- Net Sales $613 Million, Up
7%
- Operating Margin 10.1%, Up 190 Basis
Points; Adjusted Operating Margin 10.7%, Up 50 Basis
Points
- Diluted EPS $0.68, Up 42%; Adjusted
Diluted EPS $0.73, Up 19%
- Company Raises Fiscal 2015 Adjusted
Diluted EPS Guidance Range To Growth Of 12% - 15%; Previously 10% -
14%
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the
United States and Canada of apparel exclusively for babies and
young children, today reported its second quarter fiscal 2015
results.
“We continued to see strong demand for our brands in the second
quarter with sales growth in all of our business segments,” said
Michael D. Casey, Chairman and Chief Executive Officer. “We’re
encouraged by our consumers’ response to our new fall marketing and
product offerings. Given our progress in the first half, and
outlook for the balance of the year, we are raising our earnings
forecast for fiscal 2015.”
Consolidated Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
Consolidated net sales increased $38.7 million, or 6.7%, to
$612.8 million, reflecting growth in all business segments. Changes
in foreign currency exchange rates in the second quarter of fiscal
2015 as compared to the second quarter of fiscal 2014 negatively
impacted consolidated net sales in the second quarter of fiscal
2015 by $5.6 million, or 1.0%. On a constant currency basis,
consolidated net sales increased 7.7% in the second quarter of
fiscal 2015.
Operating income in the second quarter of fiscal 2015 increased
$14.6 million, or 30.8%, to $62.0 million, compared to $47.3
million in the second quarter of fiscal 2014. Operating margin in
the second quarter of fiscal 2015 increased 190 basis points to
10.1%, compared to 8.2% in the second quarter of fiscal 2014.
Adjusted operating income (a non-GAAP measure) in the second
quarter of fiscal 2015 increased $6.6 million, or 11.2%, to $65.4
million, compared to $58.8 million in the second quarter of fiscal
2014. Adjusted operating margin (a non-GAAP measure) in the second
quarter of fiscal 2015 increased 50 basis points to 10.7%, compared
to 10.2% in the second quarter of fiscal 2014, principally driven
by expense leverage.
Net income in the second quarter of fiscal 2015 increased $10.2
million, or 39.4%, to $36.1 million, or $0.68 per diluted share,
compared to $25.9 million, or $0.48 per diluted share, in the
second quarter of fiscal 2014. Adjusted net income (a non-GAAP
measure) in the second quarter of fiscal 2015 increased $5.7
million, or 17.2%, to $38.8 million, compared to $33.1 million in
the second quarter of fiscal 2014. Adjusted earnings per diluted
share (a non-GAAP measure) in the second quarter of fiscal 2015
increased 19.4% to $0.73, compared to $0.61 in the second quarter
of fiscal 2014. The Company estimates that changes in foreign
currency exchange rates in the second quarter of fiscal 2015 as
compared to the second quarter of fiscal 2014 had an immaterial
effect on adjusted earnings per diluted share in the second quarter
of fiscal 2015.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
Consolidated net sales increased $71.8 million, or 5.9%, to
$1,297.5 million, principally driven by growth in the Company’s
U.S. Carter’s and OshKosh direct-to-consumer businesses. Changes in
foreign currency exchange rates in the first half of fiscal 2015 as
compared to the first half of fiscal 2014 negatively impacted
consolidated net sales in the first half of fiscal 2015 by $11.1
million, or 0.9%. On a constant currency basis, consolidated net
sales increased 6.8% in the first half of fiscal 2015.
Operating income in the first half of fiscal 2015 increased
$37.6 million, or 34.5%, to $146.5 million, compared to $108.9
million in the first half of fiscal 2014. Operating margin in the
first half of fiscal 2015 increased 240 basis points to 11.3%,
compared to 8.9% in the first half of fiscal 2014. Adjusted
operating income in the first half of fiscal 2015 increased $23.8
million, or 18.4%, to $152.7 million, compared to $128.9 million in
the first half of fiscal 2014. Adjusted operating margin in the
first half of fiscal 2015 increased 130 basis points to 11.8%,
compared to 10.5% in the first half of fiscal 2014, reflecting
improved gross margin and expense leverage.
