<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended DECEMBER 31, 2001
------------------------------------------------
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 13-3045573
- --------------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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.
- --------------------------------------------------------------------------------
Common Stock, $.01 par value - 3,513,854 shares outstanding as of
February 13, 2002
- --------------------------------------------------------------------------------
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
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 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 17
<Page>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MOTHERS WORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
<Table>
<Caption>
DECEMBER 31, SEPTEMBER 30,
2001 2001
----------------- ----------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,851 $ 10,358
Trade receivables 4,967 4,726
Inventories 69,997 73,090
Deferred income taxes 9,691 2,278
Prepaid expenses and other current assets 3,193 4,404
------------- ------------------
Total current assets 90,699 94,856
Property, Plant and Equipment, net 47,842 46,025
Assets Held for Sale 1,575 -
Other Assets:
Goodwill 54,597 29,886
Deferred financing costs, net of accumulated amortization of $3,172 and $2,788 1,515 1,640
Other intangible assets, net of accumulated amortization of $2,020 and $1,952 1,256 1,295
Deferred income taxes 13,488 10,858
Other non-current assets 614 617
------------- ------------------
Total other assets 71,470 44,296
------------- ------------------
$ 211,586 $ 185,177
============= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit $ 17,325 $ 32,229
Current portion of long-term debt 434 434
Accounts payable 18,765 13,244
Accrued expenses and other current liabilities 30,935 16,440
------------- ------------------
Total current liabilities 67,459 62,347
Long-Term Debt 96,744 96,179
Accrued Dividends on Series A Preferred Stock 6,848 7,055
Deferred Rent 4,951 4,855
Commitments and Contingencies (Note 3)
Series C Cumulative Redeemable Preferred Stock 18,235 -
Stockholders' Equity:
Series A cumulative convertible preferred stock, $.01 par value,
$280.4878 stated value, 2,000,000 shares authorized, 41,000 shares
issued, 35,193 and 38,409 shares outstanding, respectively
(liquidation value of $16,719 and $17,828, respectively) 9,871 10,773
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,
3,512,274 and 3,480,122 shares issued and outstanding, respectively 35 35
Additional paid-in capital 28,725 26,949
Accumulated deficit (21,282) (23,016)
------------- ------------------
Total stockholders' equity 17,349 14,741
------------- ------------------
$ 211,586 $ 185,177
============= ==================
</Table>
The accompanying notes are an integral part of these financial statements.
1
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------------
2001 2000
---------- ----------
Net sales $ 114,385 $ 102,670
Cost of goods sold 55,982 52,818
------------ ----------
Gross profit 58,403 49,852
Selling, general and administrative expenses 50,936 43,412
------------ ----------
Operating income 7,467 6,440
Interest expense 3,587 3,883
------------ ----------
Income before income taxes 3,880 2,557
Income tax provision 1,346 1,189
------------ ----------
Net income 2,534 1,368
Dividends on preferred stock 800 373
------------ ----------
Net income available to common stockholders $ 1,734 $ 995
============ ==========
Income per share - basic $ 0.49 $ 0.29
============ ==========
Average shares outstanding - basic 3,512 3,453
============ ==========
Income per share - diluted $ 0.46 $ 0.28
============ ==========
Average shares outstanding - diluted 3,764 3,606
============ ==========
</Table>
The accompanying notes are an integral part of these financial statements.
2
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
DECEMBER 31,
--------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,534 $ 1,368
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,431 2,588
Deferred taxes - 1,189
Amortization of deferred financing costs 125 125
Accretion of discount on Senior Notes 51 46
Provision for deferred rent 96 90
Changes in assets and liabilities:
(Increase) decrease in -
Trade receivables 154 (227)
Inventories 10,155 6,393
Prepaid expenses and other assets 1,573 140
Increase (decrease) in -
Accounts payable, accrued expenses and other current liabilities (192) 2,552
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,927 14,264
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of iMaternity, net of cash acquired 574 -
Purchase of property and equipment (2,143) (3,262)
Increase in intangibles (29) 478
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (1,598) (2,784)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in line of credit and cash overdrafts, net (13,867) (11,221)
Repayments of long-term debt (77) (191)
Repayment of debt assumed in acquisition of iMaternity (8,892) -
Proceeds from exercise of stock options - 17
----------- ----------
NET CASH USED IN FINANCING ACTIVITIES (22,836) (11,395)
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,507) 85
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,358 3,076
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,851 $ 3,161
=========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 543 $ 870
=========== ==========
Cash paid for income taxes $ 2,466 $ 63
=========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.
3
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements are prepared in
accordance with the requirements for Form 10-Q and Article 10 of Regulation S-X
and, accordingly, certain information and footnote disclosures have been
condensed or omitted. Reference should be made to the Form 10-K, as amended, as
of and for the year ended September 30, 2001 for Mothers Work, Inc. and
Subsidiary (the "Company") as filed with the Securities and Exchange Commission
for additional disclosures including a summary of the Company's accounting
policies.
In the opinion of management, the condensed 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 quarter ended December 31, 2001, a total of 120,350 options were
granted to certain employees for the purchase of the Company's common stock at
prices not less than the fair market value of the Company's common stock on the
date of grant.
