- Net sales $901 million, growth of
6%
- Diluted EPS $1.60, growth of 7%;
adjusted diluted EPS $1.61, growth of 6%
- Returned $289 million to
shareholders through share repurchases and dividends in the first
three quarters of fiscal 2016
- Fiscal 2016 outlook: sales growth of
5% to 6%; adjusted diluted EPS growth of 9% 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 third quarter fiscal 2016
results.
“In the third quarter, we achieved a record level of sales and
earnings with sales growth in all channels of distribution,” said
Michael D. Casey, Chairman and Chief Executive Officer. “Our
performance in the quarter reflects significant growth in online
sales and higher demand from international customers. Given the
current trends in our business, we expect to achieve our growth
objectives this year and 28th consecutive year of sales
growth.”
Consolidated Results
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
Net sales increased $51.6 million, or 6.1%, to $901.4 million,
reflecting growth in the Company’s U.S. Carter’s and OshKosh retail
businesses, Carter’s wholesale business, and international segment.
Changes in foreign currency exchange rates in the third quarter of
fiscal 2016 compared to the third quarter of fiscal 2015 favorably
affected consolidated net sales in the third quarter of fiscal 2016
by $0.3 million, or 0.1%. On a constant currency basis (a non-GAAP
measure), consolidated net sales increased 6.0% in the third
quarter of fiscal 2016.
Operating income in the third quarter of fiscal 2016 increased
$0.7 million, or 0.5%, to $130.9 million, compared to $130.2
million in the third quarter of fiscal 2015. Operating margin
decreased approximately 80 basis points to 14.5%, compared to 15.3%
in the third quarter of fiscal 2015. Adjusted operating income (a
non-GAAP measure) increased $0.2 million, or 0.2%, to $131.4
million, compared to $131.2 million in the third quarter of fiscal
2015. Adjusted operating margin (a non-GAAP measure) decreased
approximately 80 basis points to 14.6%, compared to 15.4% in the
third quarter of fiscal 2015, which reflected increased investments
in store expansion and technology, partially offset by improved
gross margin.
Net income in the third quarter of fiscal 2016 increased $1.5
million, or 1.9%, to $80.8 million, or $1.60 per diluted share,
compared to $79.3 million, or $1.51 per diluted share, in the third
quarter of fiscal 2015. Adjusted net income (a non-GAAP measure)
increased $1.2 million, or 1.5%, to $81.1 million, compared to
$79.9 million in the third quarter of fiscal 2015. Adjusted
earnings per diluted share (a non-GAAP measure) in the third
quarter of fiscal 2016 increased 6.2% to $1.61, compared to $1.52
in the third quarter of fiscal 2015.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
Net sales increased $117.6 million, or 5.5%, to $2.26 billion,
reflecting growth in the Company’s U.S. Carter’s and OshKosh retail
businesses, Carter’s wholesale business, and international segment.
Changes in foreign currency exchange rates in the first three
quarters of fiscal 2016 compared to the first three quarters of
fiscal 2015 negatively affected consolidated net sales in the first
three quarters of fiscal 2016 by $6.7 million, or 0.3%. On a
constant currency basis (a non-GAAP measure), consolidated net
sales increased 5.8% in the first three quarters of fiscal
2016.
Operating income in the first three quarters of fiscal 2016
increased $10.5 million, or 3.8%, to $287.1 million, compared to
$276.7 million in the first three quarters of fiscal 2015.
Operating margin decreased approximately 20 basis points to 12.7%,
compared to 12.9% in the first three quarters of fiscal 2015.
Adjusted operating income (a non-GAAP measure) increased $5.5
million, or 1.9%, to $289.4 million, compared to $283.9 million in
the first three quarters of fiscal 2015. Adjusted operating margin
(a non-GAAP measure) decreased approximately 40 basis points to
12.8%, compared to 13.2% in the first three quarters of fiscal
2015, which reflected increased investments in growth initiatives,
partially offset by improved gross margin.