Net income in the first half of fiscal 2015 increased $25.7
million, or 42.7%, to $85.9 million, or $1.62 per diluted share,
compared to $60.2 million, or $1.11 per diluted share, in the first
half of fiscal 2014. Adjusted net income in the first half of
fiscal 2015 increased $17.5 million, or 24.0%, to $90.5 million,
compared to $73.0 million in the first half of fiscal 2014.
Adjusted earnings per diluted share in the first half of fiscal
2015 increased 26.6% to $1.70, compared to $1.35 in the first half
of fiscal 2014. The Company estimates that changes in foreign
currency exchange rates in the first half of fiscal 2015 as
compared to the first half of fiscal 2014 negatively affected
adjusted earnings per diluted share in the first half of fiscal
2015 by approximately $0.05.
Cash flow from operations in the first half of fiscal 2015 was
$27.1 million compared to $33.1 million in the first half of fiscal
2014. The decrease reflects higher earnings that were more than
offset by changes in net working capital.
See the “Reconciliation of GAAP to Adjusted Results” section of
this release for additional disclosures and reconciliations
regarding non-GAAP measures.
Note on Net Sales vs. Comparable Sales (52 vs. 53 Week
Calendars)
The Company's fiscal 2015 results will include 52 weeks compared
to 53 weeks in fiscal 2014. This change in weeks will impact the
comparability of results in 2015. In the following segment
discussions the net sales amounts and related comparisons are based
on the Company's reported fiscal 2015 and 2014 calendars. However,
direct-to-consumer (“DTC”), retail store, and eCommerce comparable
sales are based on adjusted 2014 periods that have been aligned to
the corresponding 13 and 26 week periods in fiscal 2015.
Carter’s Retail Segment Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
Carter’s retail segment sales increased $13.3 million, or 5.7%,
to $247.0 million. Carter’s DTC comparable sales increased 1.1%,
comprised of eCommerce comparable sales growth of 26.5%, partially
offset by a retail stores comparable sales decline of 4.0%.
In the second quarter of fiscal 2015, the Company opened 13
Carter’s retail stores in the United States. The Company operated
562 Carter’s retail stores in the United States as of July 4,
2015.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
Carter’s retail segment sales increased $40.7 million, or 8.8%,
to $504.7 million. Carter’s DTC comparable sales increased 0.9%,
comprised of eCommerce comparable sales growth of 16.0%, partially
offset by a retail stores comparable sales decline of 2.6%.
In the first half of fiscal 2015, the Company opened 33 Carter’s
retail stores in the United States and closed two stores.
Carter’s Wholesale Segment Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
Carter’s wholesale segment sales increased $11.7 million, or
5.8%, to $211.7 million, reflecting strong product demand, a new
playwear initiative, and fall product launches.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
Carter’s wholesale segment sales increased $9.4 million, or
2.0%, to $481.0 million, reflecting greater product demand, a new
playwear initiative, and fall product launches.
OshKosh Retail Segment Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
OshKosh retail segment sales increased $5.9 million, or 8.8%, to
$73.5 million. OshKosh DTC comparable sales increased 3.3%,
comprised of eCommerce comparable sales growth of 36.2%, partially
offset by a retail stores comparable sales decline of 2.6%.
In the second quarter of fiscal 2015, the Company opened 15
OshKosh retail stores in the United States and closed two stores.
The Company operated 221 OshKosh retail stores in the United States
as of July 4, 2015.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
OshKosh retail segment sales increased $15.4 million, or 11.8%,
to $146.5 million. OshKosh DTC comparable sales increased 4.2%,
comprised of eCommerce comparable sales growth of 27.2%, partially
offset by a decline in retail stores comparable sales of 0.6%.
In the first half of fiscal 2015, the Company opened 24 OshKosh
retail stores in the United States and closed three stores.