In connection with the acquisition of iMaternity on October 17, 2001 (see Note
8), the Company issued to the sellers warrants to purchase 350,000 shares of the
Company's common stock at an exercise price of $22.50 per share, with an
estimated fair value of approximately $874,000. The Company obtained an
appraisal from an independent third party to determine the fair value of the
warrants. Based on this appraisal, the fair value of the warrants was estimated
at the date of issuance using the Black-Scholes pricing model with a 30%
discount applied due to lack of marketability. The following assumptions were
used in the pricing model: dividend yield of zero, risk free interest rate of
4.45%, volatility factor of the expected market price of the Company's common
stock of 60.0%, and an expected life equal to the contractual term of the
warrants of 7 years. The fair value of the warrants was recorded to additional
paid-in capital at the date of grant. The warrants were immediately vested upon
grant and are exercisable for 7 years. No warrants were exercised as of December
31, 2001.
3. COMMITMENTS AND 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 management 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")
Basic EPS is computed by dividing net income available to common stockholders by
the weighted average number of outstanding common shares. Diluted EPS is
computed based upon the weighted average number of outstanding common shares,
after giving effect to the potential dilutive effect from the assumed exercise
of stock options and warrants as well as the assumed conversion of dilutive
preferred stock and subordinated notes.
4
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
The following summarizes those effects for the diluted EPS calculation (in
thousands, except per share amounts):
<Table>
<Caption>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
-------------------------------- ------------------------------
EARNINGS EARNINGS
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
------- ------ --------- ------ ------ ----------
Basic EPS $1,734 3,512 $0.49 $995 3,453 $0.29
===== =====
Incremental shares from the
Assumed exercise of outstanding
stock options and warrants - 160 - 153
Assumed conversion of
subordinated notes 7 92 - -
------ ----- ---- ----
Diluted EPS $1,741 3,764 $0.46 $995 3,606 $0.28
====== ===== ===== ==== ===== =====
</Table>
Options to purchase 679,255 and 626,021 shares were outstanding as of December
31, 2001 and 2000, respectively, but were not included in the computation of
diluted EPS as their effect would have been antidilutive.
During the first quarter of fiscal 2002, a holder of the Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") elected to
convert 3,215 shares with a stated value of $0.9 million into shares of
common stock at an initial conversion rate equal to ten shares of common
stock for each share of Series A Preferred Stock. The Company was restricted
under the terms of the $92,000,000 of 12 5/8% Senior Unsecured Exchange Notes
due 2005 (the "Senior Notes"), from paying cash dividends to the holder upon
conversion. Accordingly, the Company issued a $0.6 million subordinated note
on which unpaid interest will accumulate and compounding annually at the
prime rate until paid. The subordinated notes are convertible into common
stock, in accordance with the terms of those notes, after August 1, 2003. The
35,194 and 41,000 shares of Series A Preferred Stock outstanding at December
31, 2001 and 2000, respectively, convertible into 351,940 and 410,000 shares
of common stock, respectively, were determined to be antidilutive and
therefore excluded from the EPS computation.
Additionally, in connection with the acquisition of iMaternity on October 17,
2001 (see Note 8), the Company issued 302,619 shares of Series C Cumulative
Redeemable Preferred Stock (the "Series C Preferred Stock") with detachable
warrants. The Series C Preferred Stock is convertible into common stock only
if the Company defaults on its obligation under the provisions of the put
right which gives the holders of the Series C Preferred Stock the right,
under certain circumstances, to require the Company to purchase their shares
of Series C Preferred Stock for cash. All of the shares of Series C Preferred
Stock and warrants were outstanding as of December 31, 2001 and were excluded
from the EPS computations as their effect would be antidilutive.
The Company's outstanding antidilutive options, warrants and shares of Series A
and Series C Preferred Stock could potentially dilute EPS in the future.
5
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
5. INVENTORIES
Inventories were comprised of the following (in thousands):
<Table>
<Caption>
DECEMBER 31, 2001 SEPTEMBER 30, 2001
------------------ -------------------
Finished goods $60,496 $61,535
Work-in-progress 2,386 3,486
Raw materials 7,115 8,069
------- -------
$69,997 $73,090
======= =======
</Table>
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities were comprised of the
following (in thousands):
<Table>
<Caption>
DECEMBER 31, 2001 SEPTEMBER 30, 2001
------------------ -------------------
Salaries, wages, and employee benefits $ 8,237 $ 5,274
Restructuring costs (Notes 8 and 9) 8,081 128
Interest 5,046 2,179
Sales tax 2,196 1,763
Insurance 1,029 961
Rent 1,426 676
Professional fees 752 648
Income taxes payable 1,188 2,308
Other 2,980 2,503
-------- -------
$ 30,935 $16,440
======== =======
</Table>
Interest payments are made semiannually in February and August to the holders of
the Senior Notes.
7. ACCOUNTING FOR GOODWILL
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS No.
141") and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 141 also specifies the
criteria applicable to intangible assets acquired in a purchase method business
combination to be recognized and reported apart from goodwill. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead be tested for impairment at least annually.
SFAS No. 142 further requires that goodwill and intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and be reviewed for impairment.
