SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





ý
                
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the quarterly period ended July 4, 2009ORo
                
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from ________________ to
      ________________





Commission
file number:  001-32568





MAIDENFORM
BRANDS, INC.


(Exact
name of registrant as specified in its charter)





Delaware
              
              06-1724014(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)485F
      US Hwy 1 South, Iselin, NJ
              
              08830(Address
      of principal executive offices)
              
              (Zip
      Code)





(732)
621-2500


(Registrant’s
telephone number, including area code)





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
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes o                           No  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer ̈
                Accelerated filerx
                Non-accelerated filer ̈
                Smaller reporting company ̈(Do
      not check if smallerreporting
      company)





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes oNo  x





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





Class
              
              Outstanding
      at August 7, 2009[Common
      Stock, $0.01 par value per share]
              
              23,327,916
      shares







INDEX





PAGEPART
      I - FINANCIAL INFORMATIONItem 1. Financial Statements
      (Unaudited)Condensed Consolidated Balance
      Sheets at July 4, 2009 and January 3, 2009
                      2Condensed Consolidated Statements
      of Income for the Three and Six Months Ended July 4, 2009 and June 28,
      2008
                      3Condensed Consolidated Statements
      of Cash Flows for the Six Months Ended July 4, 2009 and June 28,
      2008
                      4Notes to the Condensed
      Consolidated Financial Statements
                      5Item 2. Management’s Discussion
      and Analysis of Financial Condition and Results of
      Operations
                      13Item 3. Quantitative and
      Qualitative Disclosures About Market Risk
                      22Item 4. Controls and
      Procedures
                      23PART II -
      OTHER INFORMATIONItem1. Legal
      Proceedings
                      24Item1A.
      Risk Factors
                      24Item 2. Unregistered Sales of
      Equity Securities and Use of Proceeds
                      24Item 3. Defaults Upon Senior
      Securities
                      24Item 4. Submission of Matters to
      a Vote of Security Holders
                      24Item 5. Other
      Information
                      25Item 6.
      Exhibits
                      25




1


PART I - FINANCIAL
INFORMATION





Item
1. Financial Statements (Unaudited)





MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS


(in
thousands, except share and per share amounts)


(unaudited)





July 4, 2009
                
                
                January 3, 2009AssetsCurrent
      assetsCash
      and cash equivalents
                
                $
                46,463
                
                
                $
                43,463Accounts
      receivable, net
                
                
                54,609
                
                
                
                38,974Inventories
                
                
                66,019
                
                
                
                65,039Deferred
      income taxes
                
                
                11,697
                
                
                
                11,837Prepaid
      expenses and other current assets
                
                
                11,608
                
                
                
                13,852Total
      current assets
                
                
                190,396
                
                
                
                173,165Property,
      plant and equipment, net
                
                
                19,287
                
                
                
                19,577Goodwill
                
                
                7,162
                
                
                
                7,162Intangible
      assets, net
                
                
                96,778
                
                
                
                97,358Other
      non-current assets
                
                
                862
                
                
                
                982Total
      assets
                
                $
                314,485
                
                
                $
                298,244Liabilities
      and stockholders’ equityCurrent
      liabilitiesCurrent
      portion of long-term debt
                
                $
                1,100
                
                
                $
                1,100Accounts
      payable
                
                
                29,235
                
                
                
                31,667Accrued
      expenses and other current liabilities
                
                
                22,625
                
                
                
                19,476Total
      current liabilities
                
                
                52,960
                
                
                
                52,243Long-term
      debt
                
                
                86,700
                
                
                
                87,250Deferred
      income taxes
                
                
                25,123
                
                
                
                24,252Other
      non-current liabilities
                
                
                14,631
                
                
                
                14,841Total
      liabilities
                
                
                179,414
                
                
                
                178,586Commitments
      and contingencies (Note 10)Stockholders’
      equityPreferred
      stock -  $0.01 par value; 10,000,000 shares authorized and none
      issued and outstanding
                
                
                -
                
                
                
                -Common
      stock - $0.01 par value; 100,000,000 shares authorized; 23,488,357 shares
      issued and 22,648,961 outstanding at July 4, 2009 and 23,488,357 issued
      and 22,496,003 outstanding at January 3, 2009
                
                
                235
                
                
                
                235Additional
      paid-in capital
                
                
                60,183
                
                
                
                60,567Retained
      earnings
                
                
                91,517
                
                
                
                78,246Accumulated
      other comprehensive loss
                
                
                (5,043
                )
                
                
                (5,408
                )Treasury
      stock, at cost (839,396 shares at July 4, 2009 and 992,354 shares at
      January 3, 2009)
                
                
                (11,821
                )
                
                
                (13,982
                )Total
      stockholders’ equity
                
                
                135,071
                
                
                
                119,658Total
      liabilities and stockholders’ equity
                
                $
                314,485
                
                
                $
                298,244





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


2





MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(in
thousands, except share and per share amounts)


(unaudited)





Three
      months ended
                  
                  
                  Six
      months endedJuly
      4, 2009
                  
                  
                  June
      28, 2008
                  
                  
                  July
      4, 2009
                  
                  
                  June
      28, 2008Net
      sales
                  
                  $
                  114,205
                  
                  
                  $
                  108,063
                  
                  
                  $
                  228,438
                  
                  
                  $
                  206,169Cost
      of sales
                  
                  
                  73,084
                  
                  
                  
                  66,253
                  
                  
                  
                  150,795
                  
                  
                  
                  126,393Gross
      profit
                  
                  
                  41,121
                  
                  
                  
                  41,810
                  
                  
                  
                  77,643
                  
                  
                  
                  79,776Selling,
      general and administrative expenses
                  
                  
                  27,965
                  
                  
                  
                  27,292
                  
                  
                  
                  53,933
                  
                  
                  
                  53,695Operating
      income
                  
                  
                  13,156
                  
                  
                  
                  14,518
                  
                  
                  
                  23,710
                  
                  
                  
                  26,081Interest
      expense, net
                  
                  
                  632
                  
                  
                  
                  1,131
                  
                  
                  
                  1,300
                  
                  
                  
                  2,312Income
      before provision for income taxes
                  
                  
                  12,524
                  
                  
                  
                  13,387
                  
                  
                  
                  22,410
                  
                  
                  
                  23,769Income
      tax expense
                  
                  
                  5,246
                  
                  
                  
                  5,580
                  
                  
                  
                  9,139
                  
                  
                  
                  9,923Net
      income
                  
                  $
                  7,278
                  
                  
                  $
                  7,807
                  
                  
                  $
                  13,271
                  
                  
                  $
                  13,846Basic
      earnings per common share
                  
                  $
                  0.32
                  
                  
                  $
                  0.35
                  
                  
                  $
                  0.59
                  
                  
                  $
                  0.62Diluted
      earnings per common share
                  
                  $
                  0.31
                  
                  
                  $
                  0.33
                  
                  
                  $
                  0.57
                  
                  
                  $
                  0.59Basic
      weighted average number of shares outstanding
                  
                  
                  22,563,665
                  
                  
                  
                  22,372,764
                  
                  
                  
                  22,530,148
                  
                  
                  
                  22,365,492Diluted
      weighted average number of shares outstanding
                  
                  
                  23,567,315
                  
                  
                  
                  23,446,634
                  
                  
                  
                  23,477,929
                  
                  
                  
                  23,434,416





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


3




MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)





Six
      months endedJuly
      4, 2009
                      
                      
                      June
      28, 2008Cash
      flows from operating activitiesNet
      income
                      
                      $
                      13,271
                      
                      
                      $
                      13,846Adjustments
      to reconcile net income to net cash   from operating
      activitiesDepreciation
      and amortization
                      
                      
                      1,822
                      
                      
                      
                      1,800Amortization
      of intangible assets
                      
                      
                      580
                      
                      
                      
                      581Amortization
      of deferred financing costs
                      
                      
                      92
                      
                      
                      
                      93Stock-based
      compensation
                      
                      
                      1,113
                      
                      
                      
                      682Deferred
      income taxes
                      
                      
                      875
                      
                      
                      
                      1,378Excess
      tax benefits related to stock-based compensation
                      
                      
                      (377
                      )
                      
                      
                      (13
                      )Bad
      debt expense
                      
                      
                      400
                      
                      
                      
                      57Net
      changes in operating assets and liabilitiesAccounts
      receivable
                      
                      
                      (15,961
                      )
                      
                      
                      (12,723
                      )Inventories
                      
                      
                      (906
                      )
                      
                      
                      3,182Prepaid
      expenses and other current and  non-current
    assets
                      
                      
                      491
                      
                      
                      
                      112Accounts
      payable
                      
                      
                      (2,438
                      )
                      
                      
                      (3,894
                      )Accrued
      expenses and other current and non-current liabilities
                      
                      
                      3,570
                      
                      
                      
                      (2,159
                      )Income
      taxes payable
                      
                      
                      1,825
                      
                      
                      
                      (2,688
                      )Net
      cash from operating activities
                      
                      
                      4,357
                      
                      
                      
                      254Cash
      flows from investing activitiesCapital
      expenditures
                      
                      
                      (1,449
                      )
                      
                      
                      (808
                      )Net
      cash from investing activities
                      
                      
                      (1,449
                      )
                      
                      
                      (808
                      )Cash
      flows from financing activitiesTerm
      loan repayments
                      
                      
                      (550
                      )
                      
                      
                      (550
                      )Proceeds
      from stock options exercised
                      
                      
                      442
                      
                      
                      
                      31Excess
      tax benefits related to stock-based compensation
                      
                      
                      377
                      
                      
                      
                      13Payments
      of employee withholding taxes related to equity awards
                      
                      
                      (68
                      )
                      
                      
                      (73
                      )Payments
      of capital lease obligations
                      
                      
                      (100
                      )
                      
                      
                      (54
                      )Net
      cash from financing activities
                      
                      
                      101
                      
                      
                      
                      (633
                      )Effects
      of exchange rate changes on cash
                      
                      
                      (9
                      )
                      
                      
                      (133
                      )Net
      increase (decrease) in cash
                      
                      
                      3,000
                      
                      
                      
                      (1,320
                      )Cash
      and cash equivalentsBeginning
      of period
                      
                      
                      43,463
                      
                      
                      
                      16,602End
      of period
                      
                      $
                      46,463
                      
                      
                      $
                      15,282Supplementary
      disclosure of cash flow informationCash
      paid during the periodInterest
                      
                      $
                      1,568
                      
                      
                      $
                      2,471Income
      taxes
                      
                      $
                      5,950
                      
                      
                      $
                      10,946





The
accompanying notes are an integral part of these condensed consolidated
financial statements.


