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Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000912057-01-544622.txt : 20020413
<SEC-HEADER>0000912057-01-544622.hdr.sgml : 20020413
ACCESSION NUMBER: 0000912057-01-544622
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20010930
FILED AS OF DATE: 20011226
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MOTHERS WORK INC
CENTRAL INDEX KEY: 0000896985
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621]
IRS NUMBER: 133045573
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-21196
FILM NUMBER: 1822871
BUSINESS ADDRESS:
STREET 1: 456 N 5TH ST
CITY: PHILADELPHIA
STATE: PA
ZIP: 19123
BUSINESS PHONE: 2158732200
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K/A
<SEQUENCE>1
<FILENAME>a2066386z10-ka.htm
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<HTML>
<HEAD>
<TITLE> Prepared by MERRILL CORPORATION
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<FONT SIZE=3 ><A HREF="#01PHI1552_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
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<P ALIGN="CENTER"><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B>Washington, D.C. 20549 </B></FONT></P>
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<P ALIGN="CENTER"><FONT SIZE=5><B>FORM 10-K/A </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=3><B>Amendment No. 2 </B></FONT></P>
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<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=3>/x/</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=3><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>For the fiscal year ended September 30, 2001<BR>
or </B></FONT></P>
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<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=3>/ /</FONT></TD>
<TD WIDTH="88%"><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>For the transition period from ____________ to ____________ </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B> Commission file number 0-21196 </B></FONT></P>
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<P ALIGN="CENTER"><FONT SIZE=5><B>Mothers Work, Inc. </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>
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<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2><B>Delaware</B></FONT><FONT SIZE=2><BR>
(State or other jurisdiction of incorporation or organization)</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2><B>13-3045573</B></FONT><FONT SIZE=2><BR>
(IRS Employer Identification No.)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%" ALIGN="CENTER"><FONT SIZE=2><B>456 North Fifth Street, Philadelphia, PA</B></FONT><FONT SIZE=2><BR>
(Address of principal executive offices)</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="43%" ALIGN="CENTER"><FONT SIZE=2><B>19123</B></FONT><FONT SIZE=2><BR>
(Zip Code)</FONT></TD>
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Registrant's telephone number, including area code<BR></FONT> <FONT SIZE=2><B>(215) 873-2200 </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>Securities registered pursuant to Section 12(b) of the Act:<BR></FONT></P>
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<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2><B>Title of each class</B></FONT><HR NOSHADE></TD>
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<TD WIDTH="58%" ALIGN="CENTER"><FONT SIZE=2><B>Name of each exchange on which registered</B></FONT><HR NOSHADE></TD>
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<TD WIDTH="24%" ALIGN="CENTER"><FONT SIZE=2>None</FONT></TD>
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<TD WIDTH="58%" ALIGN="CENTER"><FONT SIZE=2>N/A</FONT></TD>
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Securities registered pursuant to Section 12(g) of the Act:<BR></FONT> <FONT SIZE=2><B>Common Stock, par value $.01 per share </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>(Title of class) </FONT></P>
<P><FONT SIZE=2> 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 / / </FONT></P>
<P><FONT SIZE=2> Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K / /. </FONT></P>
<P><FONT SIZE=2> On
December 14, 2001, the aggregate market value of the Registrant's common stock, $.01 par value, held by nonaffiliates of the Registrant was approximately $22,952,196. </FONT></P>
<P><FONT SIZE=2> On
December 14, 2001, 3,480,122 shares of the Registrant's common stock, $.01 par value, were outstanding. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B>DOCUMENTS INCORPORATED BY REFERENCE </B></FONT></P>
<P><FONT SIZE=2> Portions of the Registrant's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders scheduled to be held on
January 17, 2002 are incorporated by reference into Part III of this Form 10-K. </FONT></P>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1552_part_i."> </A>
<A NAME="toc_ca1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART I. <BR> </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1552_explanatory_note"> </A>
<A NAME="toc_ca1552_2"> </A></FONT> <FONT SIZE=2><B>EXPLANATORY NOTE <BR> </B></FONT></P>
<P><FONT SIZE=2> The purpose of Amendment No. 2 to the Form 10-K is solely for the purpose of correcting headings on certain financial tables and to correct other errors. </FONT></P>
<P><FONT SIZE=2><A
NAME="ca1552_item_1._business"> </A>
<A NAME="toc_ca1552_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 1. Business <BR> </B></FONT></P>
<P><FONT SIZE=2><B>General </B></FONT></P>
<P><FONT SIZE=2> Mothers Work®, Inc. ("Mothers Work" or the "Company")<SUP>1</SUP> is the world's largest maternity apparel retailer. The Company was
incorporated under the laws of the State of Delaware in 1982. Its principal executive offices and production/distribution facility are located at 456 North Fifth Street, Philadelphia, Pennsylvania
19123 and its telephone number is (215) 873-2200. The Company is vertically integrated, performing design, initial stages of the manufacturing process, distribution, and retail
sales functions primarily in-house. The Company also markets its brands and takes sales orders over the phone, by mail order catalogs and brochures and on its Internet sites. </FONT></P>
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<DL compact>
<DT><FONT SIZE=2><SUP>1</SUP></FONT></DT><DD><FONT SIZE=2>The
terms Mothers Work and the Company, as used in this Report, include Mothers Work, Inc. and Cave Springs, Inc., its wholly-owned subsidiary. All references in this
Report to stores or Company-owned stores include leased departments. </FONT></DD></DL>
<P><FONT SIZE=2> The
Company's maternity wear retail stores have distinctly positioned brands with different merchandising and marketing strategies targeted to women seeking to purchase moderate to
upscale maternity fashions. As of September 30, 2001, the Company operated a total of 771 stores, including 639 through the Mimi Maternity®, A Pea in the Pod®,
Motherhood Maternity® ("Motherhood") and Motherhood Maternity Outlet® store concepts and 132 leased maternity departments, offering a full range of career, casual, and special
occasion maternity apparel. The Company locates its stores primarily in regional shopping malls, factory-direct outlet centers and, to a lesser extent, in lifestyle centers and in central business
districts within major metropolitan areas. All of the Company's maternity store concepts sell clothing that is designed to meet an expectant mother's entire lifestyle fashion needs, including her
career requirements, as well as her casual and special occasion needs. Mimi Maternity is designed to meet the needs of fashion-forward women who are willing to spend more to make a fashion statement.
A Pea in the Pod markets the most upscale of the Company's maternity fashions in boutique store locations, offering a premium merchandise selection manufactured by the Company, including the Mimi
Maternity line of clothing as well as certain designer labels produced exclusively for A Pea in the Pod. Mimi Maternity and A Pea in the Pod collectively constitute the Company's
"high-end" line. Motherhood, the broadest of the Company's lines, is positioned to offer everyday low pricing and an extraordinary assortment of career, casual, exercise, lingerie, nursing
apparel and accessories and plus sizes at moderate price points. Motherhood Maternity Outlets offer the Motherhood concept in moderate market factory-direct store locations, serving women who seek
maternity clothing but cannot or will not purchase at full retail prices. </FONT></P>
<P><FONT SIZE=2> The
Company's strategy is to: </FONT></P>
<UL>
<DL compact>
<DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Respond
quickly to customer fashion demand utilizing its Real Time Retailing® business model.
<BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Secure
and maintain desirable retail locations within regional shopping malls and lifestyle centers, exclusive street address locations, and factory-direct
outlet centers.
<BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Use
a combination of domestic and international production to ensure responsiveness to market demands as well as cost efficiencies.
<BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Maintain
positions at all price points, "giving the customer what she wants when she wants it," at the price point she selects. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>
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<UL>
</UL>
<DL compact>
<DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Expand
its presence in the moderate price market by identifying key items and offering them at everyday low prices.
<BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Maintain
a strategic presence in high visibility online portals and sites and have the full line of brands available for shopping and purchasing online.
<BR><BR></FONT></DD><DT><FONT SIZE=2>•</FONT></DT><DD><FONT SIZE=2>Deliver
marketing and branding communications in venues that influence and reach first time pregnant women early in their pregnancy. </FONT></DD></DL>
</UL>
<P><FONT SIZE=2><B>The Maternity Apparel Market </B></FONT></P>
<P><FONT SIZE=2> The Company is unaware of any reliable data on the revenue size of the maternity apparel market. The Company believes that the number of maternity clothing
wholesale vendors has decreased over the last few years as full service retailers are attempting to be more competitive in this endeavor. Vertical integration reduces the Company's reliance on the
availability of merchandise from outside vendors and provides it with a competitive advantage over other maternity retailers. Management believes that the fact that women may choose to shop the
regular market or decide to purchase loose-fitting or larger-sized clothing as a substitute for maternity wear impacts the maternity apparel market. </FONT></P>
<P><FONT SIZE=2><B>Strategy </B></FONT></P>
<P><FONT SIZE=2> The key components of the Company's strategic objectives are described below. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><I>Real Time Retailing—</I></FONT><FONT SIZE=2>Real Time Retailing is the Company's proprietary and comprehensive capability to monitor better and
respond more quickly to consumer fashion demand, thereby reducing the fashion risk inherent in the apparel business. Through the use of computerized point of sale and merchandising systems, daily
replenishment of inventory to the stores, "quick-response" design, "quick-turn" domestic manufacturing and cost efficient international production, the Company is able to provide its
customers with the merchandise that they want when they want it. The objective is to maximize the sales potential of each store by matching the profile of the store's customers with the proper
merchandise. Real Time Retailing also assists the Company in maximizing its in-store inventory turns and sales per square foot, reducing its cost of goods sold and improving gross profit
margins. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><I>Prime Locations and Broad Distribution</I></FONT><FONT SIZE=2>—The Company's ability to generate high sales per square foot, in addition to the
high quality image and design of the Company's stores and its multiple concept approach, have enabled the Company to secure and maintain desirable retail locations within regional shopping malls
throughout the United States, factory-direct outlet centers and select real estate street locations. These factors have enabled the Company not only to locate stores at many of the most desirable
shopping malls and factory-direct outlet centers in the country, but also to obtain desirable locations within such malls and centers. </FONT></P>
<P><FONT SIZE=2> By
operating four different store concepts, the Company is positioned to satisfy demand for maternity clothing throughout the moderate and high-end segments of the market
by offering a full range of career, casual, exercise, and special occasion maternity wear and lingerie. Mall operators require an appropriate mix of stores for the mall's consumer and market position.
For regional malls that require one maternity store, the Company provides several different concepts within the moderate and high-end segments of the market from which the mall can choose
to meet its consumer needs. In the case of multi-mall operators, the Company has the flexibility to supply packages of stores in multiple malls utilizing all of its concepts. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><I>Key Products</I></FONT><FONT SIZE=2>—The Company's strategy is to continue to expand in the moderate item market by offering seasonal items at
everyday low prices. Typical seasonal offerings include denim blue jeans, turtlenecks, t-shirts, leggings and lingerie. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>
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<P><FONT SIZE=2>
</FONT><FONT SIZE=2><I>Production</I></FONT><FONT SIZE=2>—The Company uses a combination of international and domestic production. International sources are used for
items such as those in the moderate apparel market where lower costs are necessary for competitive reasons, and the fashion marketability of the item is not adversely affected by the longer lead times
that are inherent when a product is acquired from an international vendor. Domestic production helps to ensure (1) in-season manufacturing capability for fast selling moderate
priced product to reduce stock-outs; (2) pre-season production of time-sensitive fashion apparel; and (3) in-season production of fashion
items identified during the season. Domestic manufacturing capability allows the Company to react in real-time to changing market trends, thereby providing the Company with a competitive
advantage over other apparel retailers who source the majority of their product entirely overseas. </FONT></P>
<P><FONT SIZE=2><B>Expansion Strategy </B></FONT></P>
<P><FONT SIZE=2> Since the time of its initial public offering in March 1993, the Company has grown its maternity store base from 67 to 771 stores as of
September 30, 2001. Reflected in this increase are stores that were obtained as a result of the Company's January 1994 acquisition of 22 Page Boy stores, its April 1995
acquisition of 66 A Pea in the Pod stores and its August 1995 acquisition of 217 Motherhood stores. </FONT></P>
<P><FONT SIZE=2> The
Company opened 68 new locations (net of closures) in fiscal 2001, consisting of 45 Motherhood and Motherhood Maternity Outlet stores, 21 leased departments and two
high-end stores compared with 78 new locations (net of closures) in fiscal 2000, consisting of 62 Motherhood and Motherhood Maternity Outlet stores, 14 leased departments and two
high-end stores. In fiscal 2002, the Company plans to add approximately 61 new maternity locations, principally Motherhood stores and Motherhood Maternity Outlets. </FONT></P>
<P><FONT SIZE=2> A
significant portion of the Company's growth has been attributable to the addition of new stores, the acquisition of existing maternity stores and the increased sales volume from
such stores. The Company's ability to open new stores on a timely basis will depend upon its success in identifying suitable store sites, obtaining leases for those sites on acceptable terms,
constructing or refurbishing the sites where necessary, hiring and training skilled store managers and personnel, and cash availability. There can be no assurance that suitable sites will be available
for new stores or that new stores will generate sales volumes comparable to those of the Company's existing stores. In addition, the costs associated with opening such stores may adversely affect the
Company's profitability. Further, the Company periodically monitors and analyzes the need for store closures. </FONT></P>
<P><FONT SIZE=2> The
Company continually identifies and evaluates real estate opportunities. In addition to its current stores, the Company has identified additional malls and other locations in the
United States that would be well suited for maternity stores. The Company considers markets nationwide but favors metropolitan areas with populations greater than 500,000. Additional malls and outlet
centers that do not meet the Company's primary site selection criteria may nevertheless be attractive store locations if favorable lease terms can be negotiated. The addition of non-mall
locations is likely to continue during fiscal 2002. </FONT></P>
<P><FONT SIZE=2> On
October 17, 2001 (the "Closing Date"), the Company completed its acquisition of eSpecialty Brands, LLC ("iMaternity®") pursuant to an Agreement and Plan of
Merger (the "Merger Agreement") dated October 15, 2001, by and among the Company, iMaternity Acquisition Corp., a wholly-owned subsidiary of the Company ("Newco"), iMaternity and the holders of
all of the outstanding equity interests of iMaternity (the "Sellers"). Pursuant to the Merger Agreement, Newco merged with and into iMaternity with iMaternity surviving as a wholly-owned subsidiary of
the Company. </FONT></P>
<P><FONT SIZE=2> Pursuant
to the merger, the Company issued to the Sellers 302,619 shares of Series C Cumulative Preferred Stock, par value $.01 per share, with a stated value of
$19.5 million (the "Series C Preferred </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>
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<P><FONT SIZE=2>
Shares"), and warrants to purchase 350,000 shares of the Company's common stock, par value $.01 per share, at a price of $22.50 per share (the "Warrants") valued at approximately $2.0 million.
The Series C Preferred Shares bear dividends at a rate of 8.625% per annum. Such dividends are cumulative and compound quarterly. Dividends accrue for the first year and are thereafter paid in
part in cash with the balance accruing. Each Series C Preferred share is entitled to one vote and votes together with the holders of the common stock as a single class. The holders of
Series C Preferred Shares have the right to receive in a liquidation, dissolution or winding up of the Company, after payment to the holders of the outstanding shares of the Company's
Series A Preferred Stock (par value $.01 per share) and before any payments to holders of junior stock, an amount per share equal to the stated value plus the greater of accrued dividends or
the "participation amount." The "participation amount" is an amount equal to 10% of the increase in the market value per share of common stock for the period from the Closing Date (using the average
closing price per share of common stock for the five trading days before closing) until the date of liquidation, dissolution or winding up of the Company. Beginning on the
earlier of October 18, 2006, a "change of control", or other "fundamental transaction" of the Company (as such terms are defined in the Series C Cumulative Preferred Stock Certificate of
Designation, filed with the Secretary of State of Delaware on October 17, 2001) the holders of outstanding Series C Preferred Shares have the right to require the Company to purchase
their shares for an amount equal to the stated value per share plus accrued dividends (the "Put Right"). If the Company defaults on its obligations under the Put Right, the holders of outstanding
Series C Preferred shares have the right to convert their Series C Preferred Shares into shares of common stock, on the terms described in the Certificate of Designation, provided, that,
in no event shall the aggregate number of shares of common stock issued upon such conversion plus 350,000 (the number of shares of common stock underlying the Warrants) exceed an amount equal to 19.9%
of the number of outstanding shares of common stock immediately before the merger. </FONT></P>
<P><FONT SIZE=2> Under
the terms of the Merger Agreement, from the Closing Date through April 17, 2004, the Company has the right to make an offer to purchase all outstanding Series C
Preferred Shares at a purchase price per share of stated value plus accrued dividends. If a majority of the holders of outstanding Series C Preferred Shares fail to accept such offer to
purchase, then such holders forfeit their Warrants or, if any Warrant has been exercised and the underlying shares of common stock have been sold by any holder, then such holder forfeits accrued
dividends on such Series C Preferred Shares. Further, upon such failure to accept such an offer to purchase, all holders of outstanding Series C Preferred Shares forfeit certain
protective provisions under the Merger Agreement, including prohibitions on issuing senior or parity stock, and redeeming junior securities. The Warrants are exercisable until October 17, 2008.