The Company adopted SFAS No. 141 and 142 effective October 1, 2001. In
adopting SFAS No. 142, the Company no longer amortizes goodwill. The
following table reflects the adjustment to exclude goodwill amortization
expense recognized in the prior period as presented (in thousands, except per
share amounts):
6
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
<Table>
<Caption>
FOR THE THREE MONTHS ENDED DECEMBER 31,
---------------------------------------
2001 2000
---- ----
Reported net income $2,534 $1,368
Add back goodwill amortization - 550
------ ------
Adjusted net income 2,534 1,918
Dividends on Preferred Stock 800 373
------ ------
Adjusted net income available to common stockholders $1,734 $1,545
====== ======
Income per share - basic:
Reported net income $0.49 $0.29
Goodwill amortization - 0.16
----- -----
Adjusted net income $0.49 $0.45
===== =====
Income per share - diluted:
Reported net income $0.46 $0.28
Goodwill amortization - 0.15
----- -----
Adjusted net income $0.46 $0.43
===== =====
</Table>
As of October 1, 2001, management determined that the Company had one reporting
unit for purposes of applying SFAS No. 142 based on its reporting structure. The
Company has made its initial assessment of impairment for the transition period
as of October 1, 2001. The fair value of the Company's single reporting unit was
determined based on the then fair market value of the Company's outstanding
common stock on a control basis. Based on this initial assessment, no impairment
loss was recognized. The Company plans to perform an annual assessment for
goodwill impairment at the end of each fiscal year or as impairment indicators
arise.
A summary of changes in the carrying amount of goodwill for the first three
months of fiscal 2002 is as follows (in thousands):
<Table>
Goodwill, net, at September 30, 2001 $29,886
Add: goodwill recorded in the acquisition of iMaternity (see Note 8) 24,711
-------
Goodwill, net, at December 31, 2001 $54,597
=======
</Table>
8. ACQUISITION
On October 17, 2001 (the "Acquisition Date"), the Company acquired all of the
outstanding equity interests of eSpecialty Brands, LLC ("iMaternity(R)") for
approximately $19,683,000, including transaction costs. The purchase price
consisted of 302,619 shares of Series C Cumulative Redeemable Preferred Stock
valued at an estimated $58.88 per share, or $17,819,000, as determined by an
independent third party appraiser, detachable warrants to purchase 350,000
shares of the Company's common stock with an estimated fair value of $874,000
(see Note 2), and transaction costs of approximately $990,000. The excess by
which the stated value of the Series C Preferred Stock exceeds its carrying
value is being accreted to the earliest redemption date using the effective
interest method. This accretion is recorded as dividends in the accompanying
consolidated statement of operations. Additionally, the holders of the Series
C Preferred Stock are entitled to receive dividends at an annual rate of
8.625% of the stated value, compounding quarterly. The discount accretion and
the dividends on the Series C Preferred Stock are included in the carrying
value of the Series C Preferred Stock in the accompanying consolidated
balance sheets.
The acquisition has been accounted for under the purchase method of accounting,
and the results of operations of iMaternity are included in the Company's
results of operations from the Acquisition Date. Prior period results have not
been restated. Assets acquired and liabilities assumed have been recorded
7
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
at their estimated fair values. The recorded values of assets acquired and
liabilities assumed are preliminary and subject to adjustment pending final
determination of their acquisition values.
Based on the preliminary allocation of purchase price, the application of the
purchase method resulted in approximately $24,711,000 of excess purchase
price over the estimated fair value of the net tangible assets acquired of
$9,820,000 less costs to exit certain operations and locations of iMaternity
and related fixed asset writedowns totaling $14,848,000. While the Company
recognizes that certain identifiable intangible assets were acquired,
primarily trademarks, trade names, and Internet domain names, based on the
nature of the items and use within the Company's business and industry, no
value was assigned to any of the identifiable intangibles. A preliminary
analysis resulted in the excess purchase price being assigned to goodwill.
In connection with the purchase price allocation, the fair value of the
acquired finished goods inventory was based on a preliminary estimate of the
net realizable value of the inventory less estimated costs to dispose. A
significant portion of the acquired inventory is expected to be sold at
substantial discount in connection with store closures or required changes in
assortment mix at the acquired stores to align with the Company's
merchandising strategies. The Company expects to be able to finalize its
estimates related to the net realizable value of the acquired merchandise
during the second quarter of fiscal 2002.
Additionally, as part of the purchase price allocation, the Company recorded
$1.7 million of vendor-related liabilities that were not disclosed by the
sellers at the Acquisition Date. Further, there are also amounts being
claimed as due from iMaternity by a number of vendors that are currently
being investigated, but which have not yet been established as legal
liabilities as of the Acquisition Date and, accordingly, have not been
recorded. The amount of liabilities and goodwill recorded in the purchase
price allocation could increase for additional vendor-related liabilities not
yet identified. All of these liabilities are currently in dispute and the
Company is seeking adjustment of the purchase price under the indemnification
provisions of the acquisition agreement. Any adjustments, if obtained, would
reduce the value of the Series C Preferred Stock and the corresponding
goodwill recorded in connection with the transaction.
At the Acquisition Date, iMaternity operated a total of 170 Dan-Howard and
Mothertime maternity clothing stores, including some under the trade name
iMaternity, and the online iMaternity.com website. The Company developed a
plan in conjunction with the acquisition to close approximately 92 iMaternity
stores and reopen the remaining acquired locations under the Company's
existing store concepts of Motherhood and Mimi Maternity. Further, the plan
included the shutdown of iMaternity's corporate headquarters and warehouse
operation in Chicago, as well as its manufacturing and warehousing facilities
in Costa Rica. In connection with the plan, the Company recorded severance
costs for involuntarily terminated employees of the acquired business of
$2,922,000, lease termination fees and related legal costs of $4,200,000, a
writedown of fixed assets totaling $5,771,000 based on the remaining net book
value of the assets to be disposed of or sold and the estimated sale
proceeds, and accrued for other costs to be incurred to complete the exit
activities of the acquired business totaling $1,955,000. Approximately 850
employees are expected to be terminated as part of the plan, consisting of
528 corporate and 322 store employees. It is anticipated that the entire
integration plan will be substantially completed within 12 months of the
Acquisition Date.