4


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(in
thousands, except share and per share amounts)


(unaudited)





1.           SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Basis
of Presentation


Maidenform
Brands, Inc. and its subsidiaries (the “Company,” “we,” “us” or
“our”) design, source and market an extensive range of intimate apparel
products, including bras, panties and shapewear. We sell through multiple
distribution channels including department stores and national chain stores,
mass merchants (including warehouse clubs), and other (including specialty
retailers, off-price retailers, foreign distributors and licensing income). In
addition, we operated 75 and 77 retail outlet stores as of July 4, 2009 and June
28, 2008, respectively, and sell products on our websites.





In our
opinion, the accompanying unaudited condensed consolidated financial statements
contain all adjustments necessary to state fairly our financial position at July
4, 2009, the results of our operations for the three and six-month periods ended
July 4, 2009 and June 28, 2008, and cash flows for the six months ended July 4,
2009 and June 28, 2008. These adjustments consist of normal recurring
adjustments. Operating results for the three and six-month periods ended July 4,
2009 are not necessarily indicative of the results that may be expected for any
other future interim period or for a full fiscal year. The condensed
consolidated balance sheet at January 3, 2009 has been derived from our audited
consolidated financial statements at that date, but does not include all
disclosures required by accounting principles generally accepted in the United
States of America.





These
condensed consolidated financial statements have been prepared in accordance
with Article 10 of Regulation S-X promulgated by the Securities and Exchange
Commission. Accordingly, certain information and disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial statements included herein should be read in
conjunction with our Annual Report on Form 10-K for the year ended January 3,
2009.





Cash and
cash equivalents, accounts receivable, accounts payable and accrued expenses are
reflected at fair value because of the short-term maturity of these instruments.
The carrying amount of long-term debt at July 4, 2009 and January 3, 2009
approximates fair value as a result of the variable interest rates being accrued
and paid on the majority of our debt.





Subsequent
events were evaluated through August 12, 2009, the date these financial
statements were available to be issued.





2.           DEBT





July
      4, 2009
                    
                    
                    January
      3, 2009Long-term
      debtTerm
      loan facility
                    
                    $
                    87,800
                    
                    
                    $
                    88,350Current
      maturities of long-term debt
                    
                    
                    1,100
                    
                    
                    
                    1,100Non-current
      portion of long-term debt
                    
                    $
                    86,700
                    
                    
                    $
                    87,250




At July
4, 2009, we had $87,800 outstanding under our term loan, and $0 outstanding
under our revolving loan with approximately $48,145 available for borrowings,
after giving effect to $1,855 of outstanding letters of credit. We use the
letters of credit as collateral for our workers’ compensation insurance programs
and bonds issued on our behalf to secure our obligation to pay customs duties.
Principal payments on the term loan are payable in quarterly installments of
$275 with all remaining amounts due on the maturity date. We are permitted to
voluntarily prepay all or part of the principal balance of the term loan with
such prepayments applied to scheduled principal payments in inverse order of
their maturity. In addition, subject to specified exceptions and limitations and
reinvesting options, partial prepayments of outstanding loans may be required
with the proceeds of asset sales, sales of equity and debt securities, and with
certain insurance and condemnation proceeds.


5





MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





Payments
due on long-term debt during each of the five years subsequent to July 4, 2009,
are as follows:





Balance
      of fiscal 2009
                  
                  $
                  550In
      fiscal 2010
                  
                  
                  1,100In
      fiscal 2011
                  
                  
                  1,100In
      fiscal 2012
                  
                  
                  1,100In
      fiscal 2013
                  
                  
                  1,100Thereafter
                  
                  
                  82,850





3.           DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES





Effective
December 30, 2007, we adopted Statement of Financial Accounting Standards
(“SFAS”) No. 157 for our financial assets and liabilities measured at fair value
on a recurring basis. The fair value hierarchy for disclosure of fair value
measurements under SFAS No. 157 is as follows:





Level 1
-  Quoted prices in active markets for identical assets or
liabilities


Level 2
-  Quoted prices for similar assets and liabilities in active markets
or significant inputs that are observable


Level 3
-  Significant inputs that are unobservable (for example cash flow
modeling inputs based on assumptions)





The
following table summarizes liabilities measured at fair value on a recurring
basis at July 4, 2009 and January 3, 2009, as required by SFAS No.
157:





Level
      1
                  
                  
                  Level
      2
                  
                  
                  Level
      3LiabilitiesInterest
      rate swap as of July 4, 2009
                  
                  $
                  -
                  
                  
                  $
                  231
                  
                  
                  $
                  -Interest
      rate swap as of January 3, 2009
                  
                  
                  -
                  
                  
                  
                  581
                  
                  
                  
                  -





The fair
value is determined using inputs that use as their basis readily observable
market data that are actively quoted and can be validated through external
sources.





We manage
our exposure to interest rate risk by maintaining a mix of fixed and variable
rate debt, which over time should moderate the costs of debt financing. When
considered necessary, we may use financial instruments in the form of interest
rate swaps to help meet this objective. It is our policy to execute such
instruments with banks we believe to be creditworthy and not to enter into
derivative financial instruments for speculative purposes. Effective July 30,
2007, we entered into an interest rate swap agreement to receive floating
interest and pay fixed interest. This interest rate swap agreement is designated
as a cash flow hedge of the variable interest payments on a portion of our
variable rate term loan debt. For derivative instruments that are designated and
qualify as a cash flow hedge, the effective portion of the gain or loss on the
derivative is reported as a component of other comprehensive income (loss) and
reclassified into earnings in the same period or periods during which the hedged
transaction affects earnings. Gains and losses on the derivative representing
either hedge ineffectiveness or hedge components excluded from the assessment of
effectiveness are recognized in current earnings. The interest rate swap
agreement matures on December 31, 2009. At July 4, 2009, $10,000 of our
outstanding term loan debt was hedged under this agreement with the remaining
balance at variable rates. Cash payments or receipts between us and the
counterparties to the swap agreement are recorded as an adjustment to interest
expense.





The fair
value of the derivative instrument in the condensed consolidated statement of
financial position as of July 4, 2009 is summarized below:





Liability
      derivativesClassification
                            
                            Fair
      valueInterest
      rate swap
                            
                            Accrued
      expenses and other current liabilities
                            
                            $
                            231




6





MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





The
effect of the derivative instrument designated as a cash flow hedge on the
condensed consolidated financial statements for the three and six-month periods
ended July 4, 2009 are as follows:





Three
      months ended
                
                
                Six
      months endedAmount
      of gain (loss)
                  recognized
      in
                  accumulated
      other
                  comprehensive
      income
                  (loss)
      on effective
                  hedges
                
                
                Amount
      of gain (loss)
                  reclassified
      from
                  accumulated
      other
                  comprehensive
      income
                  (loss)
      into interest
                  expense
                
                
                Amount
      of gain (loss)
                  recognized
      in
                  accumulatedother
                  comprehensive
      income
                  (loss)
      on effective
                  hedges
                
                
                Amount
      of gain (loss)
                  reclassified
      from
                  accumulated
      other
                  comprehensive
      income
                  (loss)
      into interest
                  expenseInterest
      rate swap
                
                $
                170
                
                
                $
                -
                
                
                $
                350
                
                
                $
                -




There
were no significant gains or losses recognized in interest expense for the three
and six-month periods ended July 4, 2009 for hedge ineffectiveness. During the
remainder of 2009, $141, net of tax of $90, will be reclassified to earnings
into interest expense.





4.           BENEFIT
PLANS AND POSTRETIREMENT PLANS




We
sponsor a defined benefit pension plan covering substantially all eligible
employees not covered by union plans. We also maintain post-retirement medical
benefit plans for certain eligible retirees for which post-retirement benefit
expense on a quarterly basis has been insignificant. The defined benefit pension
plan was frozen for current participants and closed to new entrants since
January 1, 2007.





The
components of net periodic benefit expense (income) charged to operations are as
follows:





Three
      months ended
                  
                  
                  Six
      months endedJuly
      4, 2009
                  
                  
                  June
      28, 2008
                  
                  
                  July
      4, 2009
                  
                  
                  June
      28, 2008Interest
      cost
                  
                  $
                  280
                  
                  
                  $
                  277
                  
                  
                  $
                  560
                  
                  
                  $
                  554Expected
      return on plan assets
                  
                  
                  (286
                  )
                  
                  
                  (413
                  )
                  
                  
                  (572
                  )
                  
                  
                  (826
                  )Recognized
      net actuarial loss
                  
                  
                  68
                  
                  
                  
                  -
                  
                  
                  
                  136
                  
                  
                  
                  -Net
      periodic benefit expense (income)
                  
                  $
                  62
                  
                  
                  $
                  (136
                  )
                  
                  $
                  124
                  
                  
                  $
                  (272
                  )


7


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





5.           STOCKHOLDERS’
EQUITY




AccumulatedCommon
                                        
                                        
                                        Treasury
                                        
                                        
                                        Additional
                                        
                                        
                                        
                                        
                                        
                                        other
                                        
                                        
                                        Totalstock
                                        
                                        
                                        stock
                                        
                                        
                                        paid-in
                                        
                                        
                                        Retained
                                        
                                        
                                        comprehensive
                                        
                                        
                                        stockholders'Shares
                                        
                                        
                                        $
                                        
                                        
                                        Shares
                                        
                                        
                                        $
                                        
                                        
                                        capital
                                        
                                        
                                        earnings
                                        
                                        
                                        loss
                                        
                                        
                                        equityBalance
      at January 3, 2009
                                        
                                        
                                        23,488,357
                                        
                                        
                                        $
                                        235
                                        
                                        
                                        
