New York, New York, (February 10, 2000)—Movie Star, Inc., (AMEX:MSI) today reported financial results for the second quarter and first six months of fiscal 2000 which ended December 31, 1999.
Net sales for the second quarter of fiscal 2000 of $23,354,000 were 9.4% below the $25,789,000 realized in the comparable period of fiscal 1999. The Company’s intimate apparel division sales were off 7.6%, while the retail division experienced a 20% decline. Net income was $2,003,000 or $0.13 per diluted share in the three months ended December 31, 1999, compared to $2,330,000 or $0.15 per diluted share in the prior year. Second quarter earnings for this fiscal year include a $50,000 gain as a result of the purchase of $903,000 in principal amount of the Company’s 12.875% subordinated debentures, applied to current year sinking fund requirements. Also, the Company recorded an extraordinary gain of $150,000, or $0.01 per share, on its purchases of $1,883,000 in principal amount of its 12.875% subordinated debentures, which will be applied to final redemption of the 12.875% debentures, which mature on October 1, 2001.
Net sales for the first six months of fiscal 2000 were $42,573,000, down 4.9% from $44,747,000 in the comparable period in the prior year. Sales for the intimate apparel division slipped 3.3% and those of the retail division declined 15.6%. Net income for the first half of fiscal 2000 was $2,840,000, or $0.18 per diluted share, versus $3,513,000, or $0.23 per diluted share, for the first six months a year ago. Included in the earnings for the six months ended December 31, 1999, are gains of $164,000 attributable to purchases of the Company’s 12.875% subordinated debentures to meet the current year sinking fund requirements and a $150,000 extraordinary gain on other such purchases, which will be applied to the final payment due on October 1, 2001.
Mr. Mel Knigin, Movie Star’s President and Chief Executive Officer commented, “We are disappointed in our sales levels in the second quarter and first half and are taking steps which we believe should remedy this situation. Howard Radziminsky, a skilled executive with 30 years of industry experience in our core intimate wear business, rejoined us as Senior Vice President of Sales at the start of this year and is focusing on strengthening our internal direct sales team. Coupled with our emphasis on fashion-forward products and the new Meant to BeÔ full line of loungewear and sundresses, we believe we should be able to make up most, if not all, of the first half’s year-to-year shortfall in sales, by the end of the current fiscal year.”
Mr. Knigin continued, “The continuing Company wide effort to enhance our gross margins was evident in the second quarter. Overall gross margin improved to 29.4% from 28.6% a year earlier and compared to 27.6% in the immediately preceding three months. We continued to experience operational inefficiencies in our domestic manufacturing operations until the sewing lines at our Virginia facility were closed at the end of January 2000. However, this was slightly more than offset by the benefits of our increased reliance on highly efficient offshore production, which resulted in gross margins increasing for the Company’s intimate apparel
Page 2
February 10, 2000
division to 28.3% from 27.9% in the prior year. The positive effects of tighter inventory controls, which can be seen in the 23% reduction in inventory at December 31, 1999 compared to the level twelve months earlier, should reduce the need for future markdowns and has contributed to lower interest costs. Lower inventory has also resulted in fewer markdowns in the retail division, allowing the gross margin in that division to reach 36.5% in the most recent three months compared to 33.0% in the prior year. Our long-term debt has been reduced by 27%, or $5.6 million, during the first six months of the fiscal year, significantly lowering interest costs and strengthening our balance sheet. Nearly all of the increase in selling, general, and administrative expenses for the first half was attributable to the start-up costs for the Meant to BeÔ line and the high fashion Flora Nikrooz lingerie line. Meant to BeÔ is now contributing to revenues, and after evaluating the relationship, the Company and Flora Nikrooz, mutually agreed to terminate their arrangements in December.”
Mr. Knigin concluded, “Now that we have moved nearly all of our production to offshore contractors and have successfully reduced our inventory levels, our major goal is to enhance revenue. With most of our costs being fixed, we anticipate that future sales growth will add quickly to our bottom line. We have also recently retained the investor relations consulting firm of SM Berger & Company, Inc. to aid us in communicating with investors and increase our visibility in the financial community.”
Certain of the matters set forth in this press release are forward-looking and involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: business conditions and growth in the industry; general economic conditions; addition or loss of significant customers; the loss of key personnel; product development; competition; foreign government regulations; fluctuations in foreign rates; rising costs for raw materials and the unavailability of sources of supply; the timing of orders booked; and the risk factors listed from time to time in the Company’s SEC reports.
MOVIE STAR,
INC. produces and sells ladies sleepwear, robes, leisurewear, loungewear,
panties and daywear and also operates 28 retail outlet stores.
CONTACT: INVESTOR RELATIONS:
Movie Star, Inc. -or- SM Berger & Company Inc.
Thomas Rende, CFO Steve Warcholak or Harry Millis
(212) 684-3400 (216) 464-6400
Page 3
February 10, 2000
MOVIE STAR, INC.
