<PAGE>
________________________________________________________________________________
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 of 15(d) of the Securities Exchange
Act of 1934
For the quarterly report ended December 31, 1999
-----------------
Or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to ___________________
Commission file number 0-21196
-------
Mothers Work, Inc.
------------------
(Exact name of registrant as specified in its charter)
Delaware 133045573
-------- ---------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
456 North 5th Street, Philadelphia, Pennsylvania 19123
------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 873-2200
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Common Stock, $.01 par value -- 3,431,873 shares outstanding as of February 1, 2000
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
MOTHERS WORK, INC. AND SUBSIDIARY
INDEX
-----
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Exhibit Index 13
<PAGE>
CONFIDENTIAL
------------
MOTHERS WORK, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
ASSETS 1999 1999
--------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,325,707 $ 1,139,563
Receivables 4,021,752 3,617,824
Inventories 74,102,859 74,954,635
Deferred income taxes 6,120,791 6,120,791
Prepaid expenses and other 2,307,461 1,625,694
-------------- -------------
Total current assets 89,878,570 87,458,507
PROPERTY, PLANT AND EQUIPMENT, net 43,312,372 39,610,762
OTHER ASSETS:
Goodwill, net of accumulated amortization of $10,638,312
and $10,084,350 33,755,146 34,309,108
Deferred income taxes 9,687,217 11,687,319
Deferred financing costs, net of accumulated amortization of
$1,932,709 and $1,808,032 2,495,304 2,619,981
Other intangible assets, net of accumulated amortization of $1,931,949
and $1,865,046 1,094,981 1,115,444
Other assets 989,427 807,268
-------------- -------------
Total other assets 48,022,075 50,539,120
-------------- -------------
$ 181,213,017 $ 177,608,389
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of Credit $ 31,483,365 $ 32,003,464
Current portion of long-term debt 590,829 495,829
Accounts payable 13,206,228 17,461,343
Accrued expenses 19,457,972 13,477,555
-------------- -------------
Total current liabilities 64,738,394 63,438,191
LONG TERM DEBT 96,015,648 96,161,561
ACCRUED DIVIDENDS ON PREFERRED STOCK 4,995,350 4,648,124
DEFERRED RENT 4,460,239 4,292,164
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A Cumulative convertible preferred stock, $.01 par value,
$280.4878 stated value, 2,000,000 shares authorized,
41,000 shares issued and outstanding (liquidation value
of $11,500,000) 11,500,000 11,500,000
Series B Junior participating preferred stock, $.01 par value
10,000 shares authorized, none outstanding - -
Common stock, $.01 par value, 10,000,000 shares authorized,
3,431,873 and 3,446,353 shares issued and outstanding 34,318 34,463
Additional paid-in capital 26,035,049 26,179,805
Accumulated deficit (26,565,981) (28,645,919)
-------------- -------------
Total stockholders' equity 11,003,386 9,068,349
-------------- -------------
$ 181,213,017 $ 177,608,389
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
CONFIDENTIAL
------------
MOTHERS WORK, INC & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------------------
1999 1998
<S> <C> <C>
NET SALES $ 91,866,230 $76,741,956
COST OF GOODS SOLD 46,307,293 38,139,938
---------------- -----------------
Gross profit 45,558,937 38,602,018
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 37,138,005 31,382,215
---------------- -----------------
Operating income 8,420,932 7,219,803
INTEREST EXPENSE, NET 3,993,666 4,022,922
---------------- -----------------
Income before income taxes 4,427,266 3,196,881
INCOME TAX PROVISION 2,000,102 1,549,642
---------------- -----------------
NET INCOME 2,427,164 1,647,239
PREFERRED DIVIDENDS 347,226 312,802
---------------- -----------------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 2,079,938 $ 1,334,437
---------------- -----------------
INCOME PER SHARE - BASIC $ 0.61 $ 0.37
---------------- -----------------
AVERAGE SHARES OUTSTANDING - BASIC 3,432,645 3,604,064
---------------- -----------------
INCOME PER SHARE - ASSUMING DILUTION $ 0.57 $ 0.35
---------------- -----------------
AVERAGE SHARES OUTSTANDING - ASSUMING DILUTION 3,649,729 3,794,354
---------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CONFIDENTIAL
------------
MOTHERS WORK, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,427,164 $1,647,239
Adjustments to reconcile net income to
net cash provided by operating activities--
Depreciation and amortization 2,872,741 2,555,430
Deferred income taxes 2,000,102 1,549,642
Provision for deferred rent 168,075 103,149
Amortization of deferred financing costs 124,677 124,463
Imputed interest on debt 42,160 36,443
Changes in assets and liabilities:
(Increase) decrease in--
Receivables (403,928) 514,768
Inventories 851,776 (564,663)
Prepaid expenses and other (863,926) 4,553,359
Increase (decrease) in--
Accounts payable and accrued expenses 2,423,113 (6,411,165)
-------------- -------------
Net cash provided by operating activities 9,641,954 4,108,665
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,944,486) (871,666)