Net income in the first three quarters of fiscal 2016 increased
$5.8 million, or 3.5%, to $171.0 million, or $3.34 per diluted
share, compared to $165.2 million, or $3.12 per diluted share, in
the first three quarters of fiscal 2015. Adjusted net income (a
non-GAAP measure) increased $2.0 million, or 1.2%, to $172.4
million, compared to $170.4 million in the first three quarters of
fiscal 2015. Adjusted earnings per diluted share (a non-GAAP
measure) in the first three quarters of fiscal 2016 increased 4.7%
to $3.37, compared to $3.22 in the first three quarters of fiscal
2015.
Cash flow from operations in the first three quarters of fiscal
2016 was $116.6 million compared to $146.0 million in the first
three quarters of fiscal 2015. The decrease reflected unfavorable
changes in net working capital, partially offset by 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 first three quarters of fiscal 2016, the Company
believes 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 the Company
believes was influenced by the strength of the U.S. dollar relative
to other currencies. However, the Company believes these effects
were less pronounced in the third quarter of fiscal 2016 as its
U.S. retail business experienced improvement in demand from
international consumers.
Carter’s Retail Segment
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
Carter’s retail segment sales increased $19.8 million, or 6.7%,
to $314.7 million. Carter’s retail comparable sales increased 2.1%,
comprised of eCommerce comparable sales growth of 25.2%, partially
offset by a stores comparable sales decrease of 4.1%.
In the third quarter of fiscal 2016, the Company opened 13
Carter’s stores and closed one store in the United States.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
Carter’s retail segment sales increased $61.2 million, or 7.7%,
to $860.9 million. Carter’s retail comparable sales increased 2.1%,
comprised of eCommerce comparable sales growth of 19.7%, partially
offset by a stores comparable sales decline of 2.4%.
In the first three quarters of fiscal 2016, the Company opened
44 Carter’s stores and closed two stores in the United States. The
Company operated 636 Carter’s stores in the United States as of
October 1, 2016.
Carter’s Wholesale Segment
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
Carter’s wholesale segment net sales increased $12.7 million, or
3.7%, to $356.3 million, reflecting earlier customer demand and
improved pricing due to favorable product mix.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
Carter’s wholesale segment net sales increased $17.5 million, or
2.1%, to $842.1 million, reflecting improved pricing due to
favorable product mix.
OshKosh Retail Segment
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
OshKosh retail segment net sales increased $8.7 million, or
8.9%, to $107.0 million. OshKosh retail comparable sales increased
4.1%, comprised of eCommerce comparable sales growth of 34.8%,
partially offset by a stores comparable sales decline of 3.0%.
In the third quarter of fiscal 2016, the Company opened seven
OshKosh stores in the United States and closed two stores.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
OshKosh retail segment net sales increased $22.9 million, or
9.4%, to $267.7 million. OshKosh retail comparable sales increased
2.1%, comprised of eCommerce comparable sales growth of 24.9%,
partially offset by a stores comparable sales decline of 3.5%.
In the first three quarters of fiscal 2016, the Company opened
30 OshKosh stores in the United States and closed four stores. The
Company operated 267 OshKosh stores in the United States as of
October 1, 2016.
OshKosh Wholesale Segment
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
OshKosh wholesale segment net sales decreased $1.3 million, or
7.0%, to $17.5 million due to a decrease in the number of units
shipped, reflecting lower seasonal bookings, and a decrease in the
average price per unit.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
OshKosh wholesale segment net sales decreased $10.4 million, or
21.1%, to $38.8 million due to a decrease in the number of units
shipped, reflecting lower seasonal bookings, and a decrease in the
average price per unit.
International Segment
Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal
2015
International segment net sales increased $11.8 million, or
12.5%, to $106.0 million, driven by growth in the Company’s retail
businesses in Canada, increased wholesale demand in international
markets, and eCommerce sales in China.
Changes in foreign currency exchange rates in the third quarter
of fiscal 2016 compared to the third quarter of fiscal 2015
favorably affected international segment net sales in the third
quarter of fiscal 2016 by $0.3 million, or 0.3%. On a constant
currency basis (a non-GAAP measure), international segment net
sales increased 12.2%.
