Maternity stores.

      • Capital expenditures planned at between $11 and $13 million compared to fiscal 2010 capital expenditures of $10.4 million.  After deducting projected tenant construction allowance payments to us from store landlords, the Company expects net cash outlay for capital projects to be between $7 million and $9 million, compared to $7.4 million in fiscal 2010.

      • Inventory at fiscal 2011 year end planned to be approximately 11-13% higher (approximately $9 to $11 million higher) than fiscal 2010 year end, both due to inventory increases related to the Macy's expansion and lower than planned overall sales.

      • Given these assumptions, the Company plans to generate free cash flow (defined as net cash provided by operating activities minus capital expenditures) of approximately $8 to $12 million for the full year fiscal 2011.  Based on the Company's current quarterly dividend rate of $0.175 per share, the dividend will use approximately $6.9 million of cash flow for fiscal 2011 (reflecting three quarterly dividend payments in fiscal 2011) and approximately $9.2 million on an annualized basis.  

      "Our sales have been below plan thus far in July, although we do not believe that July is a good indicator of sales for the upcoming months which will be driven much more by sales of Fall product.  We expect our comparable retail sales for the full month of July to decrease between 6.0% and 8.0% on a reported basis, and to decrease between 6.4% and 8.4% after adjusting for the "days adjustment calendar shift," reflecting one more Sunday and one less Thursday in July 2011 compared to July 2010.  We expect our comparable store sales for the full month of July to decrease between 7.0% and 9.0% on a reported basis, and to decrease between 7.4% and 9.4% after adjusting for the "days adjustment calendar shift."  

      "Our financial guidance for the fourth quarter of fiscal 2011 is as follows:

      • Net sales in the $128.5 to $131.5 million range.

      • Comparable retail sales decrease of between 0.3% and 2.8%, consisting of a comparable store sales decrease of between 1.5% and 4.0% (including the projected cannibalization impact of the Macy's leased department expansion) and an increase in Internet sales of approximately 20%.  We project the cannibalization impact of the Macy's leased department expansion to hurt our fourth quarter comparable store sales by between 1 and 2 percentage points.

      • GAAP diluted earnings per common share of between $0.18 and $0.28 per share, a projected decrease compared to the GAAP diluted earnings per share of $0.33 for the fourth quarter of fiscal 2010.

      • Non-GAAP adjusted diluted earnings per common share (before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt) of between $0.21 and $0.31 per share, versus comparably adjusted non-GAAP diluted earnings per share of $0.33 for the fourth quarter of fiscal 2010.

      Guidance for Fiscal 2012

      "Beginning in fiscal 2012, consistent with the practice of an increasing number of retailers, we will discontinue monthly sales reporting.  We will report net sales quarterly after the end of each of the Company's fiscal quarters (December, March, June and September).  Also, consistent with the practice of an increasing number of retailers, we will include sales from our Internet websites in our "comparable sales" performance statistic versus the prior year, the same way we currently do for our "comparable retail sales" figure.  Beginning in fiscal 2012, we will no longer report a "comparable store sales" statistic which excludes Internet sales.  Since we have numerous cross-channel marketing initiatives and since we aim to serve our customer in whichever channel she chooses to shop, we believe the inclusion of the sales from our Internet "stores" or websites is a more meaningful way of reporting the Company's comparable sales results.

      "Our preliminary financial guidance for the full year fiscal 2012 is as follows:

      • A projected net sales increase of between 4.0% and 6.5% compared to the $544.5 to $547.5 million sales guidance range for fiscal 2011.

      • A projected comparable sales increase of between 2.5% and 4.5% (including the projected cannibalization impact of the Macy's leased department expansion of February 2011), with comparable sales expected to be stronger in the second half of the year versus the first half of the year, as we are able to realize the benefit from more of our merchandising initiatives.  We project the cannibalization impact of the Macy's leased department expansion to hurt our fiscal 2012 comparable sales by approximately 1 percentage point.

      • A projected increase in GAAP diluted earnings per share of between 2% and 10% from our $1.73 to $1.83 guidance range for fiscal 2011.