During the first quarter of fiscal 2002, the Company closed 20 iMaternity stores
(5 of which were closed simultaneously with the acquisition), the corporate
headquarters and warehouse operation in Chicago, an Internet-related development
center in San Diego, California and other domestic warehousing facilities. The
iMaternity manufacturing and warehousing operations in Costa Rica have been
operationally shut down. The carrying value of the Costa Rica facility was
reduced to its estimated realizable value as of the Acquisition Date, which was
determined based on a market survey received from an independent third party,
and is classified as "Assets Held for Sale" in the accompanying unaudited
consolidated balance sheet as of December 31, 2001. During January 2002, the
Company closed 49 stores and, in accordance
8
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
with its plan, currently expects to close an additional 23 store locations
within the next nine months. The timing of the store closures is dependent upon
the Company's ability to negotiate and complete the remaining lease
terminations.
During the first quarter of fiscal 2002, in connection with the store
closures and the shutdown of the corporate headquarters and warehouse
operation in Chicago, the Internet-related development center in San Diego,
California, and the iMaternity manufacturing and warehousing operations in
Costa Rica, the Company terminated 137 employees, to whom $84,000 in accrued
severance was paid out and charged against the liability. As of December 31,
2001, the remaining severance accrual of $1,503,000 relates to the remaining
16 corporate and 231 store employees that will be terminated upon the closure
of the remaining 72 store locations, as planned.
A summary of the charges incurred against the reserves recorded in connection
with the iMaternity acquisition exit/restructuring activities during the first
quarter of fiscal 2002 is as follows (in thousands):
<Table>
<Caption>
Reserves Recorded in Balance as of
Purchase Accounting Charges December 31, 2001
------------------- ------- -----------------
Lease termination fees $4,200 $ 56 $ 4,144
Severance 2,922 276 3,646
Exit costs 1,955 664 1,291
Fixed asset write-downs 5,771 5,771 0
------ ------- --------
$14,848 $ 6,767 $ 8,081
======= ======= ========
</Table>
The following table displays the net non-cash assets that were acquired during
the three months ended December 31, 2001, as a result of the iMaternity
acquisition (in thousands):
<Table>
Non-cash assets (liabilities):
Inventory $7,062
Property, plant and equipment 3,612
Other current assets 8,166
Other assets 2,630
Goodwill 24,711
Current liabilities (19,170)
Debt (8,892)
--------
Net non-cash assets acquired 18,119
Less: Preferred stock issued (17,819)
Warrants issued (874)
--------
Cash acquired from the acquisition of iMaternity ($574)
========
</Table>
The following unaudited pro forma summary (in thousands except per share
amounts) combines the consolidated results of operations of Mothers Work, Inc.
and iMaternity as if the transaction occurred as of the beginning of the
respective periods presented giving effect to certain adjustments including
recognition of an income tax benefit for operating losses generated by the
acquired business, recognition of accrued and unpaid dividends on the Series C
Preferred Stock, discount accretion associated with the Series C Preferred
Stock, and reduction in depreciation expense as a result of the revaluation of
property, plant and equipment. This pro forma summary is not necessarily
indicative of the results of operations that would have occurred if the Company
and iMaternity had been combined during such periods. Moreover, the pro forma
summary is not intended to be indicative of the results of operations that may
be attained in the future.
9
<Page>
MOTHERS WORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
(unaudited)
<Table>
<Caption>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
(IN THOUSANDS)
-------------------------------------------
2001 2000
--------------------- ------------------
Revenue $116,582 $115,465
Operating income 6,626 5,332
Net income $1,887 586
Net income (loss) to common stockholders $999 ($292)
Income (loss) per share - basic $0.28 ($0.08)
Income (loss) per share - diluted $0.27 ($0.08)
</Table>
The sales from the acquired stores planned for closure was approximately $2.4
million during the three months ended December 31, 2001.
9. RESTRUCTURING CHARGES
During fiscal 1998, the Company announced that it would close or convert all of
its non-maternity Episode stores into maternity clothing stores. In connection
with the restructuring plan, the Company recorded accrued restructuring charges
of $10.6 million. As of September 30, 2001 and December 31, 2001, the balance of
the $0.1 million remaining reserve will be used for any final legal and other
lease transfer fees.
10. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 is effective for fiscal years beginning after June
15, 2002, and addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. Although early adoption is encouraged, the Company plans
to adopt this statement in fiscal 2003. Adoption of SFAS No. 143 is not expected
to have a material impact on the Company's financial position or results of
operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which establishes a single accounting model,
based on the framework established in SFAS No. 121, "Accounting for the
Impairment of Long-lived Assets and Long-lived Assets to be Disposed of," and
resolves significant implementation issues related to SFAS No. 121. SFAS No. 144
superceded SFAS No. 121 and Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of a Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 and early adoption is
encouraged. The Company plans to adopt this statement in fiscal 2003. Management
believes that the adoption of SFAS No. 144 will not have a material impact on
its financial condition or results of operations.