OshKosh Wholesale Segment Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
OshKosh wholesale segment sales increased $2.7 million, or
22.8%, to $14.3 million, reflecting favorable timing of demand.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
OshKosh wholesale segment sales increased $3.1 million, or
11.5%, to $30.4 million, reflecting favorable timing of demand.
International Segment Results
Second Quarter of Fiscal 2015 compared to Second Quarter of
Fiscal 2014
International segment sales increased $5.1 million, or 8.4%, to
$66.3 million. This increase reflects growth in the Company’s
direct-to-consumer businesses in Canada and increased wholesale
demand in other international markets. This growth was partially
offset by the impact of the Target Canada bankruptcy in January
2015 and unfavorable foreign currency exchange rates.
Changes in foreign currency exchange rates in the second quarter
of fiscal 2015 as compared to the second quarter of fiscal 2014
negatively impacted international segment net sales in the second
quarter of fiscal 2015 by $5.6 million, or 9.1%. On a constant
currency basis, international segment net sales increased
17.5%.
Canadian comparable retail stores sales increased 0.2%. In the
second quarter of fiscal 2015, the Company opened six retail stores
in Canada. The Company operated 133 retail stores in Canada as of
July 4, 2015.
First Half of Fiscal 2015 compared to First Half of Fiscal
2014
International segment sales increased $3.2 million, or 2.5%, to
$134.9 million. This increase reflects growth in the Company’s
direct-to-consumer businesses in Canada and increased wholesale
demand in other international markets. This growth was partially
offset by the impact of the Target Canada bankruptcy in January
2015, the Company’s exit of retail operations in Japan in fiscal
2014, and unfavorable foreign currency exchange rates. The
Company’s former retail operations in Japan contributed $4.4
million to segment sales in the first half of fiscal 2014.
Changes in foreign currency exchange rates in the first half of
fiscal 2015 as compared to the first half of fiscal 2014 negatively
impacted international segment net sales in the first half of
fiscal 2015 by $11.1 million, or 8.5%. On a constant currency
basis, international segment net sales increased 10.9%.
Canadian comparable retail stores sales increased 3.3% in the
first half of fiscal 2015. In the first half of fiscal 2015, the
Company opened nine retail stores in Canada.
Dividends
During the second quarter of fiscal 2015, the Company paid a
cash dividend of $0.22 per share totaling $11.5 million. The
Company paid cash dividends totaling $23.1 million in the first
half of fiscal 2015. 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
During the second quarter of fiscal 2015, the Company
repurchased and retired 346,325 shares of its common stock for
$34.8 million at an average price of $100.40 per share. In the
first half of fiscal 2015, the Company repurchased and retired
504,225 shares for $48.9 million at an average price of $96.97 per
share. Year-to-date through July 28, 2015, the Company repurchased
and retired a total of 602,425 shares for $59.4 million at an
average price of $98.60 per share. All shares were repurchased in
open market transactions pursuant to applicable regulations for
such transactions.
As of July 28, 2015, the total remaining capacity under the
Company’s previously-announced repurchase authorizations was $126
million.
2015 Business Outlook
For the third quarter of fiscal 2015, the Company projects net
sales to increase approximately 7% over the third quarter of fiscal
2014 and adjusted diluted earnings per share to increase
approximately 10% to 15% compared to adjusted diluted earnings per
share of $1.27 in the third quarter of fiscal 2014. The adjusted
diluted earnings per share forecast excludes anticipated expenses
of approximately $1 million related to the amortization of acquired
tradenames and other items the Company believes to be
non-representative of underlying business performance.
For fiscal 2015, the Company projects net sales to increase
approximately 5% over fiscal 2014 and adjusted diluted earnings per
share to increase approximately 12% to 15% compared to adjusted
diluted earnings per share of $3.93 in fiscal 2014. This forecast
for fiscal 2015 adjusted diluted earnings per share excludes
anticipated expenses of approximately $6 million related to the
amortization of acquired tradenames, approximately $2 million
related to the revaluation of the Bonnie Togs contingent
consideration, and other items the Company believes to be
non-representative of underlying business performance.