                                        (992,354
                                        )
                                        
                                        $
                                        (13,982
                                        )
                                        
                                        $
                                        60,567
                                        
                                        
                                        $
                                        78,246
                                        
                                        
                                        $
                                        (5,408
                                        )
                                        
                                        $
                                        119,658Stock-based
      compensation
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,113
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,113Equity
      award activity
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        152,958
                                        
                                        
                                        
                                        2,161
                                        
                                        
                                        
                                        (1,497
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        664Comprehensive
      incomeNet
      income
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        13,271
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        13,271Changes
      during the period
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        365
                                        
                                        
                                        
                                        365Total
      comprehensive income
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        13,636Balance
      at July 4, 2009
                                        
                                        
                                        23,488,357
                                        
                                        
                                        $
                                        235
                                        
                                        
                                        
                                        (839,396
                                        )
                                        
                                        $
                                        (11,821
                                        )
                                        
                                        $
                                        60,183
                                        
                                        
                                        $
                                        91,517
                                        
                                        
                                        $
                                        (5,043
                                        )
                                        
                                        $
                                        135,071





6.           COMPREHENSIVE
INCOME




The
changes in comprehensive income are as follows:


Three
      months ended
                  
                  
                  Six
      months endedJuly
      4, 2009
                  
                  
                  June
      28, 2008
                  
                  
                  July
      4, 2009
                  
                  
                  June
      28, 2008Net
      income
                  
                  $
                  7,278
                  
                  
                  $
                  7,807
                  
                  
                  $
                  13,271
                  
                  
                  $
                  13,846Foreign
      currency translation adjustments (a)
                  
                  
                  402
                  
                  
                  
                  156
                  
                  
                  
                  155
                  
                  
                  
                  (132
                  )Interest
      rate swap, net of tax (b)
                  
                  
                  102
                  
                  
                  
                  314
                  
                  
                  
                  210
                  
                  
                  
                  (1
                  )Comprehensive
      income
                  
                  $
                  7,782
                  
                  
                  $
                  8,277
                  
                  
                  $
                  13,636
                  
                  
                  $
                  13,713




(a)
            No
      tax benefit has been provided associated with the foreign currency
      translation adjustment due to management’s decision to reinvest the
      earnings of our foreign subsidiaries indefinitely.(b)
            Net
      of tax of $68 and $140 for the three and six-month periods ended July 4,
      2009, respectively. Net of tax of $209 and $0 for the three and six-month
      periods ended June 28, 2008,
respectively.





7.           INCOME
TAXES





We review
our annual effective tax rate on a quarterly basis and we make necessary changes
if information or events warrant such changes. The annual effective tax rate is
forecasted quarterly using actual historical information and forward-looking
estimates. The estimated annual effective tax rate may fluctuate due to changes
in forecasted annual operating income; changes to the valuation allowance for
deferred tax assets (such changes would be recorded discretely in the quarter in
which they occurred); changes to actual or forecasted permanent book to tax
differences (non-deductible expenses); impacts from future tax settlements with
state, federal or foreign tax authorities (such changes would be recorded
discretely in the quarter in which they occurred); or impacts from tax law
changes (to the extent such changes effect our deferred tax assets/liabilities,
these changes would generally be recorded discretely in the quarter in which
they occurred). Our effective income tax rate for the three and six-month
periods ended July 4, 2009 was 41.9% and 40.8%, respectively, as compared to an
effective income tax rate for the three and six-month periods ended June 28,
2008 of 41.7%. This decrease in the effective income tax rate for the six months
ended July 4, 2009 was a result of reductions in taxes on income from foreign
operations.


8


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





8.           SEGMENT
INFORMATION




We report
segment information in accordance with the provisions of SFAS No. 131,
‘‘Disclosures about Segments of an Enterprise and Related Information,’’ which
requires segment information to be disclosed based on a ‘‘management approach.’’
The management approach refers to the internal reporting that we use for making
operating decisions and assessing the performance of reportable segments. SFAS
No. 131 also requires disclosure about products and services, geographic areas
and major customers. For purposes of complying with SFAS No. 131, we identified
our two reportable segments as ‘‘wholesale’’ and ‘‘retail.’’ Our wholesale sales
are to department stores, national chain stores, mass merchants (including
warehouse clubs), specialty retailers, off-price retailers, and third party
distributors servicing similar customers in foreign countries, while our retail
segment reflects our operations from our retail outlet stores and internet
operations. Royalty income is also included in our wholesale segment. Within our
reportable segments, wholesale includes corporate-related assets. Each segment’s
results include the costs directly related to the segment’s net sales and all
other costs allocated based on the relationship to consolidated net sales to
support each segment’s net sales. Intersegment sales and transfers are recorded
at cost and treated as a transfer of inventory.


9


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





Information
on segments and reconciliation to income before provision for income taxes, are
as follows:





Three
      months ended
                        
                        
                        Six
      months endedJuly
      4, 2009
                        
                        
                        June
      28, 2008
                        
                        
                        July
      4, 2009
                        
                        
                        June
      28, 2008Net
      salesWholesale
                        
                        $
                        99,738
                        
                        
                        $
                        93,548
                        
                        
                        $
                        203,066
                        
                        
                        $
                        180,173Retail
                        
                        
                        14,467
                        
                        
                        
                        14,515
                        
                        
                        
                        25,372
                        
                        
                        
                        25,996Total
                        
                        $
                        114,205
                        
                        
                        $
                        108,063
                        
                        
                        $
                        228,438
                        
                        
                        $
                        206,169Operating
      incomeWholesale
                        
                        $
                        11,767
                        
                        
                        $
                        13,252
                        
                        
                        $
                        23,120
                        
                        
                        $
                        25,344Retail
                        
                        
                        1,389
                        
                        
                        
                        1,266
                        
                        
                        
                        590
                        
                        
                        
                        737Operating
      income
                        
                        
                        13,156
                        
                        
                        
                        14,518
                        
                        
                        
                        23,710
                        
                        
                        
                        26,081Interest
      expense, net
                        
                        
                        632
                        
                        
                        
                        1,131
                        
                        
                        
                        1,300
                        
                        
                        
                        2,312Income
      before provision  for income taxes
                        
                        $
                        12,524
                        
                        
                        $
                        13,387
                        
                        
                        $
                        22,410
                        
                        
                        $
                        23,769Depreciation
      and amortizationWholesale
                        
                        $
                        941
                        
                        
                        $
                        836
                        
                        
                        $
                        1,873
                        
                        
                        $
                        1,726Retail
                        
                        
                        259
                        
                        
                        
                        322
                        
                        
                        
                        529
                        
                        
                        
                        655Total
                        
                        $
                        1,200
                        
                        
                        $
                        1,158
                        
                        
                        $
                        2,402
                        
                        
                        $
                        2,381Net
      sales by geographic areaUnited
      States
                        
                        $
                        105,741
                        
                        
                        $
                        97,424
                        
                        
                        $
                        212,939
                        
                        
                        $
                        187,561International
      (a)
                        
                        
                        8,464
                        
                        
                        
                        10,639
                        
                        
                        
                        15,499
                        
                        
                        
                        18,608Total
                        
                        $
                        114,205
                        
                        
                        $
                        108,063
                        
                        
                        $
                        228,438
                        
                        
                        $
                        206,169Intercompany
      sales from Wholesale to Retail
                        
                        $
                        3,356
                        
                        
                        $
                        3,126
                        
                        
                        $
                        6,749
                        
                        
                        $
                        5,911July
      4, 2009
                        
                        
                        January
      3, 2009Identifiable
      assetsWholesale
                        
                        $
                        289,353
                        
                        
                        $
                        271,188Retail
                        
                        
                        25,132
                        
                        
                        
                        27,056Total
                        
                        $
                        314,485
                        
                        
                        $
                        298,244





(a)
International net sales are identified as international based on the location of
the customer.





At July
4, 2009 and January 3, 2009, our five largest uncollaterized receivables
represented approximately 70% and 63% of total accounts receivable,
respectively.





For the three-month periods ended July
4, 2009 and June 28, 2008, three customers in the wholesale segment each
accounted for more than 10% of our consolidated net sales. For the six-month
period ended July 4, 2009, two customers in the wholesale segment each accounted
for more than 10% of our consolidated net sales as compared to three customers
in the wholesale segment for the six-month period ended June 28,
2008.


10


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





9.           EARNINGS
PER SHARE




The
following is a reconciliation of basic number of common shares outstanding to
diluted common and common equivalent shares outstanding:




Three
      months ended
                      
                      
                      Six
      months endedJuly
      4, 2009
                      
                      
                      June
      28, 2008
                      
                      
                      July
      4, 2009
                      
                      
                      June
      28, 2008Net
      income
                      
                      $
                      7,278
                      
                      
                      $
                      7,807
                      
                      
                      $
                      13,271
                      
                      
                      $
                      13,846Weighted
      average number of common and common equivalent shares
      outstanding:Basic
      number of common shares outstanding
                      
                      
                      22,563,665
                      
                      
                      
                      22,372,764
                      
                      
                      
                      22,530,148
                      
                      
                      
                      22,365,492Impact
      of dilutive securities
                      
                      
                      1,003,650
                      
                      
                      
                      1,073,870
                      
                      
                      
                      947,781
                      
                      
                      
                      1,068,924Dilutive
      number of common and common equivalent shares
    outstanding
                      
                      
                      23,567,315
                      
                      
                      
                      23,446,634
                      
                      
                      
                      23,477,929
                      
                      
                      
                      23,434,416Basic
      earnings per common share
                      
                      $
                      0.32
                      
                      
                      $
                      0.35
                      
                      
                      $
                      0.59
                      
                      
                      $
                      0.62Diluted
      earnings per common share
                      
                      $
                      0.31
                      
                      
                      $
                      0.33
                      
                      
                      $
                      0.57
                      
                      
                      $
                      0.59





For the
three-month periods ended July 4, 2009 and June 28, 2008, approximately 600,000
and 546,000 equity awards, respectively, were not included in the computation of
diluted earnings per share because of their anti-dilutive effect. For the
six-month periods ended July 4, 2009 and June 28, 2008, approximately 726,000
and 590,000 equity awards, respectively, were not included in the computation of
diluted earnings per share because of their anti-dilutive effect.