Increase in intangibles and other assets (46,440) (36,324)
-------------- -------------
Net cash used in investing activities (5,990,926) (907,990)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in line of credit and cash overdrafts, net (1,226,910) (3,435,925)
Purchase of common stock (178,661) -
Repayments of long-term debt (93,073) (87,474)
Proceeds from exercise of options 33,760 23,664
-------------- -------------
Net cash used in financing activities (1,464,884) (3,499,735)
-------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,186,144 (299,060)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,139,563 3,623,003
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,325,707 $3,323,943
-------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,039,320 $ 763,143
-------------- -------------
Cash paid for income taxes $ - $ -
-------------- -------------
Capital lease obligations incurred $ - $ -
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MOTHERS WORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
-----------------------------------------
The accompanying unaudited consolidated financial statements are presented in
accordance with the requirements for Form 10-Q and do not include all the
disclosures required by generally accepted accounting principles for complete
financial statements. Reference should be made to the Form 10-K as of and for
the year ended September 30, 1999 for Mothers Work, Inc. and Subsidiary (the
"Company") for additional disclosures including a summary of the Company's
accounting policies.
In the opinion of management, the consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the consolidated financial position of the Company for the periods
presented. Since the Company's operations are seasonal, the interim operating
results of the Company may not be indicative of operating results for the full
year.
2. STOCK OPTIONS AND WARRANTS
--------------------------
During the three months ended December 31, 1999, 32,100 options were granted to
certain officers and employees for the purchase of the Company's common stock at
prices at least equal to the fair market value on the date of grant.
3. CONTINGENCIES
-------------
From time to time, the Company is named as a defendant in legal actions arising
from its normal business activities. Although the amount of any liability that
could arise with respect to currently pending actions cannot be accurately
predicted, in the opinion of the Company, any such liability will not have a
material adverse effect on the financial position or operating results of the
Company.
4. EARNINGS PER SHARE (EPS)
------------------------
The Company accounts for EPS in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS 128) which requires dual presentation of
basic and diluted EPS. SFAS 128 also requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS is based upon the weighted average
number of common shares outstanding and diluted EPS is based upon the weighted
average number of common shares outstanding plus the dilutive common stock
equivalents outstanding during the period.
The following is a reconciliation of the denominators of the basic and diluted
EPS computations shown on the face of the accompanying statements of operations.
4
<PAGE>
MOTHERS WORK, INC. AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter Ended December 31, 1999
-----------------------------------------
Income Shares Per share
(Numerator) (Denominator) Amount
------------- -------------- ----------
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $2,079,938 3,432,645 $0.61
Effect of dilutive securities
Warrants 139,998
Stock options - 77,086
---------- ---------
Diluted EPS
Income available to common stockholders $2,079,938 3,649,729 $0.57
---------- ---------
<CAPTION>
For the Quarter Ended December 31, 1998
-----------------------------------------
Income Shares Per share
(Numerator) (Denominator) Amount
---------- ------------ ----------
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $1,334,437 3,604,064 $0.37
Effect of dilutive securities
Warrants 139,993
Stock options - 50,297
---------- ---------
Diluted EPS
Income available to common stockholders $1,334,437 3,794,354 $0.35
---------- ---------
</TABLE>
Options to purchase 1,033,969 shares of common stock at prices ranging from
$1.67 to $18.75 per share were outstanding during the first quarter of fiscal
2000, and were included in the computation of diluted EPS to the extent that
they were dilutive. The outstanding options expire between 2003 and 2008. In
addition, the 41,000 shares of Series A Cumulative Convertible Preferred Stock
could potentially dilute basic EPS in the future.
5. SUBSIDIARY GUARANTOR
--------------------
Pursuant to the terms of an indenture relating to the 12 5/8% Senior Unsecured
Exchange Notes due 2005 (the "Notes"), the Company's direct subsidiary, Cave
Springs, Inc., has unconditionally guaranteed the obligations of Mothers Work,
Inc. with respect to these Notes. There are no restrictions on the ability of
the Guarantor to transfer funds to Mothers Work, Inc. in the form of loans,
advances, or dividends, except as provided by applicable law.