For the third quarter of fiscal 2016, Canada retail comparable
sales increased 1.6%, comprised of eCommerce comparable sales
growth of 37.2%, partially offset by a stores comparable sales
decline of 0.5%. In the third quarter of fiscal 2016, the Company
opened six stores in Canada.
First Three Quarters of Fiscal 2016 compared to First Three
Quarters of Fiscal 2015
International segment net sales increased $26.3 million, or
11.5%, to $255.5 million, principally driven by growth in the
Company’s retail businesses in Canada, new eCommerce sales in
China, and increased wholesale demand in international markets,
partially offset by unfavorable foreign currency exchange
rates.
Changes in foreign currency exchange rates in the first three
quarters of fiscal 2016 compared to the first three quarters of
fiscal 2015 negatively affected international segment net sales in
the first three quarters of fiscal 2016 by $6.7 million, or 2.9%.
On a constant currency basis (a non-GAAP measure), international
segment net sales increased 14.4%.
For the first three quarters of fiscal 2016, Canada retail
comparable sales increased 7.2%, comprised of stores comparable
sales growth of 5.4% and eCommerce comparable sales growth of
37.3%. In the first three quarters of fiscal 2016, the Company
opened nine stores in Canada. The Company operated 156 stores in
Canada as of October 1, 2016.
Return of Capital
Since the beginning of fiscal 2013, the Company has returned a
total of $1.05 billion to shareholders through share repurchases
and cash dividends.
In the third quarter of fiscal 2016, the Company returned a
total of $75.4 million to shareholders through share repurchases
and cash dividends. In the first three quarters of fiscal 2016, the
Company returned a total of $289.3 million to shareholders through
share repurchases and cash dividends, as described below.
During the third quarter of fiscal 2016, the Company repurchased
and retired 587,100 shares of its common stock for $58.9 million at
an average price of $100.37 per share. In the first three quarters
of fiscal 2016, the Company repurchased and retired 2,358,947
shares of its common stock for $239.1 million at an average price
of $101.37 per share. Fiscal year-to-date through October 26, 2016,
the Company repurchased and retired a total of 2,666,947 shares for
$266.1 million at an average price of $99.76 per share. All shares
were repurchased in open market transactions pursuant to applicable
regulations for such transactions. As of October 26, 2016, the
total remaining capacity under the Company’s previously announced
repurchase authorizations was approximately $309 million.
During the third quarter of fiscal 2016, the Company paid a cash
dividend of $0.33 per share totaling $16.5 million. In the first
three quarters of fiscal 2016, the Company paid cash dividends of
$0.99 per share totaling $50.1 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 fourth quarter of fiscal 2016, the Company projects net
sales will increase approximately 5% to 6% compared to the fourth
quarter of fiscal 2015 and adjusted diluted earnings per share in
the range of $1.65 to $1.70 (growth of approximately 18% to 21%)
compared to adjusted diluted earnings per share of $1.40 in the
fourth quarter of fiscal 2015. This forecast for the fourth quarter
of fiscal 2016 adjusted earnings per share excludes anticipated
expenses of approximately $0.3 million related to the Company's
direct sourcing initiative. The Company believes that these
adjustments provide a meaningful comparison of the Company's
results and afford investors a view of what management considers to
be the Company's core performance.
For fiscal 2016, the Company continues to project net sales
growth of approximately 5% to 6% compared to fiscal 2015 and now
projects adjusted diluted earnings per share will increase
approximately 9% to 10% (previously projected growth of
approximately 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
$0.8 million related to the Company's direct sourcing initiative.
The Company believes that these adjustments provide a meaningful
comparison of the Company's results and afford investors a view of
what management considers to be the Company's core performance.
