- Fourth quarter fiscal 2016
results
- Net sales $934 million, growth of
8%
- Diluted EPS $1.76, growth of 27%;
adjusted diluted EPS $1.79, growth of 28%
- Full year fiscal 2016
performance
- Net sales $3.2 billion, growth of
6%
- Diluted EPS $5.08, growth of 13%;
adjusted diluted EPS $5.14, growth of 11%
- Returned $367 million to
shareholders through share repurchases and dividends in
2016
- Board of Directors authorizes 12%
increase to quarterly dividend to $0.37 per share
- Full year fiscal 2017 outlook: net
sales growth of 4% to 6%; adjusted EPS growth of 8% to 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 fourth quarter and fiscal 2016
results.
“The fourth quarter represented a strong finish to another
record year of sales and profitability for Carter’s,” said Michael
D. Casey, Chairman and Chief Executive Officer. “Our focus on
providing the best value and experience in young children's
apparel, extending the reach of our brands, and improving
profitability enabled us to achieve our 28th consecutive year of
sales growth, improve our profit margins, and increase the return
of capital to shareholders. We are forecasting good growth in sales
and earnings in 2017 as we strive to be the world's favorite brands
in young children’s apparel.”
(Carter’s, Inc. today also issued a separate news release
announcing the acquisition of Skip Hop Holdings, Inc., a leading
global lifestyle brand for families with young children.)
Consolidated Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
Consolidated net sales increased $67.7 million, or 7.8%, to
$934.2 million. This increase reflects sales growth in nearly every
business segment.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2016 compared to the fourth quarter of fiscal 2015
negatively affected consolidated net sales in the fourth quarter of
fiscal 2016 by $0.4 million. On a constant currency basis (a
non-GAAP measure), consolidated net sales increased 7.9% in the
fourth quarter of fiscal 2016.
Operating income in the fourth quarter of fiscal 2016 increased
$23.2 million, or 20.0%, to $139.4 million, compared to $116.2
million in the fourth quarter of fiscal 2015. Operating margin in
the fourth quarter of fiscal 2016 increased 150 basis points to
14.9%, compared to 13.4% in the fourth quarter of fiscal 2015.
Adjusted operating income (a non-GAAP measure) in the fourth
quarter of fiscal 2016 was $142.0 million, compared to $117.1
million in the fourth quarter of fiscal 2015. Adjusted operating
margin (a non-GAAP measure) in the fourth quarter of fiscal 2016
was 15.2%, compared to 13.5% in the fourth quarter of fiscal 2015,
principally driven by improved gross margin.
Net income in the fourth quarter of fiscal 2016 increased $14.5
million, or 20.0%, to $87.1 million, or $1.76 per diluted share,
compared to $72.6 million, or $1.39 per diluted share, in the
fourth quarter of fiscal 2015. Adjusted net income (a non-GAAP
measure) in the fourth quarter of fiscal 2016 increased $15.5
million, or 21.2%, to $88.7 million, compared to $73.2 million in
the fourth quarter of fiscal 2015. Adjusted earnings per diluted
share (a non-GAAP measure) in the fourth quarter of fiscal 2016
increased 27.9% to $1.79, compared to $1.40 in the fourth quarter
of fiscal 2015.
Fiscal 2016 compared to Fiscal 2015
Consolidated net sales increased $185.3 million, or 6.1%, to
$3.2 billion. The net sales increase reflects growth in nearly
every business segment.
Changes in foreign currency exchange rates in fiscal 2016
compared to fiscal 2015 negatively affected consolidated net sales
in fiscal 2016 by $7.1 million. On a constant currency basis,
consolidated net sales increased 6.4% in fiscal 2016.
Operating income in fiscal 2016 increased $33.7 million, or
8.6%, to $426.6 million, compared to $392.9 million in fiscal 2015.
Operating margin in fiscal 2016 increased 30 basis points to 13.3%,
compared to 13.0% in fiscal 2015. Adjusted operating income in
fiscal 2016 increased $30.4 million, or 7.6%, to $431.4 million,
compared to $401.0 million in fiscal 2015. Adjusted operating
margin in fiscal 2016 increased 20 basis points to 13.5%, compared
to 13.3% in fiscal 2015, reflecting improved gross margin and
expense deleverage.
