Carter’s, Inc. (NYSE:CRI):
• Fourth quarter fiscal 2015
• Net sales $867 million
• Diluted EPS $1.39; adjusted diluted EPS
$1.40, growth of 6%
• Record fiscal 2015 performance
• Net sales $3.0 billion, growth of 4%
• Diluted EPS $4.50; adjusted diluted EPS
$4.61, growth of 17%
• Board of Directors authorizes new $500
million share repurchase program and 50% increase to quarterly
dividend
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 fourth quarter and fiscal 2015
results.
“We exceeded our sales and earnings objectives in the fourth
quarter,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Our focus on providing the best value and experience in
young children’s apparel enabled us to achieve our 27th consecutive
year of sales growth, gain market share, and deliver a record level
of sales and profitability in 2015. We are planning good growth in
sales and earnings in 2016 and plan to grow our business to over $4
billion in sales by 2020 by extending the reach of our iconic
brands through our global and multi-channel distribution
capabilities.”
“Over the past three years, we have returned over $760 million
to our shareholders through dividends and share repurchases. The
expanded capital return initiatives announced today reflect the
strength of our business model and our continued commitment to
return capital to our shareholders,” Casey said.
Note on Net Sales and Comparable Sales (52 vs. 53 Week
Calendars)
The Company’s fiscal 2015 results included 52 weeks compared to
53 weeks in fiscal 2014 (a 13 week fourth quarter in 2015 versus a
14 week fourth quarter in 2014). This change in the number of weeks
from fiscal 2014 to fiscal 2015 affects the comparability of
results for the fourth quarter and fiscal year 2015 compared to the
same periods in fiscal 2014. The additional week in fiscal 2014
contributed approximately $44.1 million in consolidated net sales,
which the Company estimates contributed approximately $0.05 in
adjusted diluted earnings per share. Fiscal 2015 net sales growth
by business segment, after subtracting the 53rd week of net sales
from the fiscal 2014 periods to align the two periods, was as
follows:
(dollars in millions)
Year-Over-Year Change in Net Sales Fiscal 2014
Fourth Quarter Fiscal 2015 Fiscal 2015
53rd Week Reported Aligned Basis
Reported Aligned Basis Segment
Net Sales (14 Weeks LY) (13 Weeks LY) (53
Weeks LY) (52 Weeks LY) Carter’
s
Retail $ 13.7 2.9 % 7.2 % 5.9 % 7.2 %
Carter’
s
Wholesale 19.4 (5.8
)
%
0.7 % 2.4 % 4.3 %
OshKosh Retail 4.8 5.0 % 9.7 % 8.3
% 9.9 %
OshKosh Wholesale 1.9 (21.1
)
%
(13.0
)
%
(10.4
)
%
(7.9
)
%
International 4.3 3.7 % 8.7 % 3.1
% 4.5 %
Consolidated $ 44.1
(0.3
)
%
5.0 % 4.1 %
5.8 %
In the consolidated and segment discussions that follow, the net
sales amounts and related comparisons are based on the Company’s
reported fiscal 2015 and 2014 calendars. However,
direct-to-consumer (“DTC”), retail store, and eCommerce comparable
sales metrics are based on 2014 periods that have been aligned to
the corresponding 13 and 52 week periods in fiscal 2015.
