- Net Sales $652 Million, Up
10%
- Total U.S. Direct-to-Consumer Sales:
Carter's +11%, OshKosh +15%
- EPS $0.63, Down 8%; Adjusted EPS
$0.73, Down 8%
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the
United States of apparel exclusively for babies and young children,
today reported its first quarter fiscal 2014 results.
“Despite the severe winter weather earlier this year, we
continued to see strong demand for our brands and achieved a record
level of first quarter sales. We believe consumers are responding
to the strength and compelling value of our Spring product
offerings,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Our sales growth in the first quarter was driven by our
Carter’s brand with strong performance in both our wholesale and
retail businesses. As expected, earnings were affected by higher
product costs and investments to support our growth strategies.
We’re forecasting good growth in sales and earnings, and expect to
achieve our growth objectives this year.”
First Quarter of Fiscal 2014 compared to First Quarter of
Fiscal 2013
Consolidated net sales increased $60.6 million, or 10.3%, to
$651.6 million. Net domestic sales of the Company’s Carter’s brands
increased $45.3 million, or 9.9%, to $502.0 million. Net domestic
sales of the Company’s OshKosh B’gosh brand increased $5.6 million,
or 7.6%, to $79.1 million. Net international sales increased $9.7
million, or 15.9%, to $70.5 million. Changes in foreign currency
exchange rates in the first quarter of fiscal 2014 as compared to
the first quarter of fiscal 2013 negatively impacted net sales in
the first quarter of fiscal 2014 by $4.0 million. The Company's
retail operations in Japan, which the Company substantially exited
at the end of the first quarter of fiscal 2014, contributed $4.4
million in net sales in the first quarter of fiscal 2014, compared
to $3.5 million in the first quarter of fiscal 2013.
Operating income in the first quarter of fiscal 2014 decreased
$5.4 million, or 8.1%, to $61.5 million, compared to $66.9 million
in the first quarter of fiscal 2013.
First quarter fiscal 2014 operating income includes net expenses
totaling $8.6 million related to the following: the amortization
associated with the acquisition of tradenames; the office
consolidation; the revaluation of contingent consideration
associated with the acquisition of Bonnie Togs in 2011; the
Hogansville, Georgia distribution center closure; and the Japan
retail operations exit. First quarter fiscal 2013 operating income
included expenses totaling $9.5 million related to the office
consolidation, the revaluation of the Bonnie Togs contingent
consideration, and the Hogansville distribution center closure.
Excluding the net expenses noted above in both periods, adjusted
operating income in the first quarter of fiscal 2014 decreased $6.3
million, or 8.3%, to $70.1 million, compared to $76.4 million in
the first quarter of fiscal 2013. The decrease in adjusted
operating income reflects increased retail, distribution, and
information technology spending to support the Company's growth
initiatives and higher product costs that were partially offset by
improved pricing.
Net income in the first quarter of fiscal 2014 decreased $7.1
million, or 17.2%, to $34.3 million, or $0.63 per diluted share,
compared to $41.4 million, or $0.69 per diluted share, in the first
quarter of fiscal 2013. Excluding the expenses noted above in both
periods, adjusted net income in the first quarter of fiscal 2014
decreased $7.8 million, or 16.4%, to $39.9 million, compared to
$47.7 million in the first quarter of fiscal 2013. Adjusted
earnings per diluted share in the first quarter of fiscal 2014
decreased 7.5% to $0.73, compared to $0.79 per diluted share in the
first quarter of fiscal 2013.
Cash flow from operations in the first quarter of fiscal 2014
was $30.6 million compared to $53.1 million in the first quarter of
fiscal 2013. The decrease principally reflects changes in net
working capital and a decrease in earnings.