Net income in fiscal 2016 increased $20.3 million, or 8.5%, to
$258.1 million, or $5.08 per diluted share, compared to $237.8
million, or $4.50 per diluted share, in fiscal 2015. Adjusted net
income in fiscal 2016 increased $17.5 million, or 7.2%, to $261.1
million, compared to $243.6 million in fiscal 2015. Adjusted
earnings per diluted share in fiscal 2016 increased 11.5% to $5.14,
compared to $4.61 in fiscal 2015.
Cash flow from operations in fiscal 2016 was $369.2 million
compared to $308.0 million in fiscal 2015. The increase reflects
higher 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
In the fourth quarter of 2016, the Company saw a moderation in
the effects of the stronger U.S. dollar which we believe still
affected the demand from international consumers for our brands and
weighed on 2016 comparable retail store sales.
Carter’s Retail Segment Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
Carter’s retail segment sales increased $41.7 million, or 11.8%,
to $393.3 million. Carter’s retail comparable sales increased 5.4%,
comprised of eCommerce comparable sales growth of 21.7% and a
comparable retail store sales increase of 0.1%.
Fiscal 2016 compared to Fiscal 2015
Carter’s retail segment sales increased $102.9 million, or 8.9%,
to $1.3 billion. Carter’s retail comparable sales increased 3.1%,
comprised of eCommerce comparable sales growth of 20.4% and a
comparable retail store sales decline of 1.7%.
As of the end of the fourth quarter of fiscal 2016, the Company
operated 654 Carter’s retail stores in the United States, comprised
of 495 stand-alone and 159 dual-branded locations.
Carter’s Wholesale Segment Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
Carter’s wholesale segment sales increased $3.1 million, or
1.1%, to $286.2 million, reflecting increased fall product
shipments, offset in part by lower spring 2017 product
shipments.
Fiscal 2016 compared to Fiscal 2015
Carter’s wholesale segment sales increased $20.7 million, or
1.9%, to $1.1 billion, reflecting increased demand and favorable
product mix, offset in part by lower spring 2017 product
shipments.
OshKosh Retail Segment Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
OshKosh retail segment sales increased $16.3 million, or 13.7%,
to $134.6 million. OshKosh retail comparable sales increased 5.8%,
comprised of eCommerce comparable sales growth of 25.9% and a
comparable retail stores decline of 0.6%.
Fiscal 2016 compared to Fiscal 2015
OshKosh retail segment sales increased $39.2 million, or 10.8%,
to $402.3 million. OshKosh retail comparable sales increased 3.3%,
comprised of eCommerce comparable sales growth of 25.3% and a
comparable retail store sales decline of 2.6%.
As of the end of the fourth quarter of fiscal 2016, the Company
operated 297 OshKosh retail stores in the United States, comprised
of 138 stand-alone and 159 dual-branded locations.
OshKosh Wholesale Segment Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
OshKosh wholesale segment sales decreased $5.6 million, or
33.8%, to $10.9 million, due to lower demand.
Fiscal 2016 compared to Fiscal 2015
OshKosh wholesale segment sales decreased $15.9 million, or
24.3%, to $49.7 million, due to lower demand and a decrease in the
average price per unit.
International Segment Results
Fourth Quarter of Fiscal 2016 compared to Fourth Quarter of
Fiscal 2015
International segment sales increased $12.2 million, or 12.6%,
to $109.2 million, principally driven by growth in the Company's
retail and wholesale businesses in Canada and China, offset in part
by a decrease in wholesale demand in other international
markets.
Changes in foreign currency exchange rates in the fourth quarter
of fiscal 2016 as compared to the fourth quarter of fiscal 2015
negatively affected international segment net sales in the fourth
quarter of fiscal 2016 by $0.4 million. On a constant currency
basis, international segment net sales increased 13.0%.
The Company's Canadian retail comparable sales increased 10.9%
in the fourth quarter of fiscal 2016, reflecting retail stores
comparable sales growth of 6.9% and eCommerce comparable sales
growth of 61.1%.
