Maidenform Brands, Inc. Reports Third Quarter 2010 Results and Provides Full Year Outlook for 2010

ISELIN, N.J., Nov. 10, 2010 /PRNewswire-FirstCall/ --

• Net sales increased 13.3%
• Earnings per share (EPS) of $0.55, an increase of 31% (excluding a one-time tax benefit in 2009)
• Shapewear net sales increased 9.0%
• Bra net sales increased 15.0%
• Department stores and national chain stores channel net sales increased 8.9%
• Mass merchant channel net sales increased 14.5%
• International net sales increased 40.4%

Maidenform Brands, Inc. (NYSE: MFB), a global branded marketer of intimate apparel, today reported third quarter 2010 net sales of $145.8 million, an increase of 13.3% over the third quarter of 2009, driven by continued strength in its core bra and shapewear businesses globally, sales to a specialty retailer and replenishment of products under its DKNY^® licensed brand.  

Reported EPS was $0.55 for the third quarter of 2010 compared to EPS of $0.67 in the third quarter of 2009.  During the third quarter of 2009, the Company recorded a non-cash, one-time benefit of $6.1 million, or $0.25 per share, primarily associated with the recognition of additional net deferred tax assets.  EPS of $0.55 for the third quarter of 2010 was up 31% from EPS of $0.42 in the third quarter 2009, excluding the tax benefit.    

"Our team is executing well on our strategies and that is translating into continued growth in sales and profits, both domestically and internationally," stated Maurice S. Reznik, Chief Executive Officer. "Our passion for innovation combined with our brand and product strength is resonating with consumers and we are well poised to deliver a third consecutive year of growth in 2011."

Financial Results for Third Quarter 2010 versus Third Quarter 2009

Net sales for the third quarter of 2010 increased $17.1 million, or 13.3%, to $145.8 million.  Wholesale segment net sales in the third quarter of 2010 increased $16.7 million, or 14.9%, to $128.6 million. Retail segment net sales increased $0.4 million, or 2.4%, to $17.2 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 increased $4.9 million, or 8.9%, to $60.2 million in the third quarter of 2010.  This increase was due to the solid performance across the bra, shapewear and pants categories, including new product introductions, and the continued momentum from the Company's licensed brand DKNY^®.

Mass Merchants

Mass merchant channel net sales increased $4.9 million, or 14.5%, to $38.8 million in the third quarter of 2010.  This increase included sales of shapewear products in the Self Expressions^® brand which were not in the same period of 2009 and strong sales growth in the Sweet Nothings^® brand shapewear category.  Partially offsetting these increases was a decline in sales with a warehouse customer resulting from the timing of program deliveries.    

Other

Net sales in the other channel increased $6.9 million, or 30.4%, to $29.6 million in the third quarter of 2010 primarily from increased sales to a specialty retailer.    

Total international net sales, which are included in the wholesale segment, increased $4.0 million, or 40.4%, to $13.9 million resulting from increases in Mexico, Canada and Spain.  

Retail Segment

Total retail segment net sales increased $0.4 million, or 2.4%, to $17.2 million.  Same store sales, defined as outlet stores that have been open for more than one year, increased 2.2%.  Internet sales increased $0.1 million, or 7.1%, to $1.5 million.  The retail segment operated 73 outlet stores and four shapewear kiosk and carts as of the end of the third quarter of 2010 and 76 outlet stores as of the end of the third quarter of 2009.  

Consolidated gross profit increased $8.1 million, or 18.1%, to $52.8 million in the third quarter of 2010.  As a percentage of net sales, consolidated gross margins were 36.2% in the third quarter of 2010 versus 34.7% in the third quarter of 2009. This 150 basis point increase was a result of product mix and the benefit from product cost reduction efforts, which were partially offset by customer mix, including a higher percentage of net sales from the Company's lower margin other channel.

Consolidated selling, general and administrative expenses (SG&A) increased $3.6 million, or 12.8%, to $31.7 million in the third quarter of 2010 primarily as a result of increased payroll and related benefits associated with new positions added to support the Company's strategic initiatives, increased retail operating expenses, such as kiosk and cart expenditures and store lease renewals, increased marketing expenditures, variable distribution costs, and increased professional fees.  As a percentage of net sales, SG&A declined to 21.7% in the third quarter of 2010 compared to 21.8% in the third quarter of 2009.  

Due to all of the factors described above, operating income in the third quarter of 2010 was $21.1 million, or 14.5% of net sales, compared to $16.6 million, or 12.9% of net sales, in the third quarter of 2009.