Conference Call
The Company will hold a conference call with investors to
discuss second quarter fiscal 2015 results and its business outlook
on July 29, 2015 at 8:30 a.m. Eastern Daylight Time. To participate
in the call, please dial 913-312-1456. To listen via the internet,
please visit www.carters.com and select links for “Investor
Relations” followed by “Second Quarter 2015 Earnings Conference
Call”. Presentation materials for the call can be accessed under
the same “Investor Relations” section by selecting links for “News
& Events” followed by “Webcasts & Presentations”. A replay
of the call will be available shortly after the broadcast through
August 6, 2015, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 2253968. 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 900
Company-operated stores in the United States and Canada and on-line
at www.carters.com, www.oshkoshbgosh.com, and
www.cartersoshkosh.ca. The Company’s Just One You, Precious Firsts,
and Genuine Kids brands are available at Target, and its Child of
Mine brand is available at Walmart. Carter’s is headquartered in
Atlanta, Georgia. Additional information may be found at
www.carters.com.
Cautionary Language
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 relating to the Company’s future
performance, including, without limitation, statements with respect
to the Company’s anticipated financial results for the third
quarter of fiscal 2015 and fiscal year 2015, 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, vendors, or licensees
or financial difficulties for one or more of our major customers,
vendors, or licensees; 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; incurring costs in connection with cooperating with
regulatory investigations and proceedings; the breach of the
Company’s consumer databases, systems or processes; deflationary
pricing pressures; decreases in the overall level of consumer
spending; disruptions resulting from the Company’s dependence on
foreign supply sources; foreign currency risks due to the Company’s
operations outside of the United States; the Company’s use of a
small number of vendors over whom it has little control; 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 along our supply chain; product recalls; 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’s
failure to successfully manage its eCommerce business; 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;
increased leverage, not being able to repay its indebtedness and
being subject to restrictions on operations by the Company’s debt
agreements; 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 of distribution functions in its
Braselton, Georgia facility; 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; fluctuations in the Company’s tax obligations
and effective tax rate; 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
Two fiscal quarters ended
July 4, 2015 June 28, 2014
July 4, 2015 June 28, 2014 Net sales $
612,765 $ 574,065 $ 1,297,529 $ 1,225,709 Cost of goods sold
349,870 328,588 750,582 718,507 Gross
profit 262,895 245,477 546,947 507,202 Selling, general, and
administrative expenses 209,296 206,315 420,479 416,410 Royalty
income (8,353 ) (8,185 ) (19,989 ) (18,086 ) Operating income
61,952 47,347 146,457 108,878 Interest expense 6,935 6,882 13,627
13,780 Interest income (157 ) (140 ) (294 ) (272 ) Other (income)
expense, net (1,900 ) (189 ) 62 407 Income before