Business Segment Results
Carter’s Segments
Carter’s retail segment sales increased $21.9 million, or 10.5%,
to $230.3 million. The increase was driven by incremental sales of
$19.9 million from new retail store openings and $10.2 million
growth in eCommerce sales. This growth was partially offset by an
$8.1 million decrease in comparable retail store sales and $0.2
million in lower sales due to retail store closings. Carter's
direct-to-consumer comparable sales increased 1.0%, comprised of
eCommerce comparable sales growth of 28.5% and a retail store
comparable sales decline of 4.7%. The Company believes that the
comparable retail store sales decline in the first quarter of
fiscal 2014 was largely driven by the severe winter weather which
caused a significantly higher number of store closures and the
shift of Easter shopping into April. Retail store comparable sales
improved meaningfully for the four fiscal weeks ended April 26,
2014 compared to the four fiscal weeks ended April 27, 2013.
In the first quarter of fiscal 2014, the Company opened 16
Carter’s retail stores in the United States and closed one. The
Company operated 491 Carter’s retail stores in the United States as
of March 29, 2014.
Carter’s wholesale segment sales increased $23.5 million, or
9.4%, to $271.6 million, reflecting growth in all Carter's
brands.
OshKosh B’gosh Segments
OshKosh retail segment sales increased $8.2 million, or 14.8%,
to $63.6 million. The increase was driven by incremental sales of
$4.6 million from new retail store openings, $2.9 million in higher
eCommerce sales, and a $1.4 million increase in comparable retail
store sales. This growth was partially offset by $0.6 million in
lower sales due to retail store closings. OshKosh
direct-to-consumer comparable sales increased 7.7%, comprised of
eCommerce comparable sales growth of 31.8% and a retail store
comparable sales increase of 3.0%. The Company believes that the
comparable retail store sales in the first quarter of fiscal 2014
were adversely affected by the severe winter weather which caused a
significantly higher number of store closures and the shift of
Easter shopping into April. Retail store comparable sales improved
meaningfully for the four fiscal weeks ended April 26, 2014
compared to the four fiscal weeks ended April 27, 2013.
In the first quarter of fiscal 2014, the Company opened six
OshKosh retail stores in the United States and closed one. The
Company operated 186 OshKosh retail stores in the United States as
of March 29, 2014.
OshKosh wholesale segment sales decreased $2.6 million, or
14.3%, to $15.6 million.
International Segment
International segment sales increased $9.7 million, or 15.9%, to
$70.5 million, principally driven by growth in the Company's
wholesale businesses. Changes in foreign currency exchange rates in
the first quarter of fiscal 2014 as compared to the first quarter
of fiscal 2013 negatively impacted international net sales in the
first quarter of fiscal 2014 by $4.0 million, or 6.5%. On a
constant currency basis, international segment net sales increased
22.4%.
Canadian comparable retail store sales declined 10.2%, or
approximately $2.8 million. The Company believes that the
comparable retail store sales decline in the first quarter of
fiscal 2014 was largely driven by the severe winter weather which
caused a significantly higher number of store closures and the
shift of Easter shopping into April. Retail store comparable sales
in Canada improved meaningfully for the four fiscal weeks ended
April 26, 2014 compared to the four fiscal weeks ended April 27,
2013. In the first quarter of fiscal 2014, the Company opened two
retail stores in Canada and closed one. The Company operated 103
retail stores in Canada as of March 29, 2014.
Dividends
In the first quarter of fiscal 2014, the Company's Board of
Directors authorized a 19% increase ($0.03 per share) to the
quarterly cash dividend, to $0.19 per share. Dividends totaling
$10.2 million were paid on March 20, 2014. Future declarations of
quarterly dividends and the establishment of related record and
payment dates will be at the discretion of the Company’s Board of
Directors based on a number of factors, including the Company's
future financial performance and other considerations.
Stock Repurchase Activity
Accelerated Stock Repurchase Agreements
As previously disclosed, the Company entered into accelerated
stock repurchase ("ASR") agreements of $400 million in the third
quarter of fiscal 2013. The Company received and retired 4.6
million and 1.0 million shares during the third quarter of fiscal
2013 and the first quarter of fiscal 2014, respectively, at an
average price of $70.99 per share.
Open Market Purchases
During the first quarter of fiscal 2014, the Company repurchased
30,151 shares of its common stock for $2.3 million at an average
price of $76.03 per share in open market purchases. Subsequent to
the end of the first quarter through April 25, 2014, the Company
repurchased an additional 83,800 shares for $6.2 million at an
average price of $74.26 per share. Year-to-date through April 25,
2014, the Company repurchased a total of 113,951 shares for $8.5
million at an average price of $74.73 per share in the open
market.