Beginning on October 17, 2004, the Company has the right to require the Warrant holders to exercise their Warrants if the last reported sales price of the common stock equals or exceeds $40.00
per share for at least 90 consecutive trading days. Beginning on April 18, 2004, the purchase price per share becomes equal to the stated value plus the greater of accrued dividends or the
participation amount. </FONT></P>
<P><FONT SIZE=2> iMaternity
operated a total of 170 Dan-Howard and Mothertime maternity clothing stores, including some under the tradename iMaternity, as well as the online iMaternity.com
website. The Company plans to continue to operate certain of the acquired store locations under the existing Mothers Work stores concepts of Motherhood and Mimi Maternity, and to close the iMaternity
headquarters and distribution center in Chicago, Illinois, an Internet development center in San Diego, California, and manufacturing and warehousing facilities in the United States and Costa Rica. It
is anticipated that the plan will be essentially completed within 12 months of the acquisition date. </FONT></P>
<P><FONT SIZE=2><B>Store Concepts </B></FONT></P>
<P><FONT SIZE=2> The Company operates its maternity stores under four concepts offering a full range of career, casual, exercise and special occasion maternity wear. The
following table sets forth certain information </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>
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<P><FONT SIZE=2>
regarding the Company's store composition as of September 30, 2001, including each store concept's target location, product description and price points for dresses: </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B>Summary of Store Concepts </B></FONT></P>
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<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Description of Target Location</B></FONT><HR NOSHADE></TH>
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<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Product Description </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Dress<BR>
Price Range</B></FONT><HR NOSHADE></TH>
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<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Average Store Size (square feet)</B></FONT><HR NOSHADE></TH>
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<TD WIDTH="13%"><FONT SIZE=2><BR>
A Pea in the Pod</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2><BR>
Exclusive high-end regional malls and affluent residential areas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><BR>
Bridge, high fashion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="13%" ALIGN="CENTER"><FONT SIZE=2><BR>
$200—$400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
2,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Bergdorf Goodman, Neiman Marcus, Saks Fifth Avenue, and Barney's</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2><BR>
Mimi Maternity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2><BR>
High-end regional malls</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><BR>
Fashion-forward, contemporary</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="13%" ALIGN="CENTER"><FONT SIZE=2><BR>
$50—$175</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
1,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Bloomingdales, Gap, Nordstrom's, Ann Taylor, and Banana Republic</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2><BR>
Motherhood</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2><BR>
Moderate regional malls and department stores</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><BR>
Value-oriented, mostly basic casual</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="13%" ALIGN="CENTER"><FONT SIZE=2><BR>
$19—$49 </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
1,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Macy's, Sears, J.C. Penney, Mervyn's, Lerners, Old Navy, Target, K Mart, Kohl's and Wal-Mart</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2><BR>
Motherhood Maternity Outlets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="15%"><FONT SIZE=2><BR>
Factory-direct outlet malls and centers</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><BR>
Motherhood line plus fashion at marked-down prices</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="13%" ALIGN="CENTER"><FONT SIZE=2><BR>
$7—$59 </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
2,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Neiman Marcus' Last Call, Nordstrom Off the Rack, Saks Fifth Avenue Clearinghouse, and outlets for Ann Taylor, Polo, Donna Karen, Liz Claiborne and J. Crew</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2> Most malls require only one moderate to high-end maternity store; however, major regional malls with several department stores may
be able to accommodate two. The Company has the potential to fill both positions at a given mall with Mimi Maternity and A Pea in the Pod as the Company's prestige offerings and Motherhood as the
value-oriented, mostly casual basics. As of September 30, 2001, the Company had two or more maternity stores in 34 major regional malls. </FONT></P>
<P><FONT SIZE=2><B>Store Operations </B></FONT></P>
<P><FONT SIZE=2> The Company employs skilled, motivated sales associates who are trained to provide the detailed assistance and the reassurance needed by the customer. The
Company's centralized operations allow the store associates to focus on selling and the physical maintenance of the merchandise and store appearance. Visual merchants coordinate with the merchandising
department to develop space allocation plans, design store display windows, and to define and enhance the product presentation. </FONT></P>
<P><FONT SIZE=2><B>Merchandising, Design and Store Inventory Planning </B></FONT></P>
<P><FONT SIZE=2><I> Merchandising.</I></FONT><FONT SIZE=2> Guided by Real Time Retailing, the Company's merchandising department combines input from Company
designers, current trends seen generally in women's clothing, outside vendor resources and store management input, with TrendTrack™ computer analysis of customer preferences to provide a
constant flow of merchandise to the Company's stores. The Company strives to maintain an appropriate balance between new merchandise and proven successful styles and utilizes TrendTrack's
open-to-buy system to plan its domestic and international production to control inventory quantity and mix. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>
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<P><FONT SIZE=2><I> Design.</I></FONT><FONT SIZE=2> The Design department creates and produces samples and patterns for the Company's manufactured products under
the guidance of the Merchandising department. The design of a product begins with a review of European and New York trends and current retail trends through fashion reporting service slides and fabric
samples. The designers review the Company's best selling items from prior seasons and integrate current fashion ideas from the non-maternity retail market. </FONT></P>
<P><FONT SIZE=2><I> Store Inventory Planning.</I></FONT><FONT SIZE=2> The Company establishes target inventories for each store using its inventory planning system
to enhance store merchandise coordination and stock balance, maintain adequate depth of merchandise by style, and manage close-out merchandise and end-of-season
consolidation of merchandise. Integral to the Company's inventory management program are its proprietary methods guided by Real Time Retailing and managed by its TrendTrack information system. </FONT></P>
<P><FONT SIZE=2><B>Production and Distribution </B></FONT></P>
<P><FONT SIZE=2> The Company designs and manages production for a substantial portion of its merchandise. The Company contracts its sewing to factories throughout the world,
including domestic facilities located in the Philadelphia metropolitan and surrounding area, and works with more than 40 contractors. No individual contractor represents a material portion of the
Company's sewing. Merchandise is produced abroad utilizing Company designs. The Company continues to seek additional contractors throughout the world for its sourcing needs, including independent
foreign contractors principally in Mexico, India and the Far East, as well as the Dominican Republic, Costa Rica, Guatemala and Honduras. A majority of the Company's merchandise is purchased "full
package" (finished products purchased and made to the Company's specifications) typically utilizing the Company's patterns, markers and designs. Fabric, trim and other supplies are obtained from a
variety of sources. </FONT></P>
<P><FONT SIZE=2> The
Company believes that as it continues to increase its number of store locations, there will continue to be adequate sources of fabrics and other supplies to produce a sufficient
supply of quality goods in a timely manner and on satisfactory economic terms. </FONT></P>
<P><FONT SIZE=2> The
Company's production and quality assurance teams monitor production at contractor facilities in the United States and abroad to ensure quality control, compliance with its design
specifications and timely delivery of finished goods. Finished garments from contractors and other manufacturers are received at the Company's central warehouse in Philadelphia, Pennsylvania, where
they are inspected and stored for picking. Shipments to stores are primarily made by common carrier, typically UPS, Airborne, Federal Express or a similar service providing one or two-day
delivery throughout the United States. </FONT></P>
<P><FONT SIZE=2> The
majority of the Company's merchandise is imported into the United States and is subject to duty. Duties on Mexican imports are controlled in accordance with the North American
Free Trade Agreement. The Company cannot predict whether any of the other foreign countries in which its products are manufactured, currently or at any future date, will be subject to new or increased
import restrictions by the United States government, including the likelihood, type or effect of any trade restrictions. Such trade restrictions, including increased tariffs or decreased quotas,
imposed on items sold by the Company could affect the importation of such merchandise generally and, in that event, could increase the cost or reduce the supply of merchandise available to the Company
and adversely affect the Company's business, financial condition, results of operations and liquidity. The Company's merchandise flow may also be adversely affected by political or economic
instability in any of the countries in which its goods are manufactured to the extent it affects the production or export of merchandise from such countries, significant fluctuation in the value of
the U.S. dollar against foreign currencies, and/or any restrictions on the transfer of funds. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>
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<P><FONT SIZE=2><B>Management Information and Control Systems </B></FONT></P>
<P><FONT SIZE=2> The Company's stores have point-of-sale terminals that provide information used in the Company's customized TrendTrack item and
classification tracking system. This system provides daily financial and merchandising information that is integral to the Company's Real Time Retailing strategy. The TrendTrack system has numerous
features designed to integrate the Company's retail operations with its design, manufacturing and financial functions. These features include custom merchandise profiles for each store, daily
inventory replenishment, item-tracking providing daily updated selling information for every style, classification open-to-buy and inventory control, as well as the
daily collection of credit card sales data. </FONT></P>
<P><FONT SIZE=2> In
fiscal 2002, the Company will commence deployment of a next generation point-of-sale system. This proprietary Internet-based
point-of-sale system will provide real-time access to financial and merchandising information in addition to instant credit authorization. The rollout to stores is
scheduled to continue through fiscal 2003. </FONT></P>
<P><FONT SIZE=2> The
Company employs a comprehensive materials requirements planning system to manage its production inventories, documentation, work orders and scheduling. This system provides a
perpetual inventory of raw materials, actual job costing, scheduling and bill of materials capabilities. </FONT></P>
<P><FONT SIZE=2><B>Advertising, Marketing and Strategic Alliances </B></FONT></P>
<P><FONT SIZE=2> The Company's advertising, promotion and publicity efforts leverage in-store marketing utilizing store windows, prenatal consumer-targeted
advertising for its brands and its Internet website, MaternityMall.com. The Company runs full-page ads for all its brands in pregnancy-targeted publications as well as prenatal issues of
leading baby magazines. Key prenatal magazines in which the Company advertises include </FONT><FONT SIZE=2><I>Shape Fit Pregnancy</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>Pregnancy</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>American
Baby</I></FONT><FONT SIZE=2>. A Pea in the Pod and Mimi Maternity are also advertised in fashion
magazines such as </FONT><FONT SIZE=2><I>Vogue</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>In Style</I></FONT><FONT SIZE=2>. In addition, the Company produces and distributes maternity
brochures quarterly to obstetric and gynecological offices as well as upon direct requests to customers, doctors' offices and hospitals. Nursing products are offered through a mail order catalog as
well as marketed in Motherhood ads. Strategic alliance partners offer additional brand visibility through well-negotiated business agreements to increase mutual brand visibility and
deliver incremental revenue. Publicity initiatives begun in fiscal 2000 to drive editorial coverage of the Company in magazines, TV and newsprint were focused initially on A Pea in the Pod and have
been expanded to include Motherhood and Mimi Maternity in fiscal 2001 and 2002. Publicity efforts provide product samples and photography to major magazines and newspapers to reach millions of
additional consumers. Investment in photography has been increased to drive advertisements, public
relations and in-store imagery expected by customers. During fiscal 2002, the Company plans to continue its investment in advertising and marketing; however, there can be no assurances
that this investment will result in increased sales or profitability. The customer mailing list, which by its nature is constantly changing, is regularly updated through the Company's
point-of-sale collection system. The database is an important asset in striking strategic relationships and providing access to the major brands and partners desiring to target
our pregnant customer, as well as providing an added source of revenue. </FONT></P>
<P><FONT SIZE=2> The
Company's websites are well known and are reached primarily by the customer keying in the Company's brandnames, such as apeainthepod.com and motherhood.com. MaternityMall.com is
the second most likely way for a consumer to reach one of the Company's apparel websites for surfing or shopping. The Company launched the MaternityMall.com website on the Internet in
January 1999 with five tenants. The MaternityMall.com website has significantly grown by increasing the number of e-commerce tenants and by expanding the services offered and
information provided. Cross-selling of brands occurs through the website where customers can search to find the ideal maternity brand in </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>
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<P><FONT SIZE=2>
addition to store locations. The iMaternity.com website, acquired in conjunction with the acquisition of iMaternity, now automatically links to the MaternityMall.com website. </FONT></P>
<P><FONT SIZE=2><B>Competition </B></FONT></P>
<P><FONT SIZE=2> The Company's business is highly competitive. Depth of selection in sizes, colors and styles of merchandise, product procurement and pricing, ability to
anticipate fashion trends and customer preferences, inventory control, reputation, quality of merchandise, store design and location, advertising and customer service are all important factors in
competing successfully in the retail industry. The Company faces competition in its maternity and nursing apparel lines from various full-price maternity clothing chains, a number of
off-price specialty retailers, Internet businesses and catalog retailers as well as from local, regional and national department stores and women's and, to some extent, men's clothing
stores. The Company faces competition in the moderate maternity market from retailers such as Target, Kohl's, J.C. Penney, K Mart, Wal-Mart, Mervyn's, Sears, Gap and others. Many of these
competitors are larger and have significantly greater financial resources than the Company. </FONT></P>
<P><FONT SIZE=2><B>Employees </B></FONT></P>
<P><FONT SIZE=2> At September 30, 2001, the Company had 2,097 full-time and 2,133 part-time employees nationwide. None of the Company's employees
are covered by a collective bargaining agreement. The Company considers its employee relations to be good. </FONT></P>
<P><FONT SIZE=2><B>Executive Officers of the Company </B></FONT></P>
<P><FONT SIZE=2> The executive officers of the Company are as follows: </FONT></P>
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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="56%" ALIGN="CENTER"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Dan W. Matthias</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>Chairman of the Board and Chief Executive Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Rebecca C. Matthias</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>President, Chief Operating Officer and Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>David Mangini</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>Executive Vice President</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Vana Longwell</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>President — Motherhood Maternity</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>Frank C. Mullay</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="56%"><FONT SIZE=2>Senior Vice President — Stores</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2> </FONT><FONT
SIZE=2><B><I>Dan W. Matthias</I></B></FONT><FONT SIZE=2> joined the Company in 1982 and has served as Chairman of the Board since its inception. From 1983 to 1993, he served as
the Company's Executive Vice President, and since January 1993, Mr. Matthias has been the Company's Chief Executive Officer. Prior to Mothers Work, Mr. Matthias had been involved
in the computer and electronics industry, serving as a director of Zilog, Inc. and as the President of a division of a subsidiary of Exxon Corporation. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><B><I>Rebecca C. Matthias</I></B></FONT><FONT SIZE=2> founded the Company in 1982 and has served as a director of the Company and its President since its inception.
Since January 1993, Ms. Matthias has served as the Company's Chief Operating Officer. In 1992, she was chosen as "Regional Entrepreneur of the Year"
by </FONT><FONT SIZE=2><I>Inc</I></FONT><FONT SIZE=2>. magazine and Merrill Lynch Corporation. Prior to 1982, she was a construction engineer for the Gilbane Building Company.
