- Fourth quarter fiscal 2014
- Net sales $869 million, up
13%
- EPS $1.29, up 66%; adjusted EPS
$1.32, up 30%
- Fiscal 2014
- Net sales $2.9 billion, up
10%
- EPS $3.62, up 32%; adjusted EPS
$3.93, up 17%
- Returned $123 million to
shareholders via share repurchases and dividends in 2014
- Board of Directors authorizes
quarterly dividend increase of 16% to $0.22 per share
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the
United States of apparel exclusively for babies and young children,
today reported its fourth quarter and fiscal 2014 results.
“We saw good demand for our brands in the final months of the
year,” said Michael D. Casey, Chairman and Chief Executive Officer.
“We believe our focus on providing the best value and experience in
young children’s apparel enabled us to achieve our 26th consecutive
year of sales growth and a record level of profitability in 2014.
We’re encouraged by consumers’ response to our new Spring product
offerings, and we’re expecting good growth in sales and earnings in
2015.”
53rd Week
The Company’s fiscal year ends on the Saturday nearest the last
day of December, resulting in an additional week of results every
five to six years. Accordingly, the fourth quarter of fiscal 2014
included 14 weeks, compared to 13 weeks in the fourth quarter of
fiscal 2013. Fiscal year 2014 included 53 weeks, compared to 52
weeks in fiscal 2013. The additional week in fiscal 2014
contributed $44.1 million in consolidated net sales. The additional
week's contribution to net sales by business segment in 2014 are as
follows:
(dollars in millions)
Year-Over-Year Change in Net Sales Fiscal 2014 Q4
Fiscal 2014 Fiscal 2014 53rd Week
Reported Comparable Reported
Comparable Net Sales (14 Weeks)
(13 Weeks) (53 Weeks) (52 Weeks)
Carter's Retail
$ 13.7 15.7 % 11.1 % 13.9 % 12.5 %
Carter's Wholesale 19.4
10.5 % 3.3 % 4.5 % 2.6 %
OshKosh Retail 4.8 17.8 % 12.7 %
15.8 % 14.2 %
OshKosh Wholesale 1.9 1.8 % -7.7 % -1.8 % -4.4
%
International 4.3 8.5 % 3.5 % 10.9 % 9.4 %
Consolidated $ 44.1 12.9 %
7.2 % 9.7 % 8.0 %
Foreign Currency
The appreciation of the U.S. dollar relative to the Canadian
dollar and Japanese yen negatively affected the Company’s reported
net sales and earnings in fiscal 2014. The effects of changes in
foreign currency exchange rates (FX) on net sales in fiscal 2014
compared to fiscal 2013 are as follows:
(dollars in millions)
Year-Over-Year Change
in Net Sales Fourth Quarter Fiscal 2014
Fiscal 2014 2014 FX
Constant 2014 FX
Constant Impact on Reported Currency
Impact on Reported Currency Net Sales
Net Sales Growth Growth Net Sales
Growth Growth International Segment
($5.8 ) 8.5 % 15.2 % ($16.0 ) 10.9 % 16.6 %
Consolidated
($5.8 ) 12.9 % 13.7 % ($16.0 ) 9.7 % 10.3 %
Adjustments to Reported GAAP Results
In keeping with the Company's historical practice of discussing
the results of its business operations excluding items that it
believes are not indicative of underlying business performance, the
following adjustments have been made to the Company's reported
(GAAP) results:
Fourth fiscal quarter (dollars in
millions, except earnings per share)
2014
2013 Net Diluted Net
Diluted Income EPS Income
EPS As reported (GAAP) $ 68.6 $
1.29 $ 42.7 $ 0.78 Amortization
of H.W. Carter and Sons tradenames 1.5 0.03 4.0 0.07 Revaluation of
Bonnie Togs contingent consideration 0.4 0.01 0.5 0.01 Costs to
exit retail operations in Japan — — 2.6 0.05 Closure of
distribution facility in Hogansville, GA — — 0.6 0.01 Office
consolidation costs — — 5.8 0.11
As
adjusted (non-GAAP) $ 70.6 $ 1.32
$ 56.2 $ 1.02 Fiscal year
2014 2013 Net Diluted Net
Diluted Income EPS Income EPS
As reported (GAAP) $ 194.7 $
3.62 $ 160.4 $ 2.75 Amortization
of H.W. Carter and Sons tradenames 10.4 0.19 8.6 0.15 Office
consolidation costs 4.2 0.08 21.0 0.36 Revaluation of Bonnie Togs
contingent consideration 1.3 0.03 2.8 0.05 Closure of distribution
facility in Hogansville, GA 0.6 0.01 1.2 0.02 Costs to exit retail
operations in Japan 0.3 0.01 2.6 0.04
As adjusted (non-GAAP) $ 211.5 $
3.93 $ 196.5 $ 3.37
Note: Results may not be additive due to
rounding. See "Reconciliation of GAAP to Adjusted Results" section
of this release for complete non-GAAP disclosures.