Foreign Currency
The appreciation of the U.S. dollar relative to the Canadian
dollar negatively affected the Company’s reported net sales and
earnings in fiscal 2015. The effects of changes in foreign currency
exchange rates (FX) on net sales in fiscal 2015 compared to fiscal
2014 are as follows:
(dollars in millions)
Year-Over-Year Change
in Net Sales Fourth Quarter Fiscal 2015
Fiscal 2015 2015 FX
Constant 2015 FX
Constant Reported Impact on Currency
Reported Impact on Currency Net Sales
Growth Net Sales Growth Growth Net
Sales Growth International Segment 3.7 % $
(11.3 ) 15.7 % 3.1 % $ (35.1 ) 14.2 %
Consolidated (0.3
)
%
$ (11.3 ) 1.0 % 4.1 % $ (35.1 ) 5.4 %
Consolidated Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
Consolidated net sales decreased $2.7 million, or 0.3%, to
$866.5 million. This decrease reflects declines in the Company's
domestic wholesale segments, partially offset by growth in its
domestic retail segments and international segment. The 14th week
of the fourth quarter of fiscal 2014 contributed sales of
approximately $44.1 million.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2015 compared to the fourth quarter of fiscal 2014
negatively affected consolidated net sales in the fourth quarter of
fiscal 2015 by $11.3 million. On a constant currency basis,
consolidated net sales increased 1.0% in the fourth quarter of
fiscal 2015.
Operating income in the fourth quarter of fiscal 2015 increased
$2.2 million, or 1.9%, to $116.2 million, compared to $114.0
million in the fourth quarter of fiscal 2014. Operating margin in
the fourth quarter of fiscal 2015 increased 30 basis points to
13.4%, compared to 13.1% in the fourth quarter of fiscal 2014.
Adjusted operating income (a non-GAAP measure) in the fourth
quarter of fiscal 2015 was $117.1 million, compared to $116.9
million in the fourth quarter of fiscal 2014. Adjusted operating
margin (a non-GAAP measure) in the fourth quarter of fiscal 2015
was 13.5%, compared to 13.4% in the fourth quarter of fiscal 2014,
reflecting improved gross margin and expense deleverage.
Net income in the fourth quarter of fiscal 2015 increased $4.0
million, or 5.8%, to $72.6 million, or $1.39 per diluted share,
compared to $68.6 million, or $1.29 per diluted share, in the
fourth quarter of fiscal 2014. Adjusted net income (a non-GAAP
measure) in the fourth quarter of fiscal 2015 increased $2.6
million, or 3.7%, to $73.2 million, compared to $70.6 million in
the fourth quarter of fiscal 2014. Adjusted earnings per diluted
share (a non-GAAP measure) in the fourth quarter of fiscal 2015
increased 5.5% to $1.40, compared to $1.32 in the fourth quarter of
fiscal 2014. The Company estimates that the consolidated net sales
during the 14th week of the fourth quarter of fiscal 2014
contributed approximately $0.05 in adjusted diluted earnings per
share.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
Consolidated net sales increased $120.0 million, or 4.1%, to
$3.0 billion. The net sales increase reflects growth in all
segments except OshKosh wholesale. The 53rd week of fiscal 2014
contributed sales of approximately $44.1 million.
Changes in foreign currency exchange rates in fiscal 2015
compared to fiscal 2014 negatively affected consolidated net sales
in fiscal 2015 by $35.1 million. On a constant currency basis,
consolidated net sales increased 5.4% in fiscal 2015.
Operating income in fiscal 2015 increased $59.5 million, or
17.9%, to $392.9 million, compared to $333.3 million in fiscal
2014. Operating margin in fiscal 2015 increased 150 basis points to
13.0%, compared to 11.5% in fiscal 2014. Adjusted operating income
in fiscal 2015 increased $41.7 million, or 11.6%, to $401.0
million, compared to $359.3 million in fiscal 2014. Adjusted
operating margin in fiscal 2015 increased 90 basis points to 13.3%,
compared to 12.4% in fiscal 2014, reflecting improved gross margin
and expense leverage.
Net income in fiscal 2015 increased $43.2 million, or 22.2%, to
$237.8 million, or $4.50 per diluted share, compared to $194.7
million, or $3.62 per diluted share, in fiscal 2014. Adjusted net
income in fiscal 2015 increased $32.1 million, or 15.2%, to $243.6
million, compared to $211.5 million in fiscal 2014. Adjusted
earnings per diluted share in fiscal 2015 increased 17.4% to $4.61,
compared to $3.93 in fiscal 2014. The Company estimates that the
consolidated net sales during the 53rd week of fiscal 2014
contributed approximately $0.05 in adjusted diluted earnings per
share.