Accordingly, set forth below is certain summarized financial information (within
the meaning of Section 1-02(bb) of Regulation S-X) for the Guarantor:
5
<PAGE>
MOTHERS WORK, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
December 31, 1999
(Unaudited)
December 31, 1999 September 30, 1999
----------------- ------------------
Current assets $ 2,865 $ 2,865
Non-current assets $65,061,928 $59,105,843
Current liabilities $ -- $ --
Non-current liabilities $11,182,136 $ 9,148,142
Net sales $ 5,953,220 $19,376,700
Costs and expenses $ 15,000 $ 60,000
Net income $ 3,919,225 $12,749,022
This summarized financial information for the Guarantor has been prepared from
the books and records maintained by the Guarantor and the Company. The
summarized financial information may not necessarily be indicative of the
results of operations or financial position had the Guarantor operated as an
independent entity. Certain intercompany sales included in the Subsidiary's
records are eliminated in consolidation. Mothers Work, Inc., in turn, pays all
expenditures on behalf of the Guarantor. An amount due to/due from parent will
exist at any time as a result of this activity. The summarized financial
information includes the allocation of material amounts of expenses such as
corporate services, administration, and taxes on income. The allocations are
generally based on proportional amounts of sales or assets, and taxes on income
are allocated consistently with the asset and liability approach used for
consolidated financial statement purposes. Management believes these allocation
methods are reasonable.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
- ---------------------
The following tables set forth certain operating data as a percentage of sales
and as a percentage change for the periods indicated:
<TABLE>
<CAPTION>
Percentage of Net Sales % Increase (Decrease)
Three Months Ended Three Months Ended
1999 1998 December 31, 1999 and 1998
---- ------ ---------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 19.7%
Cost of goods sold 50.4 49.7 21.4
----- -----
Gross profit 49.6 50.3 18.0
Selling, general and
administrative expenses 40.4 40.9 18.3
----- -----
Operating income 9.2 9.4 16.6
Interest expense, net 4.3 5.2 (0.7)
----- -----
Income before income taxes 4.9 4.2 38.5
Income tax expense 2.2 2.1 29.1
----- -----
Net income 2.6% 2.1% 47.3%
----- -----
</TABLE>
The following table sets forth certain information representing growth in the
number of Company-owned stores and leased departments for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
------------------- -------------------
<S> <C> <C>
Beginning of period:
Maternity stores 528 460
Leased maternity departments 97 123
--- ---
Total 625 583
Opened:
Maternity stores 24 13
Leased maternity departments - 5
Closed:
Maternity stores (1) -
Leased maternity departments - (22)
--- ---
End of period:
Maternity stores 551 473
Leased maternity departments 97 106
--- ---
Total 648 579
--- ---
</TABLE>
7
<PAGE>
Three Months Ended December 31, 1999 and 1998
Net Sales
- ---------
Net sales of $91.9 million in the first quarter of fiscal 2000 were $15.2
million (19.7%) higher than sales of $76.7 million in the first quarter of
fiscal 1999. The increase in net sales was comprised of incremental revenues
generated by 100 new maternity stores which opened in calendar year 1999 as well
as an 8.2% comparable store sales increase during the first quarter of fiscal
2000 (based on 538 stores).
Gross Profit
- ------------
First quarter fiscal 2000 gross profit was $6.9 million (18%) higher than the
$38.6 million gross profit for the first quarter fiscal 1999. The increase was
largely attributable to the increase in sales. Gross profit as a percentage of
sales in first quarter fiscal 2000 decreased to 49.6% from 50.3% in fiscal 1999.
The decrease in gross profit as a percentage of sales results from sales in the
Motherhood division, which operates at a lower gross profit margin, growing at a
faster rate than higher margin sales in the high end maternity division.
Selling, General & Administrative Expenses
- ------------------------------------------
As a percentage of net sales, selling, general and administrative expenses
decreased to 40.4% for the first quarter of fiscal 2000 from 40.9% for the first
quarter of fiscal 1999. The decrease results principally from the increase in
store sales and increased efforts to better control costs. The $5.7 million
increase in selling, general and administrative costs is also largely a result
of the increased sales.
Operating Income
- ----------------
Operating income increased to $8.4 million in the first quarter of fiscal 2000
as compared to $7.2 million in the first quarter of fiscal 1999. The increase
in operating income is primarily a result of the increased sales volume.