10.           COMMITMENTS AND
CONTINGENCIES




Purchase
commitments




In the
normal course of business, we enter into purchase commitments for both finished
goods and raw materials. At July 4, 2009, we had purchase commitments of $67,034
and believe that we have adequate reserves for expected losses arising from all
purchase commitments.





Litigation





From
time-to-time we are party to legal actions that arise in the ordinary course of
business. Based on information presently available to us, we believe that we
have adequate legal defenses, reserves or insurance coverage for these actions
and that the ultimate outcome of these actions will not have a material adverse
effect on our condensed consolidated statements of financial position, results
of operations or cash flows.


11


MAIDENFORM
BRANDS, INC. AND SUBSIDIARIES


NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(in
thousands, except share and per share amounts)


(unaudited)





11.           ACCRUED
EXPENSES AND OTHER CURRENT LIABILITIES





July 4, 2009
                
                
                January 3, 2009Accrued
      wages, incentive compensation, payroll taxes and related
      benefits
                
                $
                8,852
                
                
                $
                7,328Accrued
      customs duty
                
                
                3,287
                
                
                
                1,795Accrued
      other
                
                
                10,486
                
                
                
                10,353$
                22,625
                
                
                $
                19,476





Other
accrued expenses and current liabilities include, among other items, accrued
severance, trade promotion, freight, accrued interest, inventory return accrual,
and professional fees.





12.           RECENTLY
ISSUED ACCOUNTING STANDARDS





In
December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position (“FSP”) No. FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), to provide guidance on
an employers’ disclosures about plan assets of a defined benefit pension or
other postretirement plan. This FSP is effective for fiscal years ending after
December 15, 2009. We are currently evaluating the impact that FSP FAS 132(R)-1
will have on our consolidated financial statements.





In April
2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Board (“APB”)
Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial
Instruments” which requires disclosures about fair value of financial
instruments for interim reporting periods as well as in annual financial
statements.  We have adopted the provisions of this FSP effective July
4, 2009 and have included the required disclosures in Note 3.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS
157-4 provides guidance on estimating fair value when market activity has
decreased and on identifying transactions that are not orderly. Additionally,
entities are required to disclose in interim and annual periods the inputs and
valuation techniques used to measure fair value. This FSP is effective for
interim and annual periods ending after June 15, 2009. As the requirements under
this FSP are consistent with our current practice, the implementation of this
standard did not have a significant impact on our consolidated financial
statements.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before the date the financial statements
are issued or available to be issued. SFAS 165 requires companies to reflect in
their financial statements the effects of subsequent events that provide
additional evidence about conditions at the balance-sheet date. Subsequent
events that provide evidence about conditions that arose after the balance-sheet
date should be disclosed if the financial statements would otherwise be
misleading. Disclosures should include the nature of the event and either an
estimate of its financial effect or a statement that an estimate cannot be made.
SFAS 165 is effective for interim and annual financial periods ending after June
15, 2009, and should be applied prospectively. We have adopted the provisions of
SFAS 165 and have included the required disclosures in Note 1.





In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles - A Replacement of FASB
Statement No. 162” (“SFAS 168”). SFAS 168 establishes the FASB Standards
Accounting Codification (“Codification”) as the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by the FASB to be
applied to nongovernmental entities and rules and interpretive releases of the
SEC as authoritative GAAP for SEC registrants. The Codification will supersede
all the existing non-SEC accounting and reporting standards upon its effective
date and subsequently, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. SFAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. We will amend our financial statement
disclosures accordingly beginning with our Quarterly Report on Form 10-Q for the
three and nine-months ending October 3, 2009.


12




Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations




You
should read the following discussion and analysis in conjunction with our
financial statements and related notes included elsewhere in this report. This
report contains forward-looking statements relating to future events and our
future performance within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including, without limitation, statements regarding our expectations,
beliefs, intentions or future strategies that are signified by the words
“anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,”
“potential,” “predicts,” “projects” or similar words or phrases, although not
all forward-looking statements contain such identifying words. All
forward-looking statements included in this report are based on information
available to us on the date hereof. It is routine for our internal projections
and expectations to change as the year or each quarter in the year progress, and
therefore it should be clearly understood that the internal projections and
beliefs upon which we base our expectations may change prior to the end of each
quarter or the year. Although these expectations may change, we assume no
obligation to update or revise publicly any forward-looking statements whether
as a result of new information, future events or otherwise. Actual events or
results may differ materially from those contained in the projections or
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and elsewhere in this report,
particularly in the section captioned “PART II – OTHER INFORMATION, Item 1A –
Risk Factors.”





Management
Overview




We are a
global intimate apparel company with a portfolio of established, well-known
brands, top-selling products and an iconic heritage. We design, source and
market an extensive range of intimate apparel products, including bras, panties
and shapewear. We sell through multiple distribution channels, including
department stores and national chain stores, mass merchants (including warehouse
clubs), other (including specialty retailers, off-price retailers, foreign
distributors and licensing income), our company-operated outlet stores and our
websites.





We sell
our products under some of the most recognized brands in the intimate apparel
industry. Our Maidenform®,Flexees®,
Lilyette®, Control
It!®,
Luleh®,
Rendezvous®,
Subtract® and
private brands are sold in department stores and national chain stores. Our
Sweet Nothings®,
InspirationsTM,
Bodymates®, Self
Expressions® and
private brands are distributed through mass merchants. These other brands
leverage our product technology, but are separate brands with distinctly
different logos.  In addition to our owned brands, we also supply
private brand products to certain retailers.





Trends in Our
Business





We
operate in two segments, wholesale and retail. Our wholesale segment includes
both our domestic and international wholesale markets. Our retail segment
includes our company-operated outlet stores and our websites.





We have
identified many near-term opportunities for growth and operational improvements,
as well as challenges, including general macro-economic conditions that may
affect our customers and our business. In particular, management believes that
there are many factors influencing the intimate apparel industry, including but
not limited to: consistent demand for foundation garments, consumer demand for
innovative and leading brands, sourcing and supply chain efficiencies, continued
growth of the mass merchant channel, pressure from retailers brought about by
the consolidation in the retail industry, increases in the cost of the raw
materials used in intimate apparel products and uncertainty surrounding import
restrictions.





We
believe we are well-positioned to capitalize on or address these trends by,
among other things:





•
              increasing
      consumer identification with our brands through further marketing
      investments;


•
              continuing
      to launch innovative
products;


•
                increasing
      our presence in department stores and national chain stores through the
      use of Maidenform®,
      Flexees®,
      Lilyette®,Control
      It!®,
      Luleh®,
      Rendezvous®,
      Subtract®
      and private brands;


•
                  expanding
      distribution of our Donna Karan®
      and DKNY®brands;


•
                  increasing
      our presence in the mass merchant channel through the use of our Sweet
      Nothings®,
      Bodymates®,
      Self Expressions®,
      InspirationsTM,
      private brands and other brands for new
  customers;


•
              expanding
      our international presence;


•
              marketing
      rather than manufacturing our
brands;


•
              making
      selective acquisitions, entering into license agreements, and developing
      and marketing new products that will complement our existing products or
      distribution channels; and


•
              merchandising,
      marketing and selling private brand products to selected
      retailers.


13


Wholesale
Segment





The
following trends are among the key variables that will affect our wholesale
segment:





Department Stores and National Chain
Stores.The department stores and national chain stores are where we
generally sell the Maidenform®,
Flexees® and
Lilyette® brands.
We plan to continue to invest in increasing our net sales with department store
customers, which we believe is important to our long-term positioning in the
channel. There has been a trend toward consolidation of department stores. We
expect the rate of our future net sales growth with department stores to be
moderated by the reduction in both the number of department store customers and
the number of doors (distinct locations operated by a particular retailer)
operated by these customers. We have customers located outside the United States
that purchase our Maidenform®,
Flexees® and
Lilyette® brands.
The majority of these net sales are included in the department stores and
national chain stores channel. In 2009, we have added new customers within this
channel as a result of our license agreement for the Donna Karan® and
DKNY® brands.
This agreement grants us the rights to design, source and market a full
collection of Donna Karan® and DKNY® women’s intimate apparel
products.





Mass Merchants.The mass
merchant channel includes both mass merchants and warehouse clubs. We intend to
improve our penetration with mass merchants through the use of our brands Sweet
Nothings®,
InspirationsTM,Bodymates®, Self
Expressions®, and
private brands. We have experienced significant growth in this channel over the
past several years and expect to achieve significant growth in the future as we
are able to increase both the floor space and number of doors in which our
products are sold. We expect that both our net sales to this channel and our net
sales to this channel as a percentage of our total net sales are likely to
increase over time. The volume and mix of net sales of our brands and of private
label in the mass merchant channel can vary from period to period based upon
strategic changes that our customers may implement from time to time. Net sales
to customers in the mass merchant channel that are located outside the United
States are included in this channel.





Other.Our net sales from
this channel, which include sales to specialty retailers and to off-price
retailers, have historically been a relatively small component of our overall
net sales. We participate in private brands in the specialty retailer area as
opportunities present themselves. We continually evaluate this channel for
opportunities. Licensing income is included in this channel as well as sales to
foreign distributors.





We will
selectively target strategic acquisitions, licensing opportunities and a brand
start-up to grow our consumer base and would utilize the acquired companies and
licenses to complement our current products, channels and geographic scope. We
believe that acquisitions and licenses can enhance our product offerings to
retailers and provide growth opportunities. We believe we can leverage our core
competencies such as product development, brand management, logistics and
marketing to create significant value from the acquired businesses and licenses.
On May 6, 2008, we entered into a women’s intimate apparel license agreement for
the Donna Karan® and
DKNY®
brands.





Retail
Segment





We
believe our retail sales volume is driven by our ability to service our existing
consumers and obtain new consumers, as well as overall general macro-economic
conditions that can affect our consumers and ultimately their levels of overall
spending and choice of retail channel for their purchases. Additionally,
identifying optimal retail outlet locations, favorable leasing arrangements, and
improving our store productivity are factors important to growing our retail
segment’s net sales. We also sell our products through our websites, www.maidenform.comand www.maidenform.co.uk.Although we currently do
not generate a significant amount of net sales through these sites, we do expect
it to continue to grow.





