CRI Carters Inc

• Net sales $724 million, growth of 6%
• Operating income $93 million, growth of 10%; adjusted operating income $94 million, growth of 8%
• Diluted EPS $1.04, growth of 11%; adjusted diluted EPS $1.05, growth of 8%
• Returned $89 million to shareholders through share repurchases and dividends
• Company raises fiscal 2016 adjusted diluted EPS guidance range to growth of 10% - 12%; previously growth of 8% - 10%

Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the United States and Canada of apparel exclusively for babies and young children, today reported its first quarter fiscal 2016 results.

“We saw increased demand for our brands and achieved a record level of sales and earnings in our first quarter,” said Michael D. Casey, Chairman and Chief Executive Officer. “We achieved good growth in our wholesale, retail and international businesses, and meaningfully increased the distribution of capital to our shareholders. We’re forecasting good growth in sales and earnings for the year, and have raised our earnings guidance for 2016.”

Consolidated Results (First Quarter of Fiscal 2016 compared to First Quarter of Fiscal 2015)

Net sales increased $39.3 million, or 5.7%, to $724.1 million, reflecting growth in the Company’s U.S. Carter’s and OshKosh retail and Carter’s wholesale businesses as well as in its international segment. Changes in foreign currency exchange rates in the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015 negatively impacted consolidated net sales in the first quarter of fiscal 2016 by $4.5 million, or 0.7%. On a constant currency basis, consolidated net sales increased 6.4% in the first quarter of fiscal 2016.

Operating income in the first quarter of fiscal 2016 increased $8.5 million, or 10.1%, to $93.0 million, compared to $84.5 million in the first quarter of fiscal 2015. Operating margin increased approximately 50 basis points to 12.8%, compared to 12.3% in the first quarter of fiscal 2015. Adjusted operating income (a non-GAAP measure) increased $6.7 million, or 7.7%, to $94.0 million, compared to $87.3 million in the first quarter of fiscal 2015. Adjusted operating margin (a non-GAAP measure) increased approximately 30 basis points to 13.0%, compared to 12.7% in the first quarter of fiscal 2015, which reflected improved gross margin partially offset by expense deleverage.

Net income in the first quarter of fiscal 2016 increased $4.2 million, or 8.4%, to $54.0 million, or $1.04 per diluted share, compared to $49.8 million, or $0.94 per diluted share, in the first quarter of fiscal 2015. Adjusted net income (a non-GAAP measure) increased $2.9 million, or 5.5%, to $54.6 million, compared to $51.7 million in the first quarter of fiscal 2015. Adjusted earnings per diluted share (a non-GAAP measure) in the first quarter of fiscal 2016 increased 7.9% to $1.05, compared to $0.97 in the first quarter of fiscal 2015.

Cash flow from operations in the first quarter of fiscal 2016 was $128.3 million compared to $87.2 million in the first quarter of fiscal 2015. The increase reflected an increase in net income and favorable changes in net working capital.

See the “Reconciliation of GAAP to Adjusted Results” section of this release for additional disclosures and reconciliations regarding non-GAAP measures.

Business Segment Results (First Quarter of Fiscal 2016 compared to First Quarter of Fiscal 2015)

Carter’s Retail Segment

Carter’s retail segment sales increased $14.6 million, or 5.7%, to $272.3 million. Carter’s retail comparable sales decreased 0.1%, comprised of eCommerce comparable sales growth of 15.2%, offset by a stores comparable sales decline of 4.0%. During the first quarter of fiscal 2016, the Company believes, based on analysis of credit card transactions and other data, that Carter’s retail comparable sales were negatively affected by lower demand from international consumers shopping in its U.S. stores and on its websites, which was likely influenced by the strength of the U.S. dollar relative to other global currencies.

In the first quarter of fiscal 2016, the Company opened 16 Carter’s stores in the United States. The Company operated 610 Carter’s stores in the United States as of April 2, 2016.

Carter’s Wholesale Segment

Carter’s wholesale segment net sales increased $10.8 million, or 4.0%, to $280.1 million, reflecting increased product demand, in part due to timing of orders, and a new playwear initiative.