10
<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 net
sales and as a percentage change for the periods indicated:
<Table>
<Caption>
% PERIOD TO PERIOD
PERCENTAGE OF NET SALES INCREASE (DECREASE)
----------------------- --------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31, 2001 AND 2000
------------------ --------------------------
2001 2000
---- ----
Net sales 100.0% 100.0% 11.4%
Cost of goods sold 48.9 51.4 6.0
------ ------
Gross profit 51.1 48.6 17.2
Selling, general and
administrative expenses 44.6 42.3 17.3
------ ------
Operating income 6.5 6.3 15.9
Interest expense 3.1 3.8 (7.6)
------ ------
Income before income taxes 3.4 2.5 51.7
Income tax provision 1.2 1.2 13.2
------ ------
Net income 2.2% 1.3% 85.2%
------ ------
</Table>
The following table sets forth certain information concerning the number of
Company-owned stores and leased departments for the three months ended December
31:
<Table>
<Caption>
2001 2000
--------------------------------------------------- ------------------------------------------
MATERNITY LEASED MATERNITY LEASED
STORES DEPARTMENTS TOTAL STORES DEPARTMENTS TOTAL
--------- ----------- ----- --------- ----------- --------
Beginning of period 639 132 771 592 111 703
Opened 18 1 19 22 21 43
Acquired 170 - 170 - - -
Closed (21) - (21) (1) - (1)
---- ---- ---- ----- ---- ----
End of period 806 133 939 613 132 745
==== ==== ==== ==== ==== ====
</Table>
11
<Page>
THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
NET SALES
Net sales of $114.4 million for the first quarter of fiscal 2002 were $11.7
million (11.4%) higher than the $102.7 million reported for the first quarter of
fiscal 2001. The sales increase reflects primarily the incremental revenues
generated by the 44 net maternity locations opened since December 31, 2000 and
the added iMaternity stores sales since October 17, 2001. Comparable store sales
decreased 2.5% during the first quarter of fiscal 2002 (based on 687 locations)
versus a comparable store sales increase of 1.5% during the first quarter of
fiscal 2001 (based on 615 locations). The decline in comparable store sales is
primarily due to the continuing difficult economic environment and the resulting
lower consumer confidence.
GROSS PROFIT
First quarter fiscal 2002 gross profit increased by $8.5 million (17.2%) to
$58.4 million (51.1% of sales) compared to $49.9 million (48.6% of sales) for
the first quarter of fiscal 2001 due principally to the increased sales as well
as improved gross margin compared to the first quarter of fiscal 2001. The 2.5
percentage point improvement in gross margin primarily reflects the success of
the Company's product sourcing and inventory planning initiatives, which have
enabled the Company to realize lower product costs. Tighter controls over
managing inventory levels and lower shipping costs also served to strengthen
gross margin in the first quarter of fiscal 2002.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first quarter of fiscal
2002 increased by $7.5 million (17.3%) to $50.9 million from $43.4 million for
the first quarter of fiscal 2001. Increased wages and benefit-related costs of
$3.5 million and store rents of $3.1 million resulted from the increased number
of stores operated by the Company compared to the first quarter of fiscal 2001.
In accordance with the implementation of the new accounting standards, the
Company is not amortizing goodwill in fiscal 2002. Amortization of goodwill
totaled $0.5 million for the first quarter of fiscal 2001. Operating expenses
increased from 42.3% to 44.6% of net sales due principally to the negative
effect on expense leverage of the 2.5% comparable store sales decrease for the
quarter, as well as the relatively higher operating expenses as a percent of net
sales of the acquired iMaternity stores.
OPERATING INCOME
Operating income improved to $7.5 million (6.5% of net sales) in the first
quarter of fiscal 2002 compared to $6.4 million (6.3% of net sales) in the first
quarter of fiscal 2001. The $1.1 million increase is primarily due to the higher
sales volume and improved gross margin, offset, in part, by higher operating
expenses. The improvement in operating income as a percentage of sales is due to
the improved gross margin, largely offset by an increase in operating expenses
as a percentage of net sales.
INTEREST EXPENSE
The Company reduced interest expense by $0.3 million for the first quarter of
fiscal 2002 compared to the same period in fiscal 2001 by maintaining lower
average borrowings under its $56.0 million working capital facility (the
"Working Capital Facility") coupled with a lower interest rate on borrowings
under the Working Capital Facility. Borrowings under the Working Capital
Facility were $17.3 million at December 31, 2001 and $20.5 million at December
31, 2000. The effective interest rate on borrowings under the Working Capital
Facility decreased to 4.7% for the first quarter of fiscal 2002 from 8.9% for
the first quarter of fiscal 2001, primarily reflecting the decrease in the prime
rate of interest and in LIBOR interest rates since the first quarter of fiscal
2001.
12
<Page>
INCOME TAXES
The Company's effective tax rate decreased to 34.7% in the first quarter of
fiscal 2002 from 46.5% in the first quarter of fiscal 2001. The reduction in the
effective tax rate reflects the increase in pre-tax income relative to the
elimination of non-deductible goodwill amortization in the first quarter of
fiscal 2002.