As of April 25, 2014, the total remaining capacity under the
Company's previously-announced repurchase authorizations was $258.7
million.
2014 Business Outlook
For the second quarter of fiscal 2014, the Company projects net
sales to increase approximately 8% to 10% over the second quarter
of fiscal 2013 and adjusted diluted earnings per share to be
approximately comparable to adjusted diluted earnings per share of
$0.46 in the second quarter of fiscal 2013. This forecast for
second quarter fiscal 2014 adjusted earnings per share excludes the
following anticipated expenses: approximately $6 million related to
the amortization of the acquired tradenames; approximately $2
million related to the corporate office consolidation;
approximately $1 million to $2 million related to net exit costs
associated with retail operations in Japan; approximately $0.5
million related to the revaluation of the Bonnie Togs contingent
consideration; and other items the Company believes to be
nonrepresentative of underlying business performance.
For fiscal 2014, the Company projects net sales to increase
approximately 8% to 10% over fiscal 2013 and adjusted diluted
earnings per share to increase approximately 12% to 15% compared to
adjusted diluted earnings per share of $3.37 in fiscal 2013. This
forecast for fiscal 2014 adjusted earnings per share excludes the
following anticipated expenses: approximately $16 million related
to the amortization of the acquired tradenames; approximately $5
million related to the corporate office consolidation;
approximately $2 million related to the revaluation of the Bonnie
Togs contingent consideration; approximately $1 million related to
net exit costs associated with retail operations in Japan; and
other items the Company believes to be nonrepresentative of
underlying business performance.
Conference Call
The Company will hold a conference call with investors to
discuss first quarter fiscal 2014 results and its business outlook
on April 28, 2014 at 8:30 a.m. Eastern Time. To participate in the
call, please dial 913-312-1524. To listen to a live broadcast of
the call on the internet, please log on to www.carters.com and
select the “First Quarter 2014 Earnings Conference Call” link under
the “Investor Relations” tab. Presentation materials for the call
can be accessed under the same "Investor Relations" tab by
selecting the “Webcasts & Presentations” link under the “News
& Events” tab. A replay of the call will be available shortly
after the broadcast through May 7, 2014, at 888-203-1112 (U.S. /
Canada) or 719-457-0820 (international), passcode 5135253. The
replay will also be archived on the Company's website.
About Carter's, Inc.
Carter's, Inc. is the largest branded marketer in the United
States of apparel and related products exclusively for babies and
young children. The Company owns the Carter's and OshKosh B'gosh
brands, two of the most recognized brands in the marketplace. These
brands are sold in leading department stores, national chains, and
specialty retailers domestically and internationally. They are also
sold through more than 700 Company-operated stores in the United
States and Canada and on-line at www.carters.com and
www.oshkoshbgosh.com. 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 second
quarter of fiscal 2014 and fiscal year 2014, or any other future
period, assessment of the Company's performance and financial
position, and drivers of the Company's sales and earnings growth.