income taxes 57,074 40,794 133,062 94,963 Provision for income
taxes 20,969 14,897 47,165 34,770 Net
income $ 36,105 $ 25,897 $ 85,897 $ 60,193
Basic net income per common share $ 0.69 $ 0.48 $
1.63 $ 1.12 Diluted net income per common share $ 0.68 $ 0.48 $
1.62 $ 1.11 Dividend declared and paid per common share $ 0.22 $
0.19 $ 0.44 $ 0.38
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal quarter ended Two fiscal quarters ended
% of % of % of
% of
July 4, Total Net June 28, Total Net
July 4, Total Net June 28,
Total Net
2015 Sales 2014 Sales 2015
Sales 2014 Sales
Net
sales:
Carter’s Wholesale $ 211,730 34.6 % $ 200,059 34.8 % $ 481,045 37.1
% $ 471,688 38.5 % Carter’s Retail (a) 246,980 40.4 %
233,690 40.7 % 504,707 39.0 % 464,018 37.9 %
Total Carter’s 458,710 75.0 % 433,749 75.5 % 985,752
76.1 % 935,706 76.4 % OshKosh Retail (a) 73,453 12.0
% 67,515 11.8 % 146,495 11.3 % 131,073 10.7 % OshKosh Wholesale
14,306 2.3 % 11,649 2.0 % 30,357 2.3 % 27,235
2.2 % Total OshKosh 87,759 14.3 % 79,164 13.8
% 176,852 13.6 % 158,308 12.9 % International (b)
66,296 10.7 % 61,152 10.7 % 134,925 10.3 %
131,695 10.7 % Total net sales $ 612,765 100.0 % $
574,065 100.0 % $ 1,297,529 100.0 % $ 1,225,709
100.0 %
% of % of % of
% of
Segment Segment Segment
Segment
Operating
income:
Net Sales Net Sales Net Sales
Net Sales
Carter’s Wholesale $ 40,207 19.0 % $ 30,860 15.4
%
$ 98,138 20.4 % $ 77,727 16.5 % Carter’s Retail (a) 38,331
15.5 % 40,179 17.2 % 82,824 16.4 % 83,158 17.9
% Total Carter’s 78,538 17.1 % 71,039 16.4 % 180,962
18.4 % 160,885 17.2 % OshKosh Retail (a) (1,815 )
(2.5
)%
(1,694 ) (2.5
)%
(2,775 ) (1.9 )% (6,183 ) (4.7 )% OshKosh Wholesale 2,249
15.7 % 859 7.4 % 5,228 17.2 % 2,885 10.6 %
Total OshKosh 434 0.5 % (835 ) (1.1 )% 2,453 1.4 %
(3,298 ) (2.1 )% International (b) (c) 6,236 9.4 % 7,107
11.6 % 12,747 9.4 % 11,143 8.5 % Corporate
expenses (d) (e) (23,256 ) (29,964 ) (49,705 ) (59,852 ) Total
operating income $ 61,952 10.1 % $ 47,347 8.2 % $
146,457 11.3 % $ 108,878 8.9 %
(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 $1.4
million for the fiscal quarter ended July 4, 2015, and $1.9
million and $0.5 million for each of the two-fiscal-quarter periods
ended July 4, 2015 and June 28, 2014, respectively. The
charge associated with the revaluation for the fiscal quarter ended
June 28, 2014 was not material. Also includes expenses of
approximately $0.9 million and $0.5 million for the second quarter
of fiscal 2014 and for the first two quarters of fiscal 2014,
respectively, related to the Company’s exit from Japan retail
operations.
(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
Two fiscal quarters ended (dollars in millions)
July
4, June 28, July 4, June 28,
2015 2014 2015 2014 Closure of
distribution facility in Hogansville, GA (1) $ —
$
0.3
$ — $ 0.6 Office consolidation costs $ — $ 4.6 $ — $ 6.6
Amortization of tradenames $ 2.1 $ 5.6 $ 4.4 $ 11.9
(1) Continuing operating costs associated
with the closure of the Company’s distribution facility in
Hogansville, Georgia. This facility was sold in December 2014.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except for share
data)
(unaudited)
January 3, June 28, July 4, 2015
2015 2014 ASSETS Current assets: Cash and cash
equivalents $ 244,301 $ 340,638 $ 207,920
Accounts receivable, net 157,145 184,563 133,885 Finished goods
inventories 544,256 444,844 538,233 Prepaid expenses and other
current assets 48,475 34,788 43,684 Deferred income taxes 31,871