SEASONALITY
The Company's business, like that of other retailers, is seasonal. A significant
portion of the Company's net sales and profits are realized during the first and
third fiscal quarters, corresponding to the holiday and Spring selling seasons,
respectively. Results for any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year. Quarterly results may
fluctuate materially depending upon, among other things, the timing of new store
openings, net sales and profitability contributed by new stores, increases or
decreases in comparable store sales, adverse weather conditions, shifts in the
timing of certain holidays and promotions, and changes in the Company's
merchandise mix.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 2002, the Company's primary sources of
working capital were the $16.9 million of cash flow from operations in addition
to borrowings under the Working Capital Facility. On October 17, 2001, the
Working Capital Facility was amended to increase the collateral base to include
the acquired assets of iMaternity and to include the acquired entities as
borrowers under the Working Capital Facility. Pursuant to the terms of the
Working Capital Facility, which matures on September 15, 2004, interest on
borrowings outstanding is currently based on the lender's prime rate or, at the
Company's election, an alternative rate of LIBOR plus 200 basis points for all
or part of the direct borrowings outstanding. The blended rate for all
borrowings under the Working Capital Facility at December 31, 2001 was
approximately 4.1%. Amounts available for direct borrowings, net of letters of
credit outstanding, are limited to the lesser of (a) the unused portion of the
Working Capital Facility or (b) the Aggregate Adjusted Availability ("AAA"), as
defined in the agreement as a percentage of eligible inventory and receivables.
The Working Capital Facility is secured by a security interest in the Company's
inventory, equipment, fixtures and cash. There are no financial covenant
requirements in the agreement unless the AAA falls below $10.0 million. In such
event, the Company would have to achieve Minimum Cash Flow, as defined in the
agreement, of not less than zero. During the first quarter of fiscal 2002 and
2001, the Company exceeded the AAA minimum. As of December 31, 2001, outstanding
borrowings under the Working Capital Facility consisted of $17.3 million in
direct borrowings and $2.8 million in letters of credit with available
borrowings of $31.1 million compared to $20.5 million of direct borrowings and
$3.0 million in letters of credit and available borrowings of $24.8 million as
of September 30, 2001. In addition to the direct borrowings, a $4.0 million
standby letter of credit remains outstanding to collateralize an Industrial
Revenue Bond.
The Company's cash needs have been primarily for debt service, furniture,
buildouts of new store locations, increased inventories to support the
additional locations and building improvements and equipment for its existing
stores and corporate headquarters. During the first quarter of fiscal 2002, the
Company spent $2.1 million in capital expenditures, including $1.8 million on
furniture, fixtures, and leasehold improvements for new store facilities
(primarily Motherhood stores) and improvements to existing stores, in addition
to another $0.3 million for corporate additions and other assets. The Company
spent $3.3 million during the first quarter of fiscal 2001, including $2.7
million for new and existing store facilities and $0.6 million for corporate
additions and other assets.
Cash flow from operations increased by $2.6 million to $16.9 million for the
first quarter of fiscal 2002 compared to $14.3 million for the first quarter of
fiscal 2001. The increase was primarily the result of increased cash generated
by the reduction of inventory levels compared to the first quarter of 2001.
During the first quarter of fiscal 2002, the company utilized its cash flow from
operations primarily to reduce its borrowings under the Working Capital Facility
by $14.9 million, from $32.2 million at September 30, 2001 to $17.3 million at
December 31, 2001. In addition, during the first quarter of fiscal 2002 (and
immediately following the October 17, 2001 acquisition of iMaternity), the
Company repaid $8.9 million of debt assumed in the iMaternity acquisition with
excess cash balances as of the acquisition date.
13
<Page>
During the first quarter of fiscal 2002, certain shares of Series A Preferred
Stock were converted at the election of the holder into shares of common stock
at an initial conversion rate equal to ten shares of common stock for each share
of Series A Preferred Stock, at a stated value of $0.9 million. The Company was
restricted under the terms of its senior debt from paying cash dividends to the
holder upon conversion. Accordingly, the Company issued a $0.6 million
subordinated note with unpaid interest compounding annually at the prime rate,
as defined, until paid. The subordinated note is convertible into common stock,
in accordance with the note terms, after August 1, 2003.
Management of the Company believes that its current cash and working capital
positions, expected operating cash flows as well as available borrowing capacity
under the Working Capital Facility will be sufficient to fund the Company's
working capital and debt repayment requirements for the next twelve months.
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 2002 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, the ability to successfully consolidate and integrate the
iMaternity chain and organization, changes in weather patterns, availability of
suitable store locations at appropriate terms, continued availability of capital
and financing, ability to develop and merchandise and 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 beyond the Company's control.
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 changes
chosen reflects the Company's view of changes that are reasonably possible over
a one-year period. The Company's financial instruments consist principally of
its debt portfolio. 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, 2001, the principal components of the Company's debt portfolio
are the $92 million of Senior Unsecured Exchange Notes due 2005 (the "Notes")
and the $56.0 million working capital facility (the "Working Capital Facility"),
both of which are denominated in US dollars. The Notes bear interest at a fixed
rated of 12 5/8%, and the Working Capital Facility bears interest at a variable
rate which, at December 31, 2001, was approximately 4.1%. 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 value of the
financial instrument.
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, 2001 with all other variables held constant. A
100 basis point increase in market interest rates would result in a decrease in
the value of the debt by $0.9 million at December 31, 2001. Conversely, a 100
basis point decline in market interest rates would cause the debt value to
increase by $0.9 million at December 31, 2001.
