- Net sales $639 million, growth of
4%
- Diluted EPS $0.71, growth of 4%;
adjusted diluted EPS $0.72, decline of 2%
- Returned $214 million to
shareholders through share repurchases and dividends in the first
half of fiscal 2016
- Company revises fiscal 2016 sales
forecast to growth of 5% - 6% (previously growth of 6% - 7%) and
adjusted diluted EPS forecast to growth of approximately 10%
(previously growth of 10% - 12%)
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 second quarter fiscal 2016
results.
“We achieved our sales and earnings objectives in the second
quarter,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Our sales growth was driven by higher demand in our
retail and international businesses. We are expecting good growth
in the balance of the year, and have revised our previous forecasts
to reflect the current outlook for our wholesale and international
businesses.”
Consolidated Results
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
Net sales increased $26.7 million, or 4.4%, to $639.5 million,
reflecting growth in the Company’s U.S. Carter’s and OshKosh retail
businesses as well as in its international segment. Changes in
foreign currency exchange rates in the second quarter of fiscal
2016 compared to the second quarter of fiscal 2015 negatively
impacted consolidated net sales in the second quarter of fiscal
2016 by $2.5 million, or 0.4%. On a constant currency basis,
consolidated net sales increased 4.8% in the second quarter of
fiscal 2016.
Operating income in the second quarter of fiscal 2016 increased
$1.3 million, or 2.1%, to $63.2 million, compared to $62.0 million
in the second quarter of fiscal 2015. Operating margin decreased
approximately 20 basis points to 9.9%, compared to 10.1% in the
second quarter of fiscal 2015. Adjusted operating income (a
non-GAAP measure) decreased $1.4 million, or 2.1%, to $64.0
million, compared to $65.4 million in the second quarter of fiscal
2015. Adjusted operating margin (a non-GAAP measure) decreased
approximately 70 basis points to 10.0%, compared to 10.7% in the
second quarter of fiscal 2015, which reflects improved gross margin
offset by increased investments in store expansion, technology,
marketing, and China eCommerce.
Net income in the second quarter of fiscal 2016 increased $0.1
million, or 0.3%, to $36.2 million, or $0.71 per diluted share,
compared to $36.1 million, or $0.68 per diluted share, in the
second quarter of fiscal 2015. Adjusted net income (a non-GAAP
measure) decreased $2.1 million, or 5.4%, to $36.7 million,
compared to $38.8 million in the second quarter of fiscal 2015.
Adjusted earnings per diluted share (a non-GAAP measure) in the
second quarter of fiscal 2016 decreased 1.7% to $0.72, compared to
$0.73 in the second quarter of fiscal 2015.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
Net sales increased $66.0 million, or 5.1%, to $1.36 billion,
reflecting growth in the Company’s U.S. Carter’s and OshKosh retail
and Carter’s wholesale businesses, as well as in its international
segment. Changes in foreign currency exchange rates in the first
half of fiscal 2016 compared to the first half of fiscal 2015
negatively impacted consolidated net sales in the first half of
fiscal 2016 by $7.0 million, or 0.5%. On a constant currency basis,
consolidated net sales increased 5.6% in the first half of fiscal
2016.
Operating income in the first half of fiscal 2016 increased $9.8
million, or 6.7%, to $156.3 million, compared to $146.5 million in
the first half of fiscal 2015. Operating margin increased
approximately 20 basis points to 11.5%, compared to 11.3% in the
first half of fiscal 2015. Adjusted operating income (a non-GAAP
measure) increased $5.3 million, or 3.5%, to $158.0 million,
compared to $152.7 million in the first half of fiscal 2015.
Adjusted operating margin (a non-GAAP measure) decreased
approximately 20 basis points to 11.6%, compared to 11.8% in the
first half of fiscal 2015, which reflects improved gross margin
offset by increased investments in our growth initiatives.