OshKosh Retail Segment

OshKosh retail segment net sales increased $8.7 million, or 11.9%, to $81.8 million. OshKosh retail comparable sales increased 2.7%, comprised of eCommerce comparable sales growth of 19.8%, partially offset by a stores comparable sales decline of 1.9%. During the first quarter of fiscal 2016, the Company believes, based on analysis of credit card transactions and other data, that OshKosh retail comparable sales were negatively affected by lower demand from international consumers shopping in its U.S. stores and on its websites, which was likely influenced by the strength of the U.S. dollar relative to other global currencies.

In the first quarter of fiscal 2016, the Company opened 11 OshKosh stores in the United States and closed one store. The Company operated 251 OshKosh stores in the United States as of April 2, 2016.

OshKosh Wholesale Segment

OshKosh wholesale segment net sales decreased $4.1 million, or 25.8%, to $11.9 million, due to a decrease in the number of units shipped, driven mainly by lower seasonal bookings.

International Segment

International segment net sales increased $9.3 million, or 13.6%, to $77.9 million, driven by growth in the Company’s retail businesses in Canada and new eCommerce sales in China, partially offset by unfavorable foreign currency exchange rates.

Changes in foreign currency exchange rates in the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015 negatively affected international segment net sales in the first quarter of fiscal 2016 by $4.5 million, or 6.6%. On a constant currency basis, international segment net sales increased 20.1%.

For the first quarter of fiscal 2016, Canada retail comparable sales increased 14.9%, comprised of stores comparable sales growth of 12.8% and eCommerce comparable sales growth of 46.6%. In the first quarter of fiscal 2016, the Company opened two stores in Canada. The Company operated 149 stores in Canada as of April 2, 2016.

Return of Capital

In the first quarter of fiscal 2016, the Company returned a total of $88.6 million to shareholders through share repurchases and dividends as described below.

During the first quarter of fiscal 2016, the Company repurchased and retired 722,364 shares of its common stock for $71.6 million at an average price of $99.07 per share. Year-to-date through April 27, 2016, the Company repurchased and retired a total of 1,241,174 shares for $125.5 million at an average price of $101.09 per share. All shares were repurchased in open market transactions pursuant to applicable regulations for such transactions. As of April 27, 2016, the total remaining capacity under the Company’s previously announced repurchase authorizations was approximately $449 million.

During the first quarter of fiscal 2016, the Company paid a cash dividend of $0.33 per share totaling $17.0 million. Future declarations of quarterly dividends and the establishment of related record and payment dates will be at the discretion of the Company’s Board of Directors based on a number of factors, including the Company’s future financial performance and other considerations.

2016 Business Outlook

For the second quarter of fiscal 2016, the Company projects net sales will increase approximately 3% to 4% compared to the second quarter of fiscal 2015 and adjusted diluted earnings per share will decrease approximately 10% to 15% compared to adjusted diluted earnings per share of $0.73 in the second quarter of fiscal 2015. This forecast for second quarter fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $0.8 million related to the amortization of acquired tradenames and other items the Company believes to be non-representative of underlying business performance.

For the first half of fiscal 2016, the Company projects net sales will increase approximately 4% to 5% compared to the first half of fiscal 2015 and adjusted diluted earnings per share will be approximately comparable to adjusted diluted earnings per share of $1.70 in the first half of fiscal 2015. This forecast for the first half of fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $1.7 million related to the amortization of acquired tradenames and other items the Company believes to be non-representative of underlying business performance.

For fiscal 2016, the Company projects net sales will increase approximately 6% to 7% compared to fiscal 2015 and adjusted diluted earnings per share will increase approximately 10% to 12% compared to adjusted diluted earnings per share of $4.61 in fiscal 2015. This forecast for fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $1.7 million related to the amortization of acquired tradenames and other items the Company believes to be non-representative of underlying business performance.