Based on the variable rate debt included in the Company's debt portfolio at
December 31, 2001, a 100 basis point increase in interest rates would result in
an additional $0.1 million of interest incurred for the quarter. A 100 basis
point decrease would correspondingly lower interest expense for the quarter by
$0.1 million.
14
<Page>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) None.
(b) In connection with the Acquisition (defined and described in Item 2(c)),
the Company issued the Series C Preferred Shares and the Warrants (each as
defined and described in Item 2(c)). The general effect of the issuance of
the Series C Preferred Shares and the Warrants on holders of the Common
Stock are as described in this Item 2(b).
The rights and preferences relating to dividends and distributions upon
liquidation of the Series C Preferred Shares are senior to those of the
Common Stock. The holders of Series C Preferred Shares have the right to
receive in a liquidation, dissolution or winding up of the Company, after
payment to the holders of the outstanding shares of the Company's Series A
Preferred Stock, par value $.01 per share, and before any payments to
holders of junior stock, which includes the Common Stock, an amount per
share equal to the stated value plus the greater of accrued dividends or
the "participation amount." The "participation amount" is an amount equal
to 10% of the increase in the market value per share of Common Stock for
the period from the closing (using the average closing price per share of
Common Stock for the five trading days before closing) until the date of
liquidation, dissolution or winding up of the Company. Beginning on the
earlier of October 18, 2006 or a "change of control" or other "fundamental
transaction" of the Company (as such terms are defined in the Series C
Cumulative Preferred Stock Certificate of Designation, filed with the
Secretary of State of Delaware on October 17, 2001 (the "Certificate of
Designation")), the holders of outstanding Series C Preferred Shares have
the right to require the Company to purchase their shares for a purchase
price per share equal to the stated value plus accrued dividends (the "Put
Right"). If the Company defaults on its obligations under the Put Right,
the holders of outstanding Series C Shares have the right to convert their
Series C Preferred Shares into shares of Common Stock, on the terms
described in the Certificate of Designation, provided, that, in no event
shall the aggregate number of shares of Common Stock issued upon such
conversion plus 350,000 (the number of shares of Common Stock underlying
the Warrants) exceed an amount equal to 19.9% of the number of outstanding
shares of Common Stock immediately before the merger. Beginning on April
18, 2004, the Company has the right to purchase (the "Call Right") the
outstanding Series C Preferred Shares for a purchase price per share equal
to stated value plus the greater of accrued dividends or the "participation
amount" (described above). Under the terms of the Merger Agreement, at any
time after closing the Company has the right to make an offer to purchase
all outstanding Series C Preferred Shares at a purchase price per share of
stated value plus accrued dividends. If a majority of the holders of
outstanding Series C Preferred Shares fail to accept such offer to
purchase, then such holders forfeit their Warrants or, if any Warrant has
been exercised and the underlying shares of Common Stock have been sold by
any holder, then such holder forfeits accrued dividends on such holder's
Series C Preferred Shares. Further, upon such failure to accept such an
offer to purchase, all holders of outstanding Series C Preferred Shares
forfeit certain protective provisions under the Merger Agreement, including
prohibitions on issuing senior or parity stock, and redeeming junior
securities. In addition, each Series C Preferred Share is entitled to one
vote and votes together with the holders of the Common Stock as a single
class.
The Warrants are exercisable until October 17, 2008. Beginning on October
17, 2004, the Company has the right to require the Warrant holders to
exercise their Warrants if the last reported sales price of the Common
Stock equals or exceeds $40.00 per share for at least 90 consecutive
trading days. The holder of each Warrant has the right to require the
Company to take all necessary action to enable such holder to sell such
holder's shares of Common Stock issued upon exercise of the Warrant
pursuant to Rule 144 of the Securities Act of 1933, as amended, or a
registration statement on Form S-2 or S-3.
15
<Page>
(c) On October 17, 2001, the Company completed its acquisition (the
"Acquisition") of eSpecialty Brands, LLC ("iMaternity") pursuant to an
Agreement and Plan of Merger (the "Merger Agreement"), dated October 15,
2001, by and among the Company, iMaternity Acquisition Corp., a
wholly-owned subsidiary of the Company ("Newco"), iMaternity and the
holders of all of the outstanding equity interests of iMaternity (the
"Sellers"). The Sellers consisted of Daniel S. Kirsch, as Trustee of the
Daniel S. Kirsch Trust dated October 8, 1986, James R. Kirsch, William S.
Kirsch, a corporation owned by James and William Kirsch, Centre Capital
Investors, III, L.P. ("Centre Capital") and certain of its affiliates
(together with Centre Capital, "Centre Partners"). Pursuant to the Merger
Agreement, Newco merged with and into iMaternity with iMaternity surviving
as a wholly-owned subsidiary of the Company. Pursuant to the merger, all
outstanding equity interests of iMaternity were converted into the right to
receive, in the aggregate, 302,619 shares of the Company's Series C
Cumulative Preferred Stock, par value $.01 per share, with an aggregate
stated value of $19.5 million (the "Series C Preferred Shares"), and
warrants to purchase 350,000 shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), at a price of $22.50 per share
(the "Warrants"). The merger consideration was determined by arms-length
negotiations between the Company and the Sellers.