Fiscal 2016 compared to Fiscal 2015
International segment sales increased $38.5 million, or 11.8%,
to $364.7 million. This increase principally reflects growth in the
Company’s retail businesses in Canada, and eCommerce and wholesale
growth in China, partially offset by unfavorable foreign currency
exchange rates.
Changes in foreign currency exchange rates in fiscal 2016 as
compared to fiscal 2015 negatively affected international net sales
in fiscal 2016 by $7.1 million. On a constant currency basis,
international segment net sales increased 14.0%.
Compared to fiscal 2015, the Company's Canadian retail
comparable sales increased 8.4% in fiscal 2016, primarily due to
retail stores sales growth of 5.9% and eCommerce sales growth of
46.4%.
As of the end of the fourth quarter of fiscal 2016, the Company
operated 164 retail stores in Canada.
Return of Capital
In the fourth quarter of fiscal 2016, the Company returned a
total of $77.5 million to shareholders through share repurchases
and cash dividends. In fiscal 2016, the Company returned a total of
$366.8 million to shareholders through share repurchases and cash
dividends, as described below.
Cumulatively from fiscal years 2013 through 2016, the Company
returned a total of $1.1 billion to shareholders through share
repurchases and cash dividends.
Stock Repurchase Activity
During the fourth quarter of fiscal 2016, the Company
repurchased and retired 690,434 shares of its common stock for
$61.3 million at an average price of $88.79 per share. During
fiscal 2016, the Company repurchased and retired 3.0 million shares
for $300.4 million at an average price of $98.53 per share. Fiscal
2017 year-to-date through February 22, 2017, the Company has
repurchased and retired a total of 356,729 shares for $30.0 million
at an average price of $84.10 per share. All shares were
repurchased in open market transactions pursuant to applicable
regulations for open market share repurchases.
As of February 22, 2017, the total remaining capacity under the
Company's previously-announced repurchase authorizations was
approximately $244 million.
Dividends
During the fourth quarter of fiscal 2016, the Company paid a
cash dividend of $0.33 per share totaling $16.2 million. In fiscal
2016, the Company paid cash dividends of $1.32 per share totaling
$66.4 million.
On February 15, 2017, the Company's Board of Directors
authorized a 12% increase ($0.04 per share) to its quarterly cash
dividend, to $0.37 per share, for payment on March 24, 2017, to
shareholders of record at the close of business on March 10,
2017.
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.
2017 Business Outlook
For fiscal 2017, the Company projects net sales to increase
approximately 4% to 6% over fiscal 2016 and adjusted diluted
earnings per share to increase approximately 8% to 10% compared to
adjusted diluted earnings per share of $5.14 in fiscal 2016. This
forecast for fiscal 2017 adjusted earnings per share excludes
anticipated expenses of approximately $1.0 million related to the
announced Skip Hop transaction and approximately $1.4 million
related to the Company's direct sourcing initiative. The Company
believes these non-GAAP measurements provide investors with a
meaningful view of the Company’s core operating results, and are
the same measurements used by the Company's executive management to
assess the Company's performance.
For the first quarter of fiscal 2017, the Company projects net
sales to decline in the low-single digit range compared to the
first quarter of fiscal 2016 and adjusted diluted earnings per
share to be approximately $0.80 to $0.85 compared to adjusted
diluted earnings per share of $1.05 in the first quarter of fiscal
2016. This projection contemplates growth in U.S. retail sales,
declines in domestic wholesale and international sales, and
increased investments in the Company's growth agenda compared to
the prior-year period. This forecast for first quarter fiscal 2017
adjusted earnings per share excludes anticipated expenses of
approximately $1.0 million related to the announced Skip Hop
transaction and approximately $0.3 million related to the Company's
direct sourcing initiative. The Company believes these non-GAAP
measurements provide investors with a meaningful view of the
Company’s core operating results, and are the same measurements
used by the Company's executive management to assess the Company's
performance.