Ms. Matthias also serves as a member of the Board of Trustees of Drexel University. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><B><I>David Mangini</I></B></FONT><FONT SIZE=2> joined the Company in August 2001 as Executive Vice President, responsible for all Product Design, Merchandising,
Manufacturing, Planning and Distribution and Marketing. Beginning his career as an early strategic team member at The Gap, Inc., managing Gap and Banana Republic,
Mr. Mangini went on to drive the Foley's business as Senior Vice President, then as President, built the Structure Division for the Limited, Inc. to 650 stores. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><B><I>Vana Longwell</I></B></FONT><FONT SIZE=2> joined the Company in 1994 as Vice President—Merchandising and from April 1999 to August 2001
served as Senior Vice President—Merchandising. In August 2001, she was promoted to </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>
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<P><FONT SIZE=2>
President of Motherhood Maternity. Prior to 1994, she served as President of Wainscott Sportswear from 1989 to 1993 and from 1980 to 1989, she was the Executive Vice President and general manager of
Apparel Affiliates. </FONT></P>
<P><FONT SIZE=2> </FONT><FONT
SIZE=2><B><I>Frank C. Mullay</I></B></FONT><FONT SIZE=2> joined the Company in September 1999 as Senior Vice President—Stores. Mr. Mullay was
previously employed by The Limited, Inc. from 1983 to 1999, most recently at the Limited Too division as Interim Director of Stores and East Coast Senior Regional Manager. </FONT></P>
<P><FONT SIZE=2> The
Company's executive officers are elected annually by the Board of Directors and serve at the discretion of the Board. Other than the husband and wife relationship between Dan and
Rebecca Matthias, there are no family relationships among any of the other executive officers of the Company. </FONT></P>
<P><FONT SIZE=2><B>Trademarks </B></FONT></P>
<P><FONT SIZE=2> The Company owns such rights to the trademarks and service marks as it believes are necessary to conduct its business as currently operated. The Company,
through its wholly-owned subsidiary, Cave Springs, Inc., owns trademarks including Mothers Work®, A Pea in The Pod®, Mimi Maternity®,
Motherhood®, Motherhood Maternity Outlet®, Steena®, MaternityMall.com™ and Maternité®. As a result of the iMaternity
acquisition, the Company also owns the trademarks iMaternity®, Dan-Howard™, Mothertime® and iMaternity.com™. Additionally, the Company owns
the service marks Real Time Retailing®, What's Showing is Your Style®, Motherhood is Everything Good...™, and Maternity Redefined®. The Company is not
aware of any pending claims of infringement or other challenges to the Company's rights to use its marks in the United States as currently used by the Company. </FONT></P>
<P><FONT SIZE=2><A
NAME="cc1552_item_2._properties"> </A>
<A NAME="toc_cc1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>Item 2. Properties <BR> </B></FONT></P>
<P><FONT SIZE=2> The Company's principal executive offices, manufacturing and distribution facilities are located at 456 North Fifth Street, Philadelphia, Pennsylvania 19123.
This facility consists of approximately 318,000
square feet of which 44,000 square feet is dedicated to office space and the remaining square footage to manufacturing, warehousing and distribution. </FONT></P>
<P><FONT SIZE=2> During
October 1999, the Company entered into a multi-year lease for fabric warehouse space located at 10430 Drummond Road, Philadelphia, Pennsylvania 19152. Of the
50,000 square feet leased, 5,000 square feet is dedicated to office space and the remaining square footage to the warehouse. </FONT></P>
<P><FONT SIZE=2> The
Company leases its store premises for terms averaging from seven to ten years. Certain leases allow the Company to terminate its obligations in the event the applicable store does
not achieve a specified sales volume. Certain clauses provide for contingent payments based on sales volume and others contain clauses for escalations of the base rent as well as increases in
operating costs, marketing costs and real estate taxes. The following number of store leases, excluding leased departments, are set to expire as follows (most of the real estate leases will be
renewed): </FONT></P>
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<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=1><B><BR>
Fiscal Year<BR>
Leases Expire</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Stores</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>103</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>60</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2006 and later</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>361</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2> Generally,
start-up and operating costs for a leased department are substantially less than a stand-alone store. The Company operates leased store locations in department
stores such as Macy's, Rich's, Babies "R" Us and Lazarus. The inventory of the leased departments is merchandised and owned by </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>
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<P><FONT SIZE=2>
the Company and includes fashions from Motherhood, Mimi Maternity, and A Pea in The Pod as well as a line of maternity clothing designed exclusively for them under the Steena label. </FONT></P>
<P><FONT SIZE=2><A
NAME="cc1552_item_3._legal_proceedings"> </A>
<A NAME="toc_cc1552_2"> </A>
<BR></FONT><FONT SIZE=2><B>Item 3. Legal Proceedings <BR> </B></FONT></P>
<P><FONT SIZE=2> From time to time, the Company is named as a defendant in legal actions arising from its normal business activities. Although the amount of any liability that
could arise with respect to currently pending actions of this nature cannot be accurately predicted, in the opinion of management, no liability for any pending action will have a material adverse
effect on the financial position of the Company. </FONT></P>
<P><FONT SIZE=2><A
NAME="cc1552_item_4._submission_of_m__cc102392"> </A>
<A NAME="toc_cc1552_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 4. Submission of Matters to a Vote of Security Holders <BR> </B></FONT></P>
<P><FONT SIZE=2> Not applicable. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=4,SEQ=11,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=477769,FOLIO='11',FILE='DISK013:[01PHI2.01PHI1552]CC1552A.;8',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ce1552_1_12"> </A> </FONT></P>
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ce1552_part_ii."> </A>
<A NAME="toc_ce1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART II. <BR> </B></FONT></P>
<P><FONT SIZE=2><A
NAME="ce1552_item_5._market_for_registrant___ite03067"> </A>
<A NAME="toc_ce1552_2"> </A></FONT> <FONT SIZE=2><B>Item 5. Market for Registrant's Common Equity and Related Stockholder Matters <BR> </B></FONT></P>
<P><FONT SIZE=2> The Company's common stock is traded on the Nasdaq National Market under the symbol "MWRK." The following table sets forth, for the fiscal quarters indicated,
the high and low closing bid prices per share for the Company's common stock, as reported on the Nasdaq National Market: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2><B>Fiscal 2001<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=2> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2><B>First Quarter</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>9.937</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>8.562</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2><B>Second Quarter</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>7.375</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>7.312</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2><B>Third Quarter</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>10.380</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>7.380</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2><B>Fourth Quarter</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>8.510</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>8.450</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
Fiscal 2000</FONT><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2><BR>
</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13.250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8.000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>15.375</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9.812</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12.250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10.000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="66%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10.875</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6.000</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> As
of December 14, 2001, there were 54 holders of record and 700 estimated beneficial holders of the Company's common stock. </FONT></P>
<P><FONT SIZE=2> The
Company currently intends to retain any future earnings to fund operations and the continued development of its business and, therefore, does not anticipate paying cash dividends
on its common stock in the immediate future. No dividends may be paid on common stock or any other shares of capital stock of the Company ranking junior to the Series A Preferred Stock (other
than dividends payable in shares of common stock), until all cumulative and current dividends on the Series A Preferred Stock have been declared and paid in full. Any payment of future
dividends will be at the discretion of the Company's Board of Directors and will be based upon certain restrictive financial covenants, earnings, capital requirements and the operating and financial
condition of the Company, among other factors, at the time any such dividends are considered. See Notes 7 and 12 of "Notes to Consolidated Financial Statements" for further discussion of preferred
stock dividends. </FONT></P>
<P><FONT SIZE=2><A
NAME="ce1552_item_6._selected_financial_data"> </A>
<A NAME="toc_ce1552_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 6. Selected Financial Data <BR> </B></FONT></P>
<P><FONT SIZE=2> The following selected consolidated financial data as of September 30, 2001, 2000, 1999, 1998 and 1997, and for the fiscal years then ended, have been
derived from the financial statements of the Company which have been audited by Arthur Andersen LLP, independent public accountants. The information set forth below should be read in conjunction with
the financial statements and notes thereto as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations." </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=12,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=292642,FOLIO='12',FILE='DISK013:[01PHI2.01PHI1552]CE1552A.;13',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_ce1552_1_13"> </A>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended September 30</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1997</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per share and operating data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Income Statement Data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>388,306</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>366,283</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>299,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>298,991</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>246,934</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Cost of goods sold</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>194,320</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>183,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>150,402</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>158,047</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>113,886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>193,986</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>182,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>149,333</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>140,944</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>133,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>172,795</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>157,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>127,390</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>139,322</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>124,495</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Restructuring and non-recurring charges</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,635</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,617</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Operating income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>21,191</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21,943</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(9,013</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,936</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(14,867</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(15,877</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(15,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(15,181</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(13,252</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>594</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Income (loss) before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>6,918</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,811</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(24,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(10,316</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Income tax provision (benefit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,249</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,477</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,677</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>3,462</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,048</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,387</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(16,717</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,639</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Dividends on preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>1,491</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,251</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,168</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Net income (loss) available to common stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>1,971</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,659</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,136</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(17,885</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(8,727</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Income (loss) per share — Basic:<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Income (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>0.57</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2.45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Average shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,577</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,563</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Income (loss) per share — Diluted:<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Income (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>0.55</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>0.57</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2.45</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Average shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>3,605</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,641</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,754</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,577</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,563</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Operating Data:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Same-store sales increase (decrease)<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(2.4</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)%</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4.3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Average net sales per gross square foot<SUP>(3)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>365</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>390</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>382</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>354</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>338</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Average net sales per store<SUP>(3)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>520,000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>545,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>521,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>464,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>508,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>At end of period:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Number of stores<SUP>(4)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>771</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>583</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>587</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="32%"><FONT SIZE=2>Gross square footage</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>986,000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>864,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>852,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>738,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>820,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="99%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>September 30</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1997</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Balance Sheet Data</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="34%"><FONT SIZE=2>Working capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>32,509</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29,684</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24,021</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23,614</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>32,083</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="34%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>185,177</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>179,586</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>177,608</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>172,469</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>171,718</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="34%"><FONT SIZE=2>Total debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>128,842</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>127,179</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>128,661</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>119,982</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>108,112</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="34%"><FONT SIZE=2>Stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>14,741</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,068</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,750</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26,380</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>See
Note 1 of "Notes to Consolidated Financial Statements."
<BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Based
on stores opened at least 24 months in their current store format.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Based
on locations in operation during the entire fiscal year.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>September 30,
1998 excludes 30 Episode stores which, while owned by the Company, were operated by a liquidator. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=2,SEQ=13,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=584874,FOLIO='13',FILE='DISK013:[01PHI2.01PHI1552]CE1552A.;13',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_ce1552_1_14"> </A>
<P><FONT SIZE=2><A
NAME="ce1552_item_7._management_s_discussio__ite03668"> </A>
<A NAME="toc_ce1552_4"> </A>
<BR></FONT><FONT SIZE=2><B>Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations <BR> </B></FONT></P>
<P><FONT SIZE=2><B>Results of Operations </B></FONT></P>
<P><FONT SIZE=2> The following tables set forth the percentages that the items in the Company's Consolidated Statements of Operations bear to net sales for the fiscal years
ended September 30: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="5%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>100.0</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Cost of goods sold</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>50.0</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>50.0</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>50.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="63%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>50.0</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>50.0</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>49.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>44.5</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>43.1</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>42.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="63%"><FONT SIZE=2>Operating income</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>5.5</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>6.9</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>7.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>(3.9</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(4.3</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(5.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>0.2</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>1.8</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2.6</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Income tax provision</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>0.9</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.2</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>0.9</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.4</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="5%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> The
following table sets forth certain information representing growth in the number of stores and leased maternity departments for the periods indicated: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended September 30</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>1999(a)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Stores:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Beginning of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>703</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="69%"><FONT SIZE=2>Opened</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>85</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>82</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>94</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="69%"><FONT SIZE=2>Closed</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>(17</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(82</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>End of period</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>771</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>703</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>625</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
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<DT><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Includes
30 Episode stores at the beginning of period fiscal 1999. The Company completed the closure of these remaining Episode stores during the second quarter of fiscal 1999. </FONT></DD></DL>
<P><FONT SIZE=2><B>Year Ended September 30, 2001 and 2000 </B></FONT></P>
<P><FONT SIZE=2><I> Net Sales.</I></FONT><FONT SIZE=2> Net sales for fiscal 2001 increased 6.0% to $388.3 million from $366.3 million in fiscal 2000.