Cash flow from operations in fiscal 2015 was $308.0 million
compared to $282.4 million in fiscal 2014. The increase was driven
by higher net income offset in part by unfavorable 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.
Carter’s Retail Segment Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
Carter’s retail segment sales increased $9.9 million, or 2.9%,
to $351.6 million. Carter’s DTC comparable sales increased 5.7%,
comprised of eCommerce comparable sales growth of 34.4% and a
comparable retail store sales decline of 1.7%. The 14th week of the
fourth quarter of fiscal 2014 contributed sales of approximately
$13.7 million.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
Carter’s retail segment sales increased $64.1 million, or 5.9%,
to $1.2 billion. Carter’s DTC comparable sales increased 1.2%,
comprised of eCommerce comparable sales growth of 18.9% and a
comparable retail store sales decline of 3.1%. The 53rd week of
fiscal 2014 contributed sales of $13.7 million.
During the fourth quarter of fiscal 2015 and fiscal 2015, the
Company believes, based on analysis of credit card transactions and
other data, that Carter’s DTC comparable sales were negatively
impacted by lower demand from international tourists shopping in
its U.S. stores and websites, which was likely influenced by the
strength of the U.S. dollar relative to other global
currencies.
As of the end of the fourth quarter of fiscal 2015, the Company
operated 594 Carter’s retail stores in the United States.
Carter’s Wholesale Segment Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
Carter’s wholesale segment sales decreased $17.3 million, or
5.8%, to $283.1 million. The 14th week of the fourth quarter of
fiscal 2014 contributed sales of approximately $19.4 million.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
Carter’s wholesale segment sales increased $25.8 million, or
2.4%, to $1.1 billion, reflecting increased seasonal product
demand, a new playwear initiative, and favorable replenishment
trends. The 53rd week of fiscal 2014 contributed sales of
approximately $19.4 million.
OshKosh Retail Segment Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
OshKosh retail segment sales increased $5.7 million, or 5.0%, to
$118.3 million. OshKosh DTC comparable sales increased 4.0%,
comprised of eCommerce comparable sales growth of 27.6% and a
comparable retail stores decrease of 2.5%. The 14th week of the
fourth quarter of fiscal 2014 contributed sales of approximately
$4.8 million.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
OshKosh retail segment sales increased $27.9 million, or 8.3%,
to $363.1 million. OshKosh DTC comparable sales increased 2.4%,
comprised of eCommerce comparable sales growth of 24.0% and a
comparable retail store sales decline of 2.5%. The 53rd week of
fiscal 2014 contributed sales of $4.8 million.
During the fourth quarter of fiscal 2015 and fiscal 2015, the
Company believes that OshKosh’s DTC comparable sales were
negatively impacted by lower demand from international tourists
shopping in its U.S. stores and websites, which was likely
influenced by the strength of the U.S. dollar relative to other
global currencies.
As of the end of the fourth quarter of fiscal 2015, the Company
operated 241 OshKosh retail stores in the United States.
OshKosh Wholesale Segment Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
OshKosh wholesale segment sales decreased $4.4 million, or
21.1%, to $16.5 million, reflecting lower seasonal bookings and a
decline in sales to the off-price channel. The 14th week of the
fourth quarter of fiscal 2014 contributed sales of approximately
$1.9 million.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
OshKosh wholesale segment sales decreased $7.6 million, or
10.4%, to $65.6 million, reflecting lower seasonal bookings and a
decline in sales to the off-price channel. The 53rd week of fiscal
2014 contributed sales of approximately $1.9 million.
