2008-08-06 06:28:00
Maidenform Brands, Inc. Reports Second Quarter 2008 Results
Reported Earnings of $0.33 Per Share
Provided Financial Performance Update for 2008
Projected New Donna Karan and DKNY Women's Intimate Apparel License to Add
Approximately 5% to Net Sales Growth in 2009
ISELIN, N.J., Aug. 6 /EMWNews/ -- Maidenform Brands, Inc.
(NYSE: MFB), a global branded marketer of intimate apparel, today reported
earnings of $0.33 per diluted share (EPS) for the second quarter of 2008
which included $0.01 per share associated with start-up costs related to
the new women's intimate apparel license with Donna Karan International.
EPS for the second quarter of 2007 was $0.39, including $0.06 cents per
share of deferred financing costs related to the refinancing of the
Company's credit facility in June 2007.
Second quarter 2008 results versus second quarter 2007:
-- Net sales decreased 9.2% to $108.1 million with the majority of the
decrease related to the previously announced net sales shift of
approximately $6.0 million from the second quarter to early in the
third quarter of 2008 predominantly in the department stores and
national chain stores channel, with the balance of the decrease
attributed to a more challenging overall retail environment.
-- Department stores and national chain stores channel net sales
decreased 15.8% to $57.4 million.
-- Mass merchant channel net sales increased 11.8% to $28.5 million.
-- Retail segment net sales increased 5.1% to $14.5 million, with same
store sales up 1.9%.
-- International net sales increased 2.9% to $10.6 million.
-- Consolidated gross margins decreased 120 basis points to 38.7% due to
higher wholesale net sales in the mass merchant channel versus the
second quarter of 2007.
-- Total cash and cash equivalents was $15.3 million at the end of the
second quarter of 2008 and in line with the year ago period.
Maurice S. Reznik, Chief Executive Officer, stated, "While net sales in
the department stores and national chain stores channel as well as the
other wholesale channel were disappointing in the second quarter, we posted
gains elsewhere across our portfolio, tightly controlled our costs and
solidified new sources of revenue that will contribute to our projected top
line growth of 8% to 12% for the second half of 2008. These initiatives
include expanding our assortment with existing customers, benefiting from
the launch of new brands, and introducing new products and programs with
customers that strategically complement our current offerings. We believe
that these actions, coupled with building the new Donna Karan and DKNY
women's intimate apparel licensed business that will commence in the
beginning of 2009, will greatly contribute to the Company's long-term
success."
Financial Results for Second Quarter 2008 versus Second Quarter 2007
Net sales for the second quarter of 2008 decreased $10.9 million, or
9.2%, to $108.1 million driven largely by lower net sales in the department
stores and national chain stores channel. Wholesale segment net sales in
the second quarter of 2008 decreased $11.6 million, or 11.0%, to $93.6
million. Total international net sales, which are included in the wholesale
segment, increased $0.3 million, or 2.9%, to $10.6 million. Retail segment
net sales increased $0.7 million, or 5.1%, to $14.5 million in the second
quarter of 2008. Maidenform's net sales performance by channel of
distribution and product mix 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 $10.8 million, or 15.8%, to $57.4 million in the second quarter
of 2008. The Company had previously projected lower net sales in this
channel reflecting the timing of certain shipments which were shipped early
in the third quarter of 2008, as well as a more challenging retail
environment. Despite a decrease in this channel overall, Maidenform
experienced solid performance from the expanded distribution of the
Company's shapewear brand Control It(TM) and strength in Flexees(R)
Shapewear Chic(TM) collections.
Additionally, at the end of the second quarter, the Company implemented
key brand and product sales building initiatives in the department stores
and national chain stores channel, including the launch of the Luleh(TM)
brand, further expansion of Flexees(R) Weightless Power(TM) collection and
Lilyette(R) Every Bit Invisible(TM) full-figure bras.
Mass Merchants
The mass merchant channel net sales increased $3.0 million, or 11.8%,
to $28.5 million in the second quarter of 2008. Primary factors for this
increase were the launch of the Company's Inspirations(TM) brand, continued
penetration of Maidenform's Sweet Nothings(R) brand in the shapewear
category, and the addition of a new program with a warehouse customer.
Other
Net sales in the other channel were down $3.8 million, or 33.0%, to
$7.7 million in the second quarter of 2008, largely due to sales to an
off-price retailer in 2007 that did not repeat in 2008 and lower
liquidation sales.
Retail Segment
As noted above, total retail segment net sales increased $0.7 million,
or 5.1%, to $14.5 million in the second quarter of 2008 with same store
sales up 1.9% at Maidenform's retail outlet stores and internet sales up
20.0% to $1.2 million. Strong product performers in the retail segment
included Maidenform(R) and Lilyette(R) bras and Flexees(R) and Control
It(TM) shapewear. The Company had 77 retail outlet stores as of the end of
the second quarter of 2008, the same as of the end of the second quarter of
2007.