Our
objectives in our retail segment are to continue to increase the productivity of
our portfolio of stores through effective merchandising and focused advertising,
as well as selectively closing less productive locations and potentially opening
new stores in more productive locations. Even in those situations where we
selectively close less productive outlet stores and do not open a new store in
that region, we believe those consumers still purchase many of our Maidenform
brands from our other outlet stores, our websites or our wholesale segment
customers that carry these brands. Historically, we have primarily sold excess
and, to a lesser extent, obsolete inventories through our outlet stores at a
higher margin than that achieved through other liquidation
alternatives.


14


Definitions





In
reviewing our operating performance, we evaluate both the wholesale and retail
segments by focusing on each segment’s operating income, cash flows from
operations and inventory turns.





Net Sales. Our net sales are
derived from two operating segments, wholesale and retail. Our net sales in the
wholesale segment are recorded net of cooperative advertising allowances, sales
returns, sales discounts, and markdown allowances provided to our customers. Net
sales in our retail segment are recognized at the time the customer takes
possession of the merchandise at the point-of-sale in our stores and for our
internet sales, net sales are recognized when the products are shipped and title
passes to the customer.





Cost of Sales. We outsource
all manufacturing of the products we sell and, therefore, the principal elements
of our cost of sales are for finished goods inventories purchased from our
sourced vendors. Included in cost of sales and affecting our overall gross
margins are freight expenses from the manufacturers to our distribution centers
in situations where such expenses are charged separately. Also included in cost
of sales is the cost of warehousing, labor and overhead related to receiving and
warehousing at our distribution centers, and depreciation of assets related to
our receiving and warehousing in our distribution centers. Direct labor, cost of
fabrics, as well as raw materials for fabrics, are the primary components
driving the overall cost of our sourced finished goods inventories from our
sourcing vendors.





Selling, General and Administrative
Expenses (“SG&A”).Our
SG&A include all of our marketing, product development, selling,
distribution and general and administrative expenses for both the wholesale and
retail segments (which include our retail outlet store payroll and related
benefits). General and administrative expenses include management payroll,
benefits, travel, information systems, accounting, distribution, rent, insurance
and legal costs. Additionally, depreciation related to the shipping function in
our distribution centers and our corporate office assets such as furniture,
fixtures, and equipment, as well as amortization of intellectual property, are
included in SG&A.





Income Taxes.We account for
income taxes using the liability method, which recognizes the amount of income
tax payable or refundable for the current year and recognizes deferred tax
liabilities and assets for the future tax consequences of the events that have
been recognized in the financial statements or tax returns. For those uncertain
tax positions where it is "more likely than not" that a tax benefit will be
sustained, we have recorded the tax benefit. For those income tax positions
where it is not "more likely than not" that a tax benefit will be sustained, no
tax benefit has been recognized. Where applicable, associated interest and
penalties are recorded. We routinely evaluate all deferred tax assets to
determine the likelihood of their realization and record a valuation allowance
if it is “more likely than not” that a deferred tax asset will not be realized.
For more information, see notes to the condensed consolidated financial
statements included elsewhere in this Quarterly Report on Form
10-Q.





Net
operating loss carryforwards (“NOLs”) enable a company
to apply net operating losses incurred during a current period against a future
period's profits in order to reduce cash tax liabilities in those future
periods. In periods when a company is generating operating losses, its NOLs will
increase. The tax effect of the NOLs is recorded as a deferred tax asset. If the
company does not believe that it is “more likely than not” that it will be able
to utilize the NOLs, it records a valuation allowance against the deferred tax
asset. Additionally, Section 382 of the Internal Revenue Code
(“Section 382”) imposes limitations on a corporation's ability to utilize
its NOLs if it experiences an "ownership change." In general terms, an ownership
change results from transactions increasing the ownership of certain existing
stockholders and, or, new stockholders in the stock of a corporation by more
than 50 percentage points during a three year testing period. Any unused
annual limitation may be carried over to later years, and the amount of the
limitation may, under certain circumstances, be increased to reflect both
recognized and deemed recognized "built-in gains" that occur during the
sixty-month period after the ownership change. Upon emergence from bankruptcy in
1999, our NOLs were subject to Section 382 limitations. As a result of the
acquisition in 2004, we experienced a change in control as defined by
Section 382. As a result of this ownership change, the utilization of our
NOLs was subject to a new annual limitation under Section 382. Subsequent
to the acquisition in 2004, sales of our shares by others, including the initial
public offering in July 2005, have resulted in additional changes in control for
the purpose of Section 382; however, the annual limitation of our NOLs has not
changed. At January 3, 2009, we had approximately $35.6 million of federal and
state NOLs available for utilization in the years from 2009 through
2023.


15


Results of
Operations





Three months ended
                
                
                Six months endedJuly 4, 2009
                
                
                June 28, 2008
                
                
                July 4, 2009
                
                
                June 28, 2008OPERATING
      DATA: (in millions)Wholesale
      sales
                
                $
                99.7
                
                
                $
                93.6
                
                
                $
                203.0
                
                
                $
                180.2Retail
      sales
                
                
                14.5
                
                
                
                14.5
                
                
                
                25.4
                
                
                
                26.0Net
      sales
                
                
                114.2
                
                
                
                108.1
                
                
                
                228.4
                
                
                
                206.2Cost
      of sales
                
                
                73.1
                
                
                
                66.3
                
                
                
                150.8
                
                
                
                126.4Gross
      profit
                
                
                41.1
                
                
                
                41.8
                
                
                
                77.6
                
                
                
                79.8Selling,
      general and administrative expenses
                
                
                28.0
                
                
                
                27.3
                
                
                
                53.9
                
                
                
                53.7Operating
      income
                
                $
                13.1
                
                
                $
                14.5
                
                
                $
                23.7
                
                
                $
                26.1





As a percentage of net salesThree months ended
                
                
                Six months endedJuly 4, 2009
                
                
                June 28, 2008
                
                
                July 4, 2009
                
                
                June 28, 2008OPERATING
      DATA:Wholesale
      sales
                
                
                87.3
                %
                
                
                86.6
                %
                
                
                88.9
                %
                
                
                87.4
                %Retail
      sales
                
                
                12.7
                
                
                
                13.4
                
                
                
                11.1
                
                
                
                12.6Net
      sales
                
                
                100.0
                
                
                
                100.0
                
                
                
                100.0
                
                
                
                100.0Cost
      of sales
                
                
                64.0
                
                
                
                61.3
                
                
                
                66.0
                
                
                
                61.3Gross
      profit
                
                
                36.0
                
                
                
                38.7
                
                
                
                34.0
                
                
                
                38.7Selling,
      general and administrative expenses
                
                
                24.5
                
                
                
                25.3
                
                
                
                23.6
                
                
                
                26.0Operating
      income
                
                
                11.5
                %
                
                
                13.4
                %
                
                
                10.4
                %
                
                
                12.7
                %





Our net
sales are derived from two segments, wholesale and retail. Our net sales within
the wholesale segment are grouped by channel, based upon the brands we sell and
the customers to whom we sell, as follows: (1) department stores and national
chain stores, (2) mass merchants and (3) other.





Our
department stores and national chain stores channel primarily consists of sales
of our Maidenform®,
Flexees®,
Lilyette®, Control
It!®,
Luleh®,
Rendezvous®,
Subtract® and
private brands on a worldwide basis to customers within this category. Within
the mass merchant channel, we sell brands such as Sweet Nothings®,
InspirationsTM,
Bodymates®, Self
Expressions® and
private brands that are primarily dedicated to specific customers. These brands
are all sold on a worldwide basis to mass merchants and, to a lesser degree,
warehouse clubs. Our remaining sales are grouped within a channel designated as
other and include private brand products sold to specialty retailers and all
brand sales to off-price retail stores. In addition, we include licensing income
as well as sales to foreign distributors in our other channel.





Our
retail segment consists of outlet stores and internet sales. We had 75 outlet
stores as of July 4, 2009 compared to 77 outlet stores as of June 28,
2008.




16





Three months ended
                      
                      
                      Six months ended$
                      
                      
                      %
                      
                      
                      
                      
                      
                      
                      
                      
                      $
                      
                      
                      %July 4, 2009
                      
                      
                      June 28,2008
                      
                      
                      change
                      
                      
                      change
                      
                      
                      July 4, 2009
                      
                      
                      June 28, 2008
                      
                      
                      change
                      
                      
                      change(in millions)
                      
                      
                      (in millions)Department
      stores andnational
      chain stores
                      
                      $
                      56.4
                      
                      
                      $
                      57.4
                      
                      
                      $
                      (1.0
                      )
                      
                      
                      (1.7
                      )%
                      
                      $
                      100.5
                      
                      
                      $
                      105.8
                      
                      
                      $
                      (5.3
                      )
                      
                      
                      (5.0
                      )%Mass
      merchants
                      
                      
                      26.4
                      
                      
                      
                      28.5
                      
                      
                      
                      (2.1
                      )
                      
                      
                      (7.4
                      )
                      
                      
                      65.7
                      
                      
                      
                      58.8
                      
                      
                      
                      6.9
                      
                      
                      
                      11.7Other
                      
                      
                      16.9
                      
                      
                      
                      7.7
                      
                      
                      
                      9.2
                      
                      
                      
                      119.5
                      
                      
                      
                      36.8
                      
                      
                      
                      15.6
                      
                      
                      
                      21.2
                      
                      
                      
                      135.9Total
      wholesale
                      
                      
                      99.7
                      
                      
                      
                      93.6
                      
                      
                      
                      6.1
                      
                      
                      
                      6.5
                      
                      
                      
                      203.0
                      
                      
                      
                      180.2
                      
                      
                      
                      22.8
                      
                      
                      
                      12.7Retail
                      
                      
                      14.5
                      
                      
                      
                      14.5
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25.4
                      
                      
                      
                      26.0
                      
                      
                      
                      (0.6
                      )
                      
                      
                      (2.3
                      )Total
      consolidated net sales
                      
                      $
                      114.2
                      
                      
                      $
                      108.1
                      
                      
                      $
                      6.1
                      
                      
                      
                      5.6
                      %
                      
                      $
                      228.4
                      
                      
                      $
                      206.2
                      
                      
                      $
                      22.2
                      
                      
                      
                      10.8
                      %





In
addition, our mix of products sold worldwide between bras, shapewear, and
panties for the three and six-month periods ended July 4, 2009 and June 28,
2008, respectively, is summarized below:





Three months ended
                  
                  
                  Six months endedJuly 4, 2009
                  
                  
                  June 28, 2008 (1)
                  
                  
                  July 4, 2009
                  
                  
                  June 28, 2008 (1)Bras
                  
                  
                  64%
                  
                  
                  
                  65%
                  
                  
                  
                  65%
                  
                  
                  
                  64%Shapewear
                  
                  
                  29
                  
                  
                  
                  28
                  
                  
                  
                  29
                  
                  
                  
                  28Panties
                  
                  
                  7
                  
                  
                  
                  7
                  
                  
                  
                  6
                  
                  
                  
                  8100%
                  
                  
                  
                  100%
                  
                  
                  
                  100%
                  
                  
                  
                  100%





(1) Prior
period amounts in this table have been reclassified to conform to the current
year presentation.