Net interest expense in the third quarter of 2010 was $0.2 million compared to $0.5 million in the third quarter of 2009 as the Company benefited primarily from lower average debt outstanding and a lower average interest rate for the third quarter of 2010 as compared to the same period in 2009.    

The Company's effective income tax rate for the third quarter of 2010 was 38.9% compared to 0.6% in the third quarter of 2009.  The lower effective income tax rate in the third quarter 2009 resulted from additional net deferred tax assets, principally related to net operating losses that were recorded after the conclusion of an Internal Revenue Service audit during the period.  Excluding the non-cash, one-time benefit of $6.1 million, the effective income tax rate for the third quarter 2009 was 38.2%.

Net income for the third quarter of 2010 and 2009 was $12.8 million and $16.0 million, respectively, and EPS was $0.55 and $0.67, respectively.  Excluding the non-cash, one-time benefit mentioned above, net income for the third quarter of 2009 was $9.9 million and EPS was $0.42.    

Financial Results for Year-To-Date 2010 versus Year-To-Date 2009

Net sales for the first nine months of 2010 increased $81.0 million, or 22.7%, to $438.1 million.  The improvement over the same period in 2009 was driven by increases across all channels of distribution.  Wholesale segment net sales, on a year-to-date basis, increased $80.2 million, or 25.5%, to $395.1 million.  Total international net sales increased $10.7 million, or 42.1%, to $36.1 million resulting from the reasons mentioned above, in addition to increases in Northern Europe, the Benelux countries and Russia. Retail segment net sales for the first nine months of 2010 increased $0.8 million, or 1.9%, to $43.0 million.  Same store sales for Maidenform's retail outlet stores increased 2.7%.  Internet sales were unchanged at $3.9 million for the nine months ended 2010 and 2009.  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 36.2% versus 34.2% for the same period in 2009.  This 200 basis point increase was a result of product mix and the benefit from product cost reduction efforts.

Year-to-date operating income for 2010 was $64.8 million, or 14.8% of net sales, versus $40.3 million, or 11.3% of net sales, for the first nine months of 2009.

Net income for the first nine months of 2010 was $38.6 million and EPS was $1.65.  Net income for the nine months of 2009 was $29.3 million and EPS was $1.24.  Excluding the non-cash, one-time benefit mentioned above, net income for the nine months of 2009 was $23.2 million and EPS was $0.98.    

Total cash and cash equivalents at the end of the third quarter of 2010 were $51.9 million compared to $62.1 million at the end of the third quarter of 2009.  The Company's outstanding debt was $70.4 million as of October 2, 2010 versus $87.5 million as of October 3, 2009.  Net debt totaled $18.5 million at the end of the third quarter of 2010, with no material maturities until 2014.      

Financial Performance Guidance for 2010:

2010 Fourth Quarter and Full Year Outlook:

• Fourth quarter net sales are expected to increase in the mid-to-upper single digits percentage range with full year net sales up in the upper-teens percentage range;
• Gross margin rates are anticipated to be in the mid-30 percent range for the fourth quarter and full year;
• Fourth quarter EPS is expected to be in the range of $0.25 to $0.29 per share with full year EPS in the range of $1.90 - $1.94.  This compares to the Company's previous full year guidance of $1.88 - $1.93.

2011 Trend:

• Wholesale branded net sales growth is expected to increase by 10% to 12% over 2010;
• Private label sales are expected to decline in 2011 as an existing bra program matures;
• 2011 total Company net sales are expected to increase in the mid-to-upper single digit percentage range for the year.

Conference Call Information

Maidenform will host a conference call and webcast on Wednesday, November 10, 2010 at 8:30 am ET to discuss its third quarter 2010 results, in addition to providing an update on its business.  The conference call telephone number is (866) 578-5784 and the passcode is "Maidenform."  The conference call will be simultaneously webcasted and can be accessed via the investor relations page of Maidenform's website at www.maidenformbrands.com.  A dial-in replay of this event will be available through November 24, 2010 and will be hosted on the Company's website for a limited time.  The replay telephone numbers are (888) 286-8010 or (617) 801-6888.  The replay passcode is 65763604.

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.  During its 87-year history, Maidenform has built strong equity for its brands and established a platform for growth through a combination of innovative, first-to-market designs and creative advertising campaigns focused on increasing brand awareness with generations of women.  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^®, Luleh^® , Bodymates^®, Inspirations^®, Self Expressions^® and Sweet Nothings^®. Maidenform products are currently distributed in approximately 60 countries and territories outside the United States.

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 continue to be harmed by the current global economic downturn, the unprecedented 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; 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.

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.

SOURCE Maidenform Brands, Inc.