International Segment Results
Fourth Quarter of Fiscal 2015 (13 weeks) compared to Fourth
Quarter of Fiscal 2014 (14 weeks)
International segment sales increased $3.4 million, or 3.7%, to
$97.0 million, principally driven by increased wholesale demand,
growth in the Company’s eCommerce business in Canada, and new
eCommerce sales in China, partially offset by unfavorable foreign
currency exchange rates and the impact of the Target Canada
bankruptcy in early 2015. The 14th week of the fourth quarter of
fiscal 2014 contributed sales of approximately $4.3 million.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2015 as compared to the fourth quarter of fiscal 2014
negatively affected international segment net sales in the fourth
quarter of fiscal 2015 by $11.3 million. On a constant currency
basis, international segment net sales increased 15.7%.
Canadian comparable retail store sales increased 11.9% in the
fourth quarter of fiscal 2015, reflecting increased traffic and
pricing improvements.
Fiscal 2015 (52 weeks) compared to Fiscal 2014 (53 weeks)
International segment sales increased $9.7 million, or 3.1%, to
$326.2 million. This increase reflects growth in the Company’s DTC
business in Canada, increased wholesale demand in other
international markets, and new eCommerce sales in China. This
growth was partially offset by unfavorable foreign currency
exchange rates, the impact of the Target Canada bankruptcy, and the
Company’s exit from retail operations in Japan in fiscal 2014. The
53rd week of fiscal 2014 contributed sales of approximately $4.3
million.
Changes in foreign currency exchange rates in fiscal 2015 as
compared to fiscal 2014 negatively affected international net sales
in fiscal 2015 by $35.1 million. On a constant currency basis,
international segment net sales increased 14.2%.
The Company’s former retail operations in Japan contributed $4.4
million in net sales in fiscal 2014.
Canadian comparable retail store sales increased 6.4% in fiscal
2015, reflecting higher customer conversion and pricing
improvements.
As of the end of the fourth quarter of fiscal 2015, the Company
operated 147 retail stores in Canada.
2016 Business Outlook
For fiscal 2016, the Company projects net sales to increase
approximately 6% to 7% over fiscal 2015 and adjusted diluted
earnings per share to increase approximately 8% to 10% 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.
For the first quarter of fiscal 2016, the Company projects net
sales to increase approximately 4% over the first quarter of fiscal
2015 and adjusted diluted earnings per share to be comparable to
adjusted diluted earnings per share of $0.97 in the first quarter
of fiscal 2015. This forecast for first quarter fiscal 2016
adjusted earnings per share excludes anticipated expenses of
approximately $1.0 million related to the amortization of acquired
tradenames and other items the Company believes to be
non-representative of underlying business performance.
Expanded Return of Capital Initiatives
As part of the Company’s ongoing commitment to return capital to
shareholders, the Company’s Board of Directors on February 24, 2016
authorized a new $500 million share repurchase program and
approved a 50% increase ($0.11 per share) to its quarterly cash
dividend, to $0.33 per share, for payment on March 25, 2016, to
shareholders of record at the close of business on March 11,
2016.
The Company is evaluating its capital structure, including the
opportunity to increase its leverage in order to improve capital
efficiency and provide capacity for the return of capital to
shareholders over time.
Over the past three years the Company has returned $761 million
to shareholders through cash dividends and share repurchases and
$902 million since becoming a public company in 2003.
The share repurchase authorization announced today permits the
Company to repurchase shares of its common stock up to $500
million, in addition to approximately $58
million remaining under previous authorizations. Such
purchases may be made in the open market or in privately negotiated
transactions, with the level and timing of activity being at the
discretion of the Company's management depending on market
conditions, stock price, other investment priorities, and other
factors. These share repurchase authorizations have no expiration
date.
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.
Dividends
During the fourth quarter of fiscal 2015, the Company paid a
cash dividend of $0.22 per share totaling $11.4 million. The
Company paid cash dividends totaling $46.0 million in fiscal
2015.