Net
Sales




Consolidated
net sales increased by $6.1 million, or 5.6%, from $108.1 million for the three
months ended June 28, 2008 to $114.2 million for the three months ended July 4,
2009. Consolidated net sales increased by $22.2 million, or 10.8%, from $206.2
million for the six months ended June 28, 2008 to $228.4 million for the six
months ended July 4, 2009.





Wholesale
segment net sales increased by $6.1 million, or 6.5%, from $93.6 million for the
three months ended June 28, 2008 to $99.7 million for the three months ended
July 4, 2009. Total international net sales, which are included in the wholesale
segment, decreased by $2.1 million, or 19.8%, from $10.6 million for the three
months ended June 28, 2008 to $8.5 million for the three months ended July 4,
2009.  International sales were adversely affected by currency
exchange rates and lower sales in Russia.  Our department stores and
national chain stores channel net sales decreased by $1.0 million, or 1.7%, from
$57.4 million for the three months ended June 28, 2008 to $56.4 million for the
three months ended July 4, 2009. This decrease reflected the weakness in this
channel as a result of the global economic slowdown, along with promotional
activities with retail partners to increase inventory productivity and lost
sales associated with customer bankruptcies filed in the second half of
2008.  Partially offsetting this decrease were sales from our licensed
brands DKNY® and Donna Karan® that we launched in the first quarter of 2009. Our
mass merchant channel net sales decreased by $2.1 million, or 7.4%, from $28.5
million for the three months ended June 28, 2008 to $26.4 million for the three
months ended July 4, 2009. This decrease was a result of a non-recurring program
with a warehouse customer and lower private brand sales with one mass
customer.  Partially offsetting this decrease was the continued growth
of our Sweet Nothings® brand in the shapewear and bra
categories.   Other channel net sales, which include sales to
specialty retailers, off-price retailers, foreign distributors and licensing
income, increased by $9.2 million, or 119.5%, from $7.7 million for the three
months ended June 28, 2008 to $16.9 million for the three months ended July 4,
2009. This increase was due primarily to the replenishment of products based on
our patent-pending Total SolutionTM
technology with a specialty retailer and higher sales to off-price
retailers.





Wholesale
segment net sales increased by $22.8 million, or 12.7%, from $180.2 million for
the six months ended June 28, 2008 to $203.0 million for the six months ended
July 4, 2009. Total international net sales decreased by $3.1 million, or 16.7%,
from $18.6 million for the six months ended June 28, 2008 to $15.5 million for
the six months ended July 4, 2009, primarily resulting from the reasons
mentioned above.  Our department stores and national chain stores
channel net sales decreased by $5.3 million, or 5.0%, from $105.8 million for
the six months ended June 28, 2008 to $100.5 million for the six months ended
July 4, 2009. This decrease reflected the weakness in this channel as a result
of the global economic slowdown, along with promotional activities with retail
partners to increase inventory productivity and lost sales associated with
customer bankruptcies filed in the second half of 2008.  Partially
offsetting this decrease were sales from our licensed brands Donna Karan® and
DKNY® that we launched in the first quarter of 2009. Our mass merchant channel
net sales increased by $6.9 million, or 11.7%, from $58.8 million for the six
months ended June 28, 2008 to $65.7 million for the six months ended July 4,
2009. This increase was driven by the expansion of our Sweet Nothings® brand in
the bra and shapewear categories and ongoing replenishment of our
InspirationsTM brand
which launched in the second quarter of 2008, offset by a non-recurring program
with a warehouse customer and lower private brand sales with one mass customer.
Other channel net sales increased by $21.2 million, or 135.9%, from $15.6
million for the six months ended June 28, 2008 to $36.8 million for the six
months ended July 4, 2009. This increase was due primarily to the replenishment
of products based on our patent-pending Total SolutionTM
technology with a specialty retailer and higher sales to off-price
retailers.


17


Net sales
in our retail segment were unchanged at $14.5 million for the three months ended
July 4, 2009 when compared to the three months ended June 28, 2008. Net sales in
our retail segment decreased $0.6 million, or 2.3%, from $26.0 million for the
six months ended June 28, 2008 to $25.4 million for the six months ended July 4,
2009, due largely from reduced customer traffic and weakness in the overall
economy. Same store sales, defined as sales from stores open more than one year,
for the three and six-month periods ended July 4, 2009 decreased 6.4% and 7.3%,
respectively.  Our internet sales for the three-month periods ended
July 4, 2009 and June 28, 2008 remained unchanged at $1.2 million. Our internet
sales increased by $0.1 million, or 4.2%, from $2.4 million for the six months
ended June 28, 2008 to $2.5 million for the six months ended July 4,
2009.





Gross
Profit




Consolidated
gross profit decreased by $0.7 million, or 1.7%, from $41.8 million for the
three months ended June 28, 2008 to $41.1 million for the three months ended
July 4, 2009. As a percentage of net sales, consolidated gross margins decreased
by 270 basis points from 38.7% for the three months ended June 28, 2008 to 36.0%
for the three months ended July 4, 2009. Consolidated gross profit decreased by
$2.2 million, or 2.8%, from $79.8 million during the six months ended June 28,
2008 to $77.6 million for the six months ended July 4, 2009. As a percentage of
net sales, gross profit decreased by 470 basis points from 38.7% for the six
months ended June 28, 2008 to 34.0% for the six months ended July 4, 2009.





Gross
profit as a percentage of net sales for the wholesale segment decreased by 290
basis points from 35.5% for the three months ended June 28, 2008 to 32.6% for
the three months ended July 4, 2009. This decrease was primarily driven by
increased promotional activity to drive inventory productivity, and the mix of
customers and products, including a higher percentage of net sales from our
lower margin other channel. Gross profit as a percentage of net sales for the
wholesale segment was 36.0% for the six months ended June 28, 2008 as compared
to 30.9% for the six months ended July 4, 2009. This decrease of 510 basis
points is mainly a result of the reasons mentioned above.




Gross
profit as a percentage of net sales for the retail segment remained unchanged at
59.3% for the three-month periods ended July 4, 2009 when compared to the
comparative period last year, and increased 60 basis points from 57.7% for the
six months ended June 28, 2008 to 58.3% for the six months ended July 4, 2009.
This increase for the six months ended July 4, 2009 was largely driven by
product mix.





Selling,
General and Administrative Expenses (“SG&A”)




Consolidated
SG&A increased by $0.7 million, or 2.6%, from $27.3 million for the three
months ended June 28, 2008 to $28.0 million for the three months ended July 4,
2009. However, as a percentage of net sales, SG&A decreased from 25.3% for
the three months ended June 28, 2008 to 24.5% for the three months ended July 4,
2009.





SG&A
for our wholesale segment, which includes corporate-related expenses, increased
by $0.9 million, or 4.5%, from $19.9 million for the three months ended June 28,
2008 to $20.8 million for the three months ended July 4, 2009. However, as a
percentage of net sales, wholesale segment SG&A decreased from 21.3% for the
three months ended June 28, 2008 to 20.9% for the three months ended July 4,
2009. The increase of $0.9 million is a result of expenses associated with our
licensed brands Donna Karan® and
DKNY®,which
were launched in early 2009, higher compensation costs of $1.3 million primarily
resulting from incentive compensation, and increased professional fees of $0.8
million.  These additional expenses were partially offset by managed
cost reductions across most operating departments. Retail SG&A decreased by
$0.2 million, or 2.7%, from $7.4 million for the three months ended June 28,
2008 to $7.2 million for the three months ended July 4, 2009.





Consolidated
SG&A increased by $0.2 million, or 0.4%, from $53.7 million for the six
months ended June 28, 2008 to $53.9 million for the six months ended July 4,
2009. However, as a percentage of net sales, SG&A decreased from 26.0% for
the six months ended June 28, 2008 to 23.6% for the six months ended July 4,
2009.





SG&A
for our wholesale segment increased by $0.3 million, or 0.8%, from $39.4 million
for the six months ended June 28, 2008 to $39.7 million for the six months ended
July 4, 2009. However, as a percentage of net sales wholesale segment SG&A
decreased from 21.9% for the six months ended June 28, 2008 to 19.6% for
the six months ended July 4, 2009. The increase of $0.3 million is a result
of expenses associated with our licensed brands Donna Karan® and
DKNY®,which
were launched in early 2009, higher compensation costs of $1.1 million primarily
resulting from incentive compensation, and increased professional fees of $1.0
million.  These additional expenses were partially offset by managed
cost reductions across most operating departments. Retail SG&A decreased by
$0.1 million, or 0.7%, from $14.3 million for the six months ended June 28, 2008
to $14.2 million for the six months ended July 4,
2009.


18


Operating
Income




Our
consolidated operating income decreased by $1.4 million, or 9.7%, from $14.5
million for the three months ended June 28, 2008 to $13.1 million for the three
months ended July 4, 2009. Our consolidated operating income decreased by $2.4
million, or 9.2%, from $26.1 million for the six months ended June 28, 2008 to
$23.7 million for the six months ended July 4, 2009.