Conference Call

The Company will hold a conference call with investors to discuss first quarter fiscal 2016 results and its business outlook on April 28, 2016 at 8:30 a.m. Eastern Daylight Time. To participate in the call, please dial 913-312-0848. To listen to a live broadcast via the internet, please visit www.carters.com and select the “Q1 Quarter 2016 Earnings Conference Call” link under the “Investor Relations” tab. Presentation materials for the call can be accessed under the same tab by selecting the link for “News & Events” followed by “Webcasts & Presentations”. A replay of the call will be available shortly after the broadcast through May 7, 2016, at 888-203-1112 (U.S. / Canada) or 719-457-0820 (international), passcode 3540107. The replay will also be archived on the Company’s website under the “Investor Relations” tab.

About Carter’s, Inc.

Carter’s, Inc. is the largest branded marketer in the United States and Canada of apparel and related products exclusively for babies and young children. The Company owns the Carter’s and OshKosh B’gosh brands, two of the most recognized brands in the marketplace. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through more than 1,000 Company-operated stores in the United States and Canada and on-line at www.carters.com, www.oshkoshbgosh.com, and www.cartersoshkosh.ca. The Company’s Just One You, Precious Firsts, and Genuine Kids brands are available at Target, and its Child of Mine brand is available at Walmart. Carter’s is headquartered in Atlanta, Georgia. Additional information may be found at www.carters.com.

Cautionary Language

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to the Company’s future performance, including, without limitation, statements with respect to the Company’s anticipated financial results for the second quarter of fiscal 2016 and fiscal year 2016, or any other future period, assessments of the Company’s performance and financial position, and drivers of the Company’s sales and earnings growth. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or not materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Certain of the risks and uncertainties that could cause actual results and performance to differ materially are described in the Company’s most recently filed Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission from time to time under the headings “Risk Factors” and “Forward-Looking Statements.” Included among the risks and uncertainties that may impact future results are the risks of: losing one or more major customers, vendors, or licensees, due to competition, inadequate quality of the Company’s products, or otherwise; financial difficulties for one or more of the Company’s major customers, vendors, or licensees, or an overall decrease in consumer spending; fluctuations in foreign currency exchange rates; our products not being accepted in the marketplace, due to quality concerns, changes in consumer preference and fashion trends, or otherwise; negative publicity, including as a result of product recalls or otherwise; failure to protect the Company’s intellectual property; various types of litigation, including class action litigation brought under various consumer protection, employment, and privacy and information security laws; a breach of the Company’s consumer databases, systems or processes; the risk of slow-downs, disruptions or strikes along the Company’s supply chain, including disruptions resulting from foreign supply sources, the Company’s distribution centers, or in-sourcing capabilities; unsuccessful expansion into international markets or failure to successfully manage legal, regulatory, political and economic risks of the Company’s existing international operations, including maintaining compliance with worldwide anti-bribery laws; and an inability to obtain additional financing on favorable terms. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except for share data)

(unaudited)

          Fiscal quarter ended April 2, 2016       April 4, 2015 Net sales $ 724,085 $ 684,764 Cost of goods sold 413,156   400,712   Gross profit 310,929 284,052 Selling, general, and administrative expenses 228,996 211,183 Royalty income (11,075 ) (11,636 ) Operating income 93,008 84,505 Interest expense 6,739 6,692 Interest income (207 ) (137 ) Other expense, net 3,193   1,962   Income before income taxes 83,283 75,988 Provision for income taxes 29,303   26,196   Net income $ 53,980   $ 49,792     Basic net income per common share $ 1.05 $ 0.94 Diluted net income per common share $ 1.04 $ 0.94 Dividend declared and paid per common share $ 0.33 $ 0.22    

  CARTER’S, INC.