Consolidated Results
The discussion of results below is presented on an adjusted
basis where noted.
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
Consolidated net sales increased $99.6 million, or 12.9%, to
$869.2 million. The net sales increase reflects growth in all
business segments.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2014 compared to the fourth quarter of fiscal 2013
negatively impacted consolidated net sales in the fourth quarter of
fiscal 2014 by $5.8 million, or 0.8%. On a constant currency basis,
consolidated net sales increased 13.7% in the fourth quarter of
fiscal 2014.
Net income in the fourth quarter of fiscal 2014 increased $25.8
million, or 60.5%, to $68.6 million, or $1.29 per diluted share,
compared to $42.7 million, or $0.78 per diluted share, in the
fourth quarter of fiscal 2013. Adjusted net income in the fourth
quarter of fiscal 2014 increased $14.4 million, or 25.7%, to $70.6
million, compared to $56.2 million in the fourth quarter of fiscal
2013. Adjusted earnings per diluted share in the fourth quarter of
fiscal 2014 increased 29.8% to $1.32, compared to $1.02 in the
fourth quarter of fiscal 2013. The growth in adjusted earnings per
diluted share reflects sales growth, improved price realization,
and expense leverage that were partially offset by higher product
costs.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
Consolidated net sales increased $255.2 million, or 9.7%, to
$2.9 billion. This increase reflects growth in both Carter’s
segments, the OshKosh retail segment, and the Company's
international segment.
Changes in foreign currency exchange rates in fiscal 2014
compared to fiscal 2013 negatively impacted consolidated net sales
in fiscal 2014 by $16.0 million, or 0.6%. On a constant currency
basis, consolidated net sales increased 10.3% in fiscal 2014.
Net income in fiscal 2014 increased $34.3 million, or 21.4%, to
$194.7 million, or $3.62 per diluted share, compared to $160.4
million, or $2.75 per diluted share, in fiscal 2013. Adjusted net
income in fiscal 2014 increased $15.0 million, or 7.6%, to $211.5
million, compared to $196.5 million in fiscal 2013. Adjusted
earnings per diluted share in fiscal 2014 increased 16.6% to $3.93,
compared to $3.37 in fiscal 2013. The growth in adjusted earnings
per diluted share reflects sales growth, improved price
realization, and expense leverage that were partially offset by
higher product costs.
Cash flow from operations in fiscal 2014 was $282.4 million
compared to $209.7 million in fiscal 2013. The increase was driven
by higher net income and favorable changes in net working
capital.
Carter’s Retail Segment Results
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
Carter’s retail segment sales increased $46.4 million, or 15.7%,
to $341.7 million. Carter’s direct-to-consumer comparable sales
increased 3.5%, comprised of eCommerce comparable sales growth of
18.3% and a comparable retail store sales decline of 0.1%. The
comparable sales metric for the 14 weeks ended January 3, 2015
utilizes a comparable 14 week period of the prior year.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
Carter’s retail segment sales increased $133.0 million, or
13.9%, to $1.1 billion. Carter’s direct-to-consumer comparable
sales increased 3.7%, comprised of eCommerce comparable sales
growth of 26.1% and a comparable retail store sales decline of
1.0%. The comparable sales metric for the 53 weeks ended January 3,
2015 utilizes a comparable 53 week period of the prior year.
As of the end of the fourth quarter of fiscal 2014, the Company
operated 531 Carter’s retail stores in the United States.
Carter’s Wholesale Segment Results
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
Carter’s wholesale segment sales grew $28.5 million, or 10.5%,
to $300.4 million, reflecting growth across all Carter’s
brands.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
Carter’s wholesale segment sales increased $46.5 million, or
4.5%, to $1.1 billion, reflecting growth in a majority of the
Company’s top accounts.