36,625 36,534 Total current assets 1,026,048
1,041,458 960,256 Property, plant, and equipment, net of
accumulated depreciation of $263,580, $245,011, and $233,812
353,138 333,097 325,675 Tradenames and other intangibles, net
312,836 317,297 318,346 Goodwill 178,753 181,975 186,173 Deferred
debt issuance costs, net 5,952 6,677 7,407 Other assets 12,842
12,592 11,305 Total assets $ 1,889,569
$ 1,893,096 $ 1,809,162
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 145,809 $ 150,243 $ 164,199 Other current
liabilities 76,451 97,728 75,561 Total current
liabilities 222,260 247,971 239,760 Long-term debt 586,298
586,000 586,000 Deferred income taxes 119,230 121,536 114,878 Other
long-term liabilities 158,842 150,905 148,152
Total liabilities 1,086,630 1,106,412 1,088,790 Commitments
and contingencies Stockholders' equity: Preferred stock; par
value $.01 per share; 100,000 shares authorized; none issued or
outstanding at July 4, 2015, January 3, 2015, and June 28, 2014 — —
—
Common stock, voting; par value $.01 per share; 150,000,000 shares
authorized; 52,331,208, 52,712,193, and 53,311,864 shares issued
and outstanding at July 4, 2015, January 3, 2015 and June 28, 2014,
respectively 523 527 533 Additional paid-in capital — — —
Accumulated other comprehensive loss (29,275 ) (23,037 ) (10,050 )
Retained earnings 831,691 809,194 729,889
Total stockholders' equity 802,939 786,684 720,372
Total liabilities and stockholders' equity $
1,889,569 $ 1,893,096 $ 1,809,162
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOW
(dollars in thousands)
(unaudited)
Two fiscal quarters ended
July 4, 2015 June 28, 2014 Cash
flows from operating activities: Net income $ 85,897 $ 60,193
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 30,338 29,679
Amortization of tradenames 4,429 11,877 Accretion of contingent
consideration 809 451 Amortization of debt issuance costs 678 763
Non-cash stock-based compensation expense 9,560 9,829 Unrealized
foreign currency exchange loss, net 84 — Income tax benefit from
stock-based compensation (6,890 ) (3,750 ) Loss on disposal of
property, plant, and equipment 90 544 Deferred income taxes 1,886
(5,626 ) Effect of changes in operating assets and liabilities:
Accounts receivable 28,649 59,761 Inventories (103,379 ) (120,383 )
Prepaid expenses and other assets (14,244 ) (9,979 ) Accounts
payable and other liabilities (10,775 ) (235 ) Net cash provided by
operating activities 27,132 33,124 Cash flows
from investing activities: Capital expenditures (50,284 ) (61,300 )
Proceeds from sale of property, plant, and equipment 43 134
Net cash used in investing activities (50,241 ) (61,166 )
Cash flows from financing activities: Payments of debt
issuance costs — (114 ) Borrowings under secured revolving credit
facility 20,349 — Payments on secured revolving credit facility
(20,000 ) — Repurchase of common stock (48,894 ) (36,080 )
Dividends paid (23,143 ) (20,380 ) Income tax benefit from
stock-based compensation 6,890 3,750 Withholdings from vesting of
restricted stock (12,377 ) (4,251 ) Proceeds from exercise of stock
options 4,560 6,548 Net cash used in financing
activities (72,615 ) (50,527 ) Effect of exchange rate
changes on cash (613 ) (57 ) Net decrease in cash and cash
equivalents (96,337 ) (78,626 ) Cash and cash equivalents,
beginning of period 340,638 286,546 Cash and cash
equivalents, end of period $ 244,301 $ 207,920
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal quarter ended July 4, 2015 Gross