Net income in the first half of fiscal 2016 increased $4.3
million, or 5.0%, to $90.2 million, or $1.75 per diluted share,
compared to $85.9 million, or $1.62 per diluted share, in the first
half of fiscal 2015. Adjusted net income (a non-GAAP measure)
increased $0.8 million, or 0.8%, to $91.3 million, compared to
$90.5 million in the first half of fiscal 2015. Adjusted earnings
per diluted share (a non-GAAP measure) in the first half of fiscal
2016 increased 3.9% to $1.77, compared to $1.70 in the first half
of fiscal 2015.
Cash flow from operations in the first half of fiscal 2016 was
$85.6 million compared to $27.1 million in the first half of fiscal
2015. The increase reflected favorable changes in net working
capital and an increase in net income.
See the “Reconciliation of GAAP to Adjusted Results” section of
this release for additional disclosures and reconciliations
regarding non-GAAP measures.
Business Segment Results
During the second quarter and first half of fiscal 2016, the
Company believes, based on analysis of credit card transactions and
other data, that Carter’s and OshKosh retail comparable sales were
negatively affected by lower demand from international consumers
shopping in its U.S. stores and on its website, which was likely
influenced by the strength of the U.S. dollar relative to other
global currencies.
Carter’s Retail Segment
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
Carter’s retail segment sales increased $26.9 million, or 10.9%,
to $273.8 million. Carter’s retail comparable sales increased 4.4%,
comprised of eCommerce comparable sales growth of 17.4% and a
stores comparable sales increase of 1.4%.
In the second quarter of fiscal 2016, the Company opened 15
Carter’s stores and closed one store in the United States.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
Carter’s retail segment sales increased $41.4 million, or 8.2%,
to $546.2 million. Carter’s retail comparable sales increased 2.1%,
comprised of eCommerce comparable sales growth of 16.3%, partially
offset by a stores comparable sales decline of 1.4%.
In the first half of fiscal 2016, the Company opened 31 Carter’s
stores and closed one store in the United States. The Company
operated 624 Carter’s stores in the United States as of
July 2, 2016.
Carter’s Wholesale Segment
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
Carter’s wholesale segment net sales decreased $6.0 million, or
2.8%, to $205.7 million, reflecting a decrease in product demand,
in part due to timing of orders.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
Carter’s wholesale segment net sales increased $4.8 million, or
1.0%, to $485.9 million.
OshKosh Retail Segment
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
OshKosh retail segment net sales increased $5.5 million, or
7.5%, to $79.0 million. OshKosh retail comparable sales declined
1.3%, comprised of a stores comparable sales decline of 5.8%,
partially offset by eCommerce comparable sales growth of 17.6%.
In the second quarter of fiscal 2016, the Company opened 12
OshKosh stores in the United States and closed one store.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
OshKosh retail segment net sales increased $14.2 million, or
9.7%, to $160.7 million. OshKosh retail comparable sales increased
0.7%, comprised of eCommerce comparable sales growth of 18.8%,
partially offset by a stores comparable sales decline of 3.8%.
In the first half of fiscal 2016, the Company opened 23 OshKosh
stores in the United States and closed two stores. The Company
operated 262 OshKosh stores in the United States as of July 2,
2016.
OshKosh Wholesale Segment
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
OshKosh wholesale segment net sales decreased $4.9 million, or
34.4%, to $9.4 million, due to a decrease in the number of units
shipped, reflecting lower seasonal bookings.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
OshKosh wholesale segment net sales decreased $9.1 million, or
29.8%, to $21.3 million, due to a decrease in the number of units
shipped, reflecting lower seasonal bookings.
International Segment
Second Quarter of Fiscal 2016 compared to Second Quarter of
Fiscal 2015
International segment net sales increased $5.3 million, or 8.0%,
to $71.6 million, driven by growth in the Company’s retail
businesses in Canada and new eCommerce sales in China, partially
offset by a decline in sales to international wholesale customers
outside Canada and unfavorable foreign currency exchange rates.