Interest Expense, Net
- ---------------------
Net interest expense decreased by $0.1 million in the first quarter of fiscal
2000 compared with the first quarter of fiscal 1999, and as a percentage of
sales, decreased from 5.2% to 4.3%. The dollar decrease is largely attributable
to the increased sales volume.
Income Taxes
- ------------
The effective income tax rate was 45.2% in the first quarter of fiscal 2000 as
compared to 48.5% in the first quarter of fiscal 1999. The principal reason for
the decrease in the effective income tax rate is the relationship of non-
deductible goodwill amortization to income before income taxes.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's cash needs during the quarter ended December 31, 1999 have been
primarily for furniture, and fixtures and leasehold improvements required to
increase the number of retail locations. The Company also used excess cash flow
to reduce its outstanding borrowings on its line of credit. The Company's cash
source for the first quarter of fiscal 2000 has primarily been from operations.
At December 31, 1999 and December 31, 1998 the Company had available cash and
cash equivalents of $3.3 million.
Net cash provided by operating activities was $9.6 million in the first quarter
of fiscal 2000 compared with $4.1 million in the first quarter of fiscal 1999.
The net cash provided by operating activities in the first quarter of fiscal
2000 includes cash provided by net income, including adjustments for non-cash
items of $5.2 million, plus cash provided by working capital of $2.0 million.
The principal component of cash used for working capital in the first quarter of
fiscal 2000 was a $2.4 million increase in accounts payable and accrued
expenses, which was partially offset by an increase in prepaid expenses. The
net cash provided by working capital in the first quarter of fiscal 1999
includes cash provided by net income, including adjustments for non-cash items
of $4.4 million, partially offset by cash used by working capital of $1.9
million. The principal component of cash used for working capital in the first
quarter of fiscal 1999 consisted of a $6.4 million decrease in accounts payable
and accrued expenses, which was partially offset by a decrease in prepaid
expenses.
Net cash used in investing activities increased from $0.9 million in the
quarter ended December 31, 1998 to $6.0 million in the quarter ended December
31, 1999. The cash used in investing activities for the first quarter of fiscal
1999 amounted to $0.9 million that was derived principally from capital
expenditures for new stores. This compares with investing activities amounting
to $6.0 million for the first quarter of fiscal 2000, which included $5.9
million used for capital expenditures for new store facilities and improvements
to existing stores and $0.1 million for intangible and other assets.
Net cash used in financing activities decreased $2.0 million, from $3.5
million used in financing activities in the quarter ended December 31, 1998 to
$1.5 million used in financing activities for the quarter ended December 31,
1999. The $1.5 million used in financing activities in the first quarter of
fiscal 2000 was used to repay $1.2 million on the line of credit and cash
overdraft activity, $0.2 million in purchases of common stock and $0.1 million
in repayment of long-term debt. This compares with $3.4 million in repayment of
borrowings on the line of credit and cash overdraft activity and $0.1 million in
repayment of long-term debt in the same quarter of the preceding year.
In November 1999, the lender under the Company's working capital facility
informed the Company that it has agreed to increase its $44 million working
capital facility to $50 million and extend the term of the facility from April
2001 to October 2004, subject to the finalization and execution of the working
capital facility documents. In addition to the amount available for borrowing
and letters of credit under the working capital facility, the Company also has
an additional $4 million letter of credit to collateralize an Industrial Revenue
Bond. Further, there are no financial covenant requirements unless Aggregate
Adjusted Availability, as defined in the working capital facility agreement,
falls below $10 million. In the event that the Aggregate Adjusted Availability
falls below $10 million, then the Company must achieve a Minimum Cash Flow, as
defined in the agreement, of not less than zero. Consistent with the previous
working capital facility, the new working capital facility is secured by
substantially all of the Company's assets. On February 2, 2000 the Company had
$37.6 million in borrowings and $3.0 in additional letters of credit issued
under the working capital facility, including the $4.0 million letter of credit
collateralizing the Industrial Revenue Bond.
The Company believes that its current cash and working capital positions,
available borrowing capacity through its working capital facility and net cash
expected to be generated from operations will be sufficient to fund the
Company's working capital requirements and required principal and interest
payments through fiscal 2000.
9
<PAGE>
INFLATION
- ---------
The Company does not believe that inflation has had a material effect on the
results of operations during the past three years. There can be no assurance
that the Company's business will not be affected by inflation in the future.