As a percentage of net sales, consolidated gross margins decreased 120
basis points to 38.7%, primarily driven by both customer and product mix,
which included fewer sales in the department stores and national chain
stores channel combined with higher sales in the mass merchant channel.
Partially offsetting this change in channel mix was higher retail segment
sales and cost improvements from the Company's sourcing initiatives.
Consolidated selling, general and administrative expenses (SG&A)
increased slightly by $0.3 million, or 1.1%, to $27.3 million in the second
quarter of 2008. As a percentage of net sales, SG&A was 25.3% in the second
quarter of 2008 compared to 22.7% in the second quarter of 2007. The
increase of $0.3 million was a result of start-up costs associated with
developing and implementing the new women's intimate apparel licensing
agreement with Donna Karan International. In addition, Maidenform funded
increases in advertising expenses to support new product launches and
branding, as well as occupancy related expenses for an added distribution
center, with managed cost reductions in compensation and other expenses
across most operating departments.
Due to all the factors described above, operating income in the second
quarter of 2008 was $14.5 million and 13.4% of net sales, compared to $20.5
million and 17.2% of net sales in the year ago period.
Net interest expense in the second quarter of 2008 was $1.1 million
compared to $4.3 million in the second quarter of 2007. In June 2007,
Maidenform refinanced its credit facility with a new $150.0 million credit
facility, resulting in the expensing of $2.4 million of deferred financing
costs. Excluding this item, net interest expense was $1.9 million for the
second quarter of 2007. The Company's decrease in net interest expense for
the second quarter of 2008 was primarily due to the action taken by the
Company to refinance its credit facility, as well as overall lower average
debt outstanding in the second quarter of 2008 compared to the year ago
period.
Maidenform's effective income tax rate for the second quarter of 2008
remained unchanged at 41.7% when compared to the second quarter of 2007.
Net income for the second quarter of 2008 was $7.8 million and EPS was
$0.33, including approximately $0.01 per share associated with start-up
costs related to developing and implementing the new women's intimate
apparel licensing agreement with Donna Karan International. Net income for
the second quarter of 2007 was $9.5 million and EPS was $0.39, including
approximately $0.06 per share associated with refinancing costs for the
Company's credit facility in June 2007.
Total cash and cash equivalents at the end of the second quarter of
2008 was $15.3 million which represented the same cash position as at the
end of the second quarter of 2007. The Company's total debt outstanding was
$89.2 million as of June 28, 2008, representing a decrease of $10.8 million
from the end of the second quarter of 2007. Maidenform had a debt to EBITDA
ratio of 1.5 to 1 at the end of the second quarter of 2008.
Financial Results for Year-To-Date 2008 versus Year-To-Date 2007
Net sales for the first six months of 2008 decreased $20.0 million, or
8.8%, to $206.2 million driven by lower sales in the department stores and
national chain stores channel. Wholesale segment net sales, on a
year-to-date basis, decreased $22.0 million, or 10.9%, to $180.2 million.
Total international net sales, which are included in the wholesale segment,
increased $1.1 million, or 6.3%, to $18.6 million. Retail segment net sales
for the first six months of 2008 increased $2.0 million, or 8.3%, to $26.0
million. Same store sales for Maidenform's retail outlet stores increased
5.1%. Internet sales increased 26.3% to $2.4 million on a year-to-date
basis. The Company's net sales performance by channel of distribution is
highlighted in Exhibit 1 of this press release.
Consolidated gross margins, on a year-to-date basis, increased 50 basis
points to 38.7%, reflecting a favorable mix of products, higher retail
segment sales and cost improvements from the Company's sourcing initiatives
such as product cost re-engineering actions and inbound freight
initiatives.
Year-to-date operating income was $26.1 million and 12.7% of net sales
versus $40.7 million and 18.0% of net sales for the first six months of
2007 (15.3% excluding a pension curtailment gain of $6.1 million in the
first quarter of 2007).
Net income for the first six months of 2008 was $13.8 million, or $0.59
per diluted share, including $0.01 per share associated with start-up costs
related to the new women's intimate apparel license with Donna Karan
International. Net income for the first six months of 2007 was $20.1
million, or $0.83 per diluted share, for the first six months of 2007.
Excluding the pension curtailment gain and deferred financing costs
associated with the refinancing of the Company's credit facility (a
combined $2.2 million after tax), net income was $17.9 million, or $0.74
earnings per diluted share, for the first six months of 2007.