Changes in foreign currency exchange rates in the second quarter
of fiscal 2016 compared to the second quarter of fiscal 2015
negatively affected international segment net sales in the second
quarter of fiscal 2016 by $2.5 million, or 3.7%. On a constant
currency basis, international segment net sales increased
11.7%.
For the second quarter of fiscal 2016, Canada retail comparable
sales increased 8.0%, comprised of stores comparable sales growth
of 6.9% and eCommerce comparable sales growth of 27.4%. In the
second quarter of fiscal 2016, the Company opened one store in
Canada.
First Half of Fiscal 2016 compared to First Half of Fiscal
2015
International segment net sales increased $14.6 million, or
10.8%, to $149.5 million, driven by growth in the Company’s retail
businesses in Canada and new eCommerce sales in China, partially
offset by unfavorable foreign currency exchange rates.
Changes in foreign currency exchange rates in the first half of
fiscal 2016 compared to the first half of fiscal 2015 negatively
affected international segment net sales in the first half of
fiscal 2016 by $7.0 million, or 5.2%. On a constant currency basis,
international segment net sales increased 16.0%.
For the first half of fiscal 2016, Canada retail comparable
sales increased 11.3%, comprised of stores comparable sales growth
of 9.7% and eCommerce comparable sales growth of 37.4%. In the
first half of fiscal 2016, the Company opened three stores in
Canada. The Company operated 150 stores in Canada as of
July 2, 2016.
Return of Capital
In the second quarter of fiscal 2016, the Company returned a
total of $125.3 million to shareholders through share repurchases
and cash dividends. In the first half of fiscal 2016, the Company
returned a total of $213.9 million to shareholders through share
repurchases and cash dividends, as described below.
During the second quarter of fiscal 2016, the Company
repurchased and retired 1,049,483 shares of its common stock for
$108.6 million at an average price of $103.52 per share. In the
first half of fiscal 2016, the Company repurchased and retired
1,771,847 shares of its common stock for $180.2 million at an
average price of $101.71 per share. Fiscal year-to-date through
July 26, 2016, the Company repurchased and retired a total of
1,910,247 shares for $195.1 million at an average price of $102.15
per share. All shares were repurchased in open market transactions
pursuant to applicable regulations for such transactions. As of
July 26, 2016, the total remaining capacity under the Company’s
previously announced repurchase authorizations was approximately
$380 million.
During the second quarter of fiscal 2016, the Company paid a
cash dividend of $0.33 per share totaling $16.6 million. In the
first half of fiscal 2016, the Company paid cash dividends of $0.66
per share totaling $33.7 million. Future declarations of quarterly
dividends and the establishment of related record and payment dates
will be at the discretion of the Company’s Board of Directors based
on a number of factors, including the Company’s future financial
performance and other considerations.
2016 Business Outlook
For the third quarter of fiscal 2016, the Company projects net
sales will increase approximately 6% to 7% compared to the third
quarter of fiscal 2015 and adjusted diluted earnings per share will
increase approximately 6% to 10% compared to adjusted diluted
earnings per share of $1.52 in the third quarter of fiscal
2015.
For fiscal 2016, the Company now projects net sales will
increase approximately 5% to 6% (previously projected growth of 6%
to 7%) compared to fiscal 2015 and adjusted diluted earnings per
share will increase approximately 10% (previously projected growth
of 10% to 12%) compared to adjusted diluted earnings per share of
$4.61 in fiscal 2015. This forecast for fiscal 2016 adjusted
earnings per share excludes anticipated expenses of approximately
$1.7 million related to the amortization of acquired tradenames and
other items the Company believes to be non-representative of
underlying business performance.
Conference Call
The Company will hold a conference call with investors to
discuss second quarter fiscal 2016 results and its business outlook
on July 27, 2016 at 8:30 a.m. Eastern Daylight Time. To participate
in the call, please dial 913-312-0642. To listen to a live
broadcast via the internet, please visit www.carters.com and select
the “Q2 2016 Earnings Conference Call” link under the “Investor
Relations” tab. Presentation materials for the call can be accessed
under the same tab by selecting the link for “News & Events”
followed by “Webcasts & Presentations”. A replay of the call
will be available shortly after the broadcast through August 5,
2016, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 3330148. The replay will also be archived
on the Company’s website under the “Investor Relations” tab.