BUSINESS SEGMENT RESULTS

(dollars in thousands)

(unaudited)

          Fiscal quarter ended       % of             % of April 2, Total Net April 4, Total Net 2016 Sales 2015 Sales Net sales: Carter’s Wholesale $ 280,140 38.7 % $ 269,315 39.3 % Carter’s Retail (a) 272,323   37.6 % 257,727   37.7 % Total Carter’s 552,463   76.3 % 527,042   77.0 % OshKosh Retail (a) 81,766 11.3 % 73,042 10.7 % OshKosh Wholesale 11,914   1.6 % 16,051   2.3 % Total OshKosh 93,680   12.9 % 89,093   13.0 % International (b) 77,942   10.8 % 68,629   10.0 % Total net sales $ 724,085   100.0 % $ 684,764   100.0 %   % of % of Segment Segment Operating income (loss): Net Sales Net Sales Carter’s Wholesale $ 66,205 23.6 % $ 57,931 21.5 % Carter’s Retail (a) 41,254   15.1 % 44,493   17.3 % Total Carter’s 107,459   19.5 % 102,424   19.4 % OshKosh Retail (a) (1,785 ) (2.2 )% (960 ) (1.3 )% OshKosh Wholesale 2,206   18.5 % 2,979   18.6 % Total OshKosh 421   0.4 % 2,019   2.3 % International (b) (c) 8,441   10.8 % 6,511   9.5 % Corporate expenses (d) (e) (23,313 ) (26,449 ) Total operating income $ 93,008   12.8 % $ 84,505   12.3 %  

(a) Includes eCommerce results.

(b) Net sales includes international retail, eCommerce, and wholesale sales. Operating income includes international licensing income.

(c) Includes charges associated with the revaluation of the Company's contingent consideration related to the Company's 2011 acquisition of Bonnie Togs of approximately $0.5 million for the fiscal quarter ended April 4, 2015.

(d) Corporate expenses include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, building occupancy, information technology, legal, consulting, and audit fees.

(e) Includes charges related to the amortization of tradenames of $1.0 million for the fiscal quarter ended April 2, 2016, and $2.3 million for the fiscal quarter ended April 4, 2015.

 

CARTER’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except for share data)

(unaudited)

          April 2, 2016       January 2, 2016       April 4, 2015 ASSETS Current assets: Cash and cash equivalents $ 395,141 $ 381,209 $ 377,400 Accounts receivable, net 192,569 207,570 195,593 Finished goods inventories 376,499 469,934 358,014 Prepaid expenses and other current assets 36,791 37,815 33,894 Deferred income taxes 31,841   34,080   32,842   Total current assets 1,032,841 1,130,608 997,743 Property, plant, and equipment, net of accumulated depreciation of $307,449, $290,636, and $257,394, respectively 377,273 371,704 341,658 Tradenames and other intangibles, net 309,853 310,848 314,955 Goodwill 177,238 174,874 178,859 Other assets 15,258   15,620   13,898   Total assets $ 1,912,463   $ 2,003,654   $ 1,847,113     LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 90,387 $ 157,648 $ 94,133 Other current liabilities 102,494   105,070   93,403   Total current liabilities 192,881 262,718 187,536   Long-term debt, net 580,319 578,972 580,273 Deferred income taxes 128,815 128,838 120,274 Other long-term liabilities 161,731   158,075   153,317   Total liabilities 1,063,746 1,128,603 1,041,400   Commitments and contingencies   Stockholders' equity: Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at April 2, 2016, January 2, 2016, and April 4, 2015 — — — Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 51,206,395, 51,764,309, and 52,615,316 shares issued and outstanding at April 2, 2016, January 2, 2016 and April 4, 2015, respectively 512 518 526 Additional paid-in capital — — — Accumulated other comprehensive loss (31,081 ) (36,367 ) (29,031 ) Retained earnings 879,286   910,900   834,218   Total stockholders' equity 848,717   875,051   805,713   Total liabilities and stockholders' equity $ 1,912,463   $ 2,003,654   $ 1,847,113      