% Net % Net Operating
% Net Net Diluted
Margin Sales SG&A Sales
Income Sales Income EPS As reported
(GAAP) $ 262.9 42.9 % $ 209.3 34.2 % $ 62.0 10.1 % $ 36.1 $
0.68 Amortization of tradenames (a) — (2.1 ) 2.1 1.3 0.02
Revaluation of contingent consideration (b) — (1.4 ) 1.4
1.4 0.03
As adjusted (c) $ 262.9 42.9 %
$ 205.8 33.6 % $ 65.4 10.7 % $ 38.8 $ 0.73
Two fiscal quarters ended July 4, 2015
Gross % Net % Net
Operating % Net Net
Diluted Margin Sales SG&A
Sales Income Sales Income EPS
As reported (GAAP) $ 546.9 42.2 % $ 420.5 32.4 % $ 146.5
11.3 % $ 85.9 $ 1.62 Amortization of tradenames (a) — (4.3 ) 4.3
2.7 0.05 Revaluation of contingent consideration (b) — (1.9
) 1.9 1.9 0.03
As adjusted (c) $ 546.9
42.2 % $ 414.3 31.9 % $ 152.7 11.8 % $ 90.5 $
1.70
Fiscal quarter ended June 28, 2014
Gross % Net % Net
Operating % Net Net
Diluted Margin Sales SG&A
Sales Income Sales Income EPS
As reported (GAAP) $ 245.5 42.8 % $ 206.3 35.9 % $ 47.3 8.2
% $ 25.9 $ 0.48 Amortization of tradenames (a) — (5.6 ) 5.6 3.5
0.07 Office consolidation costs (d) — (4.6 ) 4.6 2.9 0.05 Japan
retail operations exit — (0.9 ) 0.9 0.6 0.01 Closure of
distribution facility (Hogansville, GA) — (0.3 ) 0.3
0.2 —
As adjusted (c) $ 245.5 42.8 % $ 194.8
33.9 % $ 58.8 10.2 % $ 33.1 $ 0.61
Two fiscal quarters ended June 28, 2014 Gross
% Net % Net
Operating % Net Net
Diluted Margin Sales SG&A
Sales Income Sales Income EPS
As reported (GAAP) $ 507.2 41.3 % $ 416.4 34.0 % $ 108.9 8.9
% $ 60.2 $ 1.11 Amortization of tradenames (a) — (11.9 ) 11.9 7.5
0.14 Office consolidation costs (d) — (6.6 ) 6.6 4.2 0.08
Revaluation of contingent consideration (b) — (0.5 ) 0.5 0.5 0.01
Closure of distribution facility (Hogansville, GA) — (0.6 ) 0.6 0.4
0.01 Japan retail operations exit (1.0 ) (1.5 ) 0.5 0.3
0.01
As adjusted (c) $ 506.2 41.2 % $ 395.4
32.3 % $ 128.9 10.5 % $ 73.0
$ 1.35 (a) Amortization of H.W. Carter and
Sons tradenames acquired in 2013. (b) Revaluation of the contingent
consideration liability associated with the Company’s acquisition
of Bonnie Togs in 2011. (c) 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. (d) Costs
associated with office consolidation including severance,
relocation, accelerated depreciation, and other charges.
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 September 27, 2014 Gross
Operating
Net
Diluted
Margin SG&A Income
Income
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 Closure of
distribution facility (Hogansville, GA) — (0.2 ) 0.2
0.1 —
As adjusted (c) $ 321.2 $ 219.0 $
113.4 $ 67.9 $ 1.27
Fiscal year
ended January 3, 2015 (53 weeks) Gross
Operating
Net
Diluted
Margin SG&A Income
Income
EPS
As reported (GAAP) $ 1,184.4 $ 890.3 $ 333.3 $ 194.7 $ 3.62
Amortization of tradenames (a) — (16.4 ) 16.4 10.4 0.19 Office
consolidation costs (d) — (6.6 ) 6.6 4.2 0.08 Revaluation of
contingent consideration (b) — (1.3 ) 1.3 1.3 0.03 Closure of
distribution facility (Hogansville, GA) — (0.9 ) 0.9 0.6 0.01 Japan
retail operations exit (1.0 ) (1.5 ) 0.5 0.3 0.01
As adjusted (c) $ 1,183.4 $ 863.3 $ 359.3
$ 211.5 $ 3.93 (a) Amortization
of H.W. Carter and Sons tradenames acquired in 2013. (b)
Revaluation of the contingent consideration liability associated
with the Company’s acquisition of Bonnie Togs in 2011. (c) 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. (d) Costs associated with
office consolidation including severance, relocation, accelerated
depreciation, and other charges.