YEAR 2000
- ---------
The Year issue 2000 issue arose principally from involves the inability of
certain computer programs, commercial systems and embedded chips to properly
interpret dates beyond the year 1999. The Company utilizes various proprietary
and third party technologies -- both hardware and software --- which may be
subject to this inability. There were no material, adverse implications to the
Company's business on January 1, 2000 or any time since that date.
The Company continues to believe that the reasonably likely worst case scenario
would involve short-term disruption of systems affecting its supply and
distribution channels. At the present time, the Company is not aware of any
Year 2000 issues that are expected to materially affect its products, services,
and competitive position of financial position. The Company's information
technology department continues to oversee, monitor and coordinate a company-
wide effort to ensure that any business interruptions as a result of year 2000
issues are resolved promptly. However, despite the Company's efforts to make its
systems, facilities and equipment Year 2000 compliant, the compliance of 3/rd/
third party service providers and vendors is beyond the Company's control.
Accordingly, the Company can give no assurances that the failure of the
Company's systems or the systems of others companies on which the Company's
systems rely, or the failure of key suppliers, vendors, or other third parties
to comply with Year 2000 requirements, will not have a material adverse effect
on the Company.
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
- ----------------------------------------------------------------------------
1995
- ----
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations, of this Report or made from time to time by management of the
Company 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 for fiscal 2000 and beyond to
differ materially from those expressed or implied in any such forward-looking
statements: changes in consumer spending patterns, raw material price
increases, consumer preferences and overall economic conditions, the impact of
competition and pricing, changes in weather patterns, availability of suitable
store locations at appropriate terms, continued availability of capital and
financing, ability to develop and source merchandise, ability to hire and train
associates, changes in fertility and birth rates, political stability, currency
and exchange risks, changes in existing or potential duties, tariffs or quotas,
postal rate increases and charges, paper and printing costs, and other factors
affecting the Company's business which are beyond the Company's control.
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The analysis below presents the sensitivity of the market value of the Company's
financial instruments to selected changes in market rates. The range of change
chosen reflects the Company's view of changes that are reasonably possible over
a one-year period. The debt portfolio of instruments are the Company's is and
are the principal component of its financial instruments. The market value of
the debt portfolio is referred to below as the "Debt Value". The Company
believes that the market risk exposure on other financial instruments is
immaterial.
At December 31, 1999, the major components of the Company's debt portfolio are
Senior Unsecured Exchange Notes (the " Notes") and a Line of Credit (the
"Line"), both denominated in US dollars. The Notes bear interest at a fixed
rated of 12 5/8%, and the Line bears interest at a variable rate which, at
December 31, 1999, was approximately 8 1/2%. While a change in interest rates
would not affect the interest incurred or cash flow related to the fixed portion
of the debt portfolio, the Debt Value would be affected. A change in interest
rates on the variable portion of the debt portfolio impacts the interest
incurred and cash flows, but does not impact the net financial instrument
position.
The sensitivity analysis as it relates to the fixed portion of the Company's
debt portfolio assumes an instantaneous 100 basis point move in interest rates
from their levels at December 31, 1999 with all other variables held constant.
A 100 basis point increase in market interest rates would result in a decrease
in Debt Value of $0.9 million at December 31, 1999. A 100 basis point decrease
in market interest rates would result in a $0.9 million increase in Debt Value
at December 31, 1999.
Based on the variable rate debt included in the Company's debt portfolio at
December 31, 1999, a 100 basis point increase in interest rates would result in
an additional $0.3 million of interest incurred per year. A 100 basis point
decrease would lower interest expense by $0.3 million.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (schedule submitted in electronic format
only)
(b) Reports on Form 8-K.
None.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOTHERS WORK, INC.
<TABLE>
<CAPTION>
<S> <C>
Date: February 11, 2000 By: /s/ Dan W. Matthias
--------------------------------------
Dan W. Matthias
Chief Executive Officer
And
Chairman of the Board
Date: February 11, 2000 By: /s/ Michael F. Devine, III
--------------------------------------
Michael F. Devine, III
Chief Financial Officer
And
Vice President - Finance
</TABLE>
12
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
No. Description Page No.
- ----------- ------------ --------------
<S> <C> <C>
27 Financial Data Schedule (schedule
submitted in Electronic format only) 14
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FIRST QUARTER 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,325,707
<SECURITIES> 0
<RECEIVABLES> 4,021,752
<ALLOWANCES> 0
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0
11,500,000
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