Conference Call
The Company will hold a conference call with investors to
discuss fourth quarter and fiscal 2016 results and its business
outlook on February 23, 2017 at 8:30 a.m. Eastern Standard Time. To
participate in the call, please dial 913-312-0822. To listen to a
live broadcast of the call on the internet, please visit
www.carters.com and select the “Fourth 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 links for “News & Events” followed by
“Webcasts & Presentations”. A replay of the call will be
available shortly after the broadcast through March 4, 2017, at
888-203-1112 (U.S. / Canada) or 719-457-0820 (international),
passcode 2504885. 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 2017 and fiscal year 2017, 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.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except for share
data)
(unaudited)
For the fiscal quarters ended For the
fiscal years ended
December 31, 2016
January 2, 2016 December 31,
2016 January 2, 2016 Net sales $
934,203 $ 866,544 $ 3,199,184 $ 3,013,879 Cost of goods sold
523,711 503,006 1,820,035 1,755,855
Gross profit 410,492 363,538 1,379,149 1,258,024 Selling, general,
and administrative expenses 282,624 258,737 995,406 909,233 Royalty
income (11,545 ) (11,378 ) (42,815 ) (44,066 ) Operating income
139,413 116,179 426,558 392,857 Interest expense 6,723 6,497 27,044
27,031 Interest income (110 ) (115 ) (563 ) (500 ) Other expense
(income), net 334 (1,302 ) 4,007 (1,862 ) Income
before income taxes 132,466 111,099 396,070 368,188 Provision for
income taxes 45,349 38,500 137,964 130,366
Net income $ 87,117 $ 72,599 $ 258,106
$ 237,822 Basic net income per common share $ 1.77 $
1.40 $ 5.13 $ 4.55 Diluted net income per common share $ 1.76 $
1.39 $ 5.08 $ 4.50 Dividend declared and paid per common share $
0.33 $ 0.22 $ 1.32 $ 0.88
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
For the fiscal quarters ended For the
fiscal years ended
December 31, 2016
% oftotal sales
January 2, 2016 %
oftotal sales December 31, 2016
% oftotal sales January
2, 2016 % oftotal sales
Net
sales:
Carter’s Retail (a) $ 393,286 42.1 % $ 351,633 40.6 %
$
1,254,140
39.2 % $ 1,151,268 38.2 % Carter’s Wholesale 286,235
30.6 % 283,106 32.7 % 1,128,371 35.3 %
1,107,706 36.8 % Total Carter’s 679,521
72.7 % 634,739 73.3 % 2,382,511 74.5 %
2,258,974 75.0 % OshKosh Retail (a) 134,559 14.4 %
118,300 13.7 % 402,274 12.6 % 363,087 12.0 % OshKosh Wholesale
10,891 1.2 % 16,456 1.9 % 49,663
1.6 % 65,607 2.2 % Total OshKosh
145,450 15.6 % 134,756 15.6 % 451,937
14.2 % 428,694 14.2 % International (b)
109,232 11.7 % 97,049 11.1 % 364,736
11.3 % 326,211 10.8 % Total net sales $
934,203 100.0 % $ 866,544 100.0 % $ 3,199,184
100.0 % $ 3,013,879 100.0 %
Operating
income:
Operating margin Operating margin Operating
margin Operating margin Carter’s Retail (a) $ 74,426
18.9 % $ 64,483 18.3 % $ 202,164 16.1 % $ 199,040 17.3 % Carter’s
Wholesale 62,477 21.8 % 60,012 21.2 %
250,132 22.2 % 232,497 21.0 % Total
Carter’s 136,903 20.1 % 124,495 19.6 %
452,296 19.0 % 431,537 19.1 % OshKosh
Retail (a) 11,031 8.2 % 8,535 7.2 % 10,417 2.6 % 11,931 3.3 %
OshKosh Wholesale 2,555 23.5 % 3,555
21.6 % 10,821 21.8 % 13,270 20.2 %
Total OshKosh 13,586 9.3 % 12,090 9.0 %
21,238 4.7 % 25,201 5.9 % International
(b) (c) 22,003 20.1 % 16,037 16.5 % 59,194 16.2 %
47,004 14.4 % Corporate expenses (d) (e)
(33,079 ) (36,443 ) (106,170 ) (110,885 )
Total operating income $ 139,413 14.9 % $ 116,179
13.4 % $ 426,558 13.3 % $ 392,857 13.0 % (a)
Includes eCommerce results. (b) Net sales include
international retail, eCommerce, and wholesale sales. Operating
income also 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 $1.9 million for the fiscal year ended
January 2, 2016. (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 (dollars in millions)
December 31, 2016
January 2, 2016 December 31,
2016 January 2, 2016
Amortization of H.W. Carter and Sons tradenames $ — $ 1.0 $ 1.7 $
6.2 Direct sourcing initiative $ 0.2 $ — $ 0.7 $ —
Acquisition-related costs $ 2.4 $ — $ 2.4 $ —
CARTER’S, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share