The increase was primarily due to the 68 net new stores the Company opened since September 30, 2000. Comparable store sales decreased by 2.4% during fiscal 2001 (based on 600 locations) versus
a comparable store sales increase of 8.3% during fiscal 2000 (based on 532 locations). The decline in comparable store sales is primarily due to the difficult selling environment and the resulting
lower consumer confidence, as further heightened by the tragic events that took place on September 11, 2001. As of September 30, 2001, the Company operated a total of 771 maternity
locations: 441 moderately-priced Motherhood stores, 116 high-end A Pea in the Pod/Mimi Maternity stores, 82 Motherhood Maternity Outlets, and 132 leased maternity departments. In
comparison, at September 30, 2000, the
Company had 703 store locations: 405 Motherhood stores, 112 Pea/Mimi Maternity stores, 75 Motherhood Maternity Outlets and 111 leased maternity departments. </FONT></P>
<P><FONT SIZE=2><I> Gross Profit.</I></FONT><FONT SIZE=2> Gross profit increased by $11.0 million, or 6.0%, to $194.0 million in fiscal 2001
primarily reflective of the higher sales volume. As a percentage of net sales, gross margins remained constant at 50.0%. During fiscal 2001, specific focus on product sourcing resulted in lower
product </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>
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costs. Additionally, the Company improved its delivery of products to its stores both in terms of time and cost, and reduced manufacturing costs by shifting from in-house cutting of fabric
to lower cost outside contractors. Further, the benefits from newly automated warehousing systems served to reduce labor costs included in the overhead allocation pool, while increasing production
volumes. The impact of these business changes were negatively affected by the tragic events of September 11<SUP>th</SUP> and as sales of the Company's moderately-priced Motherhood products
continued to outpace sales of its higher margin product lines. </FONT></P>
<P><FONT SIZE=2><I> Selling, General & Administrative Expenses.</I></FONT><FONT SIZE=2> Selling, general and administrative expenses increased by
$15.0 million or 9.5% in fiscal 2001 compared to fiscal 2000. The increase in operating expenses was primarily due to an increase in wages and benefit related costs of $7.8 million and
store rents of $3.7 million, which were in-line with the new store expansions offset by a slight decrease in depreciation and amortization of $0.3 million. Operating
expenses, as a percentage of net sales, increased from 43.1% to 44.5% principally due to the deleveraging impact of the negative comparable store sales decrease. </FONT></P>
<P><FONT SIZE=2><I> Operating Income.</I></FONT><FONT SIZE=2> Operating income in fiscal 2001 was $21.2 million (5.5% of net sales) compared to
$25.2 million (6.9% of net sales) in fiscal 2000. The decrease in operating income (and as a percentage of net sales) was primarily due to negative comparable store sales. </FONT></P>
<P><FONT SIZE=2><I> Interest Expense.</I></FONT><FONT SIZE=2> The Company reduced its interest expense by $1.0 million in fiscal 2001 from fiscal 2000 by
maintaining average borrowings under its working capital facility at levels below fiscal 2000 coupled with lower interest rates. Average borrowings and the corresponding effective interest rate was
$26.4 million at 7.8% in fiscal 2001 compared to $33.7 million at 8.6% in fiscal 2000. </FONT></P>
<P><FONT SIZE=2><I> Other Income.</I></FONT><FONT SIZE=2> During the fourth quarter of fiscal 2001, the Company negotiated buy-outs of two lease
arrangements in connection with the planned closure of these stores. Due to the level of the rental rates, the Company recognized income from the proceeds being paid under these buy-out
agreements of $1.2 million and wrote off related leasehold improvements and other costs of $0.6 million, resulting in a net gain of $0.6 million. </FONT></P>
<P><FONT SIZE=2><I> Income Taxes.</I></FONT><FONT SIZE=2> The Company's effective tax rate increased to 50.0% in fiscal 2001 from 45.7% in fiscal 2000 primarily
due to the relationship of non-deductible goodwill amortization to the lower pre-tax income in fiscal 2001. See Note 10 of "Notes to Consolidated Financial Statements"
for the reconciliation of the statutory federal income tax rate to the Company's effective tax rate. </FONT></P>
<P><FONT SIZE=2><B>Year Ended September 30, 2000 and 1999 </B></FONT></P>
<P><FONT SIZE=2><I> Net Sales.</I></FONT><FONT SIZE=2> The Company's 22.2% sales growth in fiscal 2000 compared to fiscal 1999 was attributable to the Company's
continued store expansion program and the 8.3% increase in comparable store sales. For fiscal 2000, comparable store sales increased by $23.3 million based on 532 locations versus a comparable
store sales increase of $29.6 million, or 12.9%, during fiscal 1999 based on 473 locations. The Company opened 78 new stores (net of closures) during fiscal 2000. As of September 30,
2000, the Company operated a total of 703 maternity stores and leased departments: 405 moderately-priced Motherhood stores, 112 high-end A Pea in the Pod/Mimi Maternity stores, 75
Motherhood Maternity Outlets, and 111 leased maternity departments. In comparison, at September 30, 1999, the Company had 625 store locations: 351 Motherhood stores, 112 Pea/Mimi Maternity
stores, 65 Motherhood Maternity Outlets and 97 leased maternity departments. Fiscal 1999 also included 30 Episode stores that were sold or closed by the end of the second quarter of fiscal 1999. </FONT></P>
<P><FONT SIZE=2><I> Gross Profit.</I></FONT><FONT SIZE=2> Gross profit increased by $33.6 million, or 22.5%, to $183.0 million in fiscal 2000
primarily reflective of the higher sales volume. As a percentage of net sales, margins improved to 50.0% in fiscal 2000 compared to 49.8% in fiscal 1999. Improvements made to reduce vendor costs, </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>
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tighter controls over managing inventory levels and lower shipping costs served to strengthen margins in fiscal 2000. </FONT></P>
<P><FONT SIZE=2><I> Selling, General & Administrative Expenses.</I></FONT><FONT SIZE=2> Selling, general and administrative expenses increased by
$30.4 million or 23.9% in fiscal 2000 compared to fiscal 1999. The increase in operating expenses was primarily due to an increase in wages and benefit related costs of $15.2 million, an
increase in store rents of $5.6 million and an increase in depreciation and amortization of $1.3 million, all of which were in-line with the new store expansions. Operating
expenses as a percentage of net sales increased from 42.5% to 43.1% principally due to the higher store wages and related benefits. </FONT></P>
<P><FONT SIZE=2><I> Operating Income.</I></FONT><FONT SIZE=2> Operating income for fiscal 2000 improved to $25.2 million (6.9% of net sales) compared to
$21.9 million (7.3% of net sales) in fiscal 1999. The increase of $3.3 million is primarily reflective of higher sales volume. </FONT></P>
<P><FONT SIZE=2><I> Interest Expense.</I></FONT><FONT SIZE=2> Interest expense increased by $0.7 million in fiscal 2000 compared to fiscal 1999, reflecting
higher average borrowings under the Company's working capital facility at a higher effective interest rate. Average borrowings and the corresponding effective interest rates were $33.7 million
at 8.6% and $27.0 million at 7.7% in fiscal 2000 and 1999, respectively. </FONT></P>
<P><FONT SIZE=2><I> Income Taxes.</I></FONT><FONT SIZE=2> The Company's effective tax rate decreased to 45.7% in fiscal 2000 from 50.3% in fiscal 1999. The
reduction in the effective tax rate in fiscal 2000 was primarily due to the relationship of non-deductible goodwill amortization to the higher pre-tax income. See
Note 10 of "Notes to Consolidated Financial Statements" for the reconciliation of the statutory federal income tax rate to the Company's effective tax rate. </FONT></P>
<P><FONT SIZE=2><B>Liquidity and Capital Resources </B></FONT></P>
<P><FONT SIZE=2> In fiscal 2001, the Company's primary sources of working capital were the $19.5 million of cash flows from operations in addition to borrowings under
its $56.0 million working capital facility (the "Working Capital Facility"). In October 2001, the Working Capital Facility was amended and restated to primarily increase the collateral
base to include the assets acquired in the purchase of eSpecialty Brands LLC ("iMaternity"). The Working Capital Facility had been amended and restated in April 2000 to increase borrowings to
the current level from $44.0 million, to raise the annual capital expenditure limitation and to extend the maturity until September 15, 2004. The interest rate is based on the lender's
prime plus 25 basis points. At any time, the Company at its option may elect an alternative rate for all or part of the direct borrowings outstanding at a rate of LIBOR plus 225 basis points. The
blended rate for all borrowings under the Working Capital Facility at September 30, 2001 was approximately 5.5%. Amounts available for direct borrowings, net of letters of credit outstanding,
are limited to the lesser of (a) the unused portion of the Working Capital Facility or (b) the Aggregate Adjusted Availability ("AAA"), as defined in the agreement as a percentage of
eligible inventory and receivables. The Working Capital Facility is secured by a security interest in the Company's inventory, equipment, fixtures and cash. In addition to the direct borrowings, a
$4.0 million standby letter of credit has been utilized in fiscal years 2001 and 2000 to collateralize an Industrial Revenue Bond. There are no financial covenant requirements in the Agreement
unless the AAA falls below $10.0 million. In such event, the Company would have to achieve Minimum Cash Flow, as defined in the Agreement, of not less than zero. During fiscal 2001 and 2000,
the Company exceeded the AAA minimum. As of September 30, 2001, outstanding borrowings under the Working Capital Facility consisted of $32.2 million in direct borrowings and
$4.1 million in letters of credit with available borrowings of $23.9 million compared to $30.5 million of direct borrowings and $3.0 million in letters of credit and
available borrowings of $18.5 million as of September 30, 2000. </FONT></P>
<P><FONT SIZE=2> In
1995, the Company sold 12<SUP>5</SUP>/<SMALL>8</SMALL>% Senior Unsecured Exchange Notes due 2005 (the "Notes") with a face amount of $92.0 million. The Notes were issued at 97.934% of
their face amount, resulting in an </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>
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annual effective interest rate of 13.0%. Interest on the Notes is payable semiannually in cash on February 1<SUP>st</SUP> and August 1<SUP>st</SUP>. The Notes were issued by
Mothers Work and are unconditionally guaranteed on a senior basis by its wholly-owned subsidiary (see Note 14 of "Notes to the Consolidated Financial Statements"). The Notes are redeemable at
the option of the Company, in whole or in part, at any time after August 1, 2000, at 106.25% of their face amount plus accrued interest, declining ratably to 100% of their face amount on and
after August 1, 2002, plus accrued interest. </FONT></P>
<P><FONT SIZE=2> The
Notes impose certain limitations on the ability of the Company to, among other things, incur additional indebtedness, pay dividends and enter into certain types of transactions.
The most restrictive of these covenants limits the Company's ability to repurchase outstanding common stock or pay dividends. </FONT></P>
<P><FONT SIZE=2> The
Company's cash needs have been primarily for debt service, furniture, buildouts of new store locations, increased inventories to support the additional locations and building
improvements and equipment for its existing stores and corporate headquarters. During fiscal 2001, the Company spent $12.2 million in capital expenditures, including $10.1 million in
furniture, fixtures, and leasehold improvements for new store facilities (primarily Motherhood stores) and improvements to existing stores, in addition to another $2.1 million for corporate
additions and other assets. This compares to $13.6 million in capital expenditure spending for fiscal 2000, of which $12.1 million was for new and existing store facilities and
$1.5 million was for corporate additions and other assets. As of September 30, 2001, the Company's cash balance included $8.2 million of cash in the bank held in anticipation of
paying down the iMaternity line of credit in conjunction with the acquisition, which was completed on October 17, 2001. </FONT></P>
<P><FONT SIZE=2> During
fiscal 2001, certain shares of Series A Preferred Stock were converted at the election of the holders into shares of common stock at an initial conversion rate equal to
ten shares of common stock for each share of Series A Preferred Stock, at a stated value of $0.7 million. The Company was restricted under the terms of its senior debt from paying cash
dividends to the holders upon conversion. Accordingly, the Company issued $0.3 million of subordinated notes with unpaid interest compounding annually at the prime rate until paid. The
subordinated notes are convertible into common stock, in accordance with the note terms, after August 1, 2003 (reference is made to Note 7 of "Notes to the Consolidated Financial
Statements"). </FONT></P>
<P><FONT SIZE=2> Management
of the Company believes that its current cash and working capital positions, expected operating cash flows as well as available borrowing capacity under the Working Capital
Facility will be sufficient to fund the Company's working capital and debt repayment requirements for fiscal 2002. </FONT></P>
<P><FONT SIZE=2><B>Statements of Financial Accounting Standards Not Yet Adopted </B></FONT></P>
<P><FONT SIZE=2> In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations," (SFAS No. 141) and Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 141 requires the use of the purchase method of accounting for business
combinations initiated after June 30, 2001, and expands the definition of intangible assets that are to be recorded separately from goodwill. For business combinations accounted for under the
purchase method which were completed prior to July 1, 2001, previously recorded goodwill and intangibles are to be evaluated against the criteria in SFAS No. 141, which may result in the
reclassification of certain intangible assets into or out of recorded goodwill. SFAS No. 142 requires that goodwill and certain intangible assets with an indefinite useful life are not to be
amortized, but are to be reviewed for impairment at least annually and written down in periods in which the recorded value of the goodwill or intangible asset exceeds its fair value. </FONT></P>
<P><FONT SIZE=2> For
goodwill and other intangible assets acquired prior to June 30, 2001, the Company will adopt the provisions of SFAS No. 141 and SFAS No. 142 as of
October 1, 2001, and accordingly, goodwill will no longer be amortized and impairment reviews will be periodically performed to assess whether any </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>
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writedowns are required. The Company's Consolidated Balance Sheet as of September 30, 2001 reflects $29.9 million of goodwill recognized as a result of the acquisitions of A Pea in the
Pod in April 1995 and Motherhood in August 1995. In accordance with the provisions of these statements, the Company amortized this goodwill through the end of fiscal 2001, recognizing
approximately $2.2 million of amortization annually for fiscal 2001, 2000 and 1999. </FONT></P>
<P><FONT SIZE=2> While
the Company has not yet completed all of the valuation and other work necessary to adopt these accounting standards, it is believed that, except for the impact of discontinuing
the amortization of goodwill, they will not have a significant impact on the Company's financial condition or operating results. The Company will adopt the provisions of SFAS No. 141 and the
transition provisions of SFAS No. 142 in accounting for its acquisition of iMaternity (see Note 12 of "Notes to Consolidated Financial Statements"). </FONT></P>
<P><FONT SIZE=2> In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
establishes a single accounting model, based on the framework established in SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Long-lived Assets to
be Disposed of," and resolves significant implementation issues related to SFAS No. 121. SFAS No. 144 superceded SFAS No. 121 and Accounting Principles Board Opinion
No. 30, "Reporting the Results of Operations—Reporting the Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company is required to adopt SFAS No. 144 for the fiscal year ending September 30, 2003, although, early application is permitted. Management does not believe that the
adoption of SFAS No. 144 will have a material impact on its financial condition or results of operations. </FONT></P>
<P><FONT SIZE=2><B>Seasonality </B></FONT></P>
<P><FONT SIZE=2> The Company's business, like that of other retailers, is seasonal. A significant portion of the Company's net sales and profits are realized during the first
and third fiscal quarters, corresponding to the holiday and Spring selling seasons, respectively. Results for any quarter are not necessarily indicative of the results that may be achieved for a full
fiscal year. Quarterly results may fluctuate materially depending upon, among other things, the timing of new store openings, net sales and profitability contributed by new stores, increases or
decreases in comparable store sales, adverse weather conditions, shifts in the timing of certain holidays and promotions, and changes in the Company's merchandise mix. </FONT></P>
<P><FONT SIZE=2><B>Inflation </B></FONT></P>
<P><FONT SIZE=2> The Company does not believe the relatively moderate levels of inflation, which have been experienced in the United States in recent years, have had a
significant effect on its net sales or profitability. However, there can be no assurance that the Company's business will not be affected by inflation in the future. </FONT></P>
<P><FONT SIZE=2><B>Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 </B></FONT></P>
<P><FONT SIZE=2> The Company cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in Item 1,
Business and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Report or made from time to time by management of the Company involve risks and
uncertainties, and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company's financial
performance and actual results and could cause actual results for fiscal 2002 and beyond to differ materially from those expressed or implied in any such forward-looking statements: changes in
consumer spending patterns, raw material price increases, consumer preferences and overall economic conditions, the impact of competition and pricing, changes </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>
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in weather patterns, availability of suitable store locations at appropriate terms and consequent changes in store opening plans, continued availability of capital and financing, ability to develop
merchandise and ability to hire and train associates, changes in fertility and birth rates, political stability, currency and exchange risks and changes in existing or potential duties, tariffs or
quotas, postal rate increases and charges, paper and printing costs, and other factors affecting the Company's business beyond the Company's control. </FONT></P>
<P><FONT SIZE=2><A
NAME="ce1552_item_7a._quantitative_and_qual__ite02669"> </A>
<A NAME="toc_ce1552_5"> </A>
<BR></FONT><FONT SIZE=2><B>Item 7A. Quantitative and Qualitative Disclosures About Market Risk <BR> </B></FONT></P>
<P><FONT SIZE=2> The analysis below presents the sensitivity of the market value of the Company's financial instruments to selected changes in market rates. The range of
changes chosen reflects the Company's view of changes that are reasonably possible over a one-year period. The Company's financial instruments consist principally of its debt portfolio.