About Carter’s, Inc.
Carter’s, Inc. is the largest branded marketer in the United
States and Canada of apparel and related products exclusively for
babies and young children. The Company owns the Carter’s and
OshKosh B’gosh brands, two of the most recognized brands in the
marketplace. These brands are sold in leading department stores,
national chains, and specialty retailers domestically and
internationally. They are also sold through more than 1,000
Company-operated stores in the United States and Canada and on-line
at www.carters.com, www.oshkoshbgosh.com, and
www.cartersoshkosh.ca. The Company’s Just One You, Precious Firsts,
and Genuine Kids brands are available at Target, and its Child of
Mine brand is available at Walmart. Carter’s is headquartered in
Atlanta, Georgia. Additional information may be found at
www.carters.com.
Cautionary Language
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 relating to the Company’s future
performance, including, without limitation, statements with respect
to the Company’s anticipated financial results for the third
quarter of fiscal 2016 and fiscal year 2016, or any other future
period, assessments of the Company’s performance and financial
position, and drivers of the Company’s sales and earnings growth.
Such statements are based on current expectations only, and are
subject to certain risks, uncertainties, and assumptions. Should
one or more of these risks or uncertainties materialize or not
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated,
estimated, or projected. Certain of the risks and uncertainties
that could cause actual results and performance to differ
materially are described in the Company’s most recently filed
Annual Report on Form 10-K and other reports filed with the
Securities and Exchange Commission from time to time under the
headings “Risk Factors” and “Forward-Looking Statements.” Included
among the risks and uncertainties that may impact future results
are the risks of: losing one or more major customers, vendors, or
licensees, due to competition, inadequate quality of the Company’s
products, or otherwise; financial difficulties for one or more of
the Company’s major customers, vendors, or licensees, or an overall
decrease in consumer spending; fluctuations in foreign currency
exchange rates; our products not being accepted in the marketplace,
due to quality concerns, changes in consumer preference and fashion
trends, or otherwise; negative publicity, including as a result of
product recalls or otherwise; failure to protect the Company’s
intellectual property; various types of litigation, including class
action litigation brought under various consumer protection,
employment, and privacy and information security laws; a breach of
the Company’s consumer databases, systems, or processes; the risk
of slow-downs, disruptions, or strikes along the Company’s supply
chain, including disruptions resulting from foreign supply sources,
the Company’s distribution centers, or in-sourcing capabilities;
unsuccessful expansion into international markets or failure to
successfully manage legal, regulatory, political and economic risks
of the Company’s existing international operations, including
maintaining compliance with worldwide anti-bribery laws; and an
inability to obtain additional financing on favorable terms. The