Stock Repurchase Activity
During the fourth quarter of fiscal 2015, the Company
repurchased and retired 359,263 shares of its common stock for
$32.0 million at an average price of $88.94 per share. During
fiscal 2015, the Company repurchased and retired 1.2 million shares
for $110.3 million at an average price of $95.55 per share.
Year-to-date through February 24, 2016, the Company has repurchased
and retired a total of 183,564 shares for $16.7 million at an
average price of $91.03 per share. All shares were repurchased in
open market transactions pursuant to applicable regulations for
open market share repurchases.
Conference Call
The Company will hold a conference call with investors to
discuss fourth quarter and fiscal 2015 results and its business
outlook on February 25, 2016 at 8:30 a.m. Eastern Standard Time. To
participate in the call, please dial 913-981-5518. To listen to a
live broadcast of the call on the internet, please visit
www.carters.com and select the “Fourth Quarter 2015 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 4, 2016, at
888-203-1112 (U.S. / Canada) or 719-457-0820 (international),
passcode 220283. 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 nearly 1,000
Company-operated stores in the United States and Canada and online
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 2016 and fiscal year 2016, 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 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; 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; failing 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; and 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.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except for share
data)
(unaudited)
For the fiscal quarters
ended For the fiscal years ended
January 2, January 3, January
2, January 3, 2016
2015 2016
2015
(13 weeks) (14 weeks) (52 weeks) (53 weeks) Net sales $ 866,544 $
869,224 $ 3,013,879 $ 2,893,868 Cost of goods sold 503,006
513,192 1,755,855 1,709,428 Gross profit
363,538 356,032 1,258,024 1,184,440 Selling, general, and
administrative expenses 258,737 251,902 909,233 890,251 Royalty
income (11,378 ) (9,880 ) (44,066 ) (39,156 ) Operating income
116,179 114,010 392,857 333,345 Interest expense 6,497 7,030 27,031
27,653 Interest income (115 ) (86 ) (500 ) (403 ) Other (income)
expenses, net (1,302 ) 1,472 (1,862 ) 3,189 Income
before income taxes 111,099 105,594 368,188 302,906 Provision for
income taxes 38,500 37,004 130,366 108,236
Net income $ 72,599 $ 68,590 $ 237,822
$ 194,670 Basic net income per common share $ 1.40 $
1.30 $ 4.55 $ 3.65 Diluted net income per common share $ 1.39 $
1.29 $ 4.50 $ 3.62 Dividend declared and paid per common share $
0.22 $ 0.19 $ 0.88 $ 0.76
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
For the fiscal quarters
ended For the
fiscal years ended January 2,
January 3,
January 2,
January 3,
2016
% of
2015
% of
2016
% of
2015
% of
(13 weeks)
total sales
(14 weeks)
total sales
(13 weeks)
total sales
(14 weeks)
total sales
Net
sales:
Carter’s Retail (a) $ 351,633 40.6 % $ 341,692 39.3 % $ 1,151,268
38.2 % $ 1,087,165 37.6 % Carter’s Wholesale 283,106 32.7 %
300,428 34.6 % 1,107,706 36.8 % 1,081,888 37.4
% Total Carter’s 634,739 73.3 % 642,120 73.9 %
2,258,974 75.0 % 2,169,053 75.0 % OshKosh Retail (a)
118,300 13.7 % 112,640 13.0 % 363,087 12.0 % 335,140 11.6 % OshKosh
Wholesale 16,456 1.9 % 20,859 2.4 % 65,607 2.2
% 73,201 2.5 % Total OshKosh 134,756 15.6 %
133,499 15.4 % 428,694 14.2 % 408,341 14.1 %