For the
foregoing reasons, operating income for the wholesale segment decreased by $1.6
million, or 12.0%, from $13.3 million for the three months ended June 28, 2008
to $11.7 million for the three months ended July 4, 2009. Operating income for
the wholesale segment decreased by $2.3 million, or 9.1%, from $25.4 million
during the six months ended June 28, 2008 to $23.1 million during the six months
ended July 4, 2009.





Also, for
the reasons discussed above, operating income for the retail segment increased
by $0.2 million, or 16.7%, from $1.2 million for the three months ended June 28,
2008 to $1.4 million for the three months ended July 4, 2009. The retail
segment’s operating income decreased by $0.1 million, or 14.3%, from $0.7
million during the six months ended June 28, 2008 to $0.6 million for the six
months ended July 4, 2009.





Interest
Expense, Net




Interest
expense, net, decreased by $0.5 million, or 45.5%, from $1.1 million for the
three months ended June 28, 2008 to $0.6 million for the three months ended July
4, 2009 as we benefited primarily from a lower average interest rate for the
current quarter when compared to the same period last year. The average balance
of total debt outstanding decreased from $89.3 million for the three months
ended June 28, 2008 to $88.2 million for the three months ended July 4, 2009,
and the average interest rate during the three months ended June 28, 2008 was
5.2% as compared to an average interest rate of 2.5% during the three months
ended July 4, 2009.





Interest
expense, net, decreased $1.0 million, or 43.5%, from $2.3 million for the six
months ended June 28, 2008 to $1.3 million for the six months ended July 4,
2009. The decrease was a result of the reason discussed above. The average
balance of total debt outstanding decreased from $89.2 million for the six
months ended June 28, 2008 to $88.3 million for the six months ended July 4,
2009. The average interest rate during the six months ended June 28, 2008 was
5.0% as compared to an average interest rate of 2.7% during the six months ended
July 4, 2009.





Income
Tax Expense




We review
our annual effective tax rate on a quarterly basis and we make necessary changes
if information or events warrant such changes. The annual effective tax rate is
forecasted quarterly using actual historical information and forward-looking
estimates. The estimated annual effective tax rate may fluctuate due to changes
in forecasted annual operating income; changes to the valuation allowance for
deferred tax assets (such changes would be recorded discretely in the quarter in
which they occurred); changes to actual or forecasted permanent book to tax
differences; impacts from future tax settlements with state, federal or foreign
tax authorities (such changes would be recorded discretely in the quarter in
which they occurred); or impacts from tax law changes (to the extent such
changes affect our deferred tax assets/liabilities, these changes would
generally be recorded discretely in the quarter in which they occurred). Our
effective income tax rate for the three and six-month periods ended July 4, 2009
was 41.9% and 40.8%, respectively, as compared to an effective income tax rate
for the three and six-month periods ended June 28, 2008 of 41.7%. This decrease
in the effective income tax rate for the six months ended July 4, 2009 was a
result of reductions in taxes on income from foreign operations.





Net
Income




For the
foregoing reasons, our net income decreased by $0.5 million, or 6.4%, from $7.8
million for the three months ended June 28, 2008 to $7.3 million for the three
months ended July 4, 2009. Our net income decreased by $0.5 million, or 3.6%,
from $13.8 million for the six months ended June 28, 2008 to $13.3 million for
the six months ended July 4, 2009.


19


Liquidity and Capital
Resources




Operating activities. Cash
flows provided by operating activities were $4.4 million for the six months
ended July 4, 2009 compared to cash flows provided by operating activities of
$0.3 million for the six months ended June 28, 2008. This change was primarily
driven by the cash provided by operations resulting from changes in working
capital.  The increase in accounts receivable was due to higher sales
for the six months ended July 4, 2009 when compared to the same period in the
prior year, somewhat offset by higher cash collections.  The increase
in inventory is a result of new product initiatives which we launched and will
be launching in 2009, and supply chain management.





Investing activities. Cash
flows used in investing activities were $1.4 million for the six months ended
July 4, 2009 compared to $0.8 million for the six months ended June 28,
2008.





Financing activities. Cash
flows provided by financing activities were $0.1 million for the six months
ended July 4, 2009 compared to cash flows used in financing activities of $0.6
million for the six months ended June 28, 2008.





At July
4, 2009 we had $87.8 million outstanding under our term loan, and $0 outstanding
under our revolving loan with approximately $48.1 million available for
borrowings, after giving effect to $1.9 million of outstanding letters of
credit. Principal payments on the term loan are payable in quarterly
installments of $0.3 million with all remaining amounts due on the maturity
date. We are permitted to voluntarily prepay all or part of the principal
balance of the term loan with such prepayments applied to scheduled principal
payments in inverse order of their maturity. We were in compliance with all debt
covenants at July 4, 2009.





Below is
a summary of our actual performance under these financial
covenants:





July 4, 2009
                            Covenant
                          
                          
                          January 3, 2009
                            CovenantActual
      fixed charge coverage ratio
                          
                          3.03
      : 1.00
                          
                          
                          2.30
      : 1.00Minimum
      ratio required
                          
                          1.25
      : 1.00
                          
                          
                          1.25
      : 1.00Actual
      leverage ratio
                          
                          0.86
      : 1.00
                          
                          
                          0.90
      : 1.00Maximum
      ratio permitted
                          
                          4.00
      : 1.00
                          
                          
                          4.00
      : 1.00Actual
      consolidated capital expenditures
                          
                          $1,449
                          
                          
                          $3,197Maximum
      permitted
                          
                          $15,000
                          
                          
                          $13,158





The
global economic downturn and the continued volatility in the financial markets
could have a material adverse effect on our business. Further deterioration in
the financial markets could lead to business disruptions for certain of our
suppliers, contract manufacturers or trade customers and consequently, could
disrupt our business. However, we believe that our existing cash balances and
available borrowings under our revolving loan, along with our future cash flow
from operations, will enable us to meet our liquidity needs and capital
expenditure requirements for the foreseeable future.


20


Contractual Obligations,
Commitments and Off-Balance Sheet Arrangements




We have
various contractual obligations which are recorded as liabilities in our
condensed consolidated financial statements. Other items, such as certain
purchase commitments and other executory contracts, are not recognized as
liabilities in our condensed consolidated financial statements but are required
to be disclosed. For example, we are contractually committed to make certain
minimum lease payments for the use of property under operating lease
agreements.





The
following table summarizes our significant contractual obligations and
commercial commitments at July 4, 2009 and the future periods in which such
obligations are expected to be settled in cash. In addition, the table below
reflects the timing of principal and interest payments on outstanding
borrowings.





Balance offiscal
                  
                  
                  In fiscal
                  
                  
                  In fiscal
                  
                  
                  In fiscal
                  
                  
                  In fiscal(in millions)
                  
                  2009
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  Thereafter
                  
                  
                  TotalLong-term
      debt
                  
                  $
                  0.6
                  
                  
                  $
                  1.1
                  
                  
                  $
                  1.1
                  
                  
                  $
                  1.1
                  
                  
                  $
                  1.1
                  
                  
                  $
                  82.8
                  
                  
                  $
                  87.8Interest
      on long-term debt (1)
                  
                  
                  0.9
                  
                  
                  
                  1.7
                  
                  
                  
                  1.7
                  
                  
                  
                  1.7
                  
                  
                  
                  1.7
                  
                  
                  
                  0.8
                  
                  
                  
                  8.5Obligations
      under capital lease (2)
                  
                  
                  0.1
                  
                  
                  
                  0.2
                  
                  
                  
                  0.1
                  
                  
                  
                  0.1
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  0.5Operating
      leases (3)
                  
                  
                  3.7
                  
                  
                  
                  6.3
                  
                  
                  
                  5.5
                  
                  
                  
                  4.7
                  
                  
                  
                  3.4
                  
                  
                  
                  6.8
                  
                  
                  
                  30.4Total
      financial obligations
                  
                  
                  5.3
                  
                  
                  
                  9.3
                  
                  
                  
                  8.4
                  
                  
                  
                  7.6
                  
                  
                  
                  6.2
                  
                  
                  
                  90.4
                  
                  
                  
                  127.2Other
      contractual obligations (4)
                  
                  
                  1.5
                  
                  
                  
                  4.7
                  
                  
                  
                  3.2
                  
                  
                  
                  5.2
                  
                  
                  
                  5.8
                  
                  
                  
                  13.4
                  
                  
                  
                  33.8Purchase
      obligations (5)
                  
                  
                  62.1
                  
                  
                  
                  4.9
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  67.0Total
      financial obligations and commitments
                  
                  $
                  68.9
                  
                  
                  $
                  18.9
                  
                  
                  $
                  11.6
                  
                  
                  $
                  12.8
                  
                  
                  $
                  12.0
                  
                  
                  $
                  103.8
                  
                  
                  $
                  228.0





(1)
The interest rate assumed for the variable portion of long-term debt was the
rate in effect at July 4, 2009.


(2)
Includes amounts classified as interest expense and SG&A under capital
leases.


(3)
The operating leases included in the above table consist of minimum rent
payments and do not include contingent rent based upon sales volume, or variable
costs such as maintenance, insurance or taxes.


(4)
Includes amounts classified as royalties, advertising and marketing
obligations.


(5)
Unconditional purchase obligations are defined as agreements to purchase goods
that are enforceable and legally binding on us and that specify all significant
terms, including fixed or minimum quantities to be purchased; fixed, minimum, or
variable price provisions; and the approximate timing of the transaction. The
purchase obligations category above relates to commitments for inventory and raw
material purchases. Amounts reflected in our condensed consolidated balance
sheets in accounts payable or other current liabilities are excluded from the
table above.





In
addition to the total contractual obligations and commitments included in the
table above, we have pension and post-retirement benefit obligations included in
other non-current liabilities of $5.3 million and $0.7 million, respectively at
July 4, 2009.