data)
(unaudited)
December 31, 2016 January 2, 2016
ASSETS Current assets: Cash and cash equivalents $ 299,358 $
381,209 Accounts receivable, net 202,471 207,570
Finished goods inventories
487,591 469,934 Prepaid expenses and other current assets 32,180
37,815 Deferred income taxes 35,486 34,080 Total
current assets 1,057,086 1,130,608 Property, plant, and equipment,
net 385,874 371,704 Tradenames and other intangible assets, net
308,928 310,848 Goodwill 176,009 174,874 Other assets 18,700
15,620 Total assets $ 1,946,597 $ 2,003,654
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 158,432 $ 157,648 Other current
liabilities 119,177 105,070 Total current liabilities
277,609 262,718 Long-term debt, net 580,376 578,972 Deferred
income taxes 130,656 128,838 Other long-term liabilities 169,832
158,075 Total liabilities 1,158,473 1,128,603
Commitments and contingencies Stockholders’ equity:
Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at December 31, 2016 and
January 2, 2016 — — Common stock, voting; par value $.01 per share;
150,000,000 shares authorized; 48,948,670 and 51,764,309 shares
issued and outstanding at December 31, 2016 and January 2, 2016,
respectively 489 518 Additional paid-in capital — — Accumulated
other comprehensive loss (34,740 ) (36,367 ) Retained earnings
822,375 910,900 Total stockholders’ equity 788,124
875,051 Total liabilities and stockholders’ equity $
1,946,597 $ 2,003,654
CARTER’S, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOW
(dollars in thousands)
(unaudited)
For the fiscal years ended December 31,
2016 January 2, 2016 Cash flows from
operating activities: Net income $ 258,106 $ 237,822 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 71,522 61,982 Amortization of
tradenames 1,919 6,417 Accretion of contingent consideration — 809
Amortization of debt issuance costs 1,461 1,603
Non-cash stock-based compensation
16,847 17,029 Unrealized foreign currency exchange loss, net 33 4
Income tax benefit from stock-based compensation (4,800 ) (8,839 )
Loss on disposal of property, plant, and equipment 1,167 870
Deferred income taxes 1,294 8,657 Effect of changes in operating
assets and liabilities: Accounts receivable, net 5,041 (23,837 )
Inventories (17,482 ) (34,352 ) Prepaid expenses and other assets
2,060 (3,496 ) Accounts payable and other liabilities 32,061
43,318 Net cash provided by operating activities 369,229
307,987 Cash flows from investing activities: Capital
expenditures (88,556 ) (103,497 ) Proceeds from sale of property,
plant, and equipment 216 72 Net cash used in
investing activities (88,340 ) (103,425 ) Cash flows from financing
activities: Payments of debt issuance costs — (1,628 ) Borrowings
under secured revolving credit facility — 205,586 Payments on
secured revolving credit facility — (205,237 ) Repurchase of common
stock (300,445 ) (110,290 ) Payment of contingent consideration —
(7,572 ) Dividends paid (66,355 ) (46,028 ) Income tax benefit from
stock-based compensation 4,800 8,839 Withholdings of taxes from
vesting of restricted stock (8,673 ) (12,651 ) Proceeds from
exercise of stock options 7,166 6,976 Net cash used
in financing activities (363,507 ) (162,005 ) Net effect of
exchange rate changes on cash 767 (1,986 ) Net (decrease)
increase in cash and cash equivalents (81,851 ) 40,571 Cash and
cash equivalents, beginning of fiscal year 381,209 340,638
Cash and cash equivalents, end of fiscal year $ 299,358
$ 381,209
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal quarter ended December 31,
2016 Gross Margin SG&A
Operating Income Net Income
Diluted EPS As reported (GAAP) $ 410.5
$ 282.6 $ 139.4 $ 87.1 $ 1.76 Direct sourcing initiative (c) — (0.2
) 0.2 0.1 — Acquisition-related costs (e) — (2.4 )
2.4 1.5 0.03
As adjusted (a) $ 410.5 $
280.1 $ 142.0 $ 88.7 $ 1.79
Fiscal year ended
December 31, 2016 Gross Margin SG&A
Operating Income Net Income Diluted EPS As
reported (GAAP) $ 1,379.1 $ 995.4 $ 426.6 $ 258.1 $ 5.08
Amortization of tradenames (d) — (1.7 ) 1.7 1.1 0.02 Direct
sourcing initiative (c) — (0.7 ) 0.7 0.5 0.01 Acquisition-related
costs (e) — (2.4 ) 2.4 1.5 0.03