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

          Fiscal quarter ended April 2, 2016       April 4, 2015 Cash flows from operating activities: Net income $ 53,980 $ 49,792 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 17,177 14,875 Amortization of tradenames 995 2,325 Accretion of contingent consideration — 483 Amortization of debt issuance costs 361 280 Non-cash stock-based compensation expense 4,556 4,740 Unrealized foreign currency exchange loss, net 3,780 1,652 Income tax benefit from stock-based compensation (3,144 ) (5,771 ) Loss on disposal of property, plant, and equipment 192 52 Deferred income taxes 2,226 2,207 Effect of changes in operating assets and liabilities: Accounts receivable, net 15,247 (11,402 ) Finished goods inventories 96,056 83,349 Prepaid expenses and other assets (576 ) (472 ) Accounts payable and other liabilities (62,568 ) (54,886 ) Net cash provided by operating activities 128,282   87,224     Cash flows from investing activities: Capital expenditures (25,552 ) (20,760 ) Proceeds from sale of property, plant, and equipment —   76   Net cash used in investing activities (25,552 ) (20,684 )   Cash flows from financing activities: Borrowings under secured revolving credit facility — 20,349 Payments on secured revolving credit facility — (20,000 ) Repurchase of common stock (71,561 ) (14,120 ) Dividends paid (17,032 ) (11,597 ) Income tax benefit from stock-based compensation 3,144 5,771 Withholdings from vesting of restricted stock (8,454 ) (12,331 ) Proceeds from exercise of stock options 3,747   2,768   Net cash used in financing activities (90,156 ) (29,160 )   Effect of exchange rate changes on cash and cash equivalents 1,358   (618 ) Net increase in cash and cash equivalents 13,932 36,762 Cash and cash equivalents, beginning of period 381,209   340,638   Cash and cash equivalents, end of period $ 395,141   $ 377,400      

CARTER’S, INC.

RECONCILIATION OF GAAP TO ADJUSTED RESULTS

(dollars in millions, except earnings per share)

(unaudited)

          Fiscal Quarter Ended April 2, 2016 Gross       % Net             % Net       Operating       % Net       Net       Diluted Margin Sales SG&A Sales Income Sales Income EPS As reported (GAAP) $ 310.9 42.9 % $ 229.0 31.6 % $ 93.0 12.8 % $ 54.0 $ 1.04 Amortization of tradenames —   (1.0 ) 1.0   0.6   0.01 As adjusted (a) $ 310.9   42.9 % $ 228.0   31.5 % $ 94.0   13.0 % $ 54.6   $ 1.05     Fiscal Quarter Ended April 4, 2015 Gross % Net % Net Operating % Net Net Diluted Margin Sales SG&A Sales Income Sales Income EPS As reported (GAAP) $ 284.1 41.5 % $ 211.2 30.8 % $ 84.5 12.3 % $ 49.8 $ 0.94 Amortization of tradenames — (2.3 ) 2.3 1.5 0.03 Revaluation of contingent consideration (b) —   (0.5 ) 0.5   0.5   0.01 As adjusted (a) $ 284.1   41.5 % $ 208.4   30.4 % $ 87.3   12.7 % $ 51.7   $ 0.97  

(a) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present SG&A, operating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison of the Company’s results. The adjusted, non-GAAP financial measurements included in this earnings release should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company’s future condition or results of operations.

(b) Revaluation of the contingent consideration liability associated with the Company’s acquisition of Bonnie Togs in 2011.

Note: Results may not be additive due to rounding.

 

CARTER’S, INC.

RECONCILIATION OF GAAP TO ADJUSTED RESULTS

(dollars in millions, except earnings per share)

(unaudited)

          Fiscal quarter ended July 4, 2015 Gross             Operating             Margin SG&A Income Net Income Diluted EPS As reported (GAAP) $ 262.9 $ 209.3 $ 62.0 $ 36.1 $ 0.68 Amortization of tradenames — (2.1 ) 2.1 1.3 0.02

Revaluation of contingent consideration (a)