      • Open approximately 5 to 10 new stores during the year, including approximately 3 to 7 new multi-brand Destination Maternity stores, and close approximately 24 to 34 stores, with approximately 6 to 11 of these planned store closings related to openings of new Destination Maternity stores.

      • Capital expenditures planned at between $10.0 and $12.5 million.  After deducting projected tenant construction allowance payments to us from store landlords, the Company expects net cash outlay for capital projects to be between $8 and $10 million."

      Company Strategy

      Mr. Krell added, "As we plan and execute our business for both this year and beyond, we continue to be guided by our five key goals and strategic objectives:

      1. Be a profitable global leader in the maternity apparel business, treating all our partners and stakeholders with respect and fairness.
      2. Increase the profitability of our U.S. business, focusing on the following:
        1. Increase comparable store sales, through continued improvement of merchandise assortments, merchandise presentation and customer experience, providing a more shoppable store environment for our customers, and through enhanced marketing and advertising.  
        2. Reduce our expenditures and continue to be more efficient in operating our business—streamline, simplify and focus.
        3. Continue to expand our multi-brand Destination Maternity store chain where ROI hurdles are met, with the goal of operating fewer but larger stores over time.
        4. Continue to close underperforming stores.
      3. In addition to achieving increased comparable store sales, we aim to grow our sales where we can do so profitably, including the following areas of focus:
        1. International expansion
        2. Potential growth of our leased department and licensed relationships
        3. Increased utilization of the Internet to drive sales, targeting both increased direct Internet sales and enhanced web marketing initiatives to drive store sales
        4. Selective new store openings and relocations in the U.S. and Canada
        5. Continued focus on enhancing our overall customer relationship, including our marketing partnership programs.
      4. Focus on generating free cash flow to drive increased shareholder value.
      5. Maintain and intensify our primary focus on delivering great maternity apparel product and service in each of our brands and store formats, to serve the maternity apparel customer like no one else can."

      Mr. Krell concluded, "We continue to feel very good about our Company's position and the actions we have taken to improve the profitability of our business and generate increased shareholder value, even in the face of a challenging sales environment, while also making investments and pursuing targeted initiatives for profitable future sales growth.  We are proud of what we have accomplished in the past three years to significantly improve our operating results and our financial position.  At the same time, we are not complacent and we have not been satisfied with our sales performance, although we recognize that over the past three years we have faced the dual challenges of a deep recession and a 7.2% decrease in births in the United States for 2010 (the most recent reported birth information) versus 2007, which includes a 3.1% decrease in births for 2010 versus 2009.  We are focused on continuing to turn around our sales performance through initiatives to enhance our merchandise assortments, merchandise presentation and customer experience.  We are confident in our ability to continue to manage our business through this uncertain consumer environment and to continue to make progress towards our key corporate goals."  

      Conference Call Information

      As announced previously, the Company will hold a conference call today at 9:00 a.m. Eastern Time, regarding the Company's third quarter fiscal 2011 earnings and future financial guidance.  You can participate in this conference call by calling (866) 730-5770.  Please call ten minutes prior to 9:00 a.m. Eastern Time.  The conference call (listen only) will also be available on the investor section of our website at http://investor.destinationmaternity.com.  The passcode for the conference call is "78660665."  In the event that you are unable to participate in the call, a replay will be available through Wednesday, August 10, 2011 by calling (888) 286-8010.  The passcode for the replay is "49233186."

      Destination Maternity Corporation is the world's largest designer and retailer of maternity apparel.   In the United States and Canada, as of June 30, 2011, Destination Maternity operates 2,360 retail locations, including 663 stores, predominantly under the tradenames Motherhood Maternity®, A Pea in the Pod®, and Destination Maternity®, and sells on the web through its DestinationMaternity.com and brand-specific websites.  Destination Maternity also distributes its Oh Baby by Motherhood™ collection through a licensed arrangement at Kohl's® stores throughout the United States and on Kohls.com.  In addition, Destination Maternity is expanding internationally and has exclusive store franchise and product supply relationships in India, the Middle East and South Korea.  As of June 30, 2011, Destination Maternity has 57 international franchised locations, including 45 shop-in-shop locations and 12 Destination Maternity branded stores.