As of
July 4, 2009, our total liabilities for unrecognized tax benefits and related
interest and penalties amounted to $7.0 million (before federal and, if
applicable, state effect). Liabilities for unrecognized tax benefits have not
been included in the schedule of cash contractual obligations because we cannot
make a reasonable, reliable estimate of the amount and period of related future
payments of these liabilities.




Off-Balance Sheet Arrangements.Our most significant off-balance sheet financing arrangements as of July
4, 2009 are non-cancelable operating lease agreements, primarily for our
company-operated outlet stores, our company headquarters and our leased
distribution centers located in Shannon, Ireland and Fayetteville, North
Carolina. We do not participate in any off-balance sheet arrangements involving
unconsolidated subsidiaries that provide financing or potentially expose us to
unrecorded financial obligations.


21


Critical Accounting Policies
and Estimates




Our
discussion and analysis of our financial condition and results of operations is
based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, expenses, and related disclosure of contingent assets and liabilities.
We base our estimates on historical experience and on various other assumptions
that we believe are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. A summary
of our significant accounting policies and a description of accounting policies
that we believe are most critical may be found in the Management’s Discussion
and Analysis of Financial Condition and Results of Operations included in our
Annual Report on Form 10-K for the year ended January 3, 2009.





Recently
Issued Accounting Standards


In
December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position (“FSP”) No. FAS 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), to provide guidance on
an employers’ disclosures about plan assets of a defined benefit pension or
other postretirement plan. This FSP is effective for fiscal years ending after
December 15, 2009. We are currently evaluating the impact that FSP FAS 132(R)-1
will have on our consolidated financial statements.





In April
2009, the FASB issued FSP No. FAS 107-1 and Accounting Principles Board (“APB”)
Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial
Instruments” which requires disclosures about fair value of financial
instruments for interim reporting periods as well as in annual financial
statements.  We have adopted the provisions of this FSP effective July
4, 2009 and have included the required disclosures in Note 3.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”). FSP FAS
157-4 provides guidance on estimating fair value when market activity has
decreased and on identifying transactions that are not orderly. Additionally,
entities are required to disclose in interim and annual periods the inputs and
valuation techniques used to measure fair value. This FSP is effective for
interim and annual periods ending after June 15, 2009. As the requirements under
this FSP are consistent with our current practice, the implementation of this
standard did not have a significant impact on our consolidated financial
statements.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before the date the financial statements
are issued or available to be issued. SFAS 165 requires companies to reflect in
their financial statements the effects of subsequent events that provide
additional evidence about conditions at the balance-sheet date. Subsequent
events that provide evidence about conditions that arose after the balance-sheet
date should be disclosed if the financial statements would otherwise be
misleading. Disclosures should include the nature of the event and either an
estimate of its financial effect or a statement that an estimate cannot be made.
SFAS 165 is effective for interim and annual financial periods ending after June
15, 2009, and should be applied prospectively. We have adopted the provisions of
SFAS 165 and have included the required disclosures in Note 1.





In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the
Hierarchy of Generally Accepted Accounting Principles - A Replacement of FASB
Statement No. 162” (“SFAS 168”). SFAS 168 establishes the FASB Standards
Accounting Codification (“Codification”) as the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by the FASB to be
applied to nongovernmental entities and rules and interpretive releases of the
SEC as authoritative GAAP for SEC registrants. The Codification will supersede
all the existing non-SEC accounting and reporting standards upon its effective
date and subsequently, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. SFAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. We will amend our financial statement
disclosures accordingly beginning with our Quarterly Report on Form 10-Q for the
three and nine-months ending October 3, 2009.





Item
3. Quantitative and Qualitative Disclosures about Market Risk





Foreign Currency Risk.We do
not believe that we have significant foreign currency transactional exposures.
For the three and six-month periods ended July 4, 2009, $7.6 million and $12.4
million, respectively, of our total net sales were in currencies other than the
U.S. dollar. During the three and six-month periods ended July 4, 2009, our net
sales were unfavorably impacted by $1.2 million and $2.1 million, respectively,
due to foreign exchange rates. Most of our purchases are denominated in U.S.
dollars. The impact of a 10% unfavorable change in the exchange rate of the U.S.
dollar against the prevailing market rates of the foreign currencies in which we
have transactional exposures would be immaterial.


22


Interest Rate Risk.Interest
rate risk is managed through a combination of variable and fixed rate debt. Our
objective is to maintain a cost-effective mix that we deem appropriate and we
have entered into an interest rate swap agreement to maintain this balance. At
July 4, 2009, our debt portfolio was composed of variable-rate debt of which we
hedge approximately 11% to a fixed rate. With respect to our variable-rate debt,
a 1% change in interest rates would be immaterial.





Commodity Price Risk.We are
subject primarily to commodity price risk arising from fluctuations in the
market prices of raw materials used in the garments purchased from our sourcing
vendors, if they pass along these increased costs. During the past five years,
there has been no significant impact from commodity price fluctuations, and we
do not currently use derivative instruments in the management of these risks. On
a going-forward basis, fluctuations in crude oil prices or petroleum based
product prices may also influence the prices of the related items such as
chemicals, dyestuffs, man-made fibers and foam, and transportation costs. Raw
material price increases could increase our cost of sales and decrease our
profitability unless we are able to pass our higher costs on to our
customers.





Inflation Risk.We are
affected by inflation and changing prices from our suppliers primarily through
the cost of raw materials, increased operating costs and expenses, and
fluctuations in interest rates. The effects of inflation on our net sales and
operations have not been material in recent years. We do not believe that
inflation risk is material to our business or our consolidated financial
position, results of operations or cash flows. In the future, volatile crude oil
and gasoline prices may impact our product and freight costs, consumer
confidence and disposable income.





Seasonality.We have not
experienced any significant seasonal fluctuations in our net sales or our
profitability.





Item
4. Controls and Procedures





(a) Evaluation of Disclosure
Controls and Procedures.





Our
management, including the Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of our “disclosure controls and procedures,” (as
defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the
period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of such date, our
disclosure controls and procedures were effective as of July 4, 2009 to ensure
that the information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms, and to ensure that
information is accumulated and communicated to our management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.





(b) Changes
in Internal Controls over Financial Reporting.





There was
no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) during
our fiscal quarter ending July 4, 2009, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


23


PART II - OTHER
INFORMATION





Item
1. Legal Proceedings


We are
not currently a party to any material legal proceedings. We are subject to
various claims and legal actions arising from time-to-time in the ordinary
course of business. While it is possible that our cash flows and results of
operations in a particular quarter or year could be materially affected, it is
our opinion that these matters will not have a material impact on our
consolidated financial position or ongoing results of operations and cash
flows.





Item
1A. Risk Factors


Risks
that could have a negative impact on our business, results of operations and
financial condition include: our growth cannot be assured and any growth may be
unprofitable; potential fluctuations in our results of operations or rate of
growth; our dependence on a limited number of customers; we have larger
competitors with greater resources; retail trends in the intimate apparel
industry, including consolidation and continued growth in the development of
private brands, resulting in downward pressure on prices, reduced floor space
and other harmful changes; failure to anticipate, identify or promptly react to
changing trends, styles, or consumer preferences; our leverage could adversely
affect our financial condition; external events may disrupt our supply chain,
result in increased cost of goods or an inability to deliver our products;
events which result in difficulty in procuring or producing products on a
cost-effective basis; increases in the prices of raw materials; changing
international trade regulation, including as it relates to the imposition or
elimination of quotas on imports of textiles and apparel; foreign currency
exposure; the sufficiency of cash to fund operations and capital expenditures;
and the influence of adverse changes in general economic conditions. This list
is intended to identify only certain of the principal factors that could have a
material and adverse impact on our business, results of operations and financial
condition.  A more detailed description of each of these and other
important risk factors can be found under the caption “Risk Factors” in our most
recent Form 10-K, filed with the Securities and Exchange Commission on March 11,
2009.




There are
no material changes to the risk factors described in the Form 10-K filed on
March 11, 2009.




Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





(a)
None.


(b)
None.


(c)
None.





Item
3. Defaults Upon Senior Securities


None.





Item
4. Submission of Matters to a Vote of Security Holders


a) On May
21, 2009, our Annual Meeting of the Stockholders was held in Iselin, New Jersey.
There were 23,166,844 shares of common stock outstanding on the record date and
entitled to vote at the Annual Meeting. A total of 21,345,313 votes were
represented at the Annual Meeting.





b) The
following directors were elected:





Favor
              
              
              WithheldKaren
      Rose
              
              
              18,449,012
              
              
              
              2,896,301Maurice
      S. Reznik
              
              
              21,318,265
              
              
              
              27,048Norman
      Axelrod
              
              
              21,200,421
              
              
              
              144,892Harold
      F. Compton
              
              
              21,198,776
              
              
              
              146,537Barbara
      Eisenberg
              
              
              21,296,346
              
              
              
              48,967David
      B. Kaplan
              
              
              21,286,539
              
              
              
              58,774Adam
      L. Stein
              
              
              21,289,331
              
              
              
              55,982




c) The
selection of PricewaterhouseCoopers LLP as the Company’s independent registered
public accounting firm for the fiscal year ending January 2, 2010 was ratified
with 21,196,445 votes in favor, 148,268 votes against, and 600
abstentions.





d) The
amendment and restatement of the Maidenform Brands, Inc. 2005 Stock Incentive
Plan was approved with 18,971,954 votes in favor, 1,425,763 votes against, 620
abstentions and 946,976 broker non-votes. The Maidenform Brands, Inc. 2005 Stock
Incentive Plan was renamed to the Maidenform Brands, Inc. 2009 Omnibus Incentive
Plan.


24





Item
5. Other Information


None.





Item
6. Exhibits


The
following exhibits are filed as part of this Quarterly Report on Form
10-Q:


31.1
              Certification
      by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
              Certification
      by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
              Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
              Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002




25


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.





MAIDENFORM BRANDS,
      INC.
                      (Registrant)Date:
      August 12, 2009
                    By:
                    /s/
      Christopher W. ViethName:
      Christopher W. ViethTitle:
      Executive Vice President, Chief Operating Officerand
                      Chief
      Financial Officer (principal financial
officer)


26


EXHIBIT
INDEX


31.1
            Certification
      by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
            Certification
      by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
            Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  200232.2
            Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002




27