The market value of the debt portfolio is referred to below as the "Debt Value". The Company believes that market risk exposure on other financial instruments is immaterial. </FONT></P>
<P><FONT SIZE=2> At
September 30, 2001, the principal components of the Company's debt portfolio are the Notes and the Working Capital Facility, both of which are denominated in US dollars. The
Notes bear interest at a fixed rate of 12<SUP>5</SUP>/<SMALL>8</SMALL>% and the Working Capital Facility bears interest at a variable rate, which at September 30, 2001 was approximately 6.0%. While a
change in interest rates would not affect the interest incurred or cash flows related to the fixed portion of the debt portfolio, the Debt Value would be affected. A change in interest rates on the
variable portion of the debt portfolio impacts the interest incurred and cash flows, but does not impact the net financial instrument position. </FONT></P>
<P><FONT SIZE=2> The
sensitivity analysis as it relates to the fixed portion of the Company's debt portfolio assumes an instantaneous 100 basis point move in interest rates from their levels at
September 30, 2001 with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the Debt Value by $0.9 million at
September 30, 2001. A 100 basis point decrease in market interest rates would result in a $0.9 million increase in the Debt Value at September 30, 2001. </FONT></P>
<P><FONT SIZE=2> Based
on the variable rate debt included in the Company's debt portfolio at September 30, 2001, a 100 basis point increase in interest rates would result in an additional
$0.3 million of interest incurred per year. A 100 basis point decrease would lower interest incurred by $0.3 million per year. </FONT></P>
<P><FONT SIZE=2><A
NAME="ce1552_item_8._financial_statements_and_supplementary_data"> </A>
<A NAME="toc_ce1552_6"> </A>
<BR></FONT><FONT SIZE=2><B>Item 8. Financial Statements and Supplementary Data <BR> </B></FONT></P>
<P><FONT SIZE=2> The Company's consolidated financial statements appear at pages F-1 through F-25, as set forth in Item 14. </FONT></P>
<P><FONT SIZE=2><A
NAME="ce1552_item_9._changes_in_and_disagre__ite03576"> </A>
<A NAME="toc_ce1552_7"> </A>
<BR></FONT><FONT SIZE=2><B>Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure <BR> </B></FONT></P>
<P><FONT SIZE=2> None. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cg1552_part_iii."> </A>
<A NAME="toc_cg1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART III. <BR> </B></FONT></P>
<P><FONT SIZE=2><A
NAME="cg1552_item_10._directors_and___cg102280"> </A>
<A NAME="toc_cg1552_2"> </A></FONT> <FONT SIZE=2><B>Item 10. Directors and Executive Officers of the Registrant <BR> </B></FONT></P>
<P><FONT SIZE=2> Information concerning directors, appearing under the caption "Election of Directors" in the Company's Proxy Statement (the "Proxy Statement") to be filed with
the Securities and Exchange Commission in connection with the Annual Meeting of Stockholders scheduled to be held on January 17, 2002, and information concerning executive officers, appearing
under the caption "Item 1. Business—Executive Officers of the Company" in Part I of this Form 10-K, are incorporated herein by reference in response to this Item
10. </FONT></P>
<P><FONT SIZE=2><A
NAME="cg1552_item_11._executive_compensation"> </A>
<A NAME="toc_cg1552_3"> </A>
<BR></FONT><FONT SIZE=2><B>Item 11. Executive Compensation <BR> </B></FONT></P>
<P><FONT SIZE=2> The information contained in the section titled "Executive Compensation" in the Proxy Statement, with respect to executive compensation, and the information
contained in the section entitled "Compensation of Directors" with respect to director compensation, are incorporated herein by reference in response to this Item 11. </FONT></P>
<P><FONT SIZE=2><A
NAME="cg1552_item_12._security_ownership_of__ite02706"> </A>
<A NAME="toc_cg1552_4"> </A>
<BR></FONT><FONT SIZE=2><B>Item 12. Security Ownership of Certain Beneficial Owners and Management <BR> </B></FONT></P>
<P><FONT SIZE=2> The information contained in the section titled "Security Ownership of Certain Beneficial Owners and Management" in the Proxy Statement, with respect to
security ownership of certain beneficial owners and management, is incorporated herein by reference in response to this Item 12. </FONT></P>
<P><FONT SIZE=2><A
NAME="cg1552_item_13._certain_relati__cg102123"> </A>
<A NAME="toc_cg1552_5"> </A>
<BR></FONT><FONT SIZE=2><B>Item 13. Certain Relationships and Related Transactions <BR> </B></FONT></P>
<P><FONT SIZE=2> The information contained in the section titled "Certain Transactions" of the Proxy Statement, with respect to certain relationships and related transactions,
is incorporated herein by reference in response to this Item 13. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="cg1552_part_iv."> </A>
<A NAME="toc_cg1552_6"> </A>
<BR></FONT><FONT SIZE=2><B>PART IV. <BR> </B></FONT></P>
<P><FONT SIZE=2><A
NAME="cg1552_item_14._exhibits,_financial_s__ite02585"> </A>
<A NAME="toc_cg1552_7"> </A></FONT> <FONT SIZE=2><B>Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K <BR> </B></FONT></P>
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<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(a) (1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2><BR>
Financial Statements</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2><BR>
The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Form 10-K, commencing on page F-1.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2><BR>
Schedules</FONT></TD>
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</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2><BR>
None.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="90%"><FONT SIZE=2><BR>
Exhibits</FONT></TD>
</TR>
</TABLE>
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<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Exhibit No.</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="86%" ALIGN="CENTER"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*3.1 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amended and Restated Certificate of Incorporation of the Company (effective March 10, 1993) (Exhibit 3.3 to the Company's Registration Statement on Form S-1, Registration No. 33-57912, dated February 4, 1993 (the
"1993 Registration Statement")).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*3.2 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>By-Laws of the Company (Exhibit 3.5 to the Company's Annual Report on Form 10-K for the year ended September 30, 1993 (the "1993 Form 10-K")).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.1 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Certificate of Designation for the Series A Cumulative Convertible Preferred Stock of the Company (Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (the "June 1995
10-Q")).</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=20,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=239913,FOLIO='20',FILE='DISK013:[01PHI2.01PHI1552]CG1552A.;14',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
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<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.2 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Indenture dated as of August 1, 1995 from the Company to Society National Bank, as Trustee (Exhibit 4.1 to the June 1995 10-Q).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.3 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Specimen certificate representing shares of the Company's common stock with legend regarding Preferred Stock Purchase Rights. (Exhibit 4.2 to the October 1995 8-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.4 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amended and Restated Rights Agreement, dated as of March 17, 1997, between the Company and StockTrans, Inc. (incorporated by reference to Exhibit 4.2 to the Company's current report on Form 8-K dated March 17,
1997).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.5 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amendment No. 1, dated as of June 4, 1997, to the Amended and Restated Rights Agreement, dated as of March 17, 1997, between the Company and StockTrans, Inc. (Exhibit 4.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*4.6 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Registration Rights Agreement, dated as of June 9, 1998, by and among the Company and certain of the Selling Stockholders (Exhibit 4.1 of the Company's Registration Statement on Form S-3, Registration No. 333-59309, dated
July 17, 1998).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>†*4.7 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>1987 Stock Option Plan (as amended and restated) (Exhibit 4.1 of the Company's Registration Statement on Form S-8, Registration No. 333-59529, dated July 21, 1998).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.1 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Registration Rights and Right of Co-Sale Agreement dated as of May 4, 1992 among the Company, Dan W. Matthias, Rebecca C. Matthias, Meridian Venture Partners, Penn Janney Fund, Inc., Apex Investment Fund, L.P., Meridian
Capital Corp., Butcher & Singer/Keystone Venture II, L.P., G-2 Family Partnership, PIISC — Penn Venture Fund, John L. Plummer, Gail G. Davis, Milton S. Stearns Jr., Trustee U/D/T dated 12/20/88, Stevan Simich, Growth Investors, George P.
Keeley, Robert E. Brown Jr., Bruce II. Hooper, John J. Serrell, Charles G. Schiess, Terence Kavanagh and Michael B. Staebler (Exhibit 10.8 to the 1993 Registration Statement).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>†*10.2 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>1994 Director Stock Option Plan (Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended September 30, 1994 (the "1994 Form 10-K")).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>†*10.3 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Employment Agreement dated as of July 14, 1994 between the Company and Dan W. Matthias (Exhibit 10.25 to the Company's Current Report on Form 8-K dated January 31, 1994).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>†*10.4 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Employment Agreement dated as of July 14, 1994 between the Company and Rebecca C. Matthias (Exhibit 10.26 to the 1994 Form 10-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.5 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Registration Rights Agreement dated as of August 1, 1995 among the Company and Morgan Stanley & Co. Incorporated, Wheat, First Securities, Inc. and Janney Montgomery Scott Inc. (Exhibit 10.2 to the June 1995
10-Q).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.6 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Loan Agreement dated September 1, 1995 between Philadelphia Authority For Industrial Development ("PAID") and the Company (Exhibit 10.26 to the Company's Registration Statement on Form S-1, Registration No. 33-97318,
dated October 26, 1995 (the "1995 Registration Statement")).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.7 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Indenture of Trust dated September 1, 1995 between PAID and Society National Bank (Exhibit 10.29 to the 1995 Registration Statement).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.8 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Variable/Fixed Rate Federally Taxable Economic Development Bond (Mothers Work, Inc.), Series of 1995, in the aggregate principal amount of $4,000,000 (Exhibit 10.30 to the 1995 Registration Statement).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.9 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Trademark License Agreement dated May 31, 1996 between the Company and Episode USA, Inc. (Exhibit 10.1 to the June 1996 8-K).</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>
<HR NOSHADE>
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<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Distribution Agreement dated April 25, 1996 among Toppy International Limited, T3 Acquisition, Inc. and the Company (Exhibit 10.2 to the June 1996 8-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Residential Lease dated June 28, 1996 between the Company and Daniel & Rebecca Matthias (Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, the "1996 Form
10-K").</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Note dated February 14, 1996 from the Company to PIDC Local Development Corporation (Exhibit 10.29 to the 1996 Form 10-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Installment Sale Agreement dated April 4, 1996 by and between PIDC Financing Corporation and the Company (Exhibit 10.30 to the 1996 Form 10-K for the fiscal year ended September 30, 1996).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.14</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Open-ended Mortgage dated April 4, 1996 between PIDC Financing Corporation and the Pennsylvania Industrial Development Authority ("PIDA") (Exhibit 10.31 to the 1996 Form 10-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Loan Agreement dated April 4, 1996 by and between PIDC Financing Corporation and PIDA (Exhibit 10.32 to the 1996 Form 10-K).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Loan & Security Agreement dated as of April 24, 1998 by and among, Mothers Work, Inc., Cave Springs, Inc. and Fleet Capital Corporation (Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.17</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Asset Transfer Agreement dated as of August 31, 1998 by and between the Company, T3 Acquisition, Inc. and The Wet Seal, Inc. (Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1998).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>*10.18</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Amendment to Loan and Security Agreement dated as of April 11, 2000 by and among, Mothers Work Inc., Cave Springs, Inc. and Fleet Capital Corporation (Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>†**10.19</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Consulting Agreement and Severance Agreement dated as of April 16, 2001 between the Company and Don W. Ochs.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>**21 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Subsidiary of the Company.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23 </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="86%"><FONT SIZE=2>Consent of Arthur Andersen LLP.</FONT></TD>
</TR>
</TABLE>
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<TR VALIGN="TOP">
<TD WIDTH="3%"><BR><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR> </FONT></TD>
<TD WIDTH="94%"><FONT SIZE=1><BR>
*Incorporated by reference.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR> </FONT></TD>
<TD WIDTH="94%"><FONT SIZE=1><BR>
**Previously filed.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=1><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><BR> </FONT></TD>
<TD WIDTH="94%"><FONT SIZE=1><BR>
†Management contract or compensatory plan or arrangement.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
(b)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2><BR>
Reports filed on Form 8-K during the last quarter of fiscal 2001:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="94%"><FONT SIZE=2><BR>
None.</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>
<HR NOSHADE>
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NAME="page_ci1552_1_23"> </A> </FONT></P>
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NAME="ci1552_signatures"> </A>
<A NAME="toc_ci1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES <BR> </B></FONT></P>
<P><FONT SIZE=2> Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment to the Annual
Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on the 26<SUP>th</SUP> day of December, 2001. </FONT></P>
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<TD WIDTH="47%"><FONT SIZE=2><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/ </FONT><FONT SIZE=2>DAN W. MATTHIAS</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Dan W. Matthias<BR></FONT> <FONT SIZE=2><I>Chairman of the Board and Chief Executive Officer; the principal executive
officer</I></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="46%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/ </FONT><FONT SIZE=2>REBECCA C. MATTHIAS</FONT><FONT SIZE=2> </FONT><HR NOSHADE><FONT SIZE=2> Rebecca C. Matthias<BR></FONT> <FONT SIZE=2><I>President and Chief Operating Officer; the principal financial and accounting
officer </I></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>
<HR NOSHADE>
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NAME="page_fa1552_1_1"> </A> </FONT></P>
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NAME="fa1552_mothers_work,_inc._and_subsidi__mot02999"> </A>
<A NAME="toc_fa1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> INDEX TO CONSOLIDATED FINANCIAL STATEMENTS <BR> </B></FONT></P>
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<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>Report of Independent Public Accountants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2>F-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><BR>
Consolidated Balance Sheets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2><BR>
F-3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><BR>
Consolidated Statements of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2><BR>
F-4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><BR>
Consolidated Statements of Stockholders' Equity</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2><BR>
F-5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><BR>
Consolidated Statements of Cash Flows</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2><BR>
F-6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2><BR>
Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="14%" ALIGN="CENTER"><FONT SIZE=2><BR>
F-7 to F-25</FONT></TD>
</TR>
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<P ALIGN="CENTER"><FONT SIZE=2>F–1</FONT></P>
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<A NAME="toc_fb1552_1"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS <BR> </B></FONT></P>
<P><FONT SIZE=2>To
Mothers Work, Inc.: </FONT></P>
<P><FONT SIZE=2> We
have audited the accompanying consolidated balance sheets of Mothers Work, Inc. (a Delaware corporation) and subsidiary as of September 30, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>
<P><FONT SIZE=2> We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion. </FONT></P>
<P><FONT SIZE=2> In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mothers Work, Inc. and subsidiary as
of September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting
principles generally accepted in the United States. </FONT></P>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<P><FONT SIZE=2>ARTHUR ANDERSEN LLP </FONT></P>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
<P><FONT SIZE=2>Philadelphia,
Pennsylvania<BR>
November 2, 2001 </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–2</FONT></P>
<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fc1552_mothers_work,_inc._and_subsidi__mot03704"> </A>
<A NAME="toc_fc1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> CONSOLIDATED BALANCE SHEETS <BR> <BR> (in thousands, except share amounts) <BR> </B></FONT></P>
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<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>September 30</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Current Assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>10,358</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,076</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Trade receivables</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>4,726</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,833</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>73,090</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>75,747</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>2,278</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,851</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Prepaid expenses and other current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>4,404</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,040</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>94,856</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>89,547</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Property, Plant and Equipment, net</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>46,025</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>44,260</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Other Assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Goodwill, net of accumulated amortization of $14,355 and $12,300</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>29,886</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>32,093</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred financing costs, net of accumulated amortization of $2,788 and $2,289</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>1,640</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,139</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other intangible assets, net of accumulated amortization of $1,952 and $2,144</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>1,295</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,045</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Deferred income taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>10,858</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,821</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Other non-current assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>617</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>681</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Total other assets</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>44,296</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>45,779</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>185,177</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>179,586</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><B>LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Current Liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Line of credit</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>32,229</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>30,548</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Current portion of long-term debt</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>434</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>13,244</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>15,445</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accrued expenses and other current liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>16,440</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>62,347</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>59,863</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Long-Term Debt</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>96,179</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>96,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Accrued Dividends on Preferred Stock</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>7,055</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,037</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Deferred Rent</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>4,855</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4,848</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Commitments and Contingencies (Note 11)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2>Stockholders' Equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Series A Cumulative convertible preferred stock, $.01 par value, $280.4878 stated value; 2,000,000 shares authorized, 41,000 shares issued, 38,409 and 41,000 shares outstanding, respectively (liquidation value
of $17,828 and $17,537, respectively)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>10,773</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Series B Junior participating preferred stock, $.01 par value; 10,000 shares authorized, none outstanding</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Common stock, $.01 par value; 10,000,000 shares authorized, 3,480,122 and 3,451,770 shares issued and outstanding, respectively</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>35</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Additional paid-in-capital</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>26,949</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>26,203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>(23,016</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(24,987</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>14,741</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>185,177</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>179,586</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>The
accompanying notes are an integral part of these statements. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–3</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=26,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=999525,FOLIO='F-3',FILE='DISK013:[01PHI2.01PHI1552]FC1552A.;9',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fe1552_1_4"> </A> </FONT></P>
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fe1552_mothers_work,_inc._and_subsidi__mot04350"> </A>
<A NAME="toc_fe1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> CONSOLIDATED STATEMENTS OF OPERATIONS <BR> <BR> (in thousands, except per share amounts) <BR> </B></FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended September 30</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>388,306</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>366,283</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>299,735</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Cost of goods sold</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>194,320</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>183,300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>150,402</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="56%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>193,986</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>182,983</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>149,333</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Selling, general and administrative expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>172,795</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>157,809</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>127,390</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="56%"><FONT SIZE=2>Operating income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>21,191</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>25,174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21,943</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(14,867</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(15,877</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(15,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>594</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="56%"><FONT SIZE=2>Income before income taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>6,918</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,811</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Income tax provision</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,249</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,424</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,462</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,048</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,387</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Dividends on preferred stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>1,491</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,251</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net income available to common stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>1,971</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,659</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,136</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Income per share — Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.57</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Average shares outstanding — Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,538</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Income per share — Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.55</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.01</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0.57</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Average shares outstanding — Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,605</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,641</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,754</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>The
accompanying notes are an integral part of these statements. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–4</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=27,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=930074,FOLIO='F-4',FILE='DISK013:[01PHI2.01PHI1552]FE1552A.;5',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg1552_1_5"> </A> </FONT></P>
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg1552_mothers_work,_inc._and_subsidi__mot03756"> </A>
<A NAME="toc_fg1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY <BR> <BR> (in thousands) <BR> </B></FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Series A<BR>
Cumulative<BR>
Convertible<BR>
Preferred<BR>
Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
of Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
Paid-in<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
Deficit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance September 30, 1998</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,598</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>36</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>27,996</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(30,782</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Exercise of stock options</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>209</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>209</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Purchase and retirement of common stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(187</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>(2</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,025</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(2,027</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Preferred stock dividends</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,251</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,251</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,387</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,387</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance September 30, 1999</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,446</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>26,180</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(28,646</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>9,068</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Exercise of stock options</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Purchase and retirement of common stock</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(18</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(179</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(179</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Preferred stock dividends</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,389</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,389</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,048</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance September 30, 2000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,452</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>26,203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(24,987</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2><B>Exercise of stock options</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>1</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>19</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>20</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2><B>Preferred stock conversions</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>(727</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>26</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>727</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2><B>Preferred stock dividends</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>(1,491</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>(1,491</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"> </TD>
<TD WIDTH="31%"><FONT SIZE=2><B>Net income</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>3,462</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>3,462</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>Balance September 30, 2001</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>10,773</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,480</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>35</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>26,949</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>(23,016</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>14,741</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>The
accompanying notes are an integral part of these statements. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–5</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=28,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=984047,FOLIO='F-5',FILE='DISK013:[01PHI2.01PHI1552]FG1552A.;4',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fi1552_1_6"> </A> </FONT></P>
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi1552_mothers_work,_inc._and_subsidi__mot03307"> </A>
<A NAME="toc_fi1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> CONSOLIDATED STATEMENTS OF CASH FLOWS <BR> <BR> (in thousands) <BR> </B></FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended September 30</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Cash Flows from Operating Activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,462</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,048</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,387</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net income to net cash provided by operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>11,915</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>11,951</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,516</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Accretion of discount on Notes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>194</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>173</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>150</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Deferred taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>536</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,136</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>957</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of deferred financing costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>499</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>481</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>498</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Provision for deferred rent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>7</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>556</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>473</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Loss on impairment of long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>64</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Changes in assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Decrease (increase) in —</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="53%"><FONT SIZE=2>Receivables</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(893</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>406</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="53%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2,657</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(793</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,277</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="53%"><FONT SIZE=2>Prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(1,300</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,814</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD COLSPAN=2><FONT SIZE=2>Increase (decrease) in —</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="2%"> </TD>
<TD WIDTH="53%"><FONT SIZE=2>Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2,366</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,694</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(6,496</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>19,507</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>18,623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>428</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Cash Flows from Investing Activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Capital expenditures</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(12,212</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,619</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,087</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Disposal of fixed assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>639</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Purchase of intangible assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(554</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(209</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(219</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(12,127</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(13,828</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,306</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Cash Flows from Financing Activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Increase (decrease) in line of credit and cash overdrafts, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>425</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,173</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,591</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Repurchase of common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(179</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,026</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Repayment of long-term debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(543</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(709</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(379</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Proceeds from exercise of options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>20</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>202</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>209</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"> </TD>
<TD COLSPAN=3><FONT SIZE=2>Net cash (used in) provided by financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(98</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,859</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,395</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Net Increase (Decrease) in Cash and Cash Equivalents</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>7,282</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,936</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,483</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Cash and Cash Equivalents, Beginning of Year</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,076</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,140</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,623</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><B>Cash and Cash Equivalents, End of Year</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>10,358</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,076</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,140</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>The
accompanying notes are an integral part of these statements. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–6</FONT></P>
<HR NOSHADE>
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<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fk1552_1_7"> </A> </FONT></P>
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fk1552_mothers_work,_inc._and_subsidi__mot03016"> </A>
<A NAME="toc_fk1552_1"> </A></FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY <BR> <BR> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <BR> </B></FONT></P>
<P><FONT SIZE=2><B>1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </B></FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Nature of Business </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Mothers Work, Inc., incorporated in Delaware in 1982, is a specialty retailer and manufacturer of maternity clothing. The Company operated 771 retail
store locations at September 30, 2001, including 132 leased departments, throughout the United States. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Principles of Consolidation </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The accompanying consolidated financial statements include the accounts of Mothers Work, Inc. and its wholly-owned subsidiary, Cave Springs, Inc.