Conference Call
The Company will hold a conference call with investors to
discuss third quarter fiscal 2016 results and its business outlook
on October 27, 2016 at 8:30 a.m. Eastern Daylight Time. To
participate in the call, please dial 913-981-5519. To listen to a
live broadcast via the internet, please visit www.carters.com and
select the “Q3 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
November 5, 2016, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 5816538. 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 fourth
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 Three Fiscal Quarters
Ended October 1, 2016 October 3,
2015 October 1, 2016 October 3,
2015 Net sales $ 901,425 $ 849,806 $ 2,264,981 $ 2,147,335 Cost
of goods sold 525,879 502,267 1,296,324
1,252,849 Gross profit 375,546 347,539 968,657 894,486
Selling, general, and administrative expenses 255,322 230,017
712,782 650,496 Royalty income (10,670 ) (12,699 ) (31,270 )
(32,688 ) Operating income 130,894 130,221 287,145 276,678 Interest
expense 6,779 6,907 20,321 20,534 Interest income (68 ) (91 ) (453
) (385 ) Other (income) expense, net (36 ) (622 ) 3,673 (560
) Income before income taxes 124,219 124,027 263,604 257,089
Provision for income taxes 43,408 44,701 92,615
91,866 Net income $ 80,811 $ 79,326 $
170,989 $ 165,223 Basic net income per common
share $ 1.62 $ 1.52 $ 3.37 $ 3.15 Diluted net income per common
share $ 1.60 $ 1.51 $ 3.34 $ 3.12 Dividend declared and paid per
common share $ 0.33 $ 0.22 $ 0.99 $ 0.66
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended Three Fiscal Quarters
Ended
October 1, 2016
% ofTotal
NetSales
October 3, 2015
% ofTotal
NetSales
October 1, 2016
% ofTotal
NetSales
October 3, 2015
% ofTotal
NetSales
Net
sales:
Carter’s Wholesale $ 356,258 39 .5% $ 343,555 40 .4% $ 842,136 37
.2% $ 824,600 38.4% Carter’s Retail (a) 314,699 34 .9%
294,928 34 .7% 860,854 38 .0% 799,635 37.2%
Total Carter’s (U.S.) 670,957 74 .4% 638,483 75 .1%
1,702,990 75 .2% 1,624,235 75.6% OshKosh Retail (a)
106,999 11 .9% 98,292 11 .6% 267,715 11 .8% 244,787 11.4% OshKosh
Wholesale 17,474 1 .9% 18,794 2 .2% 38,772 1
.7% 49,151 2.3% Total OshKosh (U.S.) 124,473 13 .8%
117,086 13 .8% 306,487 13 .5% 293,938 13.7%
International (b) 105,995 11 .8% 94,237 11 .1%
255,504 11 .3% 229,162 10.7% Total net sales $
901,425 100 .0% $ 849,806 100 .0% $ 2,264,981
100 .0% $ 2,147,335 100.0%
Operating income
(loss):
% ofSegment Net Sales
% ofSegment Net
Sales
% ofSegment Net Sales %
ofSegment Net Sales Carter’s Wholesale $ 81,551
22 .9% $ 74,347 21 .6% $ 187,655 22 .3% $ 172,485 20.9% Carter’s
Retail (a) 48,051 15 .3% 51,733 17 .5% 127,738
14 .8% 134,557 16.8% Total Carter’s (U.S.) 129,602 19
.3% 126,080 19 .7% 315,393 18 .5% 307,042
18.9% OshKosh Retail (a) 2,652 2 .5% 6,171 6 .3% (614 ) (0 .2)%
3,396 1.4% OshKosh Wholesale (U.S.) 4,450 25 .5% 4,487
23 .9% 8,266 21 .3% 9,715 19.8% Total OshKosh
7,102 5 .7% 10,658 9 .1% 7,652 2 .5% 13,111
4.5% International (b) (c) 19,645 18 .5% 18,220
19 .3% 37,191 14 .6% 30,967 13.5% Corporate
expenses (d) (e) (f) (25,455 ) (24,737 ) (73,091 ) (74,442 ) Total
operating income $ 130,894 14 .5% $ 130,221 15 .3% $
287,145 12 .7% $ 276,678 12.9%
(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 $1.9 million for the first three fiscal
quarters ended October 3, 2015. (d) Corporate expenses include
expenses related to incentive compensation, stock-based
compensation, executive management, severance and relocation,
finance, building occupancy, information technology, legal,