OshKosh Retail Segment Results
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
OshKosh retail segment sales increased $17.0 million, or 17.8%,
to $112.6 million. OshKosh direct-to-consumer comparable sales
increased 6.8%, comprised of eCommerce comparable sales growth of
17.4% and a comparable retail stores increase of 4.0%. The
comparable sales metric for the 14 weeks ended January 3, 2015
utilizes a comparable 14 week period of the prior year.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
OshKosh retail segment sales increased $45.8 million, or 15.8%,
to $335.1 million. OshKosh direct-to-consumer comparable sales
increased 7.3%, comprised of eCommerce comparable sales growth of
27.4% and a comparable retail store sales increase of 3.3%. The
comparable sales metric for the 53 weeks ended January 3, 2015
utilizes a comparable 53 week period of the prior year.
As of the end of the fourth quarter of fiscal 2014, the Company
operated 200 OshKosh retail stores in the United States.
OshKosh Wholesale Segment Results
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
OshKosh wholesale segment sales increased $0.4 million, or 1.8%,
to $20.9 million.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
OshKosh wholesale segment sales decreased $1.4 million, or 1.8%,
to $73.2 million.
International Segment Results
Fourth Quarter of Fiscal 2014 (14 weeks) compared to Fourth
Quarter of Fiscal 2013 (13 weeks)
International segment sales increased $7.3 million, or 8.5%, to
$93.6 million, principally driven by growth in the Company’s
Canadian businesses.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2014 as compared to the fourth quarter of fiscal 2013
negatively impacted international segment net sales in the fourth
quarter of fiscal 2014 by $5.8 million, or 6.7%. On a constant
currency basis, international segment net sales increased
15.2%.
The Company’s former retail operations in Japan, which the
Company substantially exited in the first quarter of fiscal 2014,
contributed $3.8 million to segment sales in the fourth quarter of
fiscal 2013.
Canadian comparable retail store sales declined 4.6%, reflecting
the discontinuation of Bonnie Togs legacy private label brands in
2014 and lower store traffic. The comparable sales metric for the
14 weeks ended January 3, 2015 utilizes a comparable 14 week period
of the prior year.
Fiscal 2014 (53 weeks) compared to Fiscal 2013 (52 weeks)
International segment sales increased $31.2 million, or 10.9%,
to $316.5 million, reflecting growth in the Company’s Canadian
businesses and higher wholesale sales outside the U.S.
Changes in foreign currency exchange rates in fiscal 2014 as
compared to fiscal 2013 negatively impacted international net sales
in fiscal 2014 by $16.0 million, or 5.7%. On a constant currency
basis, international segment net sales increased 16.6%.
The Company’s former retail operations in Japan contributed $4.4
million in net sales in fiscal 2014, compared to $15.9 million to
segment sales in fiscal 2013.
Canadian comparable retail store sales declined 3.4%, reflecting
the discontinuation of Bonnie Togs legacy private label brands in
2014 and lower store traffic, which more than offset growth in the
combined sales of Carter’s and OshKosh branded products. The
comparable sales metric for the 53 weeks ended January 3, 2015
utilizes a comparable 53 week period of the prior year.
As of the end of the fourth quarter of fiscal 2014, the Company
operated 124 retail stores in Canada.
Dividends
During the fourth quarter of fiscal 2014, the Company paid a
cash dividend of $0.19 per share totaling $10.0 million. The
Company paid cash dividends totaling $40.5 million in fiscal
2014.
On February 18, 2015, the Company’s Board of Directors
authorized a 16% increase ($0.03 per share) to the quarterly cash
dividend, to $0.22 per share for payment on March 20, 2015, to
shareholders of record at the close of business on March 10,
2015.
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.
Stock Repurchase Activity
During the fourth quarter of fiscal 2014, the Company
repurchased and retired 244,800 shares of its common stock for
$19.3 million at an average price of $78.96 per share. During
fiscal 2014, the Company repurchased and retired 1.1 million shares
for $82.1 million at an average price of $73.84. Year-to-date
through February 25, 2015, the Company has repurchased and retired
a total of 23,100 shares for $1.9 million at an average price of
$83.52 per share. All shares were repurchased in open market
transactions pursuant to applicable regulations for open market
share repurchases.
As of February 25, 2015, the total remaining capacity under the
Company’s previously-announced repurchase authorizations was $183
million.
