Munsingwear, Inc. Case Study Instructions

This case tests your ability to think strategically

Prize:

Pretend you have traded in your hush puppy shoes or sandals in for a pair of wing-tips. You are now an investment banker who is being asked to help Munsingwear, Inc. “enhance shareholder value.” How would you advise the CEO in improving their operations and profitability? Your fee, if your advice salvages value for shareholders and/or turns this company around, would be $500,000. If you solve this case with an analysis of how this company could be profitable and you idea of its probable valuation with an explanation backing your valuation, tell me where to send your fee.

Instructions:

Use only what is in this case study for your analysis. If you feel critical information is lacking, then state what is missing and how it prevents you from advising your client. You will have a chance to speak to the CEO, Mr. Lowell Fisher, in class.

After reading the 10-K what would you advise? Why? Please give no more than a written paragraph answer. Provide a brief pro-forma of your analysis if necessary.

Please provide a short analysis (no more than one or two paragraphs of how you would restructure the company to make it profitable on a normalized basis. Then provide a back of the envelop valuation based on conservative assumptions.

Good luck in your new wing tips! Do not take more than 30-40 minutes! If you win, do you want the funds wired to your off-shore account?

Munsingwear, Inc. Case Study

FORM 10-K

For the fiscal year ended January 6, 1996

Munsingwear, Inc.

IRS # 41-0429620

8000 W. 78th Street, Suite-400, Minneapolis, Minnesota 55439

Telephone number: 612-943-5000

Delaware: State of Incorporation

The aggregate market value of the voting stock held by nonaffiliates of the Registrant at April 1, 1996 was $9,384,000 based on the closing price of $7.25 per share at that date.

The number of shares of common stock outstanding at April 1, 1996 was 2,037,078

A. General Development Of Business

The Company was incorporated under the laws of Delaware in 1923 as the successor to a business founded in 1886. The Company’s principal executive offices are located at 8000 W. 78th Street, Suite-400, Minneapolis, Minnesota 55439, and its telephone number: 612-943-5000. As used in this document, the term “Company” refers to Munsingwear, Inc. and its subsidiaries unless otherwise noted or indicated by the context. At Jan. 6, 1996, the Company had one subsidiary, Munsingwear UK Limited, which was idled in 1994.

After suffering a severely weakened financial condition, primarily due to losses of $89, 243,000 during the years 1989 through 1990, the Company, on July 3, 1991, filed a voluntary petition for bankruptcy under Chapter 11 of the US Bankruptcy Code, together with a proposed Plan of Reorganization. The Company emerged from bankruptcy on Oct. 29, 1991.

Prior to the reductions in operation implemented during 1989 through 1991, the Company designed, manufactured and distributed a broad range of men’s and children’s apparel through several operating divisions and subsidiaries. Today the Company’s operations consist of what was formerly the Men’s Apparel Division and sell primarily men’s knit sport shirts under the following major brands or labels: Munsingwear ®, Grand Slam ®, Grand Slam Tour ™, Penguin Sport ™ and Slammer ®. In addition, the Company licenses its trade names and trademarks for use in a variety of products.

In the recent two fiscal years, the Company’s sales by channel of distribution have undergone significant change. In 1995, sales to premium/special markets and golf Pro shop customers rose 52% collectively over 1994. This is the result of management’s attempt to reduce the Company’s reliance on sales to traditional retail apparel channels of distribution where heavy promotional pricing, discounting and advertising activities are required.

In late 1995, the Company retained the services of an investment banking firm to explore a range of opportunities to maximize shareholder value.

B. Financial Information About Industry Segments

The Company operates in one industry segment, apparel manufacturing. As of Jan. 6, 1996, the Company’s foreign operations were not material.

C. Narrative Description Of Business

Principal Products:

The Company sells primarily men’s knit sport shirts under four major brands or labels: Munsingwear ®, Grand Slam ®, Grand Slam Tour ™, and Penguin Sport ™. Grand Slam ® and Penguin Sport ™ products are sold primarily to department stores, specialty stores and Sears. Munsingwear ® products are sold primarily to premium/special markets customers and to national chain stores, such as Montgomery Ward. Grand Slam Tour ™ is sold primarily through golf pro shops.

Munsingwear

Via CSInvesting

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