The Series C Preferred Shares and the Warrants were issued without
registration per reliance on the exemption under Rule 506 of the Securities
Act of 1933, as amended. The Company relied on representations and
warranties of the Sellers in the Merger Agreement relating to their status
as "accredited investors" (as defined in Regulation D of the Securities Act
of 1933, as amended) as well as their investment intent and sophistication
to determine that the exemption under Rule 506 was available.
16
<Page>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description
- ----------------------- ----------------------------------------------------
2.1* Agreement and Plan of Merger, dated October 15, 2001
(the "Merger Agreement"), by and among the Company,
iMaternity Acquisition Corp., eSpecialty Brands, LLC,
Maternity Holding Corporation, James R. Kirsch,
William S. Kirsch, Daniel S. Kirsch, as Trustee of
the Daniel S. Kirsch Trust dated October 8, 1986,
Centre Capital Investors III, L.P., Centre Capital
Individual Investors III, L.P., Centre Capital
Offshore Investors III, L.P., Centre Capital
Tax-Exempt Investors III, L.P. and Centre Partners
Coinvestment III, L.P. (Exhibit 2.1 to the Current
Report on Form 8-K filed on November 1, 2001 (the
"November 2001 Form 8-K")).
4.1* Amendment No. 2 to the Amended and Restated Rights
Agreement, dated October 24, 2001, between the
Company and StockTrans, Inc. (Exhibit 4.8 to the
Current Report on Form 8-K filed on October 25,
2001).
4.2* Certificate of Designation for the Series C
Cumulative Preferred Stock of the Company (Exhibit
4.9 to the November 2001 Form 8-K).
4.3* Form of Warrant to Purchase Common Stock, dated
October 17, 2001, issued by the Company to each of
the sellers under the Merger Agreement (Exhibit 4.10
to the November 2001 Form 8-K).
10.1 Additional Borrower Joinder Supplement dated October
17, 2001 of Dan Howard Industries, Inc., eSpecialty
Brands, LLC and Mother's Stores, Inc. joining that
certain Loan and Security Agreement dated as of April
24, 1998, as amended, among Mothers Work, Inc., Cave
Springs, Inc. and Fleet Capital Corporation.
*Incorporated by reference.
(b) Reports on Form 8-K.
On October 25, 2001, the Company filed a Form 8-K to further amend its Amended
and Restated Rights Agreement, dated as of March 17, 1997 between the Company
and StockTrans, Inc. to revise the definition of "Exempt Person" to include
Centre Capital Investors III, L.P., Centre Capital Individual Investors III,
L.P., Centre Capital Offshore Investors III, L.P., Centre Capital Tax-Exempt
Investors III, L.P., Centre Partners Coinvestment III, L.P. and Centre Partners
Management, LLC.
On November 1, 2001, the Company filed a current report on Form 8-K regarding
the Company's acquisition of iMaternity.
On December 31, 2001, the Company filed a Form 8-K/A to amend the Current Report
on Form 8-K filed on November 1, 2001 regarding the Company's acquisition of
iMaternity. The purpose of this amendment was to provide the financial
statements of the business acquired as required by Item 7(a) and the pro forma
financial information as required by Item 7(b).
17
<Page>
TABLE OF EXHIBITS
Exhibit No. Description
- ------------------------- ----------------------------------------------------
2.1* Agreement and Plan of Merger, dated October 15, 2001
(the "Merger Agreement"), by and among the Company,
iMaternity Acquisition Corp., eSpecialty Brands, LLC,
Maternity Holding Corporation, James R. Kirsch,
William S. Kirsch, Daniel S. Kirsch, as Trustee of
the Daniel S. Kirsch Trust dated October 8, 1986,
Centre Capital Investors III, L.P., Centre Capital
Individual Investors III, L.P., Centre Capital
Offshore Investors III, L.P., Centre Capital
Tax-Exempt Investors III, L.P. and Centre Partners
Coinvestment III, L.P. (Exhibit 2.1 to the Current
Report on Form 8-K filed on November 1, 2001 (the
"November 2001 Form 8-K"))
4.1* Amendment No. 2 to the Amended and Restated Rights
Agreement, dated October 24, 2001, between the
Company and StockTrans, Inc. (Exhibit 4.8 to the
Current Report on Form 8-K filed on October 25,
2001).
4.2* Certificate of Designation for the Series C
Cumulative Preferred Stock of the Company (Exhibit
4.9 to the November 2001 Form 8-K).
4.3* Form of Warrant to Purchase Common Stock, dated
October 17, 2001, issued by the Company to each of
the sellers under the Merger Agreement (Exhibit 4.10
to the November 2001 Form 8-K).
10.1 Additional Borrower Joinder Supplement dated October
17, 2001 of Dan Howard Industries, Inc., eSpecialty
Brands, LLC and Mother's Stores, Inc. joining that
certain Loan and Security Agreement dated as of April
24, 1998, as amended, among Mothers Work, Inc., Cave
Springs, Inc. and Fleet Capital Corporation.
18
<Page>
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.
Date: February 14, 2002 By: /s/ Dan W. Matthias
--------------------------------------
Dan W. Matthias
CHIEF EXECUTIVE OFFICER
AND
CHAIRMAN OF THE BOARD
Date: February 14, 2002 By: /s/ Edward M. Krell
--------------------------------------
Edward M. Krell
SR. VICE PRESIDENT -
CHIEF FINANCIAL OFFICER
19