2015 Business Outlook
For fiscal 2015, the Company projects net sales to increase
approximately 5% over fiscal 2014 and adjusted diluted earnings per
share to increase approximately 10% to 14% compared to adjusted
diluted earnings per share of $3.93 in fiscal 2014. This forecast
for fiscal 2015 adjusted earnings per share excludes anticipated
expenses of approximately $6 million related to the amortization of
the acquired tradenames discussed above, approximately $1 million
related to the Bonnie Togs acquisition, and other items the Company
believes to be non-representative of underlying business
performance.
For the first quarter of fiscal 2015, the Company projects net
sales to increase approximately 3% over the first quarter of fiscal
2014 and adjusted diluted earnings per share to be comparable to
adjusted diluted earnings per share of $0.73 in the first quarter
of fiscal 2014. This forecast includes the anticipated adverse
impact of approximately $15 million in net sales related to delayed
inventory receipts due to the backlog of cargo containers at West
Coast ports. This forecast for first quarter fiscal 2015 adjusted
earnings per share excludes anticipated expenses of approximately
$2 million related to the amortization of the acquired tradenames
discussed above, approximately $0.5 million related to the Bonnie
Togs acquisition, 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 fourth quarter and fiscal 2014 results and its business
outlook on February 26, 2015 at 8:30 a.m. Eastern Standard Time. To
participate in the call, please dial 913-312-1396. To listen to a
live broadcast of the call on the internet, please visit
www.carters.com and select the “Fourth Quarter 2014 Earnings
Conference Call” link under the “Investor Relations” tab.
Presentation materials for the call can be accessed under the same
tab by selecting links for “News & Events” followed by
“Webcasts & Presentations”. A replay of the call will be
available shortly after the broadcast through March 6, 2015, at
888-203-1112 (U.S. / Canada) or 719-457-0820 (international),
passcode 9058717. 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 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 800 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 first
quarter of fiscal 2015 and fiscal year 2015, or any other future
period, assessment 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 should
underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. Factors
that could cause actual results to materially differ include the
risks of: losing one or more major customers, vendors, or licensees
or financial difficulties for one or more of our major customers,
vendors, or licensees; the Company’s products not being accepted in
the marketplace; changes in consumer preference and fashion trends;
negative publicity; the Company failing to protect its intellectual
property; incurring costs in connection with cooperating with
regulatory investigations and proceedings; the breach of the
Company’s consumer databases, systems or processes; deflationary
pricing pressures; decreases in the overall level of consumer
spending; disruptions resulting from the Company’s dependence on
foreign supply sources; foreign currency risks due to the Company’s
operations outside of the United States; the Company’s use of a
small number of vendors over whom it has little control; the
Company’s foreign supply sources not meeting the Company’s quality
standards or regulatory requirements; disruptions in the Company’s
supply chain, including distribution centers or in-sourcing
capabilities or otherwise, and the risk of slow-downs, disruptions
or strikes in the event that a new agreement between the Pacific
Maritime Association, which represents the operator of the port
through which we source substantially all of our products, and the
International Longshore and Warehouse Union is not finalized and
approved in a timely manner; product recalls; the loss of the
Company’s principal product sourcing agent; increased competition
in the baby and young children's apparel market; the Company being
unable to identify new retail store locations or negotiate
appropriate lease terms for the retail stores; the Company’s
failure to successfully manage its eCommerce business; the Company
not adequately forecasting demand, which could, among other things,
create significant levels of excess inventory; failure to achieve
sales growth plans, cost savings, and other assumptions that
support the carrying value of the Company’s intangible assets;
increased leverage, not being able to repay its indebtedness and