International (b) 97,049 11.1 % 93,604 10.7 % 326,211
10.8 % 316,474 10.9 % Total net sales $ 866,544 100.0
% $ 869,223 100.0 % $ 3,013,879 100.0 % $ 2,893,868
100.0 %
Operating Operating Operating
Operating
Operating income
(loss):
margin
margin margin margin Carter’s Retail (a) $
64,483 18.3 % $ 73,638 21.6 % $ 199,040 17.3 % $ 211,297 19.4 %
Carter’s Wholesale 60,012 21.2 % 51,974 17.3 %
232,497 21.0 % 185,463 17.1 % Total Carter’s
124,495 19.6 % 125,612 19.6 % 431,537 19.1 % 396,760
18.3 % OshKosh Retail (a) 8,535 7.2 % 9,093 8.1 % 11,931 3.3
% 8,210 2.4 % OshKosh Wholesale 3,555 21.6 % 3,717
17.8 % 13,270 20.2 % 8,842 12.1 % Total OshKosh
12,090 9.0 % 12,810 9.6 % 25,201 5.9 % 17,052
4.2 % International (b) (c) 16,037 16.5 % 12,431 13.3 %
47,004 14.4 % 39,470 12.5 % Corporate expenses (d)
(e)
(36,443
)
(36,843
)
(110,885 ) (119,937 ) Total operating income $ 116,179 13.4 % $
114,010 13.1 % $ 392,857 13.0 % $ 333,345 11.5 %
(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 quarters ended
For the fiscal years ended
January 2,
January 3, January 2,
January 3, 2016 2015 2016
2015 (dollars in millions)
(13 weeks)
(14 weeks) (52 weeks) (53 weeks) Revaluation of contingent
consideration $ — $ 0.4 $ 1.9 $ 1.3 Exit from Japan retail
operations $ — $ 0.1 $ — $ 0.5 (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 2,
January 3, January 2, January
3, 2016 2015 2016 2015 (dollars in
millions) (13 weeks) (14 weeks) (52 weeks) (53 weeks) Office
consolidation costs $ — $ — $ — $ 6.6 Amortization of H.W. Carter
and Sons tradenames $ 1.0 $ 2.3 $ 6.2 $ 16.4 Closure of
distribution facility in Hogansville, GA (1) $ — $ 0.1 $ — $ 0.9
(1) Continuing operating costs
associated with the closure of the Company’s distribution facility
in Hogansville, Georgia.
CARTER’S, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share
data)
(unaudited)
January 2,
January 3, 2016 2015 ASSETS
Current assets: Cash and cash equivalents $ 381,209 $ 340,638
Accounts receivable, net 207,570 184,563 Finished goods
inventories, net 469,934 444,844 Prepaid expenses and other current
assets 38,672 34,788 Deferred income taxes 34,080 36,625
Total current assets 1,131,465 1,041,458 Property, plant,
and equipment, net 371,704 333,097 Tradenames and other intangible
assets, net 310,848 317,297 Goodwill 174,874 181,975 Deferred debt
issuance costs, net 6,813 6,677 Other assets 13,409 12,592
Total assets $ 2,009,113 $ 1,893,096
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 157,648 $ 150,243 Other current liabilities
105,070 97,728 Total current liabilities 262,718
247,971 Long-term debt 584,431 586,000 Deferred income taxes
128,838 121,536 Other long-term liabilities 158,075 150,905
Total liabilities 1,134,062 1,106,412 Commitments and
contingencies Stockholders’ equity: Preferred stock; par
value $.01 per share; 100,000 shares authorized; none issued or
outstanding at January 2, 2016 and January 3, 2015 — — Common
stock, voting; par value $.01 per share; 150,000,000 shares
authorized; 51,764,309 and 52,712,193 shares issued and outstanding
at January 2, 2016 and January 3, 2015, respectively 518 527
Additional paid-in capital — — Accumulated other comprehensive loss
(36,367 ) (23,037 ) Retained earnings 910,900 809,194 Total
stockholders’ equity 875,051 786,684 Total
liabilities and stockholders’ equity $ 2,009,113 $ 1,893,096
CARTER’S, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOW
(dollars in thousands)
(unaudited)
For the fiscal years
ended January 2, 2016
