- Net Sales $799 Million, Up
5%
- Total U.S. Direct-to-Consumer Sales:
Carter's +12%, OshKosh +12%
- EPS $1.23, Up 27%; Adjusted EPS
$1.27, Up 14%
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the
United States of apparel exclusively for babies and young children,
today reported its third quarter fiscal 2014 results.
“We’ve achieved our sales and earnings objectives in the third
quarter. Our growth was driven by our U.S. direct-to-consumer and
international businesses,” said Michael D. Casey, Chairman and
Chief Executive Officer. “We’re expecting good growth in sales and
earnings in the balance of the year driven by the strength of our
product offerings and compelling value provided by our Carter’s and
OshKosh B’gosh brands.”
Third Quarter of Fiscal 2014 compared to Third Quarter of
Fiscal 2013
Consolidated net sales increased $38.8 million, or 5.1%, to
$798.9 million. Net domestic sales of the Company’s Carter’s brands
increased $21.6 million, or 3.8%, to $591.2 million. Net domestic
sales of the Company’s OshKosh B’gosh brand increased $10.1
million, or 9.4%, to $116.5 million. Net international sales
increased $7.1 million, or 8.5%, to $91.2 million. Changes in
foreign currency exchange rates in the third quarter of fiscal 2014
as compared to the third quarter of fiscal 2013 negatively impacted
consolidated net sales in the third quarter of fiscal 2014 by $2.9
million. On a constant currency basis, consolidated net sales
increased 5.5% in the third quarter.
Operating income in the third quarter of fiscal 2014 increased
$19.4 million, or 21.3%, to $110.5 million, compared to $91.1
million in the third quarter of fiscal 2013.
Third quarter fiscal 2014 operating income includes expenses
totaling $3.0 million related to the following: the amortization of
acquired tradenames; the revaluation of the Bonnie Togs contingent
consideration; and the Hogansville, Georgia distribution center
closure. Third quarter fiscal 2013 operating income included
expenses totaling $13.1 million related to the following: the
amortization of acquired tradenames; the corporate office
consolidation; the revaluation of the Bonnie Togs contingent
consideration; and the Hogansville distribution center closure.
Excluding the expenses noted above in both periods, adjusted
operating income in the third quarter of fiscal 2014 increased $9.3
million, or 8.9%, to $113.4 million, compared to $104.2 million in
the third quarter of fiscal 2013. The increase in adjusted
operating income reflects growth in sales and expense leverage that
were partially offset by higher product costs.
Net income in the third quarter of fiscal 2014 increased $9.3
million, or 16.5%, to $65.9 million, or $1.23 per diluted share,
compared to $56.6 million, or $0.97 per diluted share, in the third
quarter of fiscal 2013. Excluding the expenses noted above in both
periods, adjusted net income in the third quarter of fiscal 2014
increased $2.9 million, or 4.5%, to $67.9 million, compared to
$65.0 million in the third quarter of fiscal 2013. Adjusted
earnings per diluted share in the third quarter of fiscal 2014
increased 13.6% to $1.27, compared to $1.12 in the third quarter of
fiscal 2013.
Business Segment Results
(Third Quarter of Fiscal 2014 compared to Third Quarter of
Fiscal 2013)
Carter’s Segments
Carter’s retail segment sales increased $30.4 million, or 12.1%,
to $281.5 million. The increase was driven by incremental sales of
$23.9 million generated by new retail store openings and an
eCommerce sales increase of $12.0 million. This growth was
partially offset by a $4.2 million decrease in comparable retail
stores sales and $1.3 million in lower sales due to retail store
closings. Carter's direct-to-consumer comparable sales increased
3.1%, comprised of eCommerce comparable sales growth of 28.0% and a
comparable retail stores sales decline of 2.0%.
In the third quarter of fiscal 2014, the Company opened 17
Carter’s retail stores in the United States and closed one. The
Company operated 525 Carter’s retail stores in the United States as
of September 27, 2014.
Carter’s wholesale segment sales decreased $8.8 million, or
2.8%, to $309.8 million, principally driven by a decline in
shipments to a single customer.