being subject to restrictions on operations by the Company’s debt
agreements; not attracting and retaining key individuals within the
organization; failure to properly manage strategic projects;
failure to implement needed upgrades to the Company’s information
technology systems; disruptions of distribution functions in its
Braselton, Georgia facility; being unsuccessful in expanding into
international markets and failing to successfully manage legal,
regulatory, political and economic risks of international
operations, including maintaining compliance with worldwide
anti-bribery laws; fluctuations in the Company’s tax obligations
and effective tax rate; incurring substantial costs as a result of
various claims or pending or threatened lawsuits; and the failure
to declare future quarterly dividends. Many of these risks are
further described in the most recently filed Quarterly Report on
Form 10-Q and other reports filed with the Securities and Exchange
Commission under the headings “Risk Factors” and “Forward-Looking
Statements.” The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
CARTER’S, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except for share
data)
(unaudited)
For the fiscalquarters
ended
For the fiscal years ended
January 3, 2015
December 28, 2013
January 3, 2015
December 28, 2013
(14 weeks) (13 weeks) (53 weeks) (52 weeks) Net sales $ 869,224 $
769,655 $ 2,893,868 $ 2,638,711 Cost of goods sold 513,192
447,232 1,709,428 1,543,332 Gross profit
356,032 322,423 1,184,440 1,095,379 Selling, general, and
administrative expenses 251,902 258,841 890,251 868,480 Royalty
income
(9,880
)
(9,812
)
(39,156
)
(37,252
)
Operating income 114,010 73,394 333,345 264,151 Interest expense
7,030 6,755 27,653 13,437 Interest income
(86
)
(147
)
(403
)
(669
)
Other expenses 1,472 871 3,189 1,918
Income before income taxes 105,594 65,915 302,906 249,465 Provision
for income taxes 37,004 23,167 108,236 89,058
Net income $ 68,590 $ 42,748 $ 194,670
$ 160,407 Basic net income per common share $ 1.30 $
0.78 $ 3.65 $ 2.78 Diluted net income per common share $ 1.29 $
0.78 $ 3.62 $ 2.75 Dividend declared and paid per common share $
0.19 $ 0.16 $ 0.76 $ 0.48
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
For the fiscal
quarters ended For the fiscal years ended
January 3,2015(14 weeks)
% oftotal sales
December 28,2013(13
weeks)
% oftotal sales
January 3,2015(53 weeks)
% oftotal sales
December 28,2013(52
weeks)
% oftotal sales
Net
sales:
Carter’s Retail (a) $341,692 39.3 % $295,333 38.4 % $ 1,087,165
37.6 % $ 954,160 36.2 % Carter’s Wholesale 300,428 34.6 %
271,902 35.3 % 1,081,888 37.4 % 1,035,420 39.2
% Total Carter’s 642,120 73.9 % 567,235 73.7 %
2,169,053 75.0 % 1,989,580 75.4 % OshKosh Retail (a)
112,640 13.0 % 95,649 12.4 % 335,140 11.6 % 289,311 11.0 % OshKosh
Wholesale 20,859 2.4 % 20,495 2.7 % 73,201 2.5
% 74,564 2.8 % Total OshKosh 133,499 15.4 % 116,144
15.1 % 408,341 14.1 % 363,875 13.8 %
International (b) 93,605 10.7 % 86,276 11.2 % 316,474
10.9 % 285,256 10.8 % Total net sales $869,224
100.0 % $769,655 100.0 % $ 2,893,868 100.0 % $
2,638,711 100.0 %
Operating income
(loss):
Operatingmargin
Operatingmargin
Operatingmargin
Operatingmargin
Carter’s Retail (a) $73,638 21.6 % $60,529 20.5 % $ 211,297 19.4 %
$ 181,169 19.0 % Carter’s Wholesale 51,974 17.3 % 47,314
17.4 % 185,463 17.1 % 185,501 17.9 % Total
Carter’s 125,612 19.6 % 107,843 19.0 % 396,760
18.3 % 366,670 18.4 % OshKosh Retail (a) 9,093 8.1 % 4,086
4.3 % 8,210 2.4 % (1,433 ) (0.5 )% OshKosh Wholesale 3,717
17.8 % 1,867 9.1 % 8,842 12.1 % 9,796 13.1 %
Total OshKosh 12,810 9.6 % 5,953 5.1 % 17,052
4.2 % 8,363 2.3 % International (b) (c) 12,431 13.3 % 13,154
15.2 % 39,470 12.5 % 40,641 14.2 % Corporate expenses
(d) (e) (36,843 ) (53,556 ) (119,937 ) (151,523 ) Total operating
income $114,010 13.1 % $73,394 9.5 % $ 333,345
11.5 % $ 264,151 10.0 %
(a) Includes eCommerce results.
(b) Net sales include international retail, eCommerce, and
wholesale sales. Operating income includes international licensing
income.
(c) Includes the following net charges:
For the fiscal quarter
ended For the fiscal years ended
January 3, 2015
December 28, 2013
January 3, 2015
December 28, 2013
(dollars in millions) (14 weeks) (13 weeks) (53 weeks) (52 weeks)
Revaluation of contingent consideration $ 0.4 $ 0.5 $
1.3
$
2.8
Exit from Japan retail operations $ 0.1 $ 4.1 $ 0.5 $ 4.1
(d) Corporate expenses include expenses related to incentive
compensation, stock-based compensation, executive management,
severance and relocation, finance, building occupancy, information
technology, certain legal fees, consulting, and audit fees.