January 3, 2015
(52 weeks)
(53 weeks) Cash flows from operating activities: Net income $
237,822 $ 194,670 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
61,982 58,487 Amortization of tradenames 6,417 16,437 Accretion of
contingent consideration 809 1,348 Amortization of debt issuance
costs 1,603 1,533 Stock-based compensation expense 17,029 17,598
Unrealized foreign currency exchange loss, net 4 2,378 Income tax
benefit from stock-based compensation (8,839 ) (4,700 ) Loss on
disposal of property, plant, and equipment 870 1,157 Deferred
income taxes 8,657 3,911 Effect of changes in operating assets and
liabilities: Accounts receivable (23,837 ) 8,405 Inventories
(34,352 ) (32,151 ) Prepaid expenses and other assets (3,496 )
(2,719 ) Accounts payable and other liabilities 43,318
16,043 Net cash provided by operating activities 307,987
282,397 Cash flows from investing activities: Capital
expenditures (103,497 ) (103,453 ) Acquisition of tradenames —
(3,550 ) Proceeds from sale of property, plant, and equipment 72
2,271 Net cash used in investing activities (103,425
) (104,732 ) Cash flows from financing activities: Payments of debt
issuance costs (1,628 ) (177 ) Borrowings under secured revolving
credit facility 205,586 — Payments on secured revolving credit
facility (205,237 ) — Repurchase of common stock (110,290 ) (82,099
) Payment of contingent consideration (7,572 ) (8,901 ) Dividends
paid (46,028 ) (40,477 ) Income tax benefit from stock-based
compensation 8,839 4,700 Withholdings of taxes from vesting of
restricted stock (12,651 ) (4,548 ) Proceeds from exercise of stock
options 6,976 9,064 Net cash used in financing
activities (162,005 ) (122,438 ) Net effect of exchange rate
changes on cash (1,986 ) (1,135 ) Net increase in cash and cash
equivalents 40,571 54,092 Cash and cash equivalents, beginning of
fiscal year 340,638 286,546 Cash and cash
equivalents, end of fiscal year $ 381,209 $ 340,638
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
Fiscal quarter ended January
2, 2016 (13 weeks) Gross
Operating
Margin SG&A Income
Net Income Diluted EPS As reported (GAAP) $
363.5 $ 258.7 $ 116.2 $ 72.6 $ 1.39 Amortization of tradenames —
(1.0
)
1.0 0.6 0.01
As adjusted (a) $ 363.5 $
257.8 $ 117.1 $ 73.2 $ 1.40
Fiscal
year ended January 2, 2016 (52 weeks) 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 (b) —
(1.9
)
1.9 1.9 0.04
As adjusted (a) $ 1,258.0
$ 901.1 $ 401.0 $ 243.6 $ 4.61
Fiscal quarter ended January 3, 2015 (14 weeks) Gross
Operating Margin SG&A Income Net
Income Diluted EPS As reported (GAAP) $ 356.0 $
251.9 $ 114.0 $ 68.6 $ 1.29 Amortization of 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 (b) —
(0.4
)
0.4 0.4 0.01
As adjusted (a) $ 356.0 $
249.0 $ 116.9 $ 70.6 $ 1.32
Fiscal
year ended January 3, 2015 (53 weeks)
Gross
Operating
Margin
SG&A Income Net Income Diluted EPS
As reported (GAAP) $ 1,184.4 $ 890.3
$
333.3 $ 194.7 $ 3.62 Amortization of 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 (b) —
(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 (a) $ 1,183.4
$ 863.3 $ 359.3 $ 211.5 $ 3.93 (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 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. (b)
Revaluation of the contingent consideration liability associated
with the Company’s 2011 acquisition of Bonnie Togs. (c) Costs
associated with office consolidation including severance,
relocation, accelerated depreciation and other charges. 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)