Company does not undertake any obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except per share
data)
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters Ended July 2,
2016 July 4, 2015 July 2,
2016 July 4, 2015 Net sales $
639,471 $ 612,765 $ 1,363,556 $ 1,297,529 Cost of goods sold
357,289 349,870 770,445 750,582 Gross
profit 282,182 262,895 593,111 546,947 Selling, general, and
administrative expenses 228,464 209,296 457,460 420,479 Royalty
income (9,525 ) (8,353 ) (20,600 ) (19,989 ) Operating income
63,243 61,952 156,251 146,457 Interest expense 6,803 6,935 13,542
13,627 Interest income (178 ) (157 ) (385 ) (294 ) Other expense
(income), net 516 (1,900 ) 3,709 62 Income
before income taxes 56,102 57,074 139,385 133,062 Provision for
income taxes 19,904 20,969 49,207 47,165
Net income $ 36,198 $ 36,105 $ 90,178 $
85,897 Basic net income per common share $ 0.72 $
0.69 $ 1.77 $ 1.63 Diluted net income per common share $ 0.71 $
0.68 $ 1.75 $ 1.62 Dividend declared and paid per common share $
0.33 $ 0.22 $ 0.66 $ 0.44
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters Ended
%
of % of % of % of Total July
2, Total Net July 4, Total Net July
2, Total Net July 4, Net 2016
Sales 2015 Sales 2016 Sales
2015 Sales
Net
sales:
Carter’s Wholesale $ 205,738 32.2 % $ 211,730 34.6 % $ 485,878 35.5
% $ 481,045 37.1 % Carter’s Retail (a) 273,832 42.8 %
246,980 40.4 % 546,155 40.1 % 504,707 39.0 %
Total Carter’s (U.S.) 479,570 75.0 % 458,710 75.0 %
1,032,033 75.6 % 985,752 76.1 % OshKosh Retail (a)
78,950 12.3 % 73,453 12.0 % 160,716 11.8 % 146,495 11.3 % OshKosh
Wholesale 9,384 1.5 % 14,306 2.3 % 21,298 1.6
% 30,357 2.3 % Total OshKosh (U.S.) 88,334 13.8 %
87,759 14.3 % 182,014 13.4 % 176,852 13.6 %
International (b) 71,567 11.2 % 66,296 10.7 % 149,509
11.0 % 134,925 10.3 % Total net sales $ 639,471
100.0 % $ 612,765 100.0 % $ 1,363,556 100.0 %
$ 1,297,529 100.0 %
% of % of %
of % of Segment Segment Segment
Segment
Operating income
(loss):
Net Sales Net Sales Net Sales Net Sales
Carter’s Wholesale $ 39,899 19.4 % $ 40,207 19.0 % $ 106,104 21.8 %
$ 98,138 20.4 % Carter’s Retail (a) 38,433 14.0 % 38,331
15.5 % 79,687 14.6 % 82,824 16.4 % Total
Carter’s (U.S.) 78,332 16.3 % 78,538 17.1 % 185,791
18.0 % 180,962 18.4 % OshKosh Retail (a) (1,481 )
(1.9 )% (1,815 ) (2.5 )% (3,266 ) (2.0 )% (2,775 ) (1.9 )% OshKosh
Wholesale (U.S.) 1,610 17.2 % 2,249 15.7 % 3,816
17.9 % 5,228 17.2 % Total OshKosh 129 0.1 %
434 0.5 % 550 0.3 % 2,453 1.4 % International
(b) (c) 9,105 12.7 % 6,236 9.4 % 17,546 11.7 %
12,747 9.4 % Corporate expenses (d) (e) (24,323 ) (23,256 )
(47,636 ) (49,705 ) Total operating income $ 63,243 9.9 % $
61,952 10.1 % $ 156,251 11.5 % $ 146,457 11.3
%
(a) Includes eCommerce results.
(b) Net sales includes international retail, eCommerce, and
wholesale sales. Operating income includes international licensing
income.
(c) Includes charges associated with the revaluation of the
Company's contingent consideration related to the Company's 2011
acquisition of Bonnie Togs of approximately $1.4 million and $1.9
million for the fiscal quarter and two fiscal quarters ended
July 4, 2015, respectively.
(d) Corporate expenses include expenses related to incentive
compensation, stock-based compensation, executive management,
severance and relocation, finance, building occupancy, information
technology, legal, consulting, and audit fees.