(e) Includes the following charges:
For the fiscal quarter
ended For the fiscal years ended
January 3, 2015
December 28, 2013
January 3, 2015
December 28, 2013
(dollars in millions) (14 weeks) (13 weeks) (53 weeks) (52 weeks)
Office consolidation costs $ —
$
9.2 $ 6.6 $ 33.3 Amortization of H.W. Carter and Sons tradenames $
2.3 $ 6.3 $ 16.4 $ 13.6 Closure of distribution facility in
Hogansville, GA (1) $ 0.1 $ 0.9 $ 0.9 $ 1.9
(1) Continuing operating costs associated with the closure of
the Company’s distribution facility in Hogansville, Georgia.
Certain prior year amounts have been reclassified for
comparative purposes.
CARTER’S, INC. CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share
data)
(unaudited)
January 3, 2015
December 28, 2013
ASSETS Current assets: Cash and cash equivalents $ 340,638 $
286,546 Accounts receivable, net 184,563 193,611 Finished goods
inventories, net 444,844 417,754 Prepaid expenses and other current
assets 34,788 35,157 Deferred income taxes 36,625 37,313
Total current assets 1,041,458 970,381 Property, plant, and
equipment, net 333,097 307,885 Tradenames and other intangible, net
317,297 330,258 Goodwill 181,975 186,077 Deferred debt issuance
costs, net 6,677 8,088 Other assets 12,592 9,795
Total assets $ 1,893,096 $ 1,812,484
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 150,243 $ 164,010 Other current liabilities
97,728 105,129 Total current liabilities 247,971
269,139 Long-term debt 586,000 586,000 Deferred income taxes
121,536 121,434 Other long-term liabilities 150,905 135,180
Total liabilities 1,106,412 1,111,753 Commitments and
contingencies Stockholders’ equity:
Preferred stock; par value $.01 per share;
100,000 shares authorized; none issued or outstanding at January 3,
2015, and December 28, 2013
—
Common stock, voting; par value $.01 per
share; 150,000,000 shares authorized; 52,712,193 and 54,541,879
shares issued and outstanding at January 3, 2015 and December 28,
2013, respectively
527 545 Additional paid-in capital — 4,332 Accumulated other
comprehensive loss (23,037 ) (10,082 ) Retained earnings 809,194
705,936 Total stockholders’ equity 786,684 700,731
Total liabilities and stockholders’ equity $ 1,893,096 $
1,812,484
CARTER’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
For the fiscal years ended January
3, 2015 December 28, 2013 (53 weeks) (52
weeks) Cash flows from operating activities: Net income $ 194,670 $
160,407
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 58,487 54,915 Amortization of H.W.
Carter and Sons tradenames 16,437 13,588 Accretion of contingent
consideration 1,348 2,825 Amortization of debt issuance costs 1,533
1,049 Stock-based compensation expense 17,598 16,040 Unrealized
foreign currency exchange loss 2,378 — Income tax benefit from
stock-based compensation (4,700 ) (11,040 ) Loss on disposal of
property, plant, and equipment 1,157 272 Deferred income taxes
3,911 596 Effect of changes in operating assets and liabilities:
Accounts receivable 8,405 (26,064 ) Inventories (32,151 ) (70,691 )
Prepaid expenses and other assets (2,719 ) (18,716 ) Accounts
payable and other liabilities 16,043 86,515 Net cash
provided by operating activities 282,397 209,696 Cash
flows from investing activities: Capital expenditures (103,453 )
(182,525 ) Acquisition of tradenames (3,550 ) (38,007 ) Proceeds
from sale of property, plant, and equipment 2,271 —
Net cash used in investing activities (104,732 ) (220,532 ) Cash
flows from financing activities: Proceeds from senior notes —
400,000 Payments of debt issuance costs (177 ) (6,989 ) Repurchase
of common stock (82,099 ) (454,133 ) Payment of contingent
consideration (8,901 ) (14,721 ) Dividends paid (40,477 ) (27,715 )
Income tax benefit from stock-based compensation 4,700 11,040
Withholdings from vesting of restricted stock (4,548 ) (5,052 )