Such statements are based on current expectations only, and are
subject to certain risks, uncertainties, and assumptions. Should
one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. Factors
that could cause actual results to materially differ include the
risks of: losing one or more major customers or vendors or
financial difficulties for one or more of our major customers or
vendors; the Company's products not being accepted in the
marketplace; changes in consumer preference and fashion trends;
negative publicity; the Company failing to protect its intellectual
property; the breach of the Company's consumer databases, systems
or processes; incurring costs in connection with cooperating with
regulatory investigations and proceedings; increased leverage, not
being able to repay its indebtedness and being subject to
restrictions on operations by the Company's debt agreements;
increased production costs; deflationary pricing pressures;
decreases in the overall level of consumer spending; disruptions
resulting from the Company's dependence on foreign supply sources;
the Company's foreign supply sources not meeting the Company's
quality standards or regulatory requirements; disruptions in the
Company's supply chain, including distribution centers or
in-sourcing capabilities or otherwise, including the risk of
slow-downs, disruptions or strikes in the event that a new
agreement between the port through which we source substantially
all of our products and International Longshore and Warehouse Union
is not reached by July 1, 2014; the loss of the Company's principal
product sourcing agent; increased competition in the baby and young
children's apparel market; the Company being unable to identify new
retail store locations or negotiate appropriate lease terms for the
retail stores; the Company not adequately forecasting demand, which
could, among other things, create significant levels of excess
inventory; failure to achieve sales growth plans, cost savings, and
other assumptions that support the carrying value of the Company's
intangible assets; not attracting and retaining key individuals
within the organization; failure to implement needed upgrades to
the Company's information technology systems; disruptions resulting
from the Company's transition of distribution functions to its new
Braselton facility and not achieving planned efficiencies; being
unsuccessful in expanding into international markets and failing to
successfully manage legal, regulatory, political and economic risks
of international operations, including maintaining compliance with
worldwide anti-bribery laws; incurring substantial costs as a
result of various claims or pending or threatened lawsuits; and the
failure to declare future quarterly dividends. Many of these risks
are further described in the most recently filed Annual Report on
Form 10-K and other reports filed with the Securities and Exchange
Commission under the headings "Risk Factors" and "Forward-Looking
Statements." The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except for share
data)
(unaudited)
Fiscal quarter ended March 29, 2014
March 30, 2013 Net sales $ 651,643 $
591,009 Cost of goods sold 389,918 347,947 Gross
profit 261,725 243,062 Selling, general, and administrative
expenses 210,095 185,361 Royalty income (9,901 ) (9,242 ) Operating
income 61,531 66,943 Interest expense 6,897 1,294 Interest income
(132 ) (191 ) Other expense, net 596 573 Income
before income taxes 54,170 65,267 Provision for income taxes 19,873
23,852 Net income $ 34,297 $ 41,415
Basic net income per common share $ 0.64 $ 0.70
Diluted net income per common share $ 0.63 $ 0.69 Dividend
declared and paid per common share $ 0.19 $ —
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal quarter ended March 29, 2014
% ofTotal March
30, 2013 % ofTotal
Net
sales:
Carter’s Wholesale $ 271,628 41.7 % $ 248,178 42.0 % Carter’s
Retail (a) 230,328 35.3 % 208,429 35.3 % Total
Carter’s 501,956 77.0 % 456,607 77.3 % OshKosh Retail
(a) 63,558 9.8 % 55,345 9.4 % OshKosh Wholesale 15,585 2.4 %
18,186 3.1 % Total OshKosh 79,143 12.2 % 73,531
12.4 % International (b) 70,544 10.8 % 60,871
10.3 % Total net sales $ 651,643 100.0 % $ 591,009
100.0 %
Operating
income:
% ofsegmentnet
sales
% ofsegmentnet
sales
Carter’s Wholesale $ 46,867 17.3 % $ 50,410 20.3 % Carter’s Retail
(a) 42,979 18.7 % 39,644 19.0 % Total Carter’s 89,846
17.9 % 90,054 19.7 % OshKosh Retail (a) (4,489 ) (7.1
)% (5,391 ) (9.7 )% OshKosh Wholesale 2,025 13.0 % 2,908
16.0 % Total OshKosh (2,464 ) (3.1 )% (2,483 ) (3.4 )%
International (b) (c) 4,036 5.7 % 4,598 7.6 % Total
segment operating income 91,418 14.0 % 92,169 15.6 % Corporate
expenses (d) (e) (29,887 ) (4.6 )% (25,226 ) (4.3 )% Total
operating income $ 61,531 9.4 % $ 66,943 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 of approximately $0.5 million and $0.9 million for
the first quarter ended March 29, 2014 and March 30, 2013,
respectively. Also includes a benefit of approximately $0.4 million
for the quarter ended March 29, 2014, reflecting a favorable
recovery on inventory related to the Company's exit from Japan
retail operations. There were no such costs related to Japan for
the quarter ended March 30, 2013. (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:
Fiscal
quarter ended (dollars in millions)
March 29,
2014 March 30, 2013 Closure of
distribution facility in Hogansville, GA (1) $ 0.3 $ 0.6 Office
consolidation costs $ 2.0 $ 8.0 Amortization of H.W. Carter and
Sons tradenames $ 6.3 $ — (1) Continuing operating costs associated
with the closure of the Company's distribution facility in
Hogansville, Georgia.