      ***



      The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this press release or made from time to time by management of the Company, including those regarding the continuation of the regular quarterly cash dividend, the trading liquidity of our common stock, earnings, net sales, comparable retail sales, comparable store sales, Internet sales, other results of operations, liquidity and financial condition, and various business initiatives, involve risks and uncertainties, and are subject to change based on various important factors.  The following factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results to differ materially from those expressed or implied in any such forward-looking statements: the continuation of the economic recovery of the retail industry in general and on apparel purchases in particular, our ability to successfully manage our various business initiatives, the success of our international business and its expansion, our ability to successfully manage and retain our leased department and licensed relationships and marketing partnerships, future sales trends in our existing store base, unusual weather patterns, changes in consumer preferences, raw material price increases, overall economic conditions and other factors affecting consumer confidence, demographics and other macroeconomic factors that may impact the level of spending for maternity apparel, expense savings initiatives, our ability to anticipate and respond to fashion trends and consumer preferences, anticipated fluctuations in our operating results, the impact of competition and fluctuations in the price, availability and quality of raw materials and contracted products, availability of suitable store locations, continued availability of capital and financing, our ability to hire and develop senior management and sales associates, our ability to develop and source merchandise, our ability to receive production from foreign sources on a timely basis, potential stock repurchases, potential debt prepayments, the continuation of the regular quarterly cash dividend, the trading liquidity of our common stock, changes in market interest rates, war or acts of terrorism and other factors set forth in the Company's periodic filings with the Securities and Exchange Commission, or in materials incorporated therein by reference.

      DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

      Consolidated Statements of Income

      (in thousands, except percentages and per share data)

      (unaudited)



      Third Quarter Ended


      Nine Months Ended



      06/30/11


      06/30/10 (1)


      06/30/11


      06/30/10 (1)















      Net sales

      $

      146,684


      $

      142,034


      $

      415,952


      $

      406,935


      Cost of goods sold


      65,749



      62,383



      187,895



      184,202















          Gross profit


      80,935



      79,651



      228,057



      222,733


          Gross margin


      55.2

      %


      56.1

      %


      54.8

      %


      54.7

      %

      Selling, general and administrative













          expenses (SG&A)


      64,597



      63,498



      193,628



      191,213


          SG&A expenses as a percentage of net sales


      44.0

      %


      44.7

      %


      46.6

      %


      47.0

      %

      Store closing, asset impairment and asset













          disposal expenses


      206



      336



      822



      1,944


      Restructuring and other charges


      193



      801



      193



      6,056















          Operating income


      15,939



      15,016



      33,414



      23,520


      Interest expense, net


      529



      771



      1,772



      2,577


      Loss on extinguishment of debt


      28



      21



      37



      51















          Income before income taxes


      15,382



      14,244



      31,605



      20,892


      Income tax provision


      5,922



      5,572



      11,304



      8,351















          Net income

      $

      9,460


      $

      8,652


      $

      20,301


      $

      12,541















      Net income per share – basic

      $

      0.73


      $

      0.70


      $

      1.59


      $

      1.02


      Average shares outstanding – basic


      12,976



      12,416



      12,755



      12,248















      Net income per share – diluted

      $

      0.72


      $

      0.67


      $

      1.55


      $

      0.99


      Average shares outstanding – diluted  


      13,215



      12,833



      13,100



      12,629















      Supplemental information:













      Net income

      $

      9,460


      $

      8,652


      $

      20,301


      $

      12,541


      Add: restructuring and other charges, net of tax


      120



      488



      120



      3,694


      Add: stock compensation expense, net of tax


      358



      335



      1,100



      914


      Add: loss on extinguishment of debt, net of tax


      17



      13



      23



      31















      Adjusted net income, before restructuring and

          other charges, stock compensation expense,

          and loss on extinguishment of debt

      $

      9,955


      $

      9,488


      $

      21,544


      $

      17,180















      Adjusted net income per share – diluted, before

          restructuring and other charges, stock

          compensation expense, and loss on

          extinguishment of debt

      $

      0.75


      $

      0.74


      $

      1.64


      $

      1.36



      (1) Share and per share amounts have been retroactively adjusted to give effect to the two-for-one stock split on March 1, 2011.



      DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

      Condensed Consolidated Balance Sheets

      (in thousands)

      (unaudited)





      June 30,

      2011


      September 30,

      2010


      ASSETS








      Current assets:








      Cash and cash equivalents


      $

      26,651


      $

      24,633


      Trade receivables



      8,972



      10,343


      Inventories



      84,134



      80,735


      Deferred income taxes



      7,289



      8,669


      Prepaid expenses and other current assets



      4,795



      6,667


      Total current assets



      131,841



      131,047


      Property, plant and equipment, net



      56,892



      58,702


      Other assets



      12,882



      15,405


         Total assets


      $

      201,615


      $

      205,154










      LIABILITIES AND STOCKHOLDERS’ EQUITY








      Current liabilities:








      Line of credit borrowings


      $

      —


      $

      —


      Current portion of long-term debt



      3,090



      5,834


      Accounts payable



      15,521



      19,475


      Accrued expenses and other current liabilities



      38,781



      42,088


      Total current liabilities



      57,392



      67,397


      Long-term debt



      28,652



      39,327


      Deferred rent and other non-current liabilities



      23,679



      26,832


      Total liabilities



      109,723



      133,556


      Stockholders’ equity



      91,892



      71,598


      Total liabilities and stockholders’ equity


      $

      201,615


      $

      205,154




      Selected Consolidated Balance Sheet Data

      (in thousands)

      (unaudited)




      June 30,

      2011


      September 30,

      2010


      June 30,

      2010










      Cash and cash equivalents


      $

      26,651


      $

      24,633


      $

      29,117

      Inventories



      84,134



      80,735



      71,870

      Property, plant and equipment, net



      56,892



      58,702



      59,417

      Line of credit borrowings



      —



      —



      —

      Total debt



      31,742



      45,161



      45,597

      Net debt (1)



      5,091



      20,528



      16,480

      Stockholders’ equity



      91,892



      71,598



      66,542


      (1) Net debt represents total debt minus cash and cash equivalents and short-term investments.



      DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

      Consolidated Statements of Cash Flows

      (in thousands)

      (unaudited)




      Nine Months Ended




      06/30/11


      06/30/10


      Operating Activities








      Net income


      $

      20,301


      $

      12,541


      Adjustments to reconcile net income to net cash provided by operating activities:








      Depreciation and amortization



      9,555



      9,813


      Stock-based compensation expense



      1,767



      1,498


      Loss on impairment of long-lived assets



      530



      1,699


      Loss (gain) on disposal of assets



      246



      (29)


      Loss on extinguishment of debt



      37



      51


      Deferred income tax provision (benefit)



      2,281



      (2,199)


      Amortization of deferred financing costs



      137



      149


      Changes in assets and liabilities:








      Decrease (increase) in:








      Trade receivables



      1,371



      (3,325)


      Inventories



      (3,399)



      7,002


      Prepaid expenses and other current assets



      368



      (616)


      Other non-current assets



      (25)



      (4)


      Increase (decrease) in:








      Accounts payable, accrued expenses and other current liabilities



      (3,426)



      1,607


      Deferred rent and other non-current liabilities



      (2,223)



      1,755


      Net cash provided by operating activities



      27,520



      29,942










      Investing Activities








      Withdrawal from (contribution to) grantor trust



      1,504



      (1,500)


      Capital expenditures



      (9,781)



      (8,402)


      Purchase of intangible assets



      (295)



      (219)


      Net cash used in investing activities



      (8,572)



      (10,121)










      Financing Activities








      Decrease in cash overdraft



      (1,343)



      (1,305)


      Repayment of long-term debt



      (13,419)



      (11,812)


      Withholding taxes on stock-based compensation paid in connection with repurchase of common stock



      (2,787)



      (957)


      Cash dividends paid



      (4,587)



      —


      Proceeds from exercise of stock options



      2,280



      1,286


      Excess tax benefit from exercise of stock options and restricted stock vesting



      2,926



      1,458


      Net cash used in financing activities



      (16,930)



      (11,330)