As adjusted (a) $ 1,379.1 $ 990.6 $ 431.4 $ 261.1 $
5.14
Fiscal quarter ended January 2,
2016
Gross Margin SG&A Operating Income Net
Income Diluted EPS As reported (GAAP) $ 363.5 $
258.7 $ 116.2 $ 72.6 $ 1.39 Amortization of tradenames (d) —
(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
Gross Margin SG&A Operating Income Net
Income Diluted EPS As reported (GAAP) $ 1,258.0 $
909.2 $ 392.9 $ 237.8 $ 4.50 Amortization of tradenames (d) — (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 (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
expenses, operating income, net income, and diluted EPS excluding
the adjustment items noted above and discussed above. The Company
believes these non-GAAP measurements provide investors with a
meaningful view of the Company’s core operating results, and are
the same measurements used by the Company's executive management to
assess the Company's performance. 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 the Company's direct sourcing initiative, which
include severance and relocation. (d) The difference between the
effects on Operating Income and Net Income represents the income
taxes related to the adjustment item (calculated using the
applicable tax rate of the underlying jurisdiction). (e) Advisory
fees incurred in connection with announced Skip Hop transaction.
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 April 2, 2016 Gross
Margin SG&A Operating
Income Net Income Diluted
EPS As reported (GAAP) $ 310.9 $ 229.0 $ 93.0 $ 54.0 $
1.04 Amortization of tradenames — (1.0 ) 1.0 0.6
0.01
As adjusted (a) $ 310.9 $ 228.0 $
94.0 $ 54.5 $ 1.05 (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 expenses,
operating income, net income, and diluted EPS excluding the
adjustment item(s) discussed above. The Company believes these
non-GAAP measurements provide investors with a meaningful view of
the Company’s core operating results, and are the same measurements
used by the Company's executive management to assess the Company's
performance. 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)
For the fiscal quarters ended For the
fiscal years ended December 31, 2016
January 2, 2016 December 31,
2016 January 2, 2016
Weighted-average number of common and common equivalent shares
outstanding: Basic number of common shares outstanding 48,824,395
51,460,090 49,917,858 51,835,053 Dilutive effect of equity awards
422,205 460,432 457,849 499,583 Diluted
number of common and common equivalent shares outstanding
49,246,600 51,920,522 50,375,707
52,334,636
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 87,117 $ 72,600 $ 258,106 $ 237,822
Income allocated to participating securities (686 ) (613 ) (2,049 )
(2,184 ) Net income available to common shareholders $ 86,431
$ 71,987 $ 256,057 $ 235,638 Basic net
income per common share $ 1.77 $ 1.40 $ 5.13 $ 4.55 Diluted net
income per common share: Net income $ 87,117 $ 72,600 $ 258,106 $
237,822 Income allocated to participating securities (681 ) (609 )
(2,035 ) (2,167 ) Net income available to common shareholders $
86,436 $ 71,991 $ 256,071 $ 235,655
Diluted net income per common share $ 1.76 $ 1.39 $ 5.08 $ 4.50
As adjusted
(a):
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 88,736 $ 73,198 $ 261,147 $ 243,641
Income allocated to participating securities (698 ) (618 ) (2,073 )
(2,238 ) Net income available to common shareholders $ 88,038
$ 72,580 $ 259,074 $ 241,403 Basic net
income per common share $ 1.80 $ 1.41 $ 5.19 $ 4.66 Diluted net
income per common share: Net income $ 88,736 $ 73,198 $ 261,147 $
243,641 Income allocated to participating securities (693 ) (613 )
(2,059 ) (2,221 ) Net income available to common shareholders $
88,043 $ 72,585 $ 259,088 $ 241,420
Diluted net income per common share $ 1.79 $ 1.40 $ 5.14 $ 4.61
(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 presented above. The Company
has excluded approximately $1.6 million and $3.1 million in
after-tax expenses from these results for the quarter and fiscal
year ended December 31, 2016, respectively. 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.