—   (1.4 ) 1.4   1.4   0.03 As adjusted (b) $ 262.9   $ 205.8   $ 65.4   $ 38.8   $ 0.73     Two fiscal quarters ended July 4, 2015 Gross Operating Margin SG&A Income Net Income Diluted EPS As reported (GAAP) $ 546.9 $ 420.5 $ 146.5 $ 85.9 $ 1.62 Amortization of tradenames — (4.3 ) 4.3 2.7 0.05 Revaluation of contingent consideration (a) —   (1.9 ) 1.9   1.9   0.03 As adjusted (b) $ 546.9   $ 414.3   $ 152.7   $ 90.5   $ 1.70     Fiscal year ended January 2, 2016 Gross Operating Margin SG&A Income Net Income Diluted EPS As reported (GAAP) $ 1,258.0 $ 909.2 $ 392.9 $ 237.8 $ 4.50 Amortization of tradenames — (6.2 ) 6.2 3.9 0.08 Revaluation of contingent consideration (a) —   (1.9 ) 1.9   1.9   0.04 As adjusted (b) $ 1,258.0   $ 901.1   $ 401.0   $ 243.6   $ 4.61  

(a) Revaluation of the contingent consideration liability associated with the Company’s acquisition of Bonnie Togs in 2011.

(b) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present SG&A, operating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison of the Company’s results. The adjusted, non-GAAP financial measurements included in this earnings release should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company’s future condition or results of operations.

Note: Results may not be additive due to rounding.

 

CARTER’S, INC.

RECONCILIATION OF NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS

 (unaudited)

          Fiscal quarter ended April 2,       April 4, 2016 2015 Weighted-average number of common and common equivalent shares outstanding: Basic number of common shares outstanding 51,176,987 52,119,215 Dilutive effect of equity awards 467,103   495,386   Diluted number of common and common equivalent shares outstanding 51,644,090   52,614,601  

As reported on a GAAP Basis:

Basic net income per common share: Net income $ 53,980 $ 49,792 Income allocated to participating securities (444 ) (560 ) Net income available to common shareholders $ 53,536   $ 49,232   Basic net income per common share $ 1.05 $ 0.94 Diluted net income per common share: Net income $ 53,980 $ 49,792 Income allocated to participating securities (441 ) (556 ) Net income available to common shareholders $ 53,539   $ 49,236   Diluted net income per common share $ 1.04 $ 0.94

As adjusted (a):

Basic net income per common share: Net income $ 54,578 $ 51,713 Income allocated to participating securities (448 ) (582 ) Net income available to common shareholders $ 54,130   $ 51,131   Basic net income per common share $ 1.06 $ 0.98 Diluted net income per common share: Net income $ 54,578 $ 51,713 Income allocated to participating securities (445 ) (577 ) Net income available to common shareholders $ 54,133   $ 51,136   Diluted net income per common share $ 1.05 $ 0.97  

(a) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present per share data excluding the adjustments discussed above. The Company has excluded $0.6 million and $1.9 million in after-tax expenses from these results for the fiscal quarters ended April 2, 2016 and April 4, 2015, respectively.

 

RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION

(unaudited)

 

The following table provides a reconciliation of EBITDA and Adjusted EBITDA for the periods indicated to net income, which is the most directly comparable financial measure presented in accordance with GAAP:

                Four fiscal Fiscal quarter ended quarters ended April 2, 2016       April 4, 2015 April 2, 2016 (dollars in millions) Net income $ 54.0 $ 49.8 $ 242.0 Interest expense 6.7 6.7 27.0 Interest income (0.2 ) (0.1 ) (0.6 ) Income tax expense 29.3 26.2 133.5 Depreciation and amortization (a) 18.2   17.2   69.4   EBITDA $ 108.0   $ 99.7   $ 471.3     Adjustments to EBITDA Revaluation of contingent consideration (b) $ —   $ 0.5   $ 1.4   Adjusted EBITDA $ 108.0   $ 100.2   $ 472.7    

(a) Includes amortization of acquired tradenames.

(b) Revaluation of the contingent consideration liability associated with the Company’s acquisition of Bonnie Togs in 2011.

Note: Results may not be additive due to rounding.

EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. We define EBITDA as net income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the item described in footnote (b) to the table above.

We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry.

The use of EBITDA and Adjusted EBITDA instead of net income or cash flows from operations has limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. EBITDA and Adjusted EBITDA do not represent net income or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA, Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. EBITDA and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us for working capital, debt service and other purposes.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160428005790/en/

Carter’s, Inc.Sean McHugh, 678-791-7615Vice President & Treasurer