Fiscal quarter ended April 4,
2015 Gross
Operating
Margin SG&A Income Net
Income Diluted EPS As reported (GAAP) $ 284.1 $
211.2 $ 84.5 $ 49.8 $ 0.94 Amortization of tradenames — (2.3 ) 2.3
1.5 0.03 Revaluation of contingent consideration (a) —
(0.5 ) 0.5 0.5 0.01
As adjusted (b) $
284.1 $ 208.4 $ 87.3 $ 51.7 $
0.97 (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. Note:
Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
For the fiscal quarters
ended For the fiscal years ended
January 2, January 3, January
2, January 3, 2016
2015 2016 2015
(13 weeks)
(14 weeks) (52 weeks) (53 weeks) Weighted-average number of common
and common equivalent shares outstanding: Basic number of common
shares outstanding 51,460,090 52,130,289 51,835,053 52,614,425
Dilutive effect of equity awards 460,432 479,744
499,583 479,114 Diluted number of common and common
equivalent shares outstanding 51,920,522 52,610,033
52,334,636 53,093,539
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 72,600 $ 68,590 $ 237,822 $ 194,670
Income allocated to participating securities (613 ) (870 ) (2,184 )
(2,586 ) Net income available to common shareholders $ 71,987
$ 67,720 $ 235,638 $ 192,084 Basic net
income per common share $ 1.40 $ 1.30 $ 4.55 $ 3.65 Diluted net
income per common share: Net income $ 72,600 $ 68,590 $ 237,822 $
194,670 Income allocated to participating securities (609 ) (863 )
(2,167 ) (2,568 ) Net income available to common shareholders $
71,991 $ 67,727 $ 235,655 $ 192,102
Diluted net income per common share $ 1.39 $ 1.29 $ 4.50 $ 3.62
As adjusted
(a):
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 73,198 $ 70,573 $ 243,641 $ 211,493
Income allocated to participating securities (618 ) (895 ) (2,238 )
(2,814 ) Net income available to common shareholders $ 72,580
$ 69,678 $ 241,403 $ 208,679 Basic net
income per common share $ 1.41 $ 1.34 $ 4.66 $ 3.97 Diluted net
income per common share: Net income $ 73,198 $ 70,573 $ 243,641 $
211,493 Income allocated to participating securities (613 ) (888 )
(2,221 ) (2,793 ) Net income available to common shareholders $
72,585 $ 69,685 $ 241,420 $ 208,700
Diluted net income per common share $ 1.40 $ 1.32 $ 4.61 $ 3.93
(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 $0.6 million and $5.8 million in
after-tax expenses from these results for the quarter and fiscal
year ended January 2, 2016, respectively. The Company has excluded
approximately $2.0 million and $16.8 million in after-tax expenses
from these results for the quarter and fiscal year ended January 3,
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:
Fiscal quarter ended
Fiscal year ended January
2, January 3, January 2,
January 3, 2016 2015
2016 2015 (dollars in millions) (13 weeks)
(14 weeks) (52 weeks) (53 weeks)
Net income $ 72.6 $ 68.6 $ 237.8 $ 194.7 Interest expense 6.5 7.0
27.0 27.7 Interest income (0.1 ) (0.1 ) (0.5 ) (0.4 ) Tax expense
38.5 37.0 130.4 108.2 Depreciation and amortization 18.8
17.9 68.4
74.9 EBITDA $ 136.3 $ 130.5
$ 463.1 $ 405.1
Adjustments to EBITDA Office consolidation costs (a) $ — $ —
$ — $ 6.6 Revaluation of contingent consideration (b) — 0.4 1.9 1.3
Facility-related closures (c) — 0.1 — 0.9 Japan retail operations
exit (d) — 0.1 —
(0.4 )
Adjusted EBITDA $ 136.3
$ 131.1 $ 465.0 $
413.7 (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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160225005709/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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