Certain prior year amounts have been
reclassified for comparative purposes.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except for share
data)
(unaudited)
March 29, 2014 December 28, 2013
March 30, 2013 ASSETS Current assets: Cash and
cash equivalents $ 277,236 $ 286,546 $ 397,563 Accounts receivable,
net 205,166 193,611 178,360 Finished goods inventories, net 363,018
417,754 284,525 Prepaid expenses and other current assets 26,362
35,157 21,612 Deferred income taxes 37,343 37,313
31,708 Total current assets 909,125 970,381 913,768
Property, plant, and equipment, net 316,786 307,885 182,193
Tradenames and other intangibles, net 323,967 330,258 305,974
Goodwill 184,604 186,077 188,731 Deferred debt issuance costs, net
7,758 8,088 2,682 Other assets 10,109 9,795 4,333
Total assets $ 1,752,349 $ 1,812,484 $
1,597,681
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 103,439 $ 164,010 $ 97,884
Other current liabilities 75,235 105,129 72,590
Total current liabilities 178,674 269,139 170,474 Long-term
debt 586,000 586,000 186,000 Deferred income taxes 118,032 121,434
112,015 Other long-term liabilities 140,493 135,180
106,004 Total liabilities $ 1,023,199 $ 1,111,753
$ 574,493 Commitments and contingencies
Stockholders’ equity: Preferred stock; par value $.01 per share;
100,000 shares authorized; none issued or outstanding at March 29,
2014, December 28, 2013, and March 30, 2013. — — — Common stock,
voting; par value $.01 per share; 150,000,000 shares authorized;
53,742,906, 54,541,879, and 59,358,011 shares issued and
outstanding at March 29, 2014, December 28, 2013, and March 30,
2013, respectively 537 545 594 Additional paid-in capital 11,420
4,332 248,032 Accumulated other comprehensive loss (12,842 )
(10,082 ) (12,670 ) Retained earnings 730,035 705,936
787,232 Total stockholders’ equity 729,150 700,731
1,023,188 Total liabilities and stockholders’ equity
$ 1,752,349 $ 1,812,484 $ 1,597,681
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOW
(dollars in thousands)
(unaudited)
Fiscal quarter ended March 29, 2014
March 30, 2013 Cash flows from
operating activities: Net income $ 34,297 $ 41,415 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,354 12,389 Amortization of H.W.
Carter and Sons tradenames 6,271 — Non-cash revaluation of
contingent consideration 454 891 Amortization of debt issuance
costs 375 196 Non-cash stock-based compensation expense 4,535 4,065
Income tax benefit from stock-based compensation (3,370 ) (3,531 )
Loss on disposal of property, plant, and equipment 189 88 Deferred
income taxes (3,320 ) 1,837 Effect of changes in operating assets
and liabilities: Accounts receivable (11,725 ) (10,402 )
Inventories 53,309 64,592 Prepaid expenses and other assets 8,424
(221 ) Accounts payable and other liabilities (74,233 ) (58,191 )
Net cash provided by operating activities 30,560 53,128
Cash flows from investing activities: Capital
expenditures (32,083 ) (31,426 ) Net cash used in investing
activities (32,083 ) (31,426 ) Cash flows from financing
activities: Payment of debt issuance costs (55 ) — Repurchase of
common stock (2,292 ) (8,942 ) Dividends paid (10,208 ) — Income
tax benefit from stock-based compensation 3,370 3,531 Withholdings
from vesting of restricted stock (4,079 ) (4,383 ) Proceeds from
exercise of stock options 5,546 3,760 Net cash used