(collectively "Mothers Work" or the "Company"), as of September 30, 2001. All significant intercompany transactions and accounts have been eliminated in consolidation. </FONT></P>
<P><FONT SIZE=2> On
October 17, 2001, the Company completed the acquisition of eSpecialty Brands LLC ("iMaternity") (see Note 12). </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Use of Estimates </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Cash and Cash Equivalents </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Cash and cash equivalents include cash on hand and cash in the bank. Cash overdrafts of $2,426,000 and $3,682,000 are included in accounts payable at
September 30, 2001 and 2000, respectively. The Company considers investments with an original maturity of three months or less when purchased to be cash equivalents. </FONT></P>
<P><FONT SIZE=2> The
Company maintains cash accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses from maintaining cash accounts in excess of such
limits. Management believes that it is not exposed to any significant credit risks on its cash accounts. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Inventories </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Inventories are valued at the lower of cost or market. Cost is determined by the "first-in, first-out" (FIFO) method. Inventories
manufactured by the Company include the cost of materials, freight, direct labor, manufacturing and distribution overhead. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Advertising Costs </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The Company expenses the costs of advertising when the advertising occurs, except for the costs associated with catalogs and brochures. The production costs
for catalogs and brochures are deferred and amortized over a three to six month period corresponding to the expected period in which these items will be mailed. Advertising and catalog expenses were
$7,212,000, $6,953,000 and $6,479,000 in fiscal 2001, 2000 and 1999, respectively. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–7</FONT></P>
<HR NOSHADE>
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<A NAME="page_fk1552_1_8"> </A>
<UL>
<P><FONT SIZE=2><B><I> Property, Plant and Equipment </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Property, plant and equipment are stated at cost. Depreciation and amortization are computed for financial reporting purposes on a straight-line
basis, using service lives ranging principally from five to ten years for furniture and equipment and forty years for the building. Leasehold improvements are amortized over the shorter of the
estimated useful life or the lease term. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss
included in net income. Maintenance and repairs are expensed as incurred except for the capitalization of major renewals and betterments that extend the life of the asset. Long-lived
assets are reviewed for impairment whenever adverse events or changes in circumstances or business climate indicate that the carrying value may not be recoverable. Factors used in the valuation
include, but are not limited to, management's plans for future operations, brand initiatives, recent
operating results and projected cash flows. If the associated undiscounted cash flows are insufficient to support the recorded asset, an impairment is recognized to reduce the carrying value of the
asset. The amount of the impairment loss is determined by comparing the discounted expected future cash flows with the carrying value. At September 30, 2001, management believes that no
reductions to the remaining useful lives or write-downs of long-lived assets are necessary. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Goodwill, Intangible and Other Assets </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Goodwill represents the excess of the cost over the fair value of net assets acquired in business combinations. Goodwill is amortized using the
straight-line method over a period of 20 years. Leasehold interests and other intangible assets are amortized over the lease term and five to ten years, respectively. Amortization
of goodwill, leasehold interests and other intangible assets was $2,422,000, $2,494,000 and $2,451,000 in fiscal 2001, 2000 and 1999, respectively. Management reviews the carrying amount of goodwill,
leasehold interests and other intangible assets at each balance sheet date to assess the continued recoverability based on future undiscounted cash flows and operating results from the related asset,
future asset utilization and changes in market conditions. At September 30, 2001, management does not believe that there has been any impairment to the carrying value of goodwill, leasehold
interests and other intangible assets. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Deferred Financing Costs </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Deferred financing costs are amortized over the term of the related debt using the effective interest method. Amortization of deferred financing costs was
$499,000, $481,000 and $498,000 in fiscal 2001, 2000 and 1999, respectively, and is included in interest expense in the accompanying Consolidated Statements of Operations. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Deferred Rent </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Rent expense on operating leases is recorded on a straight-line basis over the term of the lease. The net excess of rent expense over the actual
cash paid has been recorded as deferred rent in the accompanying Consolidated Balance Sheets. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Fair Value of Financial Instruments </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Cash and cash equivalents, trade receivables, accounts payable and accrued expenses are reflected at fair value in the accompanying consolidated financial
statements due to the short-term nature of those instruments. The carrying amounts of long-term debt and capitalized lease obligations </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–8</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=2,SEQ=31,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=604277,FOLIO='F-8',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_9"> </A>
<P><FONT SIZE=2>
approximate fair value at the balance sheet dates based on the fair market value for similar instruments. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Revenue Recognition </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Revenue is recognized at the point of sale for retail store sales or when merchandise is shipped to customers for Internet and mail order sales. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Income Taxes </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The Company utilizes the asset and liability method of accounting for income taxes as prescribed by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the
enactment date. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Accounting for Stock-Based Compensation </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The Company accounts for stock-based compensation under the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees." The Company has adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation." </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Earnings per share </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of outstanding common shares.
Diluted earnings per share is computed based upon the weighted average number of outstanding common shares, after giving effect to the potential dilutive effect from the assumed exercise of stock
options and warrants as well as the assumed conversion of dilutive preferred stock and subordinated notes (see Note 7). </FONT></P>
<P><FONT SIZE=2> The
following summarizes those effects for the diluted earnings per share calculation (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="74%"><FONT SIZE=2>Average number of shares — Basic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,538</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="74%"><FONT SIZE=2>Incremental shares from the assumed exercise of outstanding stock options and warrants</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>149</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>198</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>216</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="74%"><FONT SIZE=2>Average number of shares — Diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>3,605</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,641</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,754</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="74%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> Options
to purchase 499,955 shares were outstanding at September 30, 2001, but were not included in the computation of diluted earnings per share, as their effect would have
been antidilutive. Additionally, the assumed conversion of the Company's Series A Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"), which was convertible into
384,090 and 410,000 shares of common stock at September 30, 2001 and 2000, respectively, were determined to be antidulitive for all periods presented. The assumed conversion of the Company's
subordinated notes, which were issued in </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–9</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=3,SEQ=32,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=755060,FOLIO='F-9',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_10"> </A>
<P><FONT SIZE=2>
fiscal 2001 (see Note 7) and were convertible into approximately 33,100 shares of common stock at September 30, 2001, were also determined to be antidilutive. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Statements of Cash Flows </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> In fiscal 2001, 2000 and 1999, the Company paid interest of $14,288,000, $15,127,000 and $14,919,000, respectively, and made tax payments of $394,000, $494,000
and $28,000, respectively. Capital lease obligations totaling $511,000 were incurred with respect to new equipment leases in fiscal 2000 (none for fiscal 2001 and 1999). </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Reclassifications </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Certain prior year balances in the financial statements have been reclassified to conform with the current year presentation. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Cost of Start-up Activities </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The Company records the costs of computer software, inclusive of website development costs, in accordance with Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Development or Obtained for Internal Use" issued by the Accounting Standards Executive Committee of the Institute of Certified Public Accountants. This
statement requires that certain internal-use computer software costs be capitalized and amortized over the useful life of the asset. In fiscal 2001, the Company capitalized approximately
$177,000 of costs related to the development of internal-use software. In fiscal 2000 and 1999, the Company expended an immaterial amount for the development of software for internal use.
Accordingly, these costs were expensed as incurred during fiscal 2000 and 1999. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Shipping and Handling Fees and Costs </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> The Company includes shipping and handling revenue earned from its catalog and e-commerce activities in net sales. Shipping and handling costs,
which are included in cost of goods sold in the accompanying Consolidated Statements of Operations, include shipping supplies, related labor costs and third-party shipping costs. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Other Income </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> During the fourth quarter of fiscal 2001, the Company negotiated buy-outs of two lease arrangements in connection with the planned closure of these
stores. Due to the level of the rental rates, the Company recognized income from the proceeds being paid under these buy-out agreements of $1.2 million in the aggregate and wrote
off related leasehold improvements and other costs of $0.6 million, resulting in a net gain of $0.6 million, which is included in other income in the accompanying Consolidated Statements
of Operations. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> Business and Credit Risk </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> Financial instruments, primarily cash and cash equivalents and accounts receivable, potentially subject the Company to concentrations of credit risk. The
Company would limit its credit risk associated with cash and cash equivalents by placing such investments in highly liquid funds. Receivables associated with third-party credit cards are processed by
financial institutions which are </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–10</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=4,SEQ=33,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=569915,FOLIO='F-10',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_11"> </A>
<P><FONT SIZE=2>
monitored for financial stability. The Company is dependent on key suppliers to provide sufficient quantities of inventory at competitive prices. No single supplier represented 10% or more of net
purchases in fiscal 2001, 2000 and 1999. </FONT></P>
<UL>
<P><FONT SIZE=2><B><I> New Accounting Pronouncements </I></B></FONT></P>
</UL>
<P><FONT SIZE=2> In July 2001, the FASB issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No. 141) and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 141 requires the use of the purchase method of accounting for business
combinations initiated after June 30, 2001, and expands the definition of intangible assets that are to be recorded separately from goodwill. For business combinations accounted for under the
purchase method which were completed prior to July 1, 2001, previously recorded goodwill and intangibles are to be evaluated against the criteria in SFAS No. 141, which may result in the
reclassification of certain intangible assets into or out of recorded goodwill. SFAS No. 142 requires that goodwill and certain intangible assets with an indefinite useful life are not to be
amortized, but are to be reviewed for impairment at least annually and written down in periods in which the recorded value of the goodwill or intangible asset exceeds its fair value. </FONT></P>
<P><FONT SIZE=2> For
goodwill and other intangible assets acquired prior to June 30, 2001, the Company will adopt the provisions of SFAS No. 141 and SFAS No. 142 as of
October 1, 2001, and accordingly, goodwill will no longer be amortized and impairment reviews will be periodically performed to assess whether any writedowns are required. The Company's
Consolidated Balance Sheet as of September 30, 2001 includes $29.9 million of goodwill recognized as a result of the acquisitions of A Pea in the Pod in April 1995 and Motherhood
in August 1995. In accordance with the provisions of these statements, the Company amortized this goodwill through the end of fiscal 2001, recognizing approximately $2.2 million of
amortization annually for fiscal 2001, 2000 and 1999. </FONT></P>
<P><FONT SIZE=2> While
the Company has not yet completed all of the valuation and other work necessary to adopt these accounting standards, it is believed that, except for the impact of discontinuing
the amortization of goodwill, there will not be a significant impact on the Company's financial condition or operating results. The Company will adopt the provisions of SFAS No. 141 and the
transition provisions of SFAS No. 142 in accounting for its acquisition of iMaternity (see Note 12). </FONT></P>
<P><FONT SIZE=2> In
August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
establishes a single accounting model, based on the framework established in SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and Long-lived Assets to
be Disposed of," and resolves significant implementation issues related to SFAS
No. 121. SFAS No. 144 superceded SFAS No. 121 and Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of a
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The Company is required to adopt SFAS No. 144 for the fiscal year ending
September 30, 2003, however, early application is permitted. Management does not believe that the adoption of SFAS No. 144 will have a material impact on its financial condition or
results of operations. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–11</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=5,SEQ=34,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=1017958,FOLIO='F-11',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_12"> </A>
<P><FONT SIZE=2><B>2. INVENTORIES </B></FONT></P>
<P><FONT SIZE=2> Inventories at September 30 were as follows (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>61,535</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>60,871</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Work-in-progress</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,486</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,570</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>8,069</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,306</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>73,090</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>75,747</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2><B>3. PROPERTY, PLANT AND EQUIPMENT, NET </B></FONT></P>
<P><FONT SIZE=2> Property, plant and equipment at September 30 was comprised of the following (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Land</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>1,400</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Building and improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>10,834</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,443</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Furniture and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>27,166</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24,067</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>57,726</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>51,399</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>97,126</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>87,309</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>Less: accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>(51,101</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(43,049</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>46,025</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>44,260</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> During
fiscal 2001, the Company recorded charges under SFAS No. 121 of approximately $64,000, related to the impairment of leasehold improvements and furniture and equipment at
one store location. </FONT></P>
<P><FONT SIZE=2><B>4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES </B></FONT></P>
<P><FONT SIZE=2> At September 30, accrued expenses and other current liabilities were comprised of the following (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Salaries, wages and employee benefits</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>5,274</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,078</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Income taxes payable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2,308</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2,179</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,293</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Sales taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>1,763</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,738</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Insurance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>961</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>232</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Rent</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>676</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,527</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Audit and legal</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>648</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Restructuring costs (see Note 13)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>128</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>250</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>2,503</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,170</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>16,440</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13,327</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="71%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>F–12</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=6,SEQ=35,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=842847,FOLIO='F-12',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_13"> </A>
<P><FONT SIZE=2><B>5. LINE OF CREDIT </B></FONT></P>
<P><FONT SIZE=2> The Company's primary sources of working capital consist of cash flows from operations and borrowings under its $56.0 million working capital facility
(the "Working Capital Facility"). In October 2001, the Working Capital Facility was amended and restated to primarily increase the collateral base to include the assets acquired in the
acquisition of iMaternity (see Note 12). The Working Capital Facility was amended and restated in April 2000 to increase borrowings to the current level, to raise the annual capital
expenditure limitation, and to extend the maturity until September 15, 2004. The interest rate on direct borrowings outstanding is based on the prime rate of the Company's lender plus 25 basis
points. At any time, the Company at its option may elect an alternative rate for all or part of the direct borrowings outstanding at LIBOR plus 225 basis points. The blended rate at
September 30, 2001 was 5.5%. Amounts available for direct borrowings (net of letters of credit outstanding) are limited to the lesser of (a) the unused portion of the Working Capital
Facility or (b) the Aggregate Adjusted Availability ("AAA"), as defined in the agreement as a percentage of eligible inventory and trade receivables. The Working Capital Facility is secured by
a security interest in the Company's inventory, equipment, fixtures and cash. The facility has no financial covenants provided that the AAA does not fall below $10.0 million. In such event, the
Company must achieve a Minimum Cash Flow, as defined, of not less than zero. At September 30, 2001, there were $32.2 million of direct borrowings, $4.1 million of outstanding
letters of credit and the AAA was $23.9 million ($18.5 million at September 30, 2000). The Company was in compliance with all non-financial covenants per the
agreement. In fiscal 2001, 2000 and 1999, the weighted average interest rates on the Working Capital Facility were 7.5%, 8.6% and 8.1%, respectively. </FONT></P>
<P><FONT SIZE=2> In
addition to borrowings and letters of credit available under the Working Capital Facility, the Company has a $4.0 million standby letter of credit that collateralizes an
Industrial Revenue Bond (see Note 6). </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–13</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=7,SEQ=36,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=791440,FOLIO='F-13',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_14"> </A>
<P><FONT SIZE=2><B>6. LONG-TERM DEBT </B></FONT></P>
<P><FONT SIZE=2> The following table summarizes the Company's long-term debt at September 30 (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>12<SUP>5</SUP>/<SMALL>8</SMALL>% Senior Unsecured Exchange Notes due 2005 (net of unamortized discount)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>90,984</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>90,790</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Industrial Revenue Bond, interest is variable (5.0% at September 30, 2001 and 2000), principal due annually through 2020 (collateralized by a $4.0 million standby letter of credit)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>3,430</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,535</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2><I>Government Mortgage Notes:</I></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Interest at 3%, principal due monthly until 2011 (collateralized by a $1.0 million letter of credit and a second mortgage on certain property and equipment at the Company's headquarters)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>1,389</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,511</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Interest at 2.0%, principal due monthly until 2011 (collateralized by certain equipment at the Company's headquarters)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>200</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>219</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Interest at 4.25%, principal monthly until 2001 (collateralized by certain equipment at the Company's headquarters)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Capital lease obligations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>279</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>544</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Subordinated notes, interest at prime, no expiration</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>331</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>—</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>96,613</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>96,631</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2>Less: current maturities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(434</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(543</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="73%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>96,179</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>96,088</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> Long-term
debt maturities as of September 30, are as follows (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>700</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>279</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>92,288</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2007 and thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,630</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>97,629</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>Less: unamortized discount</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,016</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>96,613</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> In
connection with the acquisition of Motherhood on August 1, 1995, the Company sold 12<SUP>5</SUP>/<SMALL>8</SMALL>% Senior Unsecured Notes due 2005 (the "Notes") with a face amount of
$92.0 million. The Notes were issued at 97.934% of their face amount, resulting in an annual effective interest rate of 13.0%. Interest on the Notes is payable semiannually in cash on
February 1 and August 1. The Notes were issued by Mothers Work and are unconditionally guaranteed on a senior basis by its subsidiary (see Note 14). The Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after August 1, 2000, at 106.25% of their face amount, plus accrued interest, declining ratably to 100% of their face amount on
and after August 1, 2002, plus accrued interest. In November 1995, the Company completed an exchange offer whereby the Notes were exchanged for 12<SUP>5</SUP>/<SMALL>8</SMALL>% Senior Unsecured
Exchange Notes due 2005 which have been registered under the Securities Act of 1933. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–14</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=8,SEQ=37,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=1014430,FOLIO='F-14',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fk1552_1_15"> </A>
<P><FONT SIZE=2>
The Notes impose certain limitations on the ability of the Company to, among other things, incur additional indebtedness, pay dividends and enter into certain types of transactions.