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
December 31, 2016 January 2,
2016 December 31, 2016
January 2, 2016 (dollars in millions)
Net income $ 87.1 $ 72.6
$ 258.1 $ 237.8 Interest expense 6.7 6.5 27.0 27.0 Interest income
(0.1 ) (0.1 ) (0.6 ) (0.5 ) Tax expense 45.3 38.5 138.0 130.4
Depreciation and amortization (a) 19.2 18.8 73.4
68.4 EBITDA $ 158.3 $ 136.3 $ 496.0
$ 463.1
Adjustments to EBITDA
Revaluation of contingent consideration (b) — — — 1.9 Direct
sourcing initiative (c) 0.2 — 0.7 — Acquisition-related costs (d)
2.4 — 2.4 —
Adjusted EBITDA $
160.8 $ 136.3 $ 499.1 $ 465.0
(a) Includes amortization of acquired tradenames. (b)
Revaluation of the contingent consideration liability associated
with the Company’s 2011 acquisition of Bonnie Togs. (c) Pre-tax
costs associated with the Company's direct sourcing initiative,
which includes severance and relocation. (d) Advisory fees incurred
in connection with the announced Skip Hop transaction.
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 (b) - (d) to the table above.
We present EBITDA and Adjusted EBITDA because we consider them
to be 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. These measures are used by the Company's executive
management to assess the Company's performance.
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.
RECONCILIATION OF U.S. GAAP AND
NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
The tables below reflect the calculation
of constant currency for total net sales of the International
segment and consolidated net sales for the fiscal quarter and
fiscal year ended December 31, 2016:
Fiscal Quarter Ended Reported Net Sales
December 31, 2016 Impact of Foreign Currency Translation
Constant-Currency Net Sales December 31, 2016
Reported Net Sales January 2,
2016
Reported Net Sales % Change Constant-Currency Net Sales %
Change
Consolidated net sales
$ 934.2 $ 0.4 $ 934.6 $ 866.5 7.8% 7.9% International segment net
sales $ 109.2 $ 0.4 $ 109.6 $ 97.0 12.6% 13.0%
Fiscal
Year Ended Reported Net Sales December 31, 2016
Impact of Foreign Currency Translation Constant-Currency
Net Sales December 31, 2016 Reported Net Sales January 2,
2016 Reported Net Sales % Change Constant-Currency
Net Sales % Change Consolidated net sales $ 3,199.2 $
7.1 $ 3,206.3 $ 3,013.9 6.1% 6.4%
International segment net sales
$ 364.7 $ 7.1 $ 371.9 $ 326.2 11.8% 14.0%
The Company evaluates its net sales on both an “as reported” and
a “constant currency” basis. The constant currency presentation,
which is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates that occurred between the
comparative periods. Constant currency net sales results are
calculated by translating current period net sales in local
currency to the U.S. dollar amount by using the currency conversion
rate for the prior comparative period. The Company consistently
applies this approach to net sales for all countries where the
functional currency is not the U.S. dollar. The Company believes
that the presentation of net sales on a constant currency basis
provides useful supplemental information regarding changes in our
net sales that were not due to fluctuations in currency exchange
rates and such information is consistent with how the Company
assesses changes in its net sales between comparative periods.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170223005659/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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