Business Update on New Donna Karan and DKNY Women's Intimate Apparel
License
Maidenform announced on May 6, 2008 that it has entered into the
exclusive global women's intimate apparel license for Donna Karan and DKNY
commencing on January 1, 2009. Product will begin shipping to retail
customers in early January 2009. Maidenform projects that this business
will add approximately 5% to the Company's net sales growth in 2009 and
will provide a new channel of distribution to high-end department and
specialty stores. Gross margins are expected to be initially generally in
line with Maidenform's department store business. The Company believes this
license relationship will have strong long-term sales growth and gross
margin expansion opportunities, particularly internationally.
Financial Performance Update for 2008
Maidenform continues to be confident about its company specific
initiatives that it believes will drive sales growth in the second half of
2008. However, the Company is also taking a cautious approach given the
challenging economic environment for many of Maidenform's customers. With
that, Maidenform has updated its guidance for 2008 to the following:
-- Net sales growth of 8% to 12% for the third and fourth quarters of 2008
over the same comparable periods in 2007, resulting in full year 2008
net sales growth of between down 1% and up 1% as compared to prior
guidance of up approximately 4%. Sales growth initiatives contributing
to the Company's financial performance in the second half of 2008
include:
-- Sizeable assortment expansion in the bra and shapewear categories
within the mass merchant channel, in addition to a new shapewear
program
-- Ongoing replenishment and expanded assortments with the Company's
Luleh(TM) and Inspirations(TM) brands
-- Additional product introductions in the department stores and
national chain stores channel
-- Launching new programs with two specialty retailers
-- Full year consolidated gross margins of 38.5% to 39.0% as compared to
prior guidance of approximately 39%, including particularly strong
anticipated growth in the mass merchant channel.
-- Full year EPS of $1.28 to $1.36, excluding start-up costs of
approximately $2.5 million, or $0.06 per diluted share, associated with
developing and implementing the global women's intimate apparel license
under the Donna Karan and DKNY brands. The low end of the range for
EPS considers the implication of potential cancellations from certain
high credit risk accounts. This compares to a prior EPS projection of
approximately $1.46, excluding $0.06 per share of Donna Karan and DKNY
start-up costs in 2008. Exhibit 2 of this press release provides a
reconciliation of non-GAAP financial EPS, as defined under SEC rules,
to the most directly comparable GAAP EPS.
Conference Call Information
Maidenform will host a conference call and webcast this morning,
Wednesday, August 6, 2008 at 8:30 am ET to discuss its second quarter 2008
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
http://www.maidenformbrands.com. A dial-in replay of this event will be available
through August 20, 2008 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 17410476.
About Maidenform Brands, Inc.
Maidenform Brands, Inc. is a global intimate apparel company with a
portfolio of established and 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 85-year history, Maidenform has built strong equity for its brands and
established a solid growth platform 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(R), Flexees(R), Lilyette(R), Control It(TM),
Luleh(TM), Sweet Nothings(R), Rendezvous(R), Subtract(R), Bodymates(R),
Self Expressions(R) and Inspirations(TM). 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, the Company is under no
obligation to inform you if they do. 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 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 leverage could adversely affect its financial
condition; 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; 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; the sufficiency of cash to fund operations and capital
expenditures; and the influence of adverse changes in general economic
conditions.
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 28, 2008 December 29, 2007
Assets
Current assets
Cash and cash equivalents $15,282 $16,602
Accounts receivable, net 58,441 45,775
Inventories 65,859 69,041
Deferred income taxes 11,016 11,015
Prepaid expenses and other current assets 10,632 7,497
Total current assets 161,230 149,930
Property, plant and equipment, net 19,000 19,992
Goodwill 7,884 7,884
Intangible assets, net 97,937 98,518
Other non-current assets 3,497 3,327
Total assets $289,548 $279,651
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt $1,100 $1,100
Accounts payable 32,128 36,022
Accrued expenses and other current
liabilities 19,810 21,620
Total current liabilities 53,038 58,742
Long-term debt 88,075 88,625
Deferred income taxes 23,097 21,718
Other non-current liabilities 11,355 10,949
Total liabilities 175,565 180,034
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;
23,488,357 shares issued and
22,386,527 outstanding at