The most restrictive of these covenants limits the Company's ability to repurchase outstanding common stock (see Note 17). </FONT></P>
<P><FONT SIZE=2> During
fiscal 2001, certain of the holders of the Series A Preferred Stock elected to convert 2,591 shares with a stated value of $0.7 million into shares of common
stock at an initial conversion rate equal to ten shares of common stock for each share of Series A Preferred Stock. The Company was restricted under the terms of the Notes from paying cash
dividends to the holders upon conversion. Accordingly, the Company issued $0.3 million of subordinated notes with unpaid interest compounding annually at the prime rate until paid. The
subordinated notes are convertible into common stock, in accordance with the terms of those notes, after August 1, 2003. </FONT></P>
<P><FONT SIZE=2><B>7. COMMON AND PREFERRED STOCK </B></FONT></P>
<P><FONT SIZE=2> In connection with the Motherhood acquisition on August 1, 1995, the Company issued 41,000 shares of Series A Cumulative Convertible Preferred
Stock (the "Series A Preferred Stock") with a stated value of $11.5 million. The Series A Preferred Stock has a preference in liquidation equal to the stated value plus accrued
but unpaid dividends. The Company may redeem (but is under no obligation to do so) the Series A Preferred Stock at any time at a price equal to liquidation preference, subject to certain
limitations imposed by the terms of the Working Capital Facility and the Notes agreement. </FONT></P>
<P><FONT SIZE=2> The
holders of the Series A Preferred Stock are entitled to receive annual cash dividends, which are cumulative to the extent not paid, and compound annually at 8.5% of the
stated value. No dividends may be paid on common stock or any other shares of capital stock of the Company ranking junior to the Series A Preferred Stock (other than dividends payable in shares
of common stock), until all cumulative and current dividends on the Series A Preferred Stock have been declared and paid in full. As of September 30, 2001 and 2000, accrued dividends on
the Series A Preferred Stock were $7,055,000 and $6,037,000, respectively, and are classified as long-term liabilities in the accompanying Consolidated Balance Sheets. </FONT></P>
<P><FONT SIZE=2> The
Series A Preferred Stock is convertible into shares of common stock (i) between August 1, 2000 and May 1, 2006, at an initial conversion rate (subject
to adjustments for stock splits, stock dividends, recapitalizations and similar events) equal to ten shares of common stock for each share of Series A Preferred Stock, or (ii) after
November 1, 2006, at a conversion rate determined by dividing the
aggregate stated value of all shares of Series A Preferred Stock to be converted by 90% of the then-market price of the common stock, as defined. After a holder's exercise of the
conversion right under (i) above, the Company may only redeem the Series A Preferred Stock from the proceeds of an equity offering. The limitation on this redemption right may only be
modified with the consent of the holders of a majority of the outstanding principal amount of the Notes. Upon any conversion, the holder of the Series A Preferred Stock to be converted is
entitled to receive payment of all accrued and unpaid dividends in cash unless the Company is prohibited by limitations contained in the Notes agreement. In the case of a conversion under
(i) above, if dividends are not paid in cash due to restrictions imposed by the Working Capital Facility or the Notes, the Company will issue a subordinated note. If the note is not paid by
August 1, 2003, then all principal and accrued interest may be converted into that number of shares of common stock determined by dividing the amount due by the then-market price,
as defined. In the case of a conversion under (ii) above, if accrued dividends are not paid in cash, then such dividends are convertible into common stock on the same basis as the shares of
Series A Preferred Stock. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–15</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=9,SEQ=38,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=237310,FOLIO='F-15',FILE='DISK013:[01PHI2.01PHI1552]FK1552A.;10',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fm1552_1_16"> </A> </FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>
<P><FONT SIZE=2><B>7. COMMON AND PREFERRED STOCK (Continued) </B></FONT></P>
<P><FONT SIZE=2> In
connection with the Rights Agreement dated March 17, 1997 (see Note 8), the Company authorized 10,000 shares of Series B Junior Participating Preferred Stock
(the "Series B Preferred Stock"). The Series B Preferred Stock can be purchased in units equal to one one-thousandth of a share (the "Series B Units") under the terms
of the Rights Agreement. The holders of the Series B Units are entitled to receive dividends when and if declared on common stock. Series B Units are junior to the common stock and
Series A Preferred Stock for both dividends and liquidations. Each Series B Unit votes as one share of common stock. </FONT></P>
<P><FONT SIZE=2><B>8. RIGHTS AGREEMENT </B></FONT></P>
<P><FONT SIZE=2> In accordance with the Company's Rights Agreement, the Company will provide one Right outstanding for each share of Mothers Work common stock now or hereafter
outstanding. Under certain limited conditions, as defined in the Rights Agreement, each Right entitles the registered holder to purchase from the Company one Series B Unit at $85 per share,
subject to adjustment. The rights expire on October 9, 2005 (the "Final Expiration Date"). </FONT></P>
<P><FONT SIZE=2> On
March 17, 1997, the Company amended its Rights Agreement to provide the independent directors of the Company with some discretion in determining when the Distribution Date
(as defined in the Rights Agreement) shall occur and the date until which the Rights may be redeemed. In addition, the Amended and Restated Rights Agreement exempts from its operation any person that
acquires, obtains the right to acquire, or otherwise obtains beneficial ownership of 10.0% or more of the then outstanding shares of the Company's common stock (an "Acquiring Person") without any
intention of changing or influencing control of the Company provided that such person, as promptly as practicable, divests himself or itself of a sufficient number of shares of common stock so that
such person would no longer be an Acquiring Person. </FONT></P>
<P><FONT SIZE=2> The
Rights are not exercisable until the Distribution Date, which will occur upon the earlier of (i) ten business days following a public announcement that an Acquiring Person
has acquired beneficial ownership of 10.0% or more of the Company's outstanding common stock, and ten business days following the commencement of a tender offer or exchange offer that would result in
a person or group owning 10.0% or more of the Company's outstanding common stock, or (ii) such later date as may be determined by action of a majority of the independent directors. </FONT></P>
<P><FONT SIZE=2> The
Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company without conditioning
the offer on the redemption of the Rights. The rights can be mandatorily redeemed by action of a majority of the independent directors at any time prior to the earlier of the Final Expiration Date and
the Distribution Date for $.01 per Right. </FONT></P>
<P><FONT SIZE=2> Upon
exercise and the occurrence of certain events, as defined in the Rights Agreement, each holder of a Right, except the Acquiring Person, will have the right to receive Mothers
Work common stock or common stock of the acquiring company having a value equal to two times the exercise price of the Right. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–16</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=1,SEQ=39,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=879102,FOLIO='F-16',FILE='DISK013:[01PHI2.01PHI1552]FM1552A.;18',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fm1552_1_17"> </A>
<P><FONT SIZE=2><B>9. STOCK OPTION PLANS </B></FONT></P>
<P><FONT SIZE=2> The Company has two stock option plans: the </FONT><FONT SIZE=2><I>Director Stock Option Plan </I></FONT><FONT SIZE=2>and the </FONT><FONT SIZE=2><I>Amended
and Restated 1987 Stock Option Plan.</I></FONT><FONT SIZE=2> Under the Director Stock Option Plan, each outside director is granted 2,000 fully vested options on an annual basis at an exercise price
equal to the fair market value on the grant date. Under the 1987 Stock Option Plan, as amended and restated, officers and certain employees may be granted options to purchase the Company's common
stock at exercise prices equal to the fair market value of the stock at the date of grant or at other prices as determined by the Compensation Committee of the Board of Directors. No options have been
granted by the Company at less than the fair market value of the Company's common stock on the date of grant for any of the periods presented. Up to a total of 1,425,000 options may be issued under
the Plans. Options outstanding generally vest ratably over 5 years and generally expire in ten years from the date of grant. </FONT></P>
<P><FONT SIZE=2> Stock
option activity for all plans was as follows: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Outstanding<BR>
Options<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Balance — September 30, 1998</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>730</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.85</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>185</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.98</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(35</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5.54</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(71</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.09</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Balance — September 30, 1999</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>809</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.93</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>179</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.61</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(24</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.37</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Canceled</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(62</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.02</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Balance — September 30, 2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>902</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.98</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2><B>Granted</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>285</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.41</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2><B>Exercised</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(2</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.15</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2><B>Canceled</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>(169</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.51</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2><B>Balance — September 30, 2001</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>1,016</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10.58</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> Options
for 713,075, 544,512 and 485,889 shares were exercisable as of September 30, 2001, 2000 and 1999, respectively, and had a weighted-average exercise price of $10.96,
$11.49, and $11.62 for those respective periods. </FONT></P>
<P><FONT SIZE=2> The
Company has adopted the disclosure requirements of SFAS No. 123, </FONT><FONT SIZE=2><I>Accounting for Stock-Based Compensation</I></FONT><FONT SIZE=2>, but has elected to
continue to measure compensation expense in accordance with APB Opinion No. 25, </FONT><FONT SIZE=2><I>Accounting for Stock Issued to Employees</I></FONT><FONT SIZE=2>. Accordingly, no
compensation expense for stock options has been recognized for stock option awards granted at fair market value. Had the compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those plans in accordance with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would
have been reduced to the pro forma amounts indicated below. The effect of applying SFAS No. 123 in this pro forma disclosure is </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–17</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=2,SEQ=40,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=789046,FOLIO='F-17',FILE='DISK013:[01PHI2.01PHI1552]FM1552A.;18',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fm1552_1_18"> </A>
<P><FONT SIZE=2>
not indicative of future amounts. SFAS No. 123 does not apply to options awarded prior to fiscal year ended September 30, 1996. Additional option awards are anticipated in future years. </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per share amounts)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Net income applicable to common stockholders:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>As reported</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>1,971</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,659</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,136</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>Pro forma</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>521</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,190</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>735</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Basic net income per common share:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>As reported</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>0.57</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.06</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>Pro forma</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>0.15</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.64</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.21</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Diluted net income per common share:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>As reported</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>0.55</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.01</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.57</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%"> </TD>
<TD WIDTH="59%"><FONT SIZE=2>Pro forma</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>0.14</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.60</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.20</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> The
weighted average fair value of the stock options granted during 2001, 2000 and 1999 was $6.75, $8.98 and $9.28, respectively. The fair value of each option granted is estimated on
the date of grant using the Black Scholes option pricing model with the following weighted-average assumptions: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="55%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Dividend yield</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><B>none</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>none</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>none</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Expected price volatility</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><B>81.2</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>83.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>75.8</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Risk-free interest rates</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><B>3.79</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.08</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>Expected lives</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><B>6.0 years</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8.4 years</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9.1 years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> The
following table summarizes information about stock options outstanding at September 30, 2001: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Range of<BR>
Exercise<BR>
Prices</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Outstanding<BR>
(in thousands)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Remaining Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Number<BR>
Exercisable<BR>
(in thousands)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted Average<BR>
Exercise Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>4.55 to $6.83</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6.63</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>1</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>6.63</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>6.84 to 9.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>206</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8.61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>97</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>8.60</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9.11 to 11.38</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>552</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>405</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>10.09</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>11.39 to 13.65</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>230</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>183</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>13.29</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>13.66 to 15.92</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>9</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>14.50</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>15.93 to 18.20</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>16.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>5</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>16.50</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>18.21 to 20.48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>18.29</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>13</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>18.29</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>4.55 to $20.48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>1,016</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10.58</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=1><B>713</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1><B>10.96</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=1> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> In
connection with the Company's acquisition of A Pea in the Pod on April 5, 1995 ("the Pea Acquisition"), the Company entered into a $15 million subordinated debt
agreement and issued warrants to the lender to purchase up to 140,123 shares of common stock at $.01 along with the subordinated debt. The warrants were valued at their estimated fair market value of
$1.0 million and </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–18</FONT></P>
<HR NOSHADE>
<!-- ZEQ.=3,SEQ=41,EFW="2066744",CP="MOTHERS WORK, INC",DN="1",CHK=964865,FOLIO='F-18',FILE='DISK013:[01PHI2.01PHI1552]FM1552A.;18',USER='MBARTAS',CD='26-DEC-2001;15:16' -->
<A NAME="page_fm1552_1_19"> </A>
<P><FONT SIZE=2>
were recorded as an original debt discount on the subordinated debt incurred. The determination of the fair value of the warrants was estimated at the date of issuance based on the then fair market
value of the Company's common stock discounted at 12% with an estimated life of seven years. The warrants were immediately vested upon grant and expire in April 2002. The proceeds from the sale
of the Notes were used to repay this subordinated debt. </FONT></P>
<P><FONT SIZE=2><B>10. INCOME TAXES </B></FONT></P>
<P><FONT SIZE=2> For the years ended September 30, income tax provisions were comprised of the following (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Current provision</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>2,920</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>113</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,467</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Deferred provision</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>536</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,136</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>957</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>3,456</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4,249</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,424</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> The
reconciliations of the statutory federal rate to the Company's effective income tax rates for the years ended September 30, were as follows: </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Statutory tax rate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>34.0</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>34.0</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>34.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>%</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>State taxes, net of federal benefit</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>3.4</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Amortization of goodwill</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>10.8</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>8.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>11.0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>1.8</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>50.0</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>%</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>45.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>50.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><B>%</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="69%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=1> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2> The
deferred tax effects of temporary differences giving rise to the Company's net deferred tax assets at September 30, were as follows (in thousands): </FONT></P>
<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=2> </FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2><I>Deferred tax assets:</I></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Net operating losses carryforwards</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,995</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>9,207</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Deferred rent</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>1,651</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,771</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Inventory reserves</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>513</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>514</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Employee benefit accruals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>1,016</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>427</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Alternative minimum tax credit carryforwards</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>—</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>394</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Other accruals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>597</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>719</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>190</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>681</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>13,174</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,764</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2><I>Deferred tax liabilities:</I></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>(38</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(92</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>13,136</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>13,672</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>F–19</FONT></P>
<HR NOSHADE>
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<A NAME="page_fm1552_1_20"> </A>
<P><FONT SIZE=2> The
Company had net operating loss carryforwards for tax purposes at September 30, 2000 of approximately $5,869,000, of which $4,309,000 was acquired in the acquisitions of A
Pea in the Pod and Motherhood. The Company also had alternative minimum tax credits of approximately $394,000 that could be utilized against regular income taxes in the future. The remaining net
operating loss carryforwards and alternative minimum tax credits as of September 30, 2000 were fully utilized during fiscal 2001. </FONT></P>
<P><FONT SIZE=2> No
valuation allowance has been provided for the net deferred tax assets. Based on the Company's historical levels of taxable income, as adjusted for the restructuring and the
nondeductibility of goodwill amortization and the Episode operations, management believes it is more likely than not that the Company will realize the net deferred tax assets at September 30,
2001. Furthermore, management believes the existing net deductible temporary differences will reverse during periods in which the Company generates taxable income. There can be no assurance, however,
that the Company will generate taxable earnings or any specific level of earnings in the future. </FONT></P>
<P><FONT SIZE=2><B>11. COMMITMENTS AND CONTINGENCIES </B></FONT></P>
<P><FONT SIZE=2> The Company leases its retail facilities and certain equipment under various noncancelable operating leases. Certain of these leases have renewal options.