CONSOLIDATED CONDENSED BALANCE
SHEETS
(In Thousands)
|
December 31, |
|
June
30, |
|
1999 |
|
1999* |
|
(Unaudited) |
|
|
Assets
|
Current Assets |
|
|
|
Cash |
$ 2,801 |
$ 4,597 |
|
Receivables, net
|
10,012 |
6,864 |
|
Inventory |
11,046 |
16,460 |
|
Other assets |
2,336 |
2,585 |
|
Total current assets |
26,195 |
30,506 |
|
|
|
|
|
Property, plant and equipment, net |
3,349 |
3,495 |
|
Other assets |
2,758 |
2,758 |
|
|
|
|
|
Total
assets |
$32,302 |
$36,759 |
Liabilities and Stockholders’ Equity
|
Current Liabilities |
|
|
|
Current
maturities of capital lease obligations |
$ 51 |
$ 45 |
|
Accounts payable
and accrued expenses |
6,172 |
7,845 |
|
Total
current liabilities |
6,223 |
7,890 |
|
|
|
|
|
Long-term debt and capital lease obligations |
15,073 |
20,703 |
|
|
|
|
|
Commitments and Contingencies |
- |
- |
|
|
|
|
|
Stockholders’ equity |
|
|
|
Common
Stock $.01 par value – authorized 30,000,000
shares, issued 16,897,000 shares |
169 |
169 |
|
Additional
paid-in capital |
4,072 |
4,072 |
|
Retained
Earnings |
10,383 |
7,543 |
|
|
14,624 |
11,784 |
|
|
|
|
|
Less: Treasury
stock, at cost – 2,017,000 shares |
3,618 |
3,618 |
|
|
|
|
|
Total
stockholders’ equity |
11,006 |
8,166 |
|
|
|
|
|
Total liabilities and stockholders’ equity |
$32,302 |
$36,759 |
|
|
|
|
* Derived
from audited financial statements.
See notes
to consolidated condensed financial statements.
Page 4
February
10, 2000
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS
OF INCOME
(Unaudited)
(In Thousands, Except Per Share
Amounts)
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
|
Net sales |
$23,354
|
$25,789 |
|
$42,573 |
$44,747
|
|
|
|
|
|
|
|
|
Cost of sales |
16,478 |
18,403 |
|
30,387 |
31,704 |
|
|
|
|
|
|
|
|
Gross
profit |
6,876 |
7,386 |
|
12,186 |
13,043 |
|
|
|
|
|
|
|
|
Selling, general and administrative Expenses |
4,499 |
4,233 |
|
8,528 |
7,951 |
|
|
|
|
|
|
|
|
Income from
operations |
2,377 |
3,153 |
|
3,658 |
5,092 |
|
|
|
|
|
|
|
|
Gain on purchases of subordinated debentures and senior
notes |
(50) |
- |
|
(164) |
- |
|
|
|
|
|
|
|
|
Interest income |
(2) |
(2) |
|
(20) |
(3) |
|
|
|
|
|
|
|
|
Interest expense |
538 |
777 |
|
1,097 |
1,510 |
|
|
|
|
|
|
|
|
Income before
provision for income taxes |
|
|
|
|
|
|
and
extraordinary gain |
1,891 |
2,378 |
|
2,745 |
3,585 |
|
|
|
|
|
|
|
|
Provision for income taxes |
38 |
48 |
|
55 |
72 |
|
|
|
|
|
|
|
|
Income before
extraordinary gain |
1,853 |
2,330 |
|
2,690 |
3,513 |
|
|
|
|
|
|
|
|
Extraordinary gain on purchases of |
|
|
|
|
|
|
Subordinated
debentures |
(150) |
- |
|
(150) |
- |
|
|
|
|
|
|
|
|
Net income |
$ 2,003 |
$ 2,330 |
|
$ 2,840 |
$ 3,513 |
|
|
|
|
|
|
|
|
BASIC |
|
|
|
|
|
|
Income per share before extraordinary gain |
$.12 |
$.17 |
|
$.18 |
$.25 |
|
Extraordinary gain per share |
.01 |
- |
|
.01 |
- |
|
Net income per share |
$.13 |
$.17 |
|
$.19 |
$.25 |
|
|
|
|
|
|
|
|
DILUTED |
|
|
|
|
|
|
Income per share before extraordinary gain |
$.12 |
$.15 |
|
$.17 |
$.23 |
|
Extraordinary gain per share |
.01 |
- |
|
.01 |
- |
|
Net income per share |
$.13 |
$.15 |
|
$.18 |
$.23 |
|
|
|
|
|
|
|
|
Basic weighted average number of shares Outstanding |
14,880 |
14,117 |
|
14,880 |
14,117 |
|
|
|
|
|
|
|
|
Diluted weighted average number of shares Outstanding |
15,964 |
15,523 |
|
16,159 |
15,295 |
|
|
|
|
|
|
|