(e) Includes charges related to the amortization of tradenames
of $0.8 million and $1.8 million for the fiscal quarter and two
fiscal quarters ended July 2, 2016, respectively, and $2.1
million and $4.4 million for the fiscal quarter and two fiscal
quarters ended July 4, 2015, respectively.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except per share
data)
(unaudited)
July 2, 2016
January 2, 2016 July
4, 2015 ASSETS Current assets: Cash and cash equivalents
$ 205,080 $ 381,209 $ 244,301 Accounts receivable, net 150,633
207,570 157,145 Finished goods inventories 587,434 469,934 544,256
Prepaid expenses and other current assets 46,189 37,815 47,639
Deferred income taxes 32,816 34,080 31,871
Total current assets 1,022,152 1,130,608 1,025,212 Property, plant,
and equipment, net of accumulated depreciation of $317,580,
$290,636, and $263,580, respectively 386,034 371,704 353,138
Tradenames, net
309,017 310,848 312,836 Goodwill 177,540 174,874 178,753 Other
assets 17,749 15,620 13,759 Total assets $
1,912,492 $ 2,003,654 $ 1,883,698
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 190,366 $ 157,648 $ 145,809 Other current
liabilities 80,595 105,070 76,451 Total
current liabilities 270,961 262,718 222,260 Long-term debt,
net 580,678 578,972 580,427 Deferred income taxes 128,682 128,838
119,230 Other long-term liabilities 165,469 158,075
158,842 Total liabilities 1,145,790 1,128,603 1,080,759
Commitments and contingencies Stockholders' equity:
Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at July 2, 2016, January 2,
2016, and July 4, 2015 — — — Common stock, voting; par value $.01
per share; 150,000,000 shares authorized; 50,194,955, 51,764,309,
and 52,331,208 shares issued and outstanding at July 2, 2016,
January 2, 2016 and July 4, 2015, respectively 502 518 523
Additional paid-in capital — — — Accumulated other comprehensive
loss (30,533 ) (36,367 ) (29,275 ) Retained earnings 796,733
910,900 831,691 Total stockholders' equity 766,702
875,051 802,939 Total liabilities and
stockholders' equity $ 1,912,492 $ 2,003,654 $
1,883,698
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in thousands)
(unaudited)
Two Fiscal Quarters Ended
July 2, 2016 July 4, 2015 Cash
flows from operating activities: Net income $ 90,178 $ 85,897
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 34,916 30,338
Amortization of tradenames 1,831 4,429 Accretion of contingent
consideration — 809 Amortization of debt issuance costs 725 678
Non-cash stock-based compensation expense 9,250 9,560 Unrealized
foreign currency loss, net 3,130 84 Income tax benefit from
stock-based compensation (3,684 ) (6,890 ) Loss on disposal of
property, plant, and equipment 133 90 Deferred income taxes 1,258
1,886 Effect of changes in operating assets and liabilities:
Accounts receivable, net 57,229 28,649 Finished goods inventories
(114,817 ) (103,379 ) Prepaid expenses and other assets (12,643 )
(14,244 ) Accounts payable and other liabilities 18,093
(10,775 ) Net cash provided by operating activities 85,599
27,132 Cash flows from investing activities: Capital
expenditures (49,698 ) (50,284 ) Proceeds from sale of property,
plant, and equipment 193 43 Net cash used in
investing activities (49,505 ) (50,241 ) Cash flows from
financing activities: Borrowings under secured revolving credit
facility — 20,349 Payments on secured revolving credit facility —
(20,000 ) Repurchase of common stock (180,209 ) (48,894 ) Dividends
paid (33,679 ) (23,143 ) Income tax benefit from stock-based
compensation 3,684 6,890 Withholdings from vesting of restricted
stock (8,508 ) (12,377 ) Proceeds from exercise of stock options
5,101 4,560 Net cash used in financing activities
(213,611 ) (72,615 ) Effect of exchange rate changes on cash
and cash equivalents 1,388 (613 ) Net decrease in cash and