Total rent expense under operating leases amounted to $49,572,000, $44,210,000 and $38,001,000 in fiscal 2001, 2000 and 1999, respectively. Such amounts include contingent rentals based upon a
percentage of sales totaling $1,116,000, $717,000 and $1,261,000 in fiscal 2001, 2000 and 1999, respectively. </FONT></P>
<P><FONT SIZE=2> Future
annual minimum operating lease payments as of September 30, are as follows (in thousands): </FONT></P>
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<DIV ALIGN="CENTER"><TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>33,032</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>30,201</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>26,561</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>21,685</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>18,834</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2>Fiscal 2007 and thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>48,828</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>179,141</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="81%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2> From
time to time, the Company is named as a defendant in legal actions arising from its normal business activities. Although the amount of any liability that could arise with respect
to currently pending actions cannot be accurately predicted, in the opinion of management of the Company, any such liability will not have a material adverse effect on the financial position or
operating results of the Company. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–20</FONT></P>
<HR NOSHADE>
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<!-- Generated by Merrill Corporation (www.merrillcorp.com) -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fo1552_1_21"> </A> </FONT> <FONT SIZE=2><B>MOTHERS WORK, INC. AND SUBSIDIARY </B></FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>
<P><FONT SIZE=2><B>12. SUBSEQUENT EVENTS </B></FONT></P>
<P><FONT SIZE=2> On October 17, 2001, pursuant to an Agreement and Plan of Merger, the Company acquired all of the outstanding equity interests of eSpecialty Brands, LLC
("iMaternity®"). iMaternity operated a total of 170 Dan-Howard and Mothertime maternity clothing stores, including some under the tradename iMaternity, and the online
iMaternity.com website. The Company has formulated a plan to continue to operate certain of the acquired store locations under the existing Mothers Work store concepts of Motherhood and Mimi
Maternity, and to close the iMaternity corporate headquarters and distribution center in Chicago, Illinois, an Internet-related development center in San Diego, California and various manufacturing
and warehousing facilities in the United States and Costa Rica. It is anticipated that this plan will be essentially completed within 12 months of the acquisition date. </FONT></P>
<P><FONT SIZE=2> Under
the terms of the agreement, all outstanding equity interests of iMaternity were converted into the right to receive, in the aggregate, 302,619 shares of Series C
Cumulative Preferred Stock (the "Series C Preferred Stock") with a stated value of $19.5 million and warrants to purchase 350,000 shares of the Company's common stock with an exercise
price of $22.50 per share valued at approximately $2.0 million. </FONT></P>
<P><FONT SIZE=2> The
holders of the Series C Preferred Stock are entitled to receive dividends, which are cumulative to the extent not paid, and compound quarterly at 8.625% of the stated
value. Dividends accrue for the first year and are thereafter paid out in part in cash with the balance accruing, subject to certain
limitations imposed by the Working Capital Facility and the holders of the Notes. No dividends may be paid on common stock, or on any other shares of capital stock of the Company ranking junior to the
Series C Preferred Stock (other than dividends payable in shares of common stock), until all cumulative and current dividends on the Series C Preferred Stock have been declared and paid
in full. The Series C Preferred Stock is junior to the Series A Preferred Stock in liquidation and </FONT><FONT SIZE=2><I>pari passu</I></FONT><FONT SIZE=2> to the Series A
Preferred Stock in dividends. </FONT></P>
<P><FONT SIZE=2> Upon
a liquidation, dissolution or winding up of the Company, as defined, after any payments to the holders of the outstanding shares of the Company's Series A Preferred Stock,
and before any payments to the holders of junior stock, the holders of the Series C Preferred Stock have the right to receive in such liquidation, distribution or winding up an amount equal to
the stated value plus the greater of accrued and unpaid dividends or the participation amount, which as defined, is an amount equal to 10% of the increase in market value per share of the Company's
common stock for the period from the closing of the iMaternity acquisition until the liquidation, dissolution or winding up of the Company, as defined. </FONT></P>
<P><FONT SIZE=2> On
the earlier of October 18, 2006, or upon a change of control or other fundamental transaction, as defined, the holders of the Series C Preferred Stock have the right
to require the Company to purchase their shares for cash at a price equal to the stated value plus accrued and unpaid dividends (the "Put right"). If the Company defaults on its obligation under the
Put right, the holders of the outstanding Series C Preferred Stock have the right to convert their Series C Preferred Stock into shares of the Company's common stock, provided that, in
no event shall the aggregate number of shares issued upon such conversion, plus 350,000 shares of common stock related to the warrants issued in connection with the iMaternity acquisition, exceed an
amount equal to 19.9% of the number of outstanding shares of the Company's common stock outstanding immediately preceding the iMaternity acquisition. At any time on or after April 18, 2004, the
Company has the right to purchase the outstanding Series C Preferred Shares for cash at a price equal to the stated value plus the greater of accrued and unpaid dividends or the participation
amount, as defined. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–21</FONT></P>
<HR NOSHADE>
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<A NAME="page_fo1552_1_22"> </A>
<P><FONT SIZE=2>
Under the terms of the Merger Agreement, at any time after the closing of the iMaternity acquisition, the Company has the right to make an offer to purchase for cash all outstanding
shares of Series C Preferred Shares at a price of the stated value plus accrued and unpaid dividends. If a majority of the holders of the outstanding Series C Preferred Stock, as
defined, fail to accept such offer, the such
holders forfeit their warrants, or if any warrant has been exercised and the underlying common stock have been sold by any holder, then such holder forfeits accrued and unpaid dividends on such
holder's Series C Preferred Stock. Further, upon such failure to accept such offer to purchase, all holders of the outstanding Series C Preferred Stock forfeit certain protective
provisions under the Agreement and Plan of Merger, including prohibitions on issuing senior stock or parity stock, as defined, and redeeming junior securities. </FONT></P>
<P><FONT SIZE=2> The
acquisition will be accounted for as a purchase and iMaternity's results of operations will be included in the Company's financial statements as of the acquisition date. The
assets acquired and liabilities assumed were recorded based upon preliminary valuation information and are subject to adjustment, pending the final valuation determinations. </FONT></P>
<P><FONT SIZE=2><B>13. RESTRUCTURING CHARGES </B></FONT></P>
<P><FONT SIZE=2> During fiscal 1998, the Company announced that all of its Episode stores, which feature non-maternity women's apparel, would be closed or converted
into maternity clothing stores. In connection with the closure and conversion of the 51 Episode stores in operation at the time the restructuring plan was entered into, the Company recorded charges
totaling $20.9 million ($13.8 million net of tax benefit of $7.1 million) which were reflected in the Consolidated Statements of Operations as cost of goods sold
($10.3 million) and restructuring charges ($10.6 million). The charges recorded to cost of goods sold related to inventory purchase commitments and inventory write-downs based on
estimated liquidation values. Approximately 159 employees were expected to be terminated as part of the restructuring plan, which consisted of 15 corporate employees and 144 store employees. The
restructuring charges were comprised of $2.9 million of legal fees and expenses, lease buy-out features and other known costs associated with the transfer of leases,
$7.3 million for losses on fixed assets and leasehold improvements to be disposed of or sold (including leasehold improvement commitments), $0.2 million for severance, and the remainder
for other miscellaneous costs associated with the closures and conversions such as additional legal fees and royalty payments. There were no fixed assets or leasehold improvements of the Episode
division held and used by the Company subsequent to the Episode closure. All amounts recorded as restructuring charges associated with the write-downs of fixed assets and leasehold improvements were
estimated based on the remaining net book value of the assets to be disposed of or sold, and the estimated sale proceeds. Depreciation and amortization associated with the fixed assets and leasehold
improvements to be disposed of or sold were included in selling, general and administrative expenses up until the time the assets were available for sale (which approximates the timing of the actual
disposal or sale of the assets) upon which the remaining net book value, net of any sale proceeds, was recorded against the restructuring charges. Prior to September 30, 1998, the Company
closed and converted 21 store locations and terminated 69 employees, to whom the $0.2 million in accrued severance was paid out and charged against the liability. During the first quarter
of fiscal 1999, the Company sold 24 (of the remaining 30 stores as of September 30, 1998) to Wet Seal, Inc. and terminated 72 employees, to whom no severance was paid. The remaining 6
stores were closed within the six-month period ended March 31, 1999. The Company hired a liquidating service to manage the remaining 6 store locations and to liquidate the remaining
inventory during this period. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–22</FONT></P>
<HR NOSHADE>
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<A NAME="page_fo1552_1_23"> </A>
<P><FONT SIZE=2>
The remaining 18 employees, as planned, were terminated during the three-month period ended March 31, 1999. No severance was paid out related to the final tranche of employees terminated under
the restructuring plan. </FONT></P>
<P><FONT SIZE=2> At
September 30, 1998, approximately $4.6 million of the restructuring costs (including charges recorded to cost of goods sold) remained in accrued expenses. Of the
$4.6 million, $2.1 million related to losses on purchase commitments for inventory and leasehold improvements, $2.2 million related to legal fees and expenses, lease
buy-out features, and other fees associated with the transfer of leases, and the remainder was for other miscellaneous charges. During fiscal 1999, the Company recorded charges of
$3.6 million against the reserve which included $2.0 million of charges to settle inventory and leasehold improvement purchase commitments and $1.6 million of costs incurred to
settle lease transfers. At September 30, 1999, approximately $1.0 million of the restructuring costs remained in accrued expenses. During fiscal 2000, the Company finalized its remaining
lease transfer and incurred costs for miscellaneous related matters associated with this divestiture and to settle inventory purchase commitments. At September 30, 2000, approximately
$0.3 million of the restructuring costs remained in accrued expenses. It is expected that the full amount will be used for legal fees and other fees related to the final lease transfer. During
fiscal 2001 the Company charged an additional $0.1 million against the reserve for legal fees related to the lease transfer and settlement of a vendor dispute, leaving a balance of
$0.1 million for any outstanding fees. </FONT></P>
<P><FONT SIZE=2><B>14. SUBSIDIARY GUARANTOR </B></FONT></P>
<P><FONT SIZE=2> Pursuant to the terms of the indenture relating to the Notes, Cave Springs, Inc. (100% owned subsidiary of Mothers Work, the "Subsidiary Guarantor") has
jointly and severally provided an unconditional guarantee of the obligations of Mothers Work with respect to the Notes. The Subsidiary Guarantor charges royalties to Mothers Work for the retail use of
its intellectual property and charges interest on the balance of any unpaid royalties and/or funds advanced to Mothers Work. Substantially all of the assets of the Subsidiary Guarantor consist of the
intercompany receivable from Mothers Work for
unpaid royalties, cash advances and interest. All intercompany amounts are eliminated in consolidation. There are no restrictions on any of the assets of the Subsidiary Guarantor which would limit its
ability to transfer funds to Mothers Work in the form of loans, advances or cash dividends, except as provided by applicable law. </FONT></P>
<P><FONT SIZE=2><B>15. EMPLOYMENT AND CONSULTING AGREEMENTS </B></FONT></P>
<P><FONT SIZE=2> The Company has employment agreements with its Chairman of the Board/Chief Executive Officer ("CEO") and its President/Chief Operating Officer ("COO"). These
agreements provide for base compensation (approximately $400,000 each for fiscal 2001 and $377,000 each for fiscal 2000), increasing annually thereafter in an amount to be determined by the
Compensation Committee of the Board of Directors. The agreements, which expire on September 30, 2003, automatically extend for successive one-year periods extending the expiration
date into the third year after the extension, unless either the Company or the executive gives written notice to the other party that the term will not extend. Additionally, the CEO and COO are
entitled to an annual cash bonus and stock options based on performance, as defined. </FONT></P>
<P ALIGN="CENTER"><FONT SIZE=2>F–23</FONT></P>
<HR NOSHADE>
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<A NAME="page_fo1552_1_24"> </A>
<P><FONT SIZE=2><B>16. EMPLOYEE BENEFIT PLANS </B></FONT></P>
<P><FONT SIZE=2> The Company has a 401(k) savings plan for full-time employees who have at least one year of service and are 21 years of age. Employees can
contribute up to 20% of their annual salary. Effective January 1, 1999, employees who meet certain criteria are eligible for a matching contribution from the Company based on a sliding scale.
Company matches are made on the first day of the succeeding calendar year. Company matches vest fully on the employee's 4<SUP>th</SUP> anniversary date. Company matching contributions totaling
$53,000 and $47,000 were made in fiscal 2001 and 2000, respectively. There were no Company contributions in fiscal 1999. In addition the Company may make discretionary contributions to the plan, which
vest over a five-year period. The Company has not made any discretionary contributions. </FONT></P>
<P><FONT SIZE=2><B>17. STOCK BUYBACK </B></FONT></P>
<P><FONT SIZE=2> During fiscal 1999, the Board of Directors authorized the Company to purchase up to 265,000 shares of its own stock in private transactions or on the open
market. As of September 30, 2000, the Company had purchased 205,185 shares in the aggregate at a total cost of $2,205,000. Since then, the Company has been restricted from further stock
repurchases under the terms of the indenture to the Notes. </FONT></P>
<P><FONT SIZE=2><B>18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) </B></FONT></P>
<P><FONT SIZE=2> Quarterly financial results for the years ended September 30, 2001 and 2000 are as follows (in thousands, except per share amounts): </FONT></P>
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<TABLE WIDTH="92%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Quarter</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>9/30/01</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>6/30/01</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>3/31/01</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/00</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><B><U>Fiscal 2001</U></B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2> </FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Net sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR></FONT><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
92,637</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR> </B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
103,970</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR> </B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
89,029</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR> </B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
102,670</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>46,790</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>54,227</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>43,117</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>49,852</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Net income (loss) available to common stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(185</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>3,423</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(2,262</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>995</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Basic net income (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(0.05</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.99</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(0.65</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.29</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Diluted net income (loss) per share</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(0.05</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.95</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><B>(0.65</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>0.28</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2> </FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2> </FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=2> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Quarter</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="50%" ALIGN="LEFT"><FONT SIZE=1> </FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>9/30/00</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>6/30/00</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>3/31/00</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1> </FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT