- Net sales $692 million, growth of
8%
- Diluted EPS $0.78, growth of 10%;
adjusted diluted EPS $0.79, growth of 10%
- Returned $134 million to
shareholders through share repurchases and dividends in the first
half of fiscal 2017
- Company reaffirms full year fiscal
2017 outlook: net sales growth of 4% to 6%; adjusted diluted EPS
growth of 8% to 10%
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in the
United States and Canada of apparel exclusively for babies and
young children, today reported its second quarter fiscal 2017
results.
“We achieved good growth in sales and earnings in our second
quarter,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Our growth was driven by our retail and international
businesses, and the contribution from our Skip Hop brand which was
acquired earlier this year. Given the strength of our fall and
holiday product offerings, we’re forecasting good growth in the
second half and expect to achieve our growth objectives this
year.”
Consolidated Results
Second Quarter of Fiscal 2017 compared to Second Quarter of
Fiscal 2016
Net sales increased $52.6 million, or 8.2%, to $692.1 million,
principally driven by growth in the Company’s U.S. Retail segment,
and the benefit of Skip Hop, a global lifestyle brand for families
with young children acquired by the Company in February 2017. Skip
Hop contributed $25.0 million to consolidated net sales in the
second quarter of fiscal 2017. Changes in foreign currency exchange
rates in the second quarter of fiscal 2017 compared to the second
quarter of fiscal 2016 adversely affected consolidated net sales in
the second quarter of fiscal 2017 by $2.6 million, or 0.4%. On a
constant currency basis (a non-GAAP measure), consolidated net
sales increased 8.6% in the second quarter of fiscal 2017.
Operating income in the second quarter of fiscal 2017 increased
$1.3 million, or 2.0%, to $64.5 million, compared to $63.2 million
in the second quarter of fiscal 2016. Operating margin decreased 60
basis points to 9.3%, compared to 9.9% in the second quarter of
fiscal 2016. Adjusted operating income (a non-GAAP measure)
increased $1.5 million, or 2.3%, to $65.5 million, compared to
$64.0 million in the second quarter of fiscal 2016. Adjusted
operating margin (a non-GAAP measure) decreased 50 basis points to
9.5%, compared to 10.0% in the second quarter of fiscal 2016, which
principally reflects increased investments in retail operations and
marketing and increased promotions.
Net income in the second quarter of fiscal 2017 increased $1.7
million, or 4.8%, to $37.9 million, or $0.78 per diluted share,
compared to $36.2 million, or $0.71 per diluted share, in the
second quarter of fiscal 2016. Adjusted net income (a non-GAAP
measure) increased $1.9 million, or 5.1%, to $38.6 million,
compared to $36.7 million in the second quarter of fiscal 2016.
Adjusted earnings per diluted share (a non-GAAP measure) in the
second quarter of fiscal 2017 increased 9.9% to $0.79, compared to
$0.72 in the second quarter of fiscal 2016.
First Half of Fiscal 2017 compared to First Half of Fiscal
2016
Net sales increased $61.3 million, or 4.5%, to $1.42 billion,
principally driven by growth in the Company’s U.S. Retail segment
and the benefit of the Skip Hop acquisition. Skip Hop contributed
$35.4 million to consolidated net sales in the first half of fiscal
2017. Changes in foreign currency exchange rates in the first half
of fiscal 2017 compared to the first half of fiscal 2016 had a
negligible impact on consolidated net sales comparability.
Operating income in the first half of fiscal 2017 decreased
$13.2 million, or 8.4%, to $143.1 million, compared to $156.3
million in the first half of fiscal 2016. Operating margin
decreased 150 basis points to 10.0%, compared to 11.5% in the first
half of fiscal 2016. Adjusted operating income (a non-GAAP measure)
decreased $12.4 million, or 7.8%, to $145.6 million, compared to
$158.0 million in the first half of fiscal 2016. Adjusted operating
margin (a non-GAAP measure) decreased 140 basis points to 10.2%,
compared to 11.6% in the first half of fiscal 2016, which
principally reflects increased investments in retail operations,
marketing, and technology.
Net income in the first half of fiscal 2017 decreased $5.6
million, or 6.2%, to $84.6 million, or $1.73 per diluted share,
compared to $90.2 million, or $1.75 per diluted share, in the first
half of fiscal 2016. Adjusted net income (a non-GAAP measure)
decreased $5.1 million, or 5.6%, to $86.2 million, compared to
$91.3 million in the first half of fiscal 2016. Adjusted earnings
per diluted share (a non-GAAP measure) in the first half of fiscal
2017 decreased 0.5% to $1.76, compared to $1.77 in the first half
of fiscal 2016.
Cash flow from operations in the first half of fiscal 2017 was
$107.3 million compared to $85.6 million in the first half of
fiscal 2016. The increase reflects favorable changes in net working
capital, partially offset by lower earnings.
See the “Reconciliation of GAAP to Adjusted Results” section of
this release for additional disclosures and reconciliations
regarding non-GAAP measures.
Business Segment Results
At the beginning of fiscal 2017, the Company combined its
Carter’s Retail and OshKosh Retail segments into a single U.S.
Retail operating segment, and its Carter’s Wholesale and OshKosh
Wholesale segments into a single U.S. Wholesale operating segment,
to reflect the sales-channel approach executive management now uses
to evaluate business performance and manage operations in the U.S.
The International segment was not affected by these changes. The
Company’s reportable segments are now U.S. Retail, U.S. Wholesale,
and International. Prior periods have been conformed to reflect
this current segment structure.
U.S. Retail Segment
Second Quarter of Fiscal 2017 compared to Second Quarter of
Fiscal 2016
U.S. Retail segment sales increased $39.0 million, or 11.1%, to
$391.8 million. U.S. Retail comparable sales increased 6.0%,
comprised of comparable stores sales growth of 0.4% and comparable
eCommerce sales growth of 27.6%. Skip Hop contributed $0.9 million
to segment net sales in the second quarter of fiscal 2017.
In the second quarter of fiscal 2017, the Company opened 11
stores and closed three stores in the United States.
First Half of Fiscal 2017 compared to First Half of Fiscal
2016
U.S. Retail segment sales increased $48.7 million, or 6.9%, to
$755.6 million. U.S. Retail comparable sales increased 1.1%,
comprised of eCommerce comparable sales growth of 23.5%, partially
offset by a stores comparable sales decline of 5.0%. Skip Hop
contributed $1.2 million to segment net sales in the first half of
fiscal 2017.
In the first half of fiscal 2017, the Company opened 26 stores
and closed eight stores in the United States.
As of the end of the second quarter of fiscal 2017, the Company
operated 810 retail stores in the United States, comprised of 621
stand-alone and 189 dual-branded stores.
U.S. Wholesale Segment
Second Quarter of Fiscal 2017 compared to Second Quarter of
Fiscal 2016
U.S. wholesale segment net sales increased $2.6 million, or
1.2%, to $217.7 million, reflecting the benefit of the Skip Hop
acquisition, partially offset by a decrease in demand for Carter’s
and OshKosh products. Skip Hop contributed $15.1 million to segment
net sales in the second quarter of fiscal 2017.
First Half of Fiscal 2017 compared to First Half of Fiscal
2016
U.S. wholesale segment net sales increased $3.1 million, or
0.6%, to $510.3 million, reflecting the benefit of the Skip Hop
acquisition, partially offset by a decrease in demand for Carter’s
and OshKosh products. Skip Hop contributed $21.9 million to segment
net sales in the first half of fiscal 2017.
International Segment
Second Quarter of Fiscal 2017 compared to Second Quarter of
Fiscal 2016
International segment net sales increased $11.0 million, or
15.4%, to $82.6 million, reflecting the benefit of the Skip Hop
acquisition and growth in Canada and China, partially offset by
decreased wholesale demand in other markets outside of the U.S.
Skip Hop contributed $9.1 million to segment net sales in the
second quarter of fiscal 2017.
Changes in foreign currency exchange rates in the second quarter
of fiscal 2017 compared to the second quarter of fiscal 2016
adversely affected international segment net sales in the second
quarter of fiscal 2017 by $2.6 million, or 3.6%. On a constant
currency basis (a non-GAAP measure), international segment net
sales increased 19.0%
For the second quarter of fiscal 2017, Canada retail comparable
sales increased 8.2%, comprised of a stores comparable sales
increase of 5.9% and eCommerce comparable sales growth of 46.8%. In
the second quarter of fiscal 2017, the Company opened six stores
and closed one store in Canada.
First Half of Fiscal 2017 compared to First Half of Fiscal
2016
International segment net sales increased $9.5 million, or 6.4%,
to $159.0 million, reflecting the benefit of the Skip Hop
acquisition and growth in Canada and China, partially offset by
decreased wholesale demand in other markets outside of the U.S.
Skip Hop contributed $12.3 million to segment net sales in the
first half of fiscal 2017.
Changes in foreign currency exchange rates in the first half of
fiscal 2017 compared to the first half of fiscal 2016 adversely
affected international segment net sales in the first half of
fiscal 2017 by $1.2 million, or 0.8%. On a constant currency basis
(a non-GAAP measure), international segment net sales increased
7.1%.
For the first half of fiscal 2017, Canada retail comparable
sales increased 0.1%, comprised of eCommerce comparable sales
growth of 43.1%, offset by a stores comparable sales decline of
2.9%.
In the first half of fiscal 2017, the Company opened six stores
and closed two stores in Canada. As of the end of the second
quarter of fiscal 2017, the Company operated 168 retail stores in
Canada.
Return of Capital
In the second quarter and first half of fiscal 2017, the Company
returned to shareholders, through share repurchases and cash
dividends, a total of $69.4 million and $134.1 million,
respectively, as described below.
During the second quarter of fiscal 2017, the Company
repurchased and retired 587,465 shares of its common stock for
$51.6 million at an average price of $87.84 per share. In the first
half of fiscal 2017, the Company repurchased and retired 1,131,409
shares of its common stock for $98.2 million at an average price of
$86.82 per share. Fiscal year-to-date through July 26, 2017, the
Company repurchased and retired a total of 1,296,734 shares for
$112.7 million at an average price of $86.89 per share. All shares
were repurchased in open market transactions pursuant to applicable
regulations for such transactions. As of July 26, 2017, the total
remaining capacity under the Company’s previously announced
repurchase authorizations was approximately $162 million.
During the second quarter of fiscal 2017, the Company paid a
cash dividend of $0.37 per share totaling $17.8 million. In the
first half of fiscal 2017, the Company paid cash dividends of $0.74
per share totaling $35.8 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.
2017 Business Outlook
For fiscal 2017, the Company projects net sales to increase
approximately 4% to 6% compared to fiscal 2016 and adjusted
earnings per diluted share to increase approximately 8% to 10%
compared to adjusted earnings per diluted share of $5.14 in fiscal
2016. This forecast for fiscal 2017 adjusted earnings per diluted
share excludes anticipated expenses of approximately $2.5 million
related to acquisitions and approximately $0.3 million related to
the Company's direct sourcing initiative, which includes severance
and relocation costs.
For the third quarter of fiscal 2017, the Company projects net
sales to increase approximately 5% compared to the third quarter of
fiscal 2016 and adjusted earnings per diluted share to be
approximately comparable to adjusted earnings per diluted share of
$1.61 in the third quarter of fiscal 2016. This projection
contemplates increased investment to support the Company’s
long-term growth objectives compared to the prior-year period. The
forecast for third quarter fiscal 2017 adjusted earnings per
diluted share excludes anticipated expenses of approximately $0.1
million related to acquisitions.
The Company believes non-GAAP measurements, including adjusted
earnings per diluted share, provide investors with a meaningful
view of the Company’s core operating results, and are the same
measurements used by the Company's executive management to assess
the Company's performance.
Conference Call
The Company will hold a conference call with investors to
discuss second quarter fiscal 2017 results and its business outlook
on July 27, 2017 at 8:30 a.m. Eastern Daylight Time. To participate
in the call, please dial 719-325-2349. To listen to a live
broadcast via the internet, please visit www.carters.com and select
the “Q2 2017 Earnings Conference Call” link under the “Investor
Relations” tab. Presentation materials for the call can be accessed
under the same tab by selecting the link for “News & Events”
followed by “Webcasts & Presentations.” A replay of the call
will be available shortly after the broadcast through August 5,
2017, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 2169382. 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 nearly 1,000
Company-operated stores in the United States and Canada and on-line
at www.carters.com, www.oshkosh.com, and www.cartersoshkosh.ca. The
Company’s Just One You, Precious Firsts, and Genuine Kids brands
are available at Target, its Child of Mine brand is available at
Walmart, and its Simple Joys brand is available on Amazon.com. The
Company also owns Skip Hop, a global lifestyle brand for families
with young children. 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 2017 and fiscal year 2017, or any other future
period, assessments of the Company’s performance and financial
position, and drivers of the Company’s sales and earnings growth.
Such statements are based on current expectations only, and are
subject to certain risks, uncertainties, and assumptions. Should
one or more of these risks or uncertainties materialize or not
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated,
estimated, or projected. Certain of the risks and uncertainties
that could cause actual results and performance to differ
materially are described in the Company’s most recently filed
Annual Report on Form 10-K and other reports filed with the
Securities and Exchange Commission from time to time under the
headings “Risk Factors.” Included among the risks and uncertainties
that may impact future results are the risks of: losing one or more
major customers, vendors, or licensees, due to competition,
inadequate quality of the Company’s products, or otherwise;
financial difficulties for one or more of the Company’s major
customers, vendors, or licensees, or an overall decrease in
consumer spending; fluctuations in foreign currency exchange rates;
our products not being accepted in the marketplace, due to quality
concerns, changes in consumer preference and fashion trends, or
otherwise; negative publicity, including as a result of product
recalls or otherwise; failure to protect the Company’s intellectual
property; various types of litigation, including class action
litigation brought under various consumer protection, employment,
and privacy and information security laws; a breach of the
Company’s consumer databases, systems, or processes; the risk of
slow-downs, disruptions, or strikes along the Company’s supply
chain, including disruptions resulting from foreign supply sources,
the Company’s distribution centers, or in-sourcing capabilities;
unsuccessful expansion into international markets or failure to
successfully manage legal, regulatory, political and economic risks
of the Company’s existing international operations, including
maintaining compliance with worldwide anti-bribery laws; and an
inability to obtain additional financing on favorable terms. The
Company does not undertake any obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(dollars in thousands, except per share
data)
(unaudited)
Fiscal Quarter Ended Two Fiscal Quarters Ended
July 1, 2017 July 2, 2016 July 1,
2017 July 2, 2016 Net sales $ 692,117 $
639,471 $ 1,424,872 $ 1,363,556 Cost of goods sold 388,660
357,289 805,613 770,445 Gross profit 303,457
282,182 619,259 593,111 Selling, general, and administrative
expenses 250,146 228,464 497,940 457,460 Royalty income (11,210 )
(9,525 ) (21,768 ) (20,600 ) Operating income 64,521 63,243 143,087
156,251 Interest expense 7,194 6,803 14,298 13,542 Interest income
(79 ) (178 ) (218 ) (385 ) Other (income) expense, net (544 ) 516
(765 ) 3,709 Income before income taxes 57,950 56,102
129,772 139,385 Provision for income taxes 20,025 19,904
45,183 49,207 Net income $ 37,925 $
36,198 $ 84,589 $ 90,178 Basic net
income per common share $ 0.79 $ 0.72 $ 1.75 $ 1.77 Diluted net
income per common share $ 0.78 $ 0.71 $ 1.73 $ 1.75 Dividend
declared and paid per common share $ 0.37 $ 0.33 $ 0.74 $ 0.66
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended Two Fiscal Quarters Ended
July 1, 2017 % ofTotal Net
Sales July 2, 2016
% ofTotal Net Sales July 1, 2017
% ofTotal Net Sales July
2, 2016 % ofTotal Net Sales
Net
sales:
U.S. Wholesale $ 217,710 31.5 % $ 215,122 33.6 % $ 510,265 35.8 % $
507,176 37.2 % U.S. Retail (a) 391,822 56.6 % 352,782 55.2 %
755,593 53.0 % 706,871 51.8 % International (b) 82,585 11.9
% 71,567 11.2 % 159,014 11.2 % 149,509 11.0 %
Total net sales $ 692,117 100.0 % $ 639,471 100.0 % $
1,424,872 100.0 % $ 1,363,556 100.0 %
Operating income
(loss):
% ofSegment Net Sales %
ofSegment Net Sales % ofSegment
Net Sales % ofSegment Net Sales U.S.
Wholesale (g) $ 35,806 16.4 % $ 41,509 19.3 % $ 105,501 20.7 % $
109,920 21.7 % U.S. Retail (a) (g) 42,342 10.8 % 36,952 10.5 %
72,242 9.6 % 76,421 10.8 % International (b) (g) 7,597 9.2 % 9,105
12.7 % 11,282 7.1 % 17,546 11.7 % Corporate expenses (c) (d) (e)
(f) (21,224 ) (24,323 ) (45,938 ) (47,636 ) Total operating income
$ 64,521 9.3 % $ 63,243 9.9 % $ 143,087 10.0 %
$ 156,251 11.5 % (a) Includes retail store and
eCommerce results. (b) Net sales includes international retail,
eCommerce, and wholesale sales. (c) Corporate expenses include
expenses related to incentive compensation, stock-based
compensation, executive management, severance and relocation,
finance, office occupancy, information technology, legal,
consulting, and audit fees. (d) Includes charges related to the
amortization of the H.W. Carter and Sons tradenames of
approximately $0.8 million and $1.7 million for the fiscal quarter
and two fiscal quarters ended July 2, 2016, respectively. (e)
Includes acquisition-related expenses of approximately $0.6 million
and $1.8 million for fiscal quarter and two fiscal quarters ended
July 1, 2017, respectively. (f) Includes charges related to the
Company's direct sourcing initiative of approximately $0.1 million
and $0.3 million for the fiscal quarter and two fiscal quarters
ended July 1, 2017, respectively. (g) A total of $0.4 million of
certain costs related to inventory acquired from Skip Hop is
included in operating income between U.S. Wholesale, U.S. Retail,
and International for the fiscal quarter and two fiscal quarters
ended July 1, 2017.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except per share
data)
(unaudited)
July 1, 2017 December 31, 2016 July 2,
2016 ASSETS Current assets: Cash and cash equivalents $
173,564 $ 299,358 $ 205,080 Accounts receivable, net 165,183
202,471 150,633 Finished goods inventories 610,423 487,591 587,434
Prepaid expenses and other current assets 44,527 32,180 46,189
Deferred income taxes — 35,486 32,816 Total
current assets 993,697 1,057,086 1,022,152 Property, plant, and
equipment, net of accumulated depreciation of $384,881, $345,907,
and $317,580, respectively 382,472 385,874 386,034 Tradenames and
other intangible assets, net 400,735 308,928 309,017 Goodwill
231,709 176,009 177,540 Other assets 23,246 18,700
17,749 Total assets $ 2,031,859 $ 1,946,597 $
1,912,492
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 217,340 $ 158,432 $ 190,366
Other current liabilities 94,644 119,177 80,595
Total current liabilities 311,984 277,609 270,961
Long-term debt, net 661,846 580,376 580,678 Deferred income taxes
133,251 130,656 128,682 Other long-term liabilities 174,867
169,832 165,469 Total liabilities 1,281,948 1,158,473
1,145,790 Commitments and contingencies Stockholders'
equity: Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at July 1, 2017, December
31, 2016, and July 2, 2016 — — — Common stock, voting; par value
$.01 per share; 150,000,000 shares authorized; 47,971,577,
48,948,670 and 50,194,955 shares issued and outstanding at July 1,
2017, December 31, 2016 and July 2, 2016, respectively 480 489 502
Accumulated other comprehensive loss (30,653 ) (34,740 ) (30,533 )
Retained earnings 780,084 822,375 796,733
Total stockholders' equity 749,911 788,124 766,702
Total liabilities and stockholders' equity $ 2,031,859
$ 1,946,597 $ 1,912,492
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in thousands)
(unaudited)
Two Fiscal Quarters Ended July 1, 2017
July 2, 2016 Cash flows from operating activities:
Net income $ 84,589 $ 90,178 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 39,705 34,916 Amortization of tradenames 892 1,831
Amortization of fair value step up of inventory 400 — Amortization
of debt issuance costs 749 725 Non-cash stock-based compensation
expense 9,646 9,250 Foreign currency (gain) loss, net (555 ) 3,130
Income tax benefit from stock-based compensation — (3,684 ) Loss on
disposal of property, plant, and equipment 221 133 Deferred income
taxes 3,227 1,258 Effect of changes in operating assets and
liabilities, net of acquisition: Accounts receivable, net 57,215
57,229 Finished goods inventories (91,846 ) (114,817 ) Prepaid
expenses and other assets (13,871 ) (12,643 ) Accounts payable and
other liabilities 16,961 18,093
Net cash provided by operating
activities
107,333 85,599 Cash flows from investing
activities: Capital expenditures (34,276 ) (49,698 ) Acquisition of
Skip Hop Holdings, Inc., net of cash acquired (143,704 ) — Proceeds
from sale of property, plant, and equipment — 193 Net
cash used in investing activities (177,980 ) (49,505 ) Cash
flows from financing activities: Borrowings under secured revolving
credit facility 100,000 — Payments on secured revolving credit
facility (18,965 ) — Repurchases of common stock (98,236 ) (180,209
) Dividends paid (35,831 ) (33,679 ) Income tax benefit from
stock-based compensation — 3,684 Withholdings from vestings of
restricted stock (5,590 ) (8,508 ) Proceeds from exercises of stock
options 3,122 5,101 Net cash used in financing
activities (55,500 ) (213,611 ) Effect of exchange rate
changes on cash and cash equivalents 353 1,388 Net
decrease in cash and cash equivalents (125,794 ) (176,129 ) Cash
and cash equivalents, beginning of period 299,358 381,209
Cash and cash equivalents, end of period $ 173,564 $
205,080
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended July 1, 2017 Gross Margin
% Net Sales SG&A
% Net Sales Operating
Income % Net Sales Net
Income Diluted EPS As reported
(GAAP) $ 303.5 43.8 % $ 250.1 36.1 % $ 64.5 9.3 % $ 37.9 $ 0.78
Acquisition-related costs (b) 0.4 (0.6 ) 1.0 0.6 0.01 Direct
sourcing initiative (b) (c) — (0.1 ) 0.1 — —
As adjusted (a)
$ 303.9 43.9 % $ 249.5 36.1 % $ 65.5 9.5 % $ 38.6 $ 0.79
Two Fiscal Quarters Ended July 1, 2017 Gross
Margin % Net Sales SG&A % Net Sales
Operating Income % Net Sales Net Income
Diluted EPS As reported (GAAP) $ 619.3 43.5 % $ 497.9
34.9 % $ 143.1 10.0 % $ 84.6 $ 1.73 Acquisition-related costs (b)
0.4 (1.8 ) 2.2 1.4 0.03 Direct sourcing initiative (b) (c) — (0.3 )
0.3 0.2 —
As adjusted (a) $ 619.7 43.5 % $ 495.8 34.8
% $ 145.6 10.2 % $ 86.2 $ 1.76
Fiscal Quarter Ended July
2, 2016 Gross Margin % Net Sales SG&A
% Net Sales Operating Income % Net Sales
Net Income Diluted EPS As reported (GAAP) $
282.2 44.1 % $ 228.5 35.7 % $ 63.2 9.9 % $ 36.2 $ 0.71 Amortization
of tradename (b) — (0.8 ) 0.8 0.5 0.01
As adjusted (a) $
282.2 44.1 % $ 227.7 35.6 % $ 64.0 10.0 % $ 36.7 $ 0.72
Two Fiscal Quarters Ended July 2, 2016 Gross
Margin % Net Sales SG&A % Net Sales
Operating Income % Net Sales Net Income
Diluted EPS As reported (GAAP) $ 593.1 43.5 % $ 457.5
33.5 % $ 156.3 11.5 % $ 90.2 $ 1.75 Amortization of tradename (b) —
(1.7 ) 1.7 1.1 0.02
As adjusted (a) $ 593.1 43.5 % $ 455.7
33.4 % $ 158.0 11.6 % $ 91.3 $ 1.77 (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 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 and affords investors a view of what management
considers to be the Company's core performance. The adjusted,
non-GAAP financial measurements included in this earnings release
should not be considered as an alternative to net income or as any
other measurement of performance derived in accordance with GAAP.
The adjusted, non-GAAP financial measurements are presented for
informational purposes only and are not necessarily indicative of
the Company’s future condition or results of operations. (b) The
difference between the impacts on Operating Income and Net Income
represents the income taxes related to the adjustment item
(calculated using the applicable tax rate of the underlying
jurisdiction). (c) Costs associated with the Company's direct
sourcing initiative, which includes severance and relocation.
Note: Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended October 1, 2016 Gross
Margin SG&A Operating
Income Net Income Diluted
EPS As reported (GAAP) $ 375.5 $ 255.3 $ 130.9 $ 80.8 $
1.60 Direct sourcing initiative (b) (c) — (0.5 ) 0.5
0.3 0.01
As adjusted (a) $ 375.5 $ 254.8
$ 131.4 $ 81.1 $ 1.61
Fiscal
Year Ended December 31, 2016 Gross Margin
SG&A Operating Income Net Income
Diluted EPS As reported (GAAP) $ 1,379.1 $ 995.4 $
426.6 $ 258.1 $ 5.08 Amortization of tradename (b) — (1.7 ) 1.7 1.1
0.02 Direct sourcing initiative (b) (c) — (0.7 ) 0.7 0.5 0.01
Acquisition-related costs (b) — (2.4 ) 2.4 1.5
0.03
As adjusted (a) $ 1,379.1 $ 990.6 $ 431.4
$ 261.1 $ 5.14 (a) In addition to the
results provided in this earnings release in accordance with GAAP,
the Company has provided adjusted, non-GAAP financial measurements
that present SG&A, operating income, net income, and net income
on a diluted share basis excluding the adjustments discussed above.
The Company believes these adjustments provide a meaningful
comparison of the Company’s results and affords investors a view of
what management considers to be the Company's core performance. The
adjusted, non-GAAP financial measurements included in this earnings
release should not be considered as an alternative to net income or
as any other measurement of performance derived in accordance with
GAAP. The adjusted, non-GAAP financial measurements are presented
for informational purposes only and are not necessarily indicative
of the Company’s future condition or results of operations. (b) The
difference between the impacts on Operating Income and Net Income
represents the income taxes related to the adjustment item
(calculated using the applicable tax rate of the underlying
jurisdiction). (c) Costs associated with the Company's direct
sourcing initiative, which include severance and relocation.
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 1, 2017 July 2, 2016
July 1, 2017 July 2, 2016
Weighted-average number of common and common equivalent shares
outstanding: Basic number of common shares outstanding 47,863,618
50,143,568 48,093,155 50,660,278 Dilutive effect of equity awards
550,726 469,114 552,866 468,632 Diluted
number of common and common equivalent shares outstanding
48,414,344 50,612,682 48,646,021 51,128,910
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 37,925 $ 36,198 $ 84,589 $ 90,178 Income
allocated to participating securities (291 ) (279 ) (660 ) (720 )
Net income available to common shareholders $ 37,634 $
35,919 $ 83,929 $ 89,458 Basic net income per
common share $ 0.79 $ 0.72 $ 1.75 $ 1.77 Diluted net income per
common share: Net income $ 37,925 $ 36,198 $ 84,589 $ 90,178 Income
allocated to participating securities (289 ) (278 ) (656 ) (715 )
Net income available to common shareholders $ 37,636 $
35,920 $ 83,933 $ 89,463 Diluted net income
per common share $ 0.78 $ 0.71 $ 1.73 $ 1.75
As adjusted
(a):
Basic net income per common share: Net income $ 38,559 $ 36,697 $
86,167 $ 91,276 Income allocated to participating securities (296 )
(284 ) (673 ) (729 ) Net income available to common shareholders $
38,263 $ 36,413 $ 85,494 $ 90,547 Basic
net income per common share $ 0.80 $ 0.73 $ 1.78 $ 1.79 Diluted net
income per common share: Net income $ 38,559 $ 36,697 $ 86,167 $
91,276 Income allocated to participating securities (294 ) (282 )
(669 ) (725 ) Net income available to common shareholders $ 38,265
$ 36,415 $ 85,498 $ 90,551 Diluted net
income per common share $ 0.79 $ 0.72 $ 1.76 $ 1.77 (a)
In addition to the results provided in this earnings release
in accordance with GAAP, the Company has provided adjusted,
non-GAAP financial measurements that present per share data
excluding the adjustments discussed above. The Company has excluded
$0.6 million and $1.6 million in after-tax expenses from these
results for the fiscal quarter and two fiscal quarters ended July
1, 2017, respectively. The Company has excluded $0.5 million and
$1.1 million from these results for the fiscal quarter and two
fiscal quarters ended July 2, 2016, respectively.
Note: Results may not be additive due to
rounding.
RECONCILIATION OF U.S. GAAP AND
NON-GAAP INFORMATION
(unaudited)
The following table provides a
reconciliation of net income to EBITDA and Adjusted EBITDA for the
periods indicated:
Fiscal Quarter Ended Two Fiscal Quarters Ended
Four Fiscal Quarters Ended July 1, 2017
July 2, 2016 July 1, 2017 July 2,
2016 July 1, 2017 (dollars in millions) Net income $
37.9 $ 36.2 $ 84.6 $ 90.2 $ 252.5 Interest expense 7.2 6.8 14.3
13.5 27.8 Interest income (0.1 ) (0.2 ) (0.2 ) (0.4 ) (0.4 ) Income
tax expense 20.0 19.9 45.2 49.2 133.9 Depreciation and amortization
(a) 20.8 18.6 40.6 36.7 77.3
EBITDA $ 85.9 $ 81.3 $ 184.4 $ 189.3 $
491.2
Adjustments to EBITDA
Acquisition-related costs $ 1.0 $ — $ 2.2 $ — $ 4.6 Direct sourcing
initiative (b) 0.1 — 0.3 — 1.0
Adjusted EBITDA $ 86.9 $ 81.3 $ 187.0 $
189.3 $ 496.7 (a) Includes amortization
of acquired tradenames. (b) Pre-tax costs associated with the
Company's direct sourcing initiative, which includes severance and
relocation.
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 listed in the table above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry.
These measures also afford investors a view of what management
considers to be the Company's core performance.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
RECONCILIATION OF U.S. GAAP AND
NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
The tables below reflect the calculation
of constant currency for total net sales of the International
segment and consolidated net sales for the fiscal quarter and two
fiscal quarters ended July 1, 2017:
Fiscal Quarter Ended
ReportedNet SalesJuly
1,2017
Impact
ofForeignCurrencyTranslation
Constant-CurrencyNet
SalesJuly 1, 2017
ReportedNet SalesJuly 2,
2016
ReportedNet Sales%
Change
Constant-CurrencyNet
Sales% Change
Consolidated net sales $ 692.1 $ (2.6 ) $ 694.7 $ 639.5 8.2
% 8.6 % International segment net sales $ 82.6 $ (2.6 ) $ 85.1 $
71.6 15.4 % 19.0 %
Two Fiscal Quarters
Ended
ReportedNet SalesJuly
1,2017
Impact
ofForeignCurrencyTranslation
Constant-CurrencyNet
SalesJuly 1, 2017
ReportedNet SalesJuly 2,
2016
ReportedNet Sales%
Change
Constant-CurrencyNet
Sales% Change
Consolidated net sales $ 1,424.9 $ (1.2 ) $ 1,426.1 $
1,363.6 4.5 % 4.6 % International segment net sales $ 159.0 $ (1.2
) $ 160.2 $ 149.5 6.4 % 7.1 %
The Company evaluates its net sales on both an “as reported” and
a “constant currency” basis. The constant currency presentation,
which is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates that occurred between the
comparative periods. Constant currency net sales results are
calculated by translating current period net sales in local
currency to the U.S. dollar amount by using the currency conversion
rate for the prior comparative period. The Company consistently
applies this approach to net sales for all countries where the
functional currency is not the U.S. dollar. The Company believes
that the presentation of net sales on a constant currency basis
provides useful supplemental information regarding changes in our
net sales that were not due to fluctuations in currency exchange
rates and such information is consistent with how the Company
assesses changes in its net sales between comparative periods.
Note: Results may not be additive due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005626/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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