consulting, and audit fees. (e) Includes charges related to the
amortization of the H.W. Carter and Sons tradenames of
approximately $1.7 million for the three fiscal quarters ended
October 1, 2016, and approximately $1.0 million and $5.3 million
for the fiscal quarter and three fiscal quarters ended October 3,
2015, respectively. This amortization expense for the third fiscal
quarter ended October 1, 2016 was not material. (f) Includes
charges related to the Company's direct sourcing initiative of $0.5
million for the fiscal quarter and for the three fiscal quarters
ended October 1, 2016.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except per share
data)
(unaudited)
October 1, 2016 January 2, 2016
October 3, 2015 ASSETS Current assets: Cash and cash
equivalents $ 140,626 $ 381,209 $ 288,260 Accounts receivable, net
271,207 207,570 246,565 Finished goods inventories 552,726 469,934
511,520 Prepaid expenses and other current assets 43,155 37,815
36,414 Deferred income taxes 37,600 34,080 34,895
Total current assets 1,045,314 1,130,608 1,117,654 Property,
plant, and equipment, net of accumulated depreciation of $333,660,
$290,636, and $276,230, respectively 388,440 371,704 361,305
Tradenames, net 308,973 310,848 311,842 Goodwill 176,956 174,874
176,633 Other assets 18,022 15,620 14,940
Total assets $ 1,937,705 $ 2,003,654 $ 1,982,374
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 155,223 $ 157,648 $ 173,594 Other
current liabilities 126,922 105,070 105,199
Total current liabilities 282,145 262,718 278,793 Long-term
debt, net 580,613 578,972 579,612 Deferred income taxes 129,278
128,838 119,499 Other long-term liabilities 169,535 158,075
161,527 Total liabilities 1,161,571 1,128,603
1,139,431 Commitments and contingencies Stockholders'
equity: Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at October 1, 2016, January
2, 2016, and October 3, 2015 — — — Common stock, voting; par value
$.01 per share; 150,000,000 shares authorized; 49,625,609,
51,764,309, and 52,076,784 shares issued and outstanding at October
1, 2016, January 2, 2016 and October 3, 2015, respectively 496 518
521 Additional paid-in capital — — — Accumulated other
comprehensive loss (31,889 ) (36,367 ) (33,480 ) Retained earnings
807,527 910,900 875,902 Total stockholders'
equity 776,134 875,051 842,943 Total
liabilities and stockholders' equity $ 1,937,705 $ 2,003,654
$ 1,982,374
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in thousands)
(unaudited)
Three Fiscal Quarters Ended October 1,
2016 October 3, 2015 Cash flows from
operating activities: Net income $ 170,989 $ 165,223 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 52,384 44,187 Amortization of
tradenames 1,875 5,422 Accretion of contingent consideration — 809
Amortization of debt issuance costs 1,092 1,246 Non-cash
stock-based compensation expense 13,026 13,304 Unrealized foreign
currency loss, net 2,361 221 Income tax benefit from stock-based
compensation (4,067 ) (7,963 ) Loss on disposal of property, plant,
and equipment 821 80 Deferred income taxes (2,333 ) (1,801 ) Effect
of changes in operating assets and liabilities: Accounts
receivable, net (63,436 ) (61,108 ) Finished goods inventories
(81,011 ) (73,724 ) Prepaid expenses and other assets (10,138 )
(3,144 ) Accounts payable and other liabilities 35,011
63,282 Net cash provided by operating activities 116,574
146,034 Cash flows from investing activities:
Capital expenditures (71,190 ) (76,987 ) Proceeds from sale of
property, plant, and equipment 216 66 Net cash used