      Net Increase in Cash and Cash Equivalents



      2,018



      8,491


      Cash and Cash Equivalents, Beginning of Period



      24,633



      20,626


      Cash and Cash Equivalents, End of Period


      $

      26,651


      $

      29,117




      DESTINATION MATERNITY CORPORATION AND SUBSIDIARIES

      Supplemental Financial Information


      Reconciliation of Net Income to Adjusted EBITDA (1)

      and Adjusted EBITDA Before Restructuring and Other Charges,

      and Operating Income Margin to Adjusted EBITDA Margin

      and Adjusted EBITDA Margin Before Restructuring and Other Charges

      (in thousands, except percentages)

      (unaudited)




      Third Quarter Ended


      Nine Months Ended



      06/30/11


      06/30/10


      06/30/11


      06/30/10
















      Net income


      $

      9,460


      $

      8,652


      $

      20,301


      $

      12,541


      Add: income tax provision



      5,922



      5,572



      11,304



      8,351


      Add: interest expense, net



      529



      771



      1,772



      2,577


      Add: loss on extinguishment of debt



      28



      21



      37



      51
















      Operating income



      15,939



      15,016



      33,414



      23,520


      Add: depreciation and amortization expense



      3,201



      3,133



      9,555



      9,813


      Add: loss on impairment of long-lived assets



      156



      465



      530



      1,699


      Add: loss (gain) on disposal of assets



      90



      (151)



      246



      (29)


      Add: stock compensation expense



      576



      549



      1,767



      1,498
















      Adjusted EBITDA (1)



      19,962



      19,012



      45,512



      36,501


      Add: restructuring and other charges



      193



      801



      193



      6,056


      Adjusted EBITDA before restructuring

          and other charges


      $

      20,155


      $

      19,813


      $

      45,705


      $

      42,557
















      Net sales


      $

      146,684


      $

      142,034


      $

      415,952


      $

      406,935
















      Operating income margin (operating income

           as a percentage of net sales)



      10.9%



      10.6%



      8.0%



      5.8%


      Adjusted EBITDA margin (adjusted

          EBITDA as a percentage of net sales)



      13.6%



      13.4%



      10.9%



      9.0%


      Adjusted EBITDA margin before

          restructuring and other charges (adjusted

          EBITDA before restructuring and other

          charges as a percentage of net sales)



      13.7%



      13.9%



      11.0%



      10.5%



      (1) Adjusted EBITDA represents operating income before deduction for the following non-cash charges: (i) depreciation and amortization expense; (ii) loss on impairment of tangible and intangible assets; (iii) loss (gain) on disposal of assets; and (iv) stock compensation expense.



      Consolidated Statement of Income

      For the Twelve Months Ended June 30, 2011

      (in thousands, except percentages and per share data)

      (unaudited)


      Net sales


      $

      540,209


      Cost of goods sold



      243,859







          Gross profit



      296,350


          Gross margin



      54.9

      %

      Selling, general and administrative expenses (SG&A)



      254,068


          SG&A expenses as a percentage of net sales



      47.0

      %

      Store closing, asset impairment and asset disposal expenses



      1,160


      Restructuring and other charges



      (205)







          Operating income



      41,327


      Interest expense, net



      2,495


      Loss on extinguishment of debt



      37







          Income before income taxes



      38,795


      Income tax provision



      14,206







          Net income


      $

      24,589







      Net income per share – basic


      $

      1.94


      Average shares outstanding – basic



      12,682







      Net income per share – diluted


      $

      1.89


      Average shares outstanding – diluted  



      13,043







      Supplemental information:





      Net income


      $

      24,589


      Add: restructuring and other charges, net of tax



      (128)


      Add: stock compensation expense, net of tax



      1,374


      Add: loss on extinguishment of debt, net of tax



      23







      Adjusted net income, before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt


      $

      25,858







      Adjusted net income per share – diluted, before restructuring and other charges, stock compensation expense, and loss on extinguishment of debt


      $

      1.98




      Reconciliation of Net Income to Adjusted EBITDA

      and Adjusted EBITDA Before Restructuring and Other Charges,

      and Operating Income Margin to Adjusted EBITDA Margin

      and Adjusted EBITDA Margin Before Restructuring and Other Charges

      For the Twelve Months Ended June 30, 2011

      (in thousands, except percentages)

      (unaudited)


