- Net sales $756 million, growth of
3%
- Diluted EPS $0.89 vs. $0.95 in Q1
2017, including unusual charge of $0.20 related to Toys “R” Us
bankruptcy; adjusted diluted EPS $1.09, growth of 12%
- Returned $46 million to shareholders
through share repurchases and dividends
- Full year fiscal 2018 outlook: net
sales growth of 3%; adjusted diluted EPS growth of 12%
Carter’s, Inc. (NYSE:CRI), the largest branded marketer in North
America of apparel exclusively for babies and young children, today
reported its first quarter fiscal 2018 results.
“Excluding the unusual charge related to the Toys “R” Us
bankruptcy, we achieved our sales and earnings objectives in the
first quarter,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Our growth was driven by our retail and international
segments, including good contribution from our Skip Hop and Mexico
businesses acquired last year. The Toys “R” Us store closures will
affect the growth of our wholesale sales this year. Longer term, we
believe Carter’s is uniquely positioned to recapture lost sales to
Toys “R” Us given our presence in over 18,000 retail store
locations in the United States and leading website in branded
children’s apparel. Given the strength of our product offerings,
investments in brand marketing and eCommerce capabilities, and the
benefit from the new federal tax law, we are expecting good growth
in sales and earnings this year.”
Adoption of New Accounting Standard
Beginning in fiscal 2018, the Company adopted the Financial
Accounting Standards Board’s Accounting Standards Codification No.
606, Revenue from Contracts with Customers, and related amendments
(“ASC 606”) using the full retrospective adoption method. All
periods in fiscal 2017 and fiscal 2016 were amended to reflect
these provisions, and retained earnings at January 2, 2016
(beginning of fiscal 2016) were adjusted for the cumulative effect
of periods prior to fiscal 2016. The adoption of ASC 606 had no
material effect on the Company’s consolidated financial position,
results of operations, or cash flows.
Consolidated Results
First Quarter of Fiscal 2018 compared to First Quarter of Fiscal
2017
Net sales increased $23.0