in financing activities (7,718 ) (6,034 ) Effect of exchange
rate changes on cash (69 ) (341 ) Net (decrease) increase in cash
and cash equivalents (9,310 ) 15,327 Cash and cash equivalents,
beginning of period 286,546 382,236 Cash and
cash equivalents, end of period $ 277,236 $ 397,563
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
Fiscal quarter ended March 29, 2014
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 261.7 $ 210.1 $ 61.5 $34.3 $ 0.63
Amortization of tradenames (a) — (6.3 ) 6.3 4.0 0.07 Office
consolidation costs (b) — (2.0 ) 2.0 1.2 0.02 Revaluation of
contingent consideration (c) — (0.5 ) 0.5 0.5 0.01 Facility-related
closures (d) — (0.3 ) 0.3 0.2 — Japan retail operations exit (e)
(1.0 ) (0.6 ) (0.4 ) (0.3 ) (0.01 )
As adjusted (f) $ 260.7 $ 200.5 $ 70.1
$39.9 $ 0.73
Fiscal quarter ended
March 30, 2013
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported (GAAP) $
243.1 $ 185.4 $ 66.9 $ 41.4 $ 0.69 Office consolidation costs (b) —
(8.0 ) 8.0 5.1 0.09 Revaluation of contingent consideration (c) —
(0.9 ) 0.9 0.9 0.02 Facility-related closures (d) —
(0.6 ) 0.6 0.4 0.01
As
adjusted (f) $ 243.1 $ 175.9 $ 76.4 $ 47.7
$ 0.79
(a)
Amortization of acquired H.W. Carter and Sons tradenames. (b) Costs
associated with office consolidation including severance,
relocation, accelerated depreciation, and other charges. (c)
Revaluation of the contingent consideration liability associated
with the Company's 2011 acquisition of Bonnie Togs. (d) Costs
associated with the closure of the Company's distribution facility
in Hogansville, Georgia. (e) Reflects a favorable recovery on
inventory related to the exit of the Company's retail business in
Japan. (f) 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.
Note: Results may not be additive due to
rounding. Certain prior year amounts have been reclassified for
comparative purposes.
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
Fiscal quarter ended June 29, 2013
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS
As reported (GAAP) $ 220.2 $ 195.0 $ 32.7 $ 19.7 $
0.33 Office consolidation costs (a) — (10.2 ) 10.2 6.4 0.10
Revaluation of contingent consideration (b) — (1.0 ) 1.0 1.0 0.02
Amortization of tradenames (c) — (1.0 ) 1.0 0.6
0.01
As adjusted (d) $ 220.2 $ 182.9
$ 44.9 $ 27.7 $ 0.46
Fiscal
year ended December 28, 2013
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported (GAAP) $
1,095.4 $ 868.5 $ 264.2 $ 160.4 $ 2.75 Office consolidation costs
(a) — (33.3 ) 33.3 21.0 0.36 Amortization of tradenames (c) — (13.6
) 13.6 8.6 0.15 Japan retail operations exit (e) 1.1 (3.0 ) 4.1 2.6
0.04 Revaluation of contingent consideration (b) — (2.8 ) 2.8 2.8
0.05 Facility-related closures (f) — (1.9 ) 1.9 1.2
0.02
As adjusted (d) $ 1,096.4 $ 813.9
$ 319.8 $ 196.5 $ 3.37 (a) Costs associated
with office consolidation including severance, relocation,
accelerated depreciation, and other charges. (b) Revaluation of the
contingent consideration liability associated with the Company's
2011 acquisition of Bonnie Togs. (c) Amortization of acquired H.W.
Carter and Sons tradenames. (d) 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. (e) Costs incurred to exit the
Company's retail business in Japan. (f) Costs associated with the
closure of the Company's distribution facility in Hogansville,
Georgia.