June 28, 2008 and 23,488,357
shares issued and 22,357,292
outstanding at December 29, 2007 235 235
Additional paid-in capital 61,162 60,919
Retained earnings 67,372 53,526
Accumulated other comprehensive income 739 872
Treasury stock, at cost (1,101,830
shares at June 28, 2008 and
1,131,065 shares at December 29, 2007) (15,525) (15,935)
Total stockholders' equity 113,983 99,617
Total liabilities and stockholders'
equity $289,548 $279,651
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 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $108,063 $118,960 $206,169 $226,193
Cost of sales 66,253 71,394 126,393 139,755
Gross profit 41,810 47,566 79,776 86,438
Selling, general and
administrative expenses 27,292 27,063 53,695 45,739
Operating income 14,518 20,503 26,081 40,699
Interest expense, net 1,131 4,246 2,312 6,267
Income before provision
for income taxes 13,387 16,257 23,769 34,432
Income tax expense 5,580 6,775 9,923 14,358
Net income $7,807 $9,482 $13,846 $20,074
Basic earnings per common
share $0.35 $0.41 $0.62 $0.87
Diluted earnings per
common share $0.33 $0.39 $0.59 $0.83
Basic weighted average
number of shares
outstanding 22,372,764 23,014,893 22,365,492 22,996,174
Diluted weighted average
number of shares
outstanding 23,446,634 24,196,358 23,434,416 24,170,707
MAIDENFORM BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six months ended
June 28, 2008 June 30, 2007
Cash flows from operating activities
Net income $13,846 $20,074
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization 1,800 1,453
Amortization of intangible assets 581 581
Amortization of deferred financing costs 93 2,787
Stock-based compensation 682 1,048
Deferred income taxes 1,378 3,764
Excess tax benefits related to
stock-based compensation (13) (514)
Pension plan curtailment gain - (6,099)
Net changes in operating assets and
liabilities
Accounts receivable (12,666) (18,126)
Inventories 3,182 (8,379)
Prepaid expenses and other
current and non-current assets 112 (463)
Accounts payable (3,894) 12,774
Accrued expenses and other
current and non-current liabilities (2,159) 3,722
Income taxes payable (2,688) 408
Net cash from operating activities 254 13,030
Cash flows from investing activities
Capital expenditures (808) (2,313)
Net cash from investing activities (808) (2,313)
Cash flows from financing activities
Term loan borrowings - 100,000
Term loan repayments (550) (110,000)
Borrowings under revolving loan - 5,000
Repayments under revolving loan - (5,000)
Proceeds from stock options exercised 31 338
Excess tax benefits related to
stock-based compensation 13 514
Payments of employee withholding taxes
related to equity awards (73) -
Payments of capital lease obligations (54) (50)
Deferred financing costs - (1,068)
Net cash from financing activities (633) (10,266)
Effects of exchange rate changes on cash (133) 185
Net (decrease) increase in cash (1,320) 636
Cash and cash equivalents
Beginning of period 16,602 14,617
End of period $15,282 $15,253
Supplementary disclosure of cash flow
information
Cash paid during the period
Interest $2,471 $4,179
Income taxes $10,946 $9,139
Supplemental schedule of non-cash
investing and financing activities
Equipment acquired with capital lease
obligations $- $470
Exhibit 1
MAIDENFORM BRANDS, INC. AND SUBSIDIARIES
SALES BY CHANNEL OF DISTRIBUTION AND PRODUCT MIX
(in millions)
(unaudited)
Three months ended Six months ended
June 28, June 30, $ % June 28, June 30, $ %
2008 2007 change change 2008 2007 change change
(in millions) (in millions)
Department
stores and
national
chain
stores $57.4 $68.2 $(10.8) (15.8%) $105.8 $121.7 $(15.9) (13.1%)
Mass
merchants 28.5 25.5 3.0 11.8 58.8 54.1 4.7 8.7
Other 7.7 11.5 (3.8) (33.0) 15.6 26.4 (10.8) (40.9)
Total
wholesale 93.6 105.2 (11.6) (11.0) 180.2 202.2 (22.0) (10.9)
Retail 14.5 13.8 0.7 5.1 26.0 24.0 2.0 8.3
Total
consolidated
net sales $108.1 $119.0 $(10.9) (9.2%) $206.2 $226.2 $(20.0) (8.8%)
Three months ended Six months ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Bras 67% 69% 66% 72%
Shapewear 23 22 23 19
Panties 10 9 11 9
100% 100% 100% 100%
Exhibit 2
DILUTED EARNINGS PER SHARE GAAP TO NON-GAAP PRO-FORMA RECONCILIATION
SCHEDULE
(unaudited)
Three months Six months 2008 guidance Year
ended ended range ended
June June June June December
28, 30, 28, 30, 29,
2008 2007 2008 2007 From To 2007
Reported diluted earnings
per share $0.33 $0.39 $0.59 $0.83 $1.22 $1.30 $1.43
Adjustments:
Deferred financing
costs (i) - 0.06 - 0.06 - - 0.06
Pension curtailment
gain (ii) - - - (0.15) - - (0.16)
Start-up costs (iii) 0.01 - 0.01 - 0.06 0.06 -
Non-gaap pro-forma
diluted earnings per
share $0.34 $0.45 $0.60 $0.74 $1.28 $1.36 $1.33
(i) Expensing deferred financing costs as a result of refinancing the
Company's credit facility.
(ii) Maidenform's pension plan was frozen effective January 1, 2007 for
current employee participants and closed to new entrants. In
connection with this freeze, the Company recognized a non-cash
curtailment gain.
(iii) Start-up costs associated with developing and implementing the
global women's intimate apparel license under the Donna Karan and
DKNY brands.
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