in investing activities (70,974 ) (76,921 ) Cash flows from
financing activities: Payments of debt issuance costs — (1,495 )
Borrowings under secured revolving credit facility — 205,586
Payments on secured revolving credit facility — (205,237 )
Repurchase of common stock (239,138 ) (78,339 ) Payment of
contingent consideration — (7,572 ) Dividends paid (50,131 )
(34,617 ) Income tax benefit from stock-based compensation 4,067
7,963 Withholdings from vesting of restricted stock (8,594 )
(12,575 ) Proceeds from exercise of stock options 6,386
5,743 Net cash used in financing activities (287,410 )
(120,543 ) Effect of exchange rate changes on cash and cash
equivalents 1,227 (948 ) Net decrease in cash and cash
equivalents (240,583 ) (52,378 ) Cash and cash equivalents,
beginning of period 381,209 340,638 Cash and cash
equivalents, end of period $ 140,626 $ 288,260
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended October 1, 2016
Gross Margin
% Net Sales
SG&A % Net Sales
Operating Income % Net
Sales Net Income Diluted
EPS As reported (GAAP) $ 375.5 41.7% $ 255.3 28.3% $
130.9 14.5% $ 80.8 $ 1.60 Direct sourcing initiative (c) (d) —
(0.5 ) 0.5 0.3 0.01
As adjusted (a) $
375.5 41.7% $ 254.8 28.3% $ 131.4 14.6% $ 81.1
$ 1.61
Three Fiscal Quarters Ended October
1, 2016 Gross Margin % Net Sales SG&A
% Net Sales Operating Income % Net Sales
Net Income Diluted EPS As reported (GAAP) $
968.7 42.8% $ 712.8 31.5% $ 287.1 12.7% $ 171.0 $ 3.34 Amortization
of tradenames (d) — (1.7 ) 1.7 1.1 0.02 Direct sourcing initiative
(c) (d) — (0.5 ) 0.5 0.3 0.01
As adjusted
(a) $ 968.7 42.8% $ 710.5 31.4% $ 289.4
12.8% $ 172.4 $ 3.37
Fiscal Quarter Ended
October 3, 2015 Gross Margin % Net Sales
SG&A % Net Sales Operating Income % Net
Sales Net Income Diluted EPS As reported
(GAAP) $ 347.5 40.9% $ 230.0 27.1% $ 130.2 15.3% $ 79.3 $ 1.51
Amortization of tradenames (d) — (1.0 ) 1.0 0.6 0.01
As adjusted
(a) $ 347.5 40.9% $ 229.0 27.0% $ 131.2
15.4% $ 79.9 $ 1.52
Three Fiscal Quarters
Ended October 3, 2015 Gross Margin % Net Sales
SG&A % Net Sales Operating Income % Net
Sales Net Income Diluted EPS As reported
(GAAP) $ 894.5 41.7% $ 650.5 30.3% $ 276.7 12.9% $ 165.2 $ 3.12
Amortization of tradenames (d) — (5.3 ) 5.3 3.3 0.06 Revaluation of
contingent consideration (b) — (1.9 ) 1.9 1.9
0.04
As adjusted (a) $ 894.5 41.7% $ 643.3
30.0% $ 283.9 13.2% $ 170.4 $ 3.22
(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 and affords investors a view of what management
considers to be the Company's core 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 acquisition of Bonnie Togs in 2011. (c) Costs
associated with the Company's direct sourcing initiative, which
includes severance and relocation. (d) The difference between the
impacts on Operating Income and Net Income represents the income
taxes related to the adjustment item and it was calculated by using
the applicable tax rate of the underlying jurisdiction.
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 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 (c) — (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 (c) — (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 and affords investors a view of
what management considers to be the Company's core 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 acquisition of Bonnie Togs in 2011. (c) The
difference between the impacts on Operating Income and Net Income
represents the income taxes related to the adjustment item and it
was calculated by using the applicable tax rate of the underlying
jurisdiction.