cash equivalents (176,129 ) (96,337 ) Cash and cash equivalents,
beginning of period 381,209 340,638 Cash and cash
equivalents, end of period $ 205,080 $ 244,301
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended July 2,
2016 Gross % Net
% Net
Operating % Net
Net Diluted
Margin Sales SG&A Sales
Income Sales Income EPS As reported
(GAAP) $ 282.2 44.1 % $ 228.5 35.7 % $ 63.2 9.9 % $ 36.2 $ 0.71
Amortization of tradenames — (0.8 ) 0.8 0.5
0.01
As adjusted (a) $ 282.2 44.1 % $ 227.7
35.6 % $ 64.0 10.0 % $ 36.7 $ 0.72
Two
Fiscal Quarters Ended July 2, 2016 Gross Margin % Net
Sales SG&A % Net Sales Operating
Income % Net Sales Net Income Diluted EPS
As reported (GAAP) $ 593.1 43.5 % $ 457.5 33.5 % $ 156.3
11.5 % $ 90.2 $ 1.75 Amortization of tradenames — (1.7 ) 1.7
1.1 0.02
As adjusted (a) $ 593.1 43.5 %
$ 455.7 33.4 % $ 158.0 11.6 % $ 91.3 $ 1.77
Fiscal Quarter Ended July 4, 2015 Gross Margin
% Net Sales SG&A % Net Sales Operating
Income % Net Sales Net Income Diluted EPS
As reported (GAAP) $ 262.9 42.9 % $ 209.3 34.2 % $ 62.0 10.1
% $ 36.1 $ 0.68 Amortization of tradenames — (2.1 ) 2.1 1.3 0.02
Revaluation of contingent consideration (b) — (1.4 ) 1.4
1.4 0.03
As adjusted (a) $ 262.9 42.9 %
$ 205.8 33.6 % $ 65.4 10.7 % $ 38.8 $ 0.73
Two Fiscal Quarters Ended July 4, 2015 Gross
Margin % Net Sales SG&A % Net Sales
Operating Income % Net Sales Net Income
Diluted EPS As reported (GAAP) $ 546.9 42.2 % $ 420.5
32.4 % $ 146.5 11.3 % $ 85.9 $ 1.62 Amortization of tradenames —
(4.3 ) 4.3 2.7 0.05 Revaluation of contingent consideration (b) —
(1.9 ) 1.9 1.9 0.03
As adjusted (a) $
546.9 42.2 % $ 414.3 31.9 % $ 152.7 11.8 % $
90.5 $ 1.70
(a) In addition to the results provided in this earnings release
in accordance with GAAP, the Company has provided adjusted,
non-GAAP financial measurements that present SG&A, operating
income, net income, and net income on a diluted share basis
excluding the adjustments discussed above. The Company believes
these adjustments provide a meaningful comparison of the Company’s
results. The adjusted, non-GAAP financial measurements included in
this earnings release should not be considered as an alternative to
net income or as any other measurement of performance derived in
accordance with GAAP. The adjusted, non-GAAP financial measurements
are presented for informational purposes only and are not
necessarily indicative of the Company’s future condition or results
of operations.
(b) Revaluation of the contingent consideration liability
associated with the Company’s acquisition of Bonnie Togs in
2011.
Note: Results may not be additive due to rounding.
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended October
3, 2015 Gross
Operating
Margin SG&A Income Net Income
Diluted EPS As reported (GAAP) $ 347.5 $ 230.0 $
130.2 $ 79.3 $ 1.51 Amortization of tradenames — (1.0 ) 1.0
0.6 0.01
As adjusted (a) $ 347.5 $
229.0 $ 131.2 $ 79.9 $ 1.52
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 — (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 SG&A, operating
income, net income, and net income on a diluted share basis
excluding the adjustments discussed above. The Company believes
these adjustments provide a meaningful comparison of the Company’s
results. The adjusted, non-GAAP financial measurements included in
this earnings release should not be considered as an alternative to
net income or as any other measurement of performance derived in
accordance with GAAP. The adjusted, non-GAAP financial measurements
are presented for informational purposes only and are not
necessarily indicative of the Company’s future condition or results
of operations.
(b) Revaluation of the contingent consideration liability
associated with the Company’s acquisition of Bonnie Togs in
2011.