Proceeds from exercise of stock options 9,064 12,912
Net cash used in financing activities (122,438 ) (84,658 ) Net
effect of exchange rate changes on cash (1,135 ) (196 ) Net
increase (decrease) in cash and cash equivalents 54,092 (95,690 )
Cash and cash equivalents, beginning of period 286,546
382,236 Cash and cash equivalents, end of period $ 340,638
$ 286,546
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
Fiscal quarter ended January 3, 2015
(14 weeks)
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 356.0 $ 251.9 $ 114.0 $ 68.6 $ 1.29
Amortization of H.W. Carter and Sons
tradenames
— (2.3 ) 2.3 1.5 0.03 Costs to exit retail operations in Japan —
(0.1 ) 0.1 — —
Closure of distribution facility in
Hogansville, GA
— (0.1 ) 0.1 — — Revaluation of contingent consideration (a) —
(0.4 ) 0.4 0.4 0.01
As adjusted (b) $
356.0 $ 249.0 $ 116.9 $ 70.6 $ 1.32
Fiscal year ended January 3, 2015
(53 weeks)
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 1,184.4 $ 890.3 $ 333.3 $ 194.7 $ 3.62
Amortization of H.W. Carter and Sons tradenames — (16.4 ) 16.4 10.4
0.19 Office consolidation costs (c) — (6.6 ) 6.6 4.2 0.08
Revaluation of contingent consideration (a) — (1.3 ) 1.3 1.3 0.03
Closure of distribution facility in Hogansville, GA — (0.9 ) 0.9
0.6 0.01 Costs to exit retail operations in Japan (1.0 ) (1.5 ) 0.5
0.3 0.01
As adjusted (b) $ 1,183.4 $
863.3 $ 359.3 $ 211.5 $ 3.93
Fiscal quarter ended December 28, 2013 (13
weeks)
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 322.4 $ 258.8 $ 73.4 $ 42.7 $ 0.78
Office consolidation costs (c) — (9.2 ) 9.2 5.8 0.11 Amortization
of H.W. Carter and Sons tradenames — (6.3 ) 6.3 4.0 0.07 Costs to
exit retail operations in Japan 1.1 (3.0 ) 4.1 2.6 0.05 Closure of
distribution facility in Hogansville, GA — (0.9 ) 0.9 0.6 0.01
Revaluation of contingent consideration (a) — (0.5 ) 0.5
0.5 0.01
As adjusted (b) $ 323.5 $
238.9 $ 94.4 $ 56.2 $ 1.02
Fiscal year ended December 28, 2013 (52 weeks)
Gross Margin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 1,095.4 $ 868.5 $ 264.2 $ 160.4 $ 2.75
Office consolidation costs (c) — (33.3 ) 33.3 21.0 0.36
Amortization of H.W. Carter and Sons tradenames — (13.6 ) 13.6 8.6
0.15 Revaluation of contingent consideration (a) — (2.8 ) 2.8 2.8
0.05 Costs to exit retail operations in Japan 1.1 (3.0 ) 4.1 2.6
0.04 Closure of distribution facility in Hogansville, GA —
(1.9 ) 1.9 1.2 0.02
As adjusted (b) $ 1,096.4
$ 813.9 $ 319.8 $ 196.5 $ 3.37
(a) Revaluation of the contingent consideration liability
associated with the Company’s 2011 acquisition of Bonnie Togs.
(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 gross margin,
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.
(c) Costs associated with office consolidation including
severance, relocation, accelerated depreciation and other
charges.
Note: Results may not be additive due to rounding. Certain prior
year amounts have been reclassified for comparative purposes.
CARTER’S, INC. RECONCILIATION OF GAAP TO
ADJUSTED RESULTS
(dollars in millions, except earnings per
share)
Fiscal quarter ended March 29, 2014
Gross Margin SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 261.7 $ 210.1 $ 61.5 $ 34.3 $ 0.63
Amortization of H.W. Carter and Sons tradenames — (6.3 ) 6.3 4.0
0.07 Office consolidation costs (a) — (2.0 ) 2.0 1.2 0.02
Revaluation of contingent consideration (b) — (0.5 ) 0.5 0.5 0.01
Costs to exit retail operations in Japan (1.0 ) (0.6 ) (0.4 ) (0.3
) (0.01 ) Closure of distribution facility in Hogansville, GA —
(0.3 ) 0.3 0.2 —
As adjusted (c)
$ 260.7 $ 200.5 $ 70.1 $ 39.9 $ 0.73
(a) Costs associated with office consolidation including
severance, accelerated depreciation, and other charges.
(b) Revaluation of the contingent consideration liability
associated with the Company’s 2011 acquisition of Bonnie Togs.