OshKosh B’gosh Segments
OshKosh retail segment sales increased $9.5 million, or 11.6%,
to $91.4 million. The increase was driven by incremental sales of
$7.2 million generated by new store openings, an eCommerce sales
increase of $3.5 million, and a comparable retail stores sales
increase of $0.1 million. This growth was partially offset by $1.3
million in lower sales due to retail store closings. OshKosh
direct-to-consumer comparable sales increased 4.6%, comprised of
eCommerce comparable sales growth of 32.1% and a comparable retail
stores sales increase of 0.2%.
In the third quarter of fiscal 2014, the Company opened ten
OshKosh retail stores in the United States and closed two. The
Company operated 195 OshKosh retail stores in the United States as
of September 27, 2014.
OshKosh wholesale segment sales increased $0.5 million, or 2.1%,
to $25.1 million.
International Segment
International segment sales increased $7.1 million, or 8.5%, to
$91.2 million, reflecting growth in the Company's wholesale,
eCommerce, and Canadian retail store businesses. Changes in foreign
currency exchange rates in the third quarter of fiscal 2014 as
compared to the third quarter of fiscal 2013 negatively impacted
international segment net sales in the third quarter of fiscal 2014
by $2.9 million. On a constant currency basis, international
segment net sales increased 11.9%. The Company's former retail
operations in Japan, which the Company substantially exited in the
first quarter of fiscal 2014, contributed $3.9 million to segment
sales in the third quarter of fiscal 2013.
Canadian comparable retail stores sales declined 2.2%,
reflecting growth in combined sales of Carter's and OshKosh B'gosh
branded products that was more than offset by the discontinuation
of Bonnie Togs legacy private label brands in fiscal 2014. In the
third quarter of fiscal 2014, the Company opened five retail stores
in Canada. The Company operated 115 retail stores in Canada as of
September 27, 2014.
First Three Quarters of Fiscal 2014 compared to First Three
Quarters of Fiscal 2013
Consolidated net sales increased $155.6 million, or 8.3% to $2.0
billion. Net domestic sales of the Company’s Carter’s brands
increased $104.6 million, or 7.4%, to $1.5 billion. Net domestic
sales of the Company’s OshKosh B’gosh brand increased $27.1
million, or 10.9%, to $274.8 million. Net international sales
increased $23.9 million, or 12.0%, to $222.9 million. Changes in
foreign currency exchange rates in the first three quarters of
fiscal 2014 as compared to the first three quarters of fiscal 2013
negatively impacted consolidated net sales in the first three
quarters of fiscal 2014 by $9.7 million. On a constant currency
basis, consolidated net sales increased 8.8% in the first three
quarters of fiscal 2014.
Operating income in the first three quarters of fiscal 2014
increased $28.6 million, or 15.0%, to $219.3 million, compared to
$190.8 million in the first three quarters of fiscal 2013.
Operating income in the first three quarters of fiscal 2014
includes net expenses totaling $23.0 million related to the
following: the amortization of acquired tradenames; the office
consolidation; the revaluation of the Bonnie Togs contingent
consideration; the Hogansville distribution center closure; and the
exit of retail operations in Japan. Operating income in the first
three quarters of fiscal 2013 included expenses totaling $34.7
million related to the following: the office consolidation; the
amortization of acquired tradenames; 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 three quarters of fiscal 2014
increased $16.9 million, or 7.5%, to $242.4 million, compared to
$225.4 million in the first three quarters of fiscal 2013. The
increase in adjusted operating income reflects growth in sales and
expense leverage that were partially offset by higher product
costs.
Net income in the first three quarters of fiscal 2014 increased
$8.4 million, or 7.2%, to $126.1 million, or $2.34 per diluted
share, compared to $117.7 million, or $1.98 per diluted share, in
the first three quarters of fiscal 2013. Excluding the net expenses
noted above in both periods, adjusted net income in the first three
quarters of fiscal 2014 increased $0.5 million, or 0.4%, to $140.9
million, compared to $140.4 million in the first three quarters of
fiscal 2013. Adjusted earnings per diluted share in the first three
quarters of fiscal 2014 increased 10.4% to $2.61, compared to $2.36
in the first three quarters of fiscal 2013.
Cash flow from operations in the first three quarters of fiscal
2014 was $24.9 million compared to $63.5 million in the first three
quarters of fiscal 2013. The decrease reflects increased working
capital requirements, principally due to business growth, higher
product costs, and improved timing of payments.
Business Segment Results
(First Three Quarters of Fiscal 2014 compared to First Three
Quarters of Fiscal 2013)
Carter’s Segments
Carter’s retail segment sales increased $86.6 million, or 13.2%,
to $745.5 million. The increase was driven by incremental sales of
$63.4 million generated by new retail store openings and an
eCommerce sales increase of $32.4 million. This growth was
partially offset by a $7.4 million decrease in comparable retail
stores sales and $1.8 million in lower sales due to retail store
closings. Carter's direct-to-consumer comparable sales increased
3.8%, comprised of eCommerce comparable sales growth of 30.4% and a
comparable retail stores sales decline of 1.4%. In the first three
fiscal quarters of fiscal 2014, the Company opened 53 Carter's
retail stores and closed four stores.
Carter’s wholesale segment sales increased $17.9 million, or
2.3%, to $781.5 million.
OshKosh B’gosh Segments
OshKosh retail segment sales increased $28.8 million, or 14.9%,
to 222.5 million. The increase was driven by incremental sales of
$17.0 million generated by new store openings, an eCommerce sales
increase of $9.4 million, and a comparable retail stores sales
increase of $4.9 million. This growth was partially offset by $2.5
million in lower sales due to retail store closings. OshKosh
direct-to-consumer comparable sales increased 7.5%, comprised of
eCommerce comparable sales growth of 34.9% and a comparable retail
stores sales increase of 3.0%. In the first three fiscal quarters
of fiscal 2014, the Company opened 20 OshKosh retail stores and
closed six stores.
OshKosh wholesale segment sales decreased $1.7 million, or 3.2%,
to 52.3 million.
International Segment
International segment sales increased $23.9 million, or 12.0%,
to $222.9 million, reflecting growth in the Company's wholesale,
Canadian retail store, and eCommerce businesses. Changes in foreign
currency exchange rates in the first three quarters of fiscal 2014
as compared to the first three quarters of fiscal 2013 negatively
impacted international segment net sales in the first three
quarters of fiscal 2014 by $9.7 million. On a constant currency
basis, international segment net sales increased 16.9%. The
Company's former retail operations in Japan contributed $4.4
million in net sales in the first three quarters of fiscal 2014,
compared to $12.1 million in the first three quarters of fiscal
2013.
Canadian comparable retail store sales declined 2.8%, reflecting
growth in combined sales of Carter's and OshKosh B'gosh branded
products that was more than offset by the discontinuation of Bonnie
Togs legacy private label brands in fiscal 2014. In the first three
fiscal quarters of fiscal 2014, the Company opened 14 retail stores
in Canada and closed one store.
Dividends
During the third quarter of fiscal 2014, the Company paid a cash
dividend of $0.19 per share totaling $10.1 million. During the
first three quarters of fiscal 2014, the Company paid cash
dividends totaling $30.5 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.
Share Repurchase Activity
During the third quarter of fiscal 2014, the Company repurchased
and retired 367,948 shares of its common stock for $26.7 million at
an average price of $72.54 per share in open market transactions.
During the first three quarters of fiscal 2014, the Company
repurchased and retired 867,099 shares for $62.8 million at an
average price of $72.39 per share in open market transactions.
Year-to-date through October 22, 2014, the Company repurchased and
retired a total of 935,399 shares for $68.1 million at an average
price of $72.84 per share in the open market.
As of October 22, 2014, the total remaining capacity under the
Company's previously-announced repurchase authorizations was $199
million.
2014 Business Outlook
In the fourth quarter of fiscal 2014, the Company projects net
sales to increase approximately 10% to 12% over the fourth quarter
of fiscal 2013 and adjusted diluted earnings per share to increase
approximately 20% to 25% compared to adjusted diluted earnings per
share of $1.02 in the fourth quarter of fiscal 2013. This forecast
for fourth quarter fiscal 2014 adjusted earnings per share excludes
the following anticipated expenses: approximately $2 million
related to the amortization of the acquired tradenames and
approximately $0.4 million related to the revaluation of the Bonnie
Togs contingent consideration.
In 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 14% to 16% 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 $7
million related to the corporate office consolidation;
approximately $1 million related to the revaluation of the Bonnie
Togs contingent consideration; approximately $1 million related to
the Hogansville distribution center closure; and approximately $1
million related to net exit costs associated with retail operations
in Japan.
Conference Call
The Company will hold a conference call with investors to
discuss third quarter fiscal 2014 results and its business outlook
on October 23, 2014 at 8:30 a.m. Eastern Time. To participate in
the call, please dial 913-312-1443. To listen to a live broadcast
of the call on the internet, please log on to www.carters.com and
select the “Third 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 November 1, 2014, at 888-203-1112 (U.S.
/ Canada) or 719-457-0820 (international), passcode 2113570. 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 800 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 fourth
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 pressure on margins; 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, and
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 in a timely manner; 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 properly manage strategic projects; 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 Quarterly Report on Form 10-Q 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 Three fiscal quarters ended September 27,
September 28, September 27,
September 28, 2014 2013 2014
2013 Net sales $ 798,936 $ 760,173 $ 2,024,645 $
1,869,056 Cost of goods sold 477,730 450,524
1,196,237 1,096,100 Gross profit 321,206 309,649
828,408 772,956 Selling, general, and administrative expenses
221,939 229,264 638,349 609,639 Royalty income (11,190 ) (10,691 )
(29,276 ) (27,440 ) Operating income 110,457 91,076 219,335 190,757
Interest expense 6,843 4,133 20,623 6,681 Interest income (45 )
(138 ) (317 ) (523 ) Other expense (income), net 1,311 (55 )
1,718 1,049 Income before income taxes 102,348 87,136
197,311 183,550 Provision for income taxes 36,462 30,565
71,232 65,891 Net income $ 65,886 $
56,571 $ 126,079 $ 117,659 Basic net
income per common share $ 1.24 $ 0.98 $ 2.36 $ 2.00 Diluted net
income per common share $ 1.23 $ 0.97 $ 2.34 $ 1.98 Dividend
declared and paid per common share $ 0.19 $ 0.16 $ 0.57 $ 0.32
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal
quarter ended Three fiscal quarters ended
September September
September
September 27, % of 28,
% of 27, % of 28, % of
2014 Total 2013 Total 2014
Total 2013 Total
Net
sales:
Carter’s Wholesale $ 309,772 38.8 % $ 318,607 41.9 % $ 781,460 38.6
% $ 763,518 40.9 % Carter’s Retail (a) 281,455 35.2 %
251,028 33.0 % 745,473 36.8 % 658,827 35.2 %
Total Carter’s 591,227 74.0 % 569,635 74.9 %
1,526,933 75.4 % 1,422,345 76.1 % OshKosh Retail (a)
91,427 11.4 % 81,894 10.8 % 222,500 11.0 % 193,662 10.4 % OshKosh
Wholesale 25,107 3.1 % 24,583 3.2 % 52,342 2.6
% 54,070 2.9 % Total OshKosh 116,534 14.5 % 106,477
14.0 % 274,842 13.6 % 247,732 13.4 %
International (b) 91,175 11.5 % 84,061 11.1 % 222,870
11.0 % 198,979 10.5 % Total net sales $ 798,936
100.0 % $ 760,173 100.0 % $ 2,024,645 100.0 %
$ 1,869,056 100.0 %
% of % of %
of % of segment segment segment
segment
Operating
income:
net sales net sales net sales net sales
Carter’s Wholesale $ 55,762 18.0 % $ 56,703 17.8 % $ 133,489 17.1 %
$ 138,186 18.1 % Carter’s Retail (a) 54,501 19.4 % 47,601
19.0 % 137,659 18.5 % 120,641 18.3 % Total
Carter’s 110,263 18.6 % 104,304 18.3 % 271,148
17.8 % 258,827 18.2 % OshKosh Retail (a) 5,300 5.8 % 5,649
6.9 % (883 ) (0.4 )% (5,520 ) (2.9 )% OshKosh Wholesale 2,240
8.9 % 4,445 18.1 % 5,125 9.8 % 7,929
14.7 % Total OshKosh 7,540 6.5 % 10,094 9.5 % 4,242
1.5 % 2,409 1.0 % International (b) (c) 15,896
17.4 % 15,129 18.0 % 27,039 12.1 % 27,478 13.8
% Total segment operating income 133,699 16.7 % 129,527 17.0 %
302,429 14.9 % 288,714 15.4 % Corporate expenses (d) (e) (23,242 )
(2.9 )% (38,451 ) (5.1 )% (83,094 ) (4.1 )% (97,957 ) (5.2 )% Total
operating income $ 110,457 13.8 % $ 91,076 12.0 % $
219,335 10.8 % $ 190,757 10.2 %
(a)
Includes eCommerce results.
(b)
Net sales includes international retail,
eCommerce, and wholesale sales. Operating income includes
international licensing income.
(c)
Includes the following charges:
Fiscal quarter ended
Three fiscal quarters ended
September 27, September 28,
September 27, September 28, (dollars in
millions)
2014 2013 2014 2013
Revaluation of contingent consideration $ 0.4 $ 0.5 $ 0.9 $ 2.3
Exit from Japan retail operations $ — $ — $ 0.5 $ —
(d)
Corporate expenses include expenses
related to incentive compensation, stock-based compensation,
executive management, severance and relocation, finance, building
occupancy, information technology, certain legal fees, consulting,
and audit fees.
(e)
Includes the following charges:
Fiscal quarter ended Three
fiscal quarters ended September 27,
September 28, September 27,
September 28, (dollars in millions)
2014 2013
2014 2013 Closure of distribution facility in
Hogansville, GA (1) $ 0.2 $ 0.4 $ 0.9 $ 1.0 Office consolidation
costs $ — $ 5.9 $ 6.6 $ 24.1 Amortization of H.W. Carter and Sons
tradenames $ 2.3 $ 6.3 $ 14.2 $ 7.3 (1)
Continuing operating costs associated with the closure of the
Company's distribution facility in Hogansville, Georgia.
CARTER’S, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except for share
data)
(unaudited)
September 27, 2014
December 28, 2013 September 28, 2013 ASSETS
Current assets: Cash and cash equivalents $ 133,646 $ 286,546 $
201,819 Accounts receivable, net 232,478 193,611 245,610 Finished
goods inventories, net 519,416 417,754 440,446 Prepaid expenses and
other current assets 31,258 35,157 22,872 Deferred income taxes
38,569 37,313 33,456 Total current assets
955,367 970,381 944,203 Property, plant, and equipment, net 332,875
307,885 256,225 Tradenames and other intangibles, net 316,046
330,258 336,596 Goodwill 184,196 186,077 188,006 Deferred debt
issuance costs, net 7,043 8,088 7,961 Other assets 11,214
9,795 4,566 Total assets $ 1,806,741 $
1,812,484 $ 1,737,557
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $
117,329 $ 164,010 $ 158,600 Other current liabilities 100,473
105,129 85,107 Total current liabilities
217,802 269,139 243,707 Long-term debt 586,000 586,000
586,000 Deferred income taxes 113,173 121,434 110,708 Other
long-term liabilities 138,185 135,180 138,219
Total liabilities 1,055,160 1,111,753 1,078,634 Commitments
and contingencies Stockholders' equity:
Preferred stock; par value $.01 per share;
100,000 shares authorized; none issued or outstanding at September
27, 2014, December 28, 2013, and September 28, 2013
— — — Common stock, voting; par value $.01 per share; 150,000,000
shares authorized; 52,977,519, 54,541,879 and 54,542,594 shares
issued and outstanding at September 27, 2014, December 28, 2013 and
September 28, 2013, respectively 530 545 545 Additional paid-in
capital — 4,332 — Accumulated other comprehensive loss (13,627 )
(10,082 ) (13,531 ) Retained earnings 764,678 705,936
671,909 Total stockholders' equity 751,581 700,731
658,923 Total liabilities and stockholders' equity $
1,806,741 $ 1,812,484 $ 1,737,557
CARTER’S, INC. CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOW
(dollars in thousands)
(unaudited)
Three fiscal quarters ended September
27, September 28, 2014 2013
Cash flows from operating activities: Net income $ 126,079 $
117,659 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 42,831 36,065
Amortization of H.W. Carter and Sons tradenames 14,157 7,271
Non-cash revaluation of contingent consideration 900 2,347
Amortization of debt issuance costs 1,144 677 Non-cash stock-based
compensation expense 13,883 12,356 Income tax benefit from
stock-based compensation (4,356 ) (10,775 ) Loss on disposal of
property, plant, and equipment 541 376 Deferred income taxes (8,963
) (1,469 ) Effect of changes in operating assets and liabilities:
Accounts receivable (39,133 ) (77,751 ) Inventories (104,143 )
(91,953 ) Prepaid expenses and other assets 2,373 (1,061 ) Accounts
payable and other liabilities (20,386 ) 69,724 Net cash
provided by operating activities 24,927 63,466
Cash flows from investing activities: Capital expenditures (83,634
) (129,628 ) Acquisitions — (38,007 ) Proceeds from sale of
property, plant, and equipment 143 — Net cash used in
investing activities (83,491 ) (167,635 ) Cash flows from
financing activities: Proceeds from senior notes — 400,000 Payments
of debt issuance costs (145 ) (6,487 ) Repurchase of common stock
(62,769 ) (454,133 ) Payment of contingent consideration (8,901 )
(14,721 ) Dividends paid (30,453 ) (18,988 ) Income tax benefit
from stock-based compensation 4,356 10,775 Withholdings from
vesting of restricted stock (4,472 ) (4,991 ) Proceeds from
exercise of stock options 7,771 12,424 Net cash used
in financing activities (94,613 ) (76,121 ) Effect of
exchange rate changes on cash 277 (127 ) Net decrease in
cash and cash equivalents (152,900 ) (180,417 ) Cash and cash
equivalents, beginning of period 286,546 382,236 Cash
and cash equivalents, end of period $ 133,646 $ 201,819
CARTER’S, INC. RECONCILIATION OF
GAAP TO ADJUSTED RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal quarter ended September 27, 2014
Gross Operating
Margin SG&A Income
Net Income Diluted EPS As reported (GAAP) $
321.2 $ 221.9 $ 110.5 $ 65.9 $ 1.23 Amortization of
tradenames (a) — (2.3 ) 2.3 1.5 0.03 Revaluation of contingent
consideration (b) — (0.4 ) 0.4 0.4 0.01 Facility-related closures
(c) — (0.2 ) 0.2 0.1 —
As adjusted (f)
$ 321.2 $ 219.0 $ 113.4 $ 67.9 $
1.27
Fiscal quarter ended September 28, 2013
Gross Operating Margin SG&A
Income Net Income Diluted EPS As reported
(GAAP) $ 309.6 $ 229.3 $ 91.1 $ 56.6 $ 0.97 Amortization of
tradenames (a) — (6.3 ) 6.3 4.0 0.07 Office consolidation costs (d)
— (5.9 ) 5.9 3.7 0.06 Revaluation of contingent consideration (b) —
(0.5 ) 0.5 0.5 0.01 Facility-related closures (c) — (0.4 )
0.4 0.3 —
As adjusted (f) $ 309.6
$ 216.2 $ 104.2 $ 65.0 $ 1.12
Three fiscal quarters ended September 27, 2014
Gross Operating Margin SG&A
Income Net Income Diluted EPS As reported
(GAAP) $ 828.4 $ 638.3 $ 219.3 $ 126.1 $ 2.34 Amortization of
tradenames (a) — (14.2 ) 14.2 8.9 0.16 Office consolidation costs
(d) — (6.6 ) 6.6 4.2 0.08 Revaluation of contingent consideration
(b) — (0.9 ) 0.9 0.9 0.02 Facility-related closures (c) — (0.9 )
0.9 0.6 0.01 Japan retail operations exit (e) (1.0 ) (1.5 ) 0.5
0.3 0.01
As adjusted (f) $ 827.4 $
614.3 $ 242.4 $ 140.9 $ 2.61
Three fiscal quarters ended September 28, 2013 Gross
Operating Margin SG&A Income
Net Income Diluted EPS As reported (GAAP) $
773.0 $ 609.6 $ 190.8 $ 117.7 $ 1.98 Office consolidation costs (d)
— (24.1 ) 24.1 15.2 0.26 Amortization of tradenames (a) — (7.3 )
7.3 4.6 0.08 Revaluation of contingent consideration (b) — (2.3 )
2.3 2.3 0.04 Facility-related closures (c) — (1.0 ) 1.0
0.6 0.01
As adjusted (f) $ 773.0 $
575.0 $ 225.4 $ 140.4 $ 2.36 (a)
Amortization of acquired H.W. Carter and Sons tradenames. (b)
Revaluation of the contingent consideration liability associated
with the Company's 2011 acquisition of Bonnie Togs. (c) Costs
associated with the closure of the Company's distribution facility
in Hogansville, Georgia. (d) Costs associated with office
consolidation including severance, relocation, accelerated
depreciation, and other charges. (e) Costs incurred to exit the
Company's retail business in Japan. Results for three fiscal
quarters ended September 27, 2014 also reflect a favorable recovery
on inventory. (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 gross
margin, SG&A, operating income, net income, and net income on a
diluted share basis excluding the adjustments discussed above. The
Company believes these adjustments provide a meaningful comparison
of the Company’s results. The adjusted, non-GAAP financial
measurements included in this earnings release should not be
considered as an alternative to net income or as any other
measurement of performance derived in accordance with GAAP. The
adjusted, non-GAAP financial measurements are presented for
informational purposes only and are not necessarily indicative of
the Company’s future condition or results of operations.
Note: Results may not be additive due to
rounding.
CARTER’S, INC. RECONCILIATION OF GAAP TO
ADJUSTED RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal quarter ended December 28, 2013
Gross Operating
Margin SG&A Income
Net Income Diluted EPS As reported (GAAP) $
322.4 $ 258.8 $ 73.4 $ 42.7 $ 0.78 Office consolidation costs (a) —
(9.2 ) 9.2 5.8 0.11 Amortization of tradenames (b) — (6.3 ) 6.3 4.0
0.07 Japan retail operations exit (c) 1.1 (3.0 ) 4.1 2.6 0.05
Revaluation of contingent consideration (d) — (0.5 ) 0.5 0.5 0.01
Facility-related closures (e) — (0.9 ) 0.9 0.6
0.01
As adjusted (f) $ 323.5 $ 238.9 $ 94.4
$ 56.2 $ 1.02
Fiscal year ended
December 28, 2013 Gross
Operating Margin
SG&A Income 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 (b) — (13.6 ) 13.6 8.6 0.15 Revaluation
of contingent consideration (d) — (2.8 ) 2.8 2.8 0.05 Japan retail
operations exit (c) 1.1 (3.0 ) 4.1 2.6 0.04 Facility-related
closures (e) — (1.9 ) 1.9 1.2 0.02
As
adjusted (f) $ 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) Amortization of acquired H.W.
Carter and Sons tradenames. (c) Costs incurred to exit the
Company's retail business in Japan. (d) Revaluation of the
contingent consideration liability associated with the Company's
2011 acquisition of Bonnie Togs. (e) Costs associated with the
closure of the Company's distribution facility in Hogansville,
Georgia. (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 gross margin,
SG&A, operating income, net income, and net income on a diluted
share basis excluding the adjustments discussed above. The Company
believes these adjustments provide a meaningful comparison of the
Company’s results. The adjusted, non-GAAP financial measurements
included in this earnings release should not be considered as an
alternative to net income or as any other measurement of
performance derived in accordance with GAAP. The adjusted, non-GAAP
financial measurements are presented for informational purposes
only and are not necessarily indicative of the Company’s future
condition or results of operations.
Note: Results may not be additive due to
rounding.
CARTER’S, INC. RECONCILIATION OF NET INCOME
ALLOCABLE TO COMMON SHAREHOLDERS
(unaudited)
Fiscal quarter ended Three
fiscal quarters ended September 27,
September 28, September 27,
September 28, 2014 2013 2014
2013 Weighted-average number of common and common equivalent
shares outstanding: Basic number of common shares outstanding
52,356,122 56,908,631 52,788,217 57,982,401 Dilutive effect of
equity awards 470,842 531,514 476,893 614,045
Diluted number of common and common equivalent shares
outstanding 52,826,964 57,440,145 53,265,110
58,596,446
As reported on a
GAAP Basis:
Basic net income per common share: Net income $ 65,886 $ 56,571 $
126,079 $ 117,659 Income allocated to participating securities (887
) (759 ) (1,706 ) (1,566 ) Net income available to common
shareholders $ 64,999 $ 55,812 $ 124,373 $
116,093 Basic net income per common share $ 1.24 $ 0.98 $
2.36 $ 2.00 Diluted net income per common share: Net income $
65,886 $ 56,571 $ 126,079 $ 117,659 Income allocated to
participating securities (880 ) (753 ) (1,695 ) (1,553 ) Net income
available to common shareholders $ 65,006 $ 55,818 $
124,384 $ 116,106 Diluted net income per common share
$ 1.23 $ 0.97 $ 2.34 $ 1.98
As adjusted
(a):
Basic net income per common share: Net income $ 67,933 $ 64,993 $
140,919 $ 140,371 Income allocated to participating securities (914
) (873 ) (1,910 ) (1,871 ) Net income available to common
shareholders $ 67,019 $ 64,120 $ 139,009 $
138,500 Basic net income per common share $ 1.28 $ 1.13 $
2.63 $ 2.39 Diluted net income per common share: Net income $
67,933 $ 64,993 $ 140,919 $ 140,371 Income allocated to
participating securities (907 ) (866 ) (1,897 ) (1,854 ) Net income
available to common shareholders $ 67,026 $ 64,127 $
139,022 $ 138,517 Diluted net income per common share
$ 1.27 $ 1.12 $ 2.61 $ 2.36 (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 $2.0 million and $14.8 million in
after-tax expenses from these results for the fiscal quarter and
three fiscal quarters ended September 27, 2014, respectively. The
Company has excluded $8.4 million and $22.7 million in after-tax
expenses from these results for the fiscal quarter and three fiscal
quarters ended September 28, 2013, respectively.
RECONCILIATION OF U.S. GAAP AND NON-GAAP
INFORMATION(unaudited)
The following table provides a reconciliation of EBITDA and
adjusted EBITDA for the periods indicated to net income, which is
the most directly comparable financial measure presented in
accordance with GAAP:
Four fiscal Fiscal
quarter ended Three fiscal quarters ended quarters ended September
27, September 28, September 27, September 28,
September 27, 2014 2013 2014 2013 2014 (dollars in millions) Net
income $ 65.9 $ 56.6 $ 126.1 $ 117.7 $ 168.8 Interest expense 6.8
4.1 20.6 6.7 27.4 Interest income — (0.1 ) (0.3 ) (0.5 ) (0.5 ) Tax
expense 36.5 30.6 71.2 65.9 94.4 Depreciation and amortization 15.4
17.4 57.0 43.3 82.2
EBITDA $ 124.6 $ 108.5 $ 274.6 $ 233.0
$ 372.3
Adjustments to EBITDA Office
consolidation costs (a) $ — $ 5.3 $ 6.5 $ 20.9 $ 15.0 Revaluation
of contingent consideration (b) 0.4 0.5 0.9 2.3 1.4
Facility-related closures (c) 0.2 0.3 0.9 0.5 1.5 Japan retail
operations exit (d) — — (0.3 ) — 3.8
Adjusted EBITDA $ 125.3 $ 114.6 $ 282.6
$ 256.9 $ 393.9 (a) Costs associated with
office consolidation including severance, relocation, and other
charges. These amounts exclude costs related to accelerated
depreciation as such amounts are included in the total of
depreciation and amortization above. (b) Revaluation of the
contingent consideration liability associated with the Company's
2011 acquisition of Bonnie Togs. (c) Costs associated with the
closure of the Company's distribution facility in Hogansville,
Georgia. These amounts exclude costs related to accelerated
depreciation as such amounts are included in the total of
depreciation and amortization above. (d) Costs incurred to exit the
Company's retail business in Japan. First three fiscal quarters and
four fiscal quarters ended September 27, 2014 also reflect a
favorable recovery of inventory. These amounts exclude costs
related to accelerated depreciation as such amounts are included in
the total of depreciation and amortization above.
Note: Results may not be additive due to
rounding.
EBITDA and Adjusted EBITDA are supplemental financial measures
that are not defined or prepared in accordance with GAAP. We define
EBITDA as net income before interest, income taxes and depreciation
and amortization. Adjusted EBITDA is EBITDA adjusted for the items
described in the footnotes (a) - (d) to the table above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our
industry.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Carters (NYSE:CRI)
Historical Stock Chart
From Apr 2023 to Apr 2024