Note: Results may not be additive due to rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended
Two Fiscal Quarters Ended
July 2, July 4, July 2,
July 4, 2016 2015
2016 2015 Weighted-average number of common and
common equivalent shares outstanding: Basic number of common shares
outstanding 50,143,568 52,020,386 50,660,278 52,069,800 Dilutive
effect of equity awards 469,114 526,016 468,632
514,121 Diluted number of common and common
equivalent shares outstanding 50,612,682 52,546,402
51,128,910 52,583,921
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 36,198 $ 36,105 $ 90,178 $ 85,897 Income
allocated to participating securities (279 ) (305 ) (720 ) (847 )
Net income available to common shareholders $ 35,919 $
35,800 $ 89,458 $ 85,050 Basic net income per
common share $ 0.72 $ 0.69 $ 1.77 $ 1.63 Diluted net income per
common share: Net income $ 36,198 $ 36,105 $ 90,178 $ 85,897 Income
allocated to participating securities (278 ) (303 ) (715 ) (840 )
Net income available to common shareholders $ 35,920 $
35,802 $ 89,463 $ 85,057 Diluted net income
per common share $ 0.71 $ 0.68 $ 1.75 $ 1.62
As adjusted
(a):
Basic net income per common share: Net income $ 36,697 $ 38,805 $
91,276 $ 90,518 Income allocated to participating securities (284 )
(329 ) (729 ) (893 ) Net income available to common shareholders $
36,413 $ 38,476 $ 90,547 $ 89,625 Basic
net income per common share $ 0.73 $ 0.74 $ 1.79 $ 1.72 Diluted net
income per common share: Net income $ 36,697 $ 38,805 $ 91,276 $
90,518 Income allocated to participating securities (282 ) (326 )
(725 ) (886 ) Net income available to common shareholders $ 36,415
$ 38,479 $ 90,551 $ 89,632 Diluted net
income per common share $ 0.72 $ 0.73 $ 1.77 $ 1.70
(a) In addition to the results provided in this earnings release
in accordance with GAAP, the Company has provided adjusted,
non-GAAP financial measurements that present per share data
excluding the adjustments discussed above. The Company has excluded
$0.5 million and $1.1 million in after-tax expenses from these
results for the fiscal quarter and two fiscal quarters ended
July 2, 2016, respectively. The Company has excluded $2.7
million and $4.6 million in after-tax expenses from these results
for the fiscal quarters ended July 4, 2015, respectively.
RECONCILIATION OF U.S. GAAP AND
NON-GAAP INFORMATION
(unaudited)
The following table provides a
reconciliation of net income to EBITDA and Adjusted EBITDA for the
periods indicated:
Four Fiscal Fiscal Quarter Ended Two
Fiscal Quarters Ended Quarters Ended July 2, 2016
July 4, 2015 July 2, 2016
July 4, 2015 July 2, 2016 (dollars in
millions) Net income $ 36.2 $ 36.1 $ 90.2 $ 85.9 $ 242.1 Interest
expense 6.8 6.9 13.5 13.6 26.9 Interest income (0.2 ) (0.2 ) (0.4 )
(0.3 ) (0.6 ) Income tax expense 19.9 21.0 49.2 47.2 132.4
Depreciation and amortization (a) 18.6 17.6 36.8
34.8 70.4 EBITDA $ 81.3 $ 81.4 $
189.3 $ 181.2 $ 471.2
Adjustments to
EBITDA Revaluation of contingent consideration (b) $ — $
1.4 — 1.9 $ —
Adjusted EBITDA $
81.3 $ 82.8 $ 189.3 $ 183.1 $ 471.2
(a) Includes amortization of acquired tradenames.
(b) Revaluation of the contingent consideration liability
associated with the Company’s acquisition of Bonnie Togs in
2011.
Note: Results may not be additive due to rounding.
EBITDA and Adjusted EBITDA are supplemental financial measures
that are not defined or prepared in accordance with GAAP. We define
EBITDA as net income before interest, income taxes, and
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted
for the item described in footnote (b) to the table above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our
industry.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160727005660/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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