      Net income


      $

      24,589


      Add: income tax provision



      14,206


      Add: interest expense, net



      2,495


      Add: loss on extinguishment of debt



      37


      Operating income



      41,327


      Add: depreciation and amortization expense



      12,659


      Add: loss on impairment of long-lived assets



      696


      Add: loss on disposal of assets



      471


      Add: stock compensation expense



      2,205


      Adjusted EBITDA



      57,358


      Add: restructuring and other charges



      (205)


      Adjusted EBITDA before restructuring and other charges


      $

      57,153







      Net sales


      $

      540,209







      Operating income margin



      7.7%


      Adjusted EBITDA margin



      10.6%


      Adjusted EBITDA margin before restructuring and other charges



      10.6%




      Reconciliation of Net Income Per Share - Diluted

      to Adjusted Net Income Per Share – Diluted,

      Before Restructuring and Other Charges, Stock Compensation

      Expense, and Loss on Extinguishment of Debt

      (unaudited)



      Projected for the

      Year Ending

      09/30/11


      Actual for the

      Year Ended

      09/30/10 (1) (2)









      Net income per share – diluted (3)

      $

      1.73 to 1.83



      $

      1.33


      Add: per share effect of restructuring and other charges


      0.01




      0.28


      Add: per share effect of stock compensation expense


      0.11




      0.10


      Add: per share effect of loss on extinguishment of debt


      0.00




      0.00


      Adjusted net income per share - diluted, before restructuring

        and other charges, stock compensation expense, and loss

        on extinguishment of debt (3)

      $

      1.85 to 1.95



      $

      1.70



      (1) Components do not add to total due to rounding.


      (2) Amounts have been retroactively adjusted to give effect to the two-for-one stock split on March 1, 2011.


      (3) Projected net income and projected adjusted net income per share – diluted for the year ending September 30, 2011 are based on approximately 13.1 million projected average diluted shares outstanding.



      Reconciliation of Net Income Per Share - Diluted

      to Adjusted Net Income Per Share – Diluted,

      Before Restructuring and Other Charges, Stock Compensation

      Expense, and Loss on Extinguishment of Debt

      (unaudited)



      Projected for the

      Fourth Quarter Ending

      09/30/11


      Actual for the

      Fourth Quarter Ended

      09/30/10 (1)









      Net income per share – diluted (2)

      $

      0.18 to 0.28



      $

      0.33


      Add: per share effect of restructuring and other charges


      —




      (0.02)


      Add: per share effect of stock compensation expense


      0.03




      0.02


      Add: per share effect of loss on extinguishment of debt


      —




      —


      Adjusted net income per share - diluted, before restructuring

        and other charges, stock compensation expense, and loss

        on extinguishment of debt (2)

      $

      0.21 to 0.31



      $

      0.33



      (1) Amounts have been retroactively adjusted to give effect to the two-for-one stock split on March 1, 2011.


      (2) Projected net income and projected adjusted net income per share – diluted for the fourth quarter ending September 30, 2011 are based on approximately 13.2 million projected average diluted shares outstanding.



      Reconciliation of Net Income to Adjusted EBITDA

      and Adjusted EBITDA Before Restructuring and Other Charges

      (in millions, unaudited)



      Projected for the

      Year Ending

      09/30/11 (1)


      Actual for the

      Year Ended

      09/30/10 (1)









      Net income

      $

      22.7 to 24.0



      $

      16.8


      Add: income tax provision


      12.8 to 13.6




      11.3


      Add: interest expense, net


      2.2




      3.3


      Add: loss on extinguishment of debt


      0.0




      0.1










      Operating income


      37.7 to 39.8




      31.4


      Add: depreciation and amortization expense


      12.8




      12.9


      Add: loss on impairment of long-lived assets and loss on

        disposal of assets


      1.2




      2.1


      Add: stock compensation expense      


      2.4




      1.9


      Adjusted EBITDA


      54.0 to 56.1




      48.3


      Add: restructuring and other charges


      0.2




      5.7


      Adjusted EBITDA before restructuring and other charges

      $

      54.2 to 56.3



      $

      54.0



      (1) Components do not add to total due to rounding.



      SOURCE Destination Maternity Corporation

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