Note: Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended Three Fiscal Quarters
Ended October 1, 2016 October
3, 2015 October 1, 2016
October 3, 2015 Weighted-average number of common and
common equivalent shares outstanding: Basic number of common shares
outstanding 49,526,480 51,740,523 50,282,345 51,960,041 Dilutive
effect of equity awards 460,271 507,815 470,050
512,861 Diluted number of common and common
equivalent shares outstanding 49,986,751 52,248,338
50,752,395 52,472,902
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 80,811 $ 79,326 $ 170,989 $ 165,223
Income allocated to participating securities (632 ) (675 ) (1,359 )
(1,557 ) Net income available to common shareholders $ 80,179
$ 78,651 $ 169,630 $ 163,666 Basic net
income per common share $ 1.62 $ 1.52 $ 3.37 $ 3.15 Diluted net
income per common share: Net income $ 80,811 $ 79,326 $ 170,989 $
165,223 Income allocated to participating securities (627 ) (669 )
(1,350 ) (1,545 ) Net income available to common shareholders $
80,184 $ 78,657 $ 169,639 $ 163,678
Diluted net income per common share $ 1.60 $ 1.51 $ 3.34 $ 3.12
As adjusted
(a):
Basic net income per common share: Net income $ 81,135 $ 79,925 $
172,411 $ 170,443 Income allocated to participating securities (634
) (681 ) (1,371 ) (1,607 ) Net income available to common
shareholders $ 80,501 $ 79,244 $ 171,040 $
168,836 Basic net income per common share $ 1.63 $ 1.53 $
3.40 $ 3.25 Diluted net income per common share: Net income $
81,135 $ 79,925 $ 172,411 $ 170,443 Income allocated to
participating securities (629 ) (675 ) (1,362 ) (1,595 ) Net income
available to common shareholders $ 80,506 $ 79,250 $
171,049 $ 168,848 Diluted net income per common share
$ 1.61 $ 1.52 $ 3.37 $ 3.22 (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 $0.3 million and $1.4 million in
after-tax expenses from these results for the fiscal quarter and
three fiscal quarters ended October 1, 2016, respectively. The
Company has excluded $0.6 million and $5.2 million in after-tax
expenses from these results for the fiscal quarter and three fiscal
quarters ended October 3, 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:
Fiscal Quarter Ended Three Fiscal Quarters
Ended
Four Fiscal Quarters Ended
October 1, 2016
October 3, 2015 October 1, 2016
October 3, 2015 October 1, 2016 (dollars in
millions) Net income $ 80.8 $ 79.3 $ 171.0 $ 165.2 $ 243.6 Interest
expense 6.8 6.9 20.3 20.5 26.8 Interest income (0.1 ) (0.1 ) (0.5 )
(0.4 ) (0.6 ) Income tax expense 43.4 44.7 92.6 91.9 131.1
Depreciation and amortization (a) 17.5 14.8 54.3
49.6 73.1 EBITDA $ 148.4 $ 145.6
$ 337.7 $ 326.8 $ 474.0
Adjustments to EBITDA
Revaluation of contingent consideration (b) $ — $ — $ — $ 1.9 $ —
Direct sourcing initiative (c) 0.5 — 0.5 —
0.5
Adjusted EBITDA $ 148.9 $ 145.6
$ 338.2 $ 328.7 $ 474.5 (a)
Includes amortization of acquired tradenames. (b)
Revaluation of the contingent consideration liability associated
with the Company’s acquisition of Bonnie Togs in 2011. (c) Pre-tax
costs associated with the Company's direct sourcing initiative,
which includes severance and relocation. Approximately $0.2 million
of income tax benefit is associated with this adjustment and it was
calculated by using the applicable tax rate of the underlying
jurisdiction.
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.
These measures also afford investors a view of what management
considers to be the Company's core 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 three
fiscal quarters ended October 1, 2016:
Fiscal Quarter Ended
Reported Net Sales October 1,
2016
Impact of Foreign Currency Translation
Constant-Currency Net Sales October 1, 2016
Reported Net Sales October 3, 2015
Reported Net Sales % Change
Constant-Currency Net Sales % Change Consolidated net
sales $ 901.4 $ (0.3 ) $ 901.1 $ 849.8 6.1% 6.0% International
segment net sales $ 106.0 $ (0.3 ) $ 105.7 $ 94.2 12.5% 12.2%
First Three Fiscal Quarters Ended Reported Net
Sales October 1, 2016 Impact of Foreign Currency
Translation Constant-Currency Net Sales October 1, 2016
Reported Net Sales October 3, 2015 Reported Net Sales %
Change Constant-Currency Net Sales % Change
Consolidated net sales $ 2,265.0 $ 6.7 $ 2,271.7 $ 2,147.3 5.5%
5.8% International segment net sales $ 255.5 $ 6.7 $ 262.2 $ 229.1
11.5% 14.4%
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/20161027005754/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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