Note: Results may not be additive due to
rounding. Certain prior year amounts have been reclassified for
comparative purposes.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
Fiscal quarter ended March 29, 2014
March 30, 2013 Weighted-average number
of common and common equivalent shares outstanding: Basic number of
common shares outstanding 53,172,459 58,467,804 Dilutive effect of
equity awards 501,322 877,404 Diluted number of
common and common equivalent shares outstanding 53,673,781
59,345,208
As reported on a
GAAP Basis:
Basic net income per common share: Net income $ 34,297 $ 41,415
Income allocated to participating securities (470 ) (602 ) Net
income available to common shareholders $ 33,827 $ 40,813
Basic net income per common share $ 0.64 $ 0.70
Diluted net income per common share: Net income $ 34,297 $ 41,415
Income allocated to participating securities (467 ) (595 ) Net
income available to common shareholders $ 33,830 $ 40,820
Diluted net income per common share $ 0.63 $ 0.69
As adjusted
(a):
Basic net income per common share: Net income $ 39,866 $ 47,709
Income allocated to participating securities (547 ) (694 ) Net
income available to common shareholders $ 39,319 $ 47,015
Basic net income per common share $ 0.74 $ 0.80
Diluted net income per common share: Net income $ 39,866 $ 47,709
Income allocated to participating securities (543 ) (686 ) Net
income available to common shareholders $ 39,323 $ 47,023
Diluted net income per common share $ 0.73 $ 0.79 (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 $5.6 million
and $6.3 million in after-tax expenses from these results for the
first fiscal quarters of 2014 and 2013, respectively.
RECONCILIATION OF U.S. GAAP AND NON-GAAP
INFORMATION
The following table provides a reconciliation
of EBITDA and adjusted EBITDA for the periods indicated to net
income (loss), which is the most directly comparable financial
measure presented in accordance with U.S. Generally Accepted
Accounting Principles (in thousands):
Fiscal
quarter ended
Four fiscalquarters ended
March 29,2014 March 30,2013 March 29,2014 (dollars in
millions) Net income $ 34.3 $ 41.4 153.3 Interest expense 6.9 1.3
19.0 Interest income (0.1 ) (0.2 ) (0.6 ) Tax expense 19.9 23.9
85.1 Depreciation and amortization 21.6 12.4
77.7 EBITDA $ 82.5 $ 78.8
$ 334.5
Adjustments to EBITDA Office
consolidation costs (a) $ 2.0 $ 6.7 24.7 Revaluation of contingent
consideration (b) 0.5 0.9 2.4 Facility-related closures (c) 0.3 0.5
1.0 Japan retail operations exit (d) (1.0 ) —
3.1
Adjusted EBITDA $ 84.3 $
86.8 $ 365.7 (a) Costs related to
consolidating our Shelton, Connecticut and Atlanta, Georgia
offices, as well as certain functions from our other offices, into
a new headquarters facility in Atlanta, Georgia. These amounts
exclude costs related to accelerated depreciation as such amounts
are included in the total of depreciation and amortization above.
(b) Revaluation of the contingent consideration liability
associated with the Company's 2011 acquisition of Bonnie Togs. (c)
Costs related to the closure of a distribution facility located in
Hogansville, GA, announced in the first quarter of fiscal 2012.
These amounts exclude costs related to accelerated depreciation as
such amounts are included in the total of depreciation and
amortization above. (d)
Fiscal quarter and four fiscal quarters
ended March 29, 2014 reflect a favorable recovery of inventory and
net costs associated with the exit of the Company's retail business
in Japan, respectively. These amounts exclude costs related to
accelerated depreciation as such amounts are included in the total
of depreciation and amortization above.
Note: Results may not be additive due to
rounding.
EBITDA and Adjusted EBITDA are supplemental
financial measures that are not defined or prepared in accordance
with U.S. GAAP. We define EBITDA as net income before interest,
income taxes and depreciation and amortization. Adjusted EBITDA is
EBITDA adjusted for the items described in the footnotes (a) - (d)
to the table above.
We present EBITDA and Adjusted EBITDA because
we consider them important supplemental measures of our performance
and believe they are frequently used by securities analysts,
investors and other interested parties in the evaluation of
companies in our industry.
The use of EBITDA and Adjusted EBITDA instead
of net income or cash flows from operations has limitations as an
analytical tool, and you should not consider them in isolation, or
as a substitute for analysis of our results as reported under GAAP.
EBITDA and Adjusted EBITDA do not represent net income or cash flow
from operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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