(c) 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 gross margin,
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. Certain prior
year amounts have been reclassified for comparative purposes.
CARTER’S, INC. RECONCILIATION OF NET INCOME
ALLOCABLE TO COMMON SHAREHOLDERS
For the fiscalquarters
ended
For the fiscal years ended
January 3, 2015
December 28, 2013
January 3, 2015
December 28, 2013
(14 weeks) (13 weeks) (53 weeks) (52 weeks) Weighted-average number
of common and common equivalent shares outstanding: Basic number of
common shares outstanding 52,130,289 53,777,662 52,614,425
56,931,216 Dilutive effect of equity awards 479,744 516,242
479,114 590,951 Diluted number of common and
common equivalent shares outstanding 52,610,033 54,293,904
53,093,539 57,522,167
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 68,590 $ 42,748 $ 194,670 $ 160,407
Income allocated to participating securities (870 ) (586 ) (2,586 )
(2,144 ) Net income available to common shareholders $ 67,720
$ 42,162 $ 192,084 $ 158,263 Basic net
income per common share $ 1.30 $ 0.78 $ 3.65 $ 2.78 Diluted net
income per common share: Net income $ 68,590 $ 42,748 $ 194,670 $
160,407 Income allocated to participating securities (863 ) (581 )
(2,568 ) (2,126 ) Net income available to common shareholders $
67,727 $ 42,167 $ 192,102 $ 158,281
Diluted net income per common share $ 1.29 $ 0.78 $ 3.62 $ 2.75
As adjusted
(a):
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 70,573 $ 56,160 $ 211,493 $ 196,532
Income allocated to participating securities (895 ) (772 ) (2,814 )
(2,634 ) Net income available to common shareholders $ 69,678
$ 55,388 $ 208,679 $ 193,898 Basic net
income per common share $ 1.34 $ 1.03 $ 3.97 $ 3.41 Diluted net
income per common share: Net income $ 70,573 $ 56,160 $ 211,493 $
196,532 Income allocated to participating securities (888 ) (766 )
(2,793 ) (2,610 ) Net income available to common shareholders $
69,685 $ 55,394 $ 208,700 $ 193,922
Diluted net income per common share $ 1.32 $ 1.02 $ 3.93 $ 3.37
(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
approximately $2.0 million and $16.8 million in after-tax expenses
from these results for quarter and fiscal year ended January 3,
2015, respectively. The Company has excluded approximately $13.4
million and $36.1 million in after-tax expenses from these results
for the quarter and fiscal year ended December 28, 2013,
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:
Fiscal quarter ended
Fiscal year ended
January 3, 2015
December 28, 2013
January 3, 2015
December 28, 2013
(dollars in millions) (14 weeks) (13 weeks) (53
weeks) (52 weeks) Net income $ 68.6 $ 42.7 $ 194.7 $
160.4 Interest expense 7.0 6.8 27.7 13.4 Interest income (0.1 )
(0.1 ) (0.4 ) (0.7 ) Tax expense 37.0 23.2 108.2 89.1 Depreciation
and amortization 17.9 25.2 74.9
68.5 EBITDA $ 130.5 $
97.7 $ 405.1 $ 330.7
Adjustments to EBITDA Office consolidation costs (a) $ — $
8.4 $ 6.6 $ 29.3 Revaluation of contingent consideration (b) 0.4
0.5 1.3 2.8 Facility-related closures (c) 0.1 0.6 0.9 1.2 Japan
retail operations exit (d) 0.1 4.0 (0.4
) 4.1
Adjusted EBITDA $ 131.1
$ 111.2 $ 413.7 $ 368.0
(a) Costs associated with office consolidation including
severance, relocation, and other charges. These amounts exclude
costs related to accelerated depreciation as such amounts are
included in the total of depreciation and amortization above.
(b) Revaluation of the contingent consideration liability
associated with the Company’s 2011 acquisition of Bonnie Togs.
(c) Costs associated with the closure of the Company’s
distribution facility in Hogansville, Georgia. These amounts
exclude costs related to accelerated depreciation as such amounts
are included in the total of depreciation and amortization
above.
(d) Costs incurred to exit the Company’s retail business in
Japan. Fiscal year ended January 3, 2015 also reflects a favorable
recovery of inventory. These amounts exclude costs related to
accelerated depreciation as such amounts are included in the total
of depreciation and amortization above.
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 items
described in the footnotes (a) - (d) 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.
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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