Note: Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
(unaudited)
Fiscal quarter ended Two fiscal quarters ended
July 4, June 28, July 4, June
28, 2015 2014 2015 2014
Weighted-average number of common and common equivalent shares
outstanding: Basic number of common shares outstanding 52,020,386
52,836,070 52,069,800 53,004,264 Dilutive effect of equity awards
526,016 455,116 514,121 478,426 Diluted
number of common and common equivalent shares outstanding
52,546,402 53,291,186 52,583,921 53,482,690
As reported on a
GAAP Basis:
Basic net income per common share: Net income $ 36,105 $ 25,897 $
85,897 $ 60,193 Income allocated to participating securities (305 )
(345 ) (847 ) (812 ) Net income available to common shareholders $
35,800 $ 25,552 $ 85,050 $ 59,381 Basic
net income per common share $ 0.69 $ 0.48 $ 1.63 $ 1.12 Diluted net
income per common share:
Net income
$ 36,105 $ 25,897 $ 85,897 $ 60,193 Income allocated to
participating securities (303 ) (343 ) (840 ) (807 ) Net income
available to common shareholders $ 35,802 $ 25,554 $
85,057 $ 59,386 Diluted net income per common share $
0.68 $ 0.48 $ 1.62 $ 1.11
As adjusted
(a):
Basic net income per common share: Net income $ 38,805 $ 33,120 $
90,518 $ 72,986 Income allocated to participating securities (329 )
(443 ) (893 ) (989 ) Net income available to common shareholders $
38,476 $ 32,677 $ 89,625 $ 71,997 Basic
net income per common share $ 0.74 $ 0.62 $ 1.72 $ 1.36 Diluted net
income per common share: Net income $ 38,805 $ 33,120 $ 90,518 $
72,986 Income allocated to participating securities (326 ) (440 )
(886 ) (983 ) Net income available to common shareholders $ 38,479
$ 32,680 $ 89,632 $ 72,003 Diluted net
income per common share $ 0.73 $ 0.61 $ 1.70 $ 1.35
(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 $2.7 million and $4.6 million in after-tax expenses
from these results for the fiscal quarter and two fiscal quarters
ended July 4, 2015, respectively. The Company has excluded $7.2
million and $12.8 million in after-tax expenses from these results
for the fiscal quarter and two fiscal quarters ended June 28, 2014,
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 Two fiscal
quarters ended quarters ended July
4, July 4, 2015 June 28, 2014 July 4, 2015
June 28, 2014 2015 (dollars in millions) Net income $
36.1 $ 25.9 $ 85.9 $ 60.2 $ 220.4 Interest expense 6.9 6.9 13.6
13.8 27.5 Interest income (0.2 ) (0.1 ) (0.3 ) (0.3 ) (0.4 ) Income
tax expense 21.0 14.9 47.2 34.8 120.6 Depreciation and amortization
(a) 17.6 20.0 34.8 41.6 68.1
EBITDA $ 81.4 $ 67.5 $ 181.2 $ 150.0 $
436.2
Adjustments to EBITDA
Office consolidation costs (b) (c) $ — $ 4.6 $ — $ 6.5 $ —
Revaluation of contingent consideration (d) 1.4 — 1.9 0.5 2.8
Closure of distribution facility (Hogansville, GA) (c) — 0.3 — 0.6
0.3 Japan retail operations exit (c) — 0.6 —
(0.4 ) 0.1
Adjusted EBITDA $ 82.8 $ 73.0
$ 183.1 $ 157.3 $ 439.4
(a) Includes amortization of acquired
tradenames.
(b) Costs associated with office
consolidation including severance, relocation, and other
charges.
(c) Amounts exclude costs related to
accelerated depreciation as such amounts are included in the total
of depreciation and amortization above.
(d) Revaluation of the contingent
consideration liability associated with the Company’s acquisition
of Bonnie Togs in 2011.
Note: Results may not be additive due to
rounding.
EBITDA and Adjusted EBITDA are supplemental financial measures
that are not defined or prepared in accordance with GAAP. We define
EBITDA as net income before interest, income taxes, and
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted
for the items described in the footnotes (a) - (e) to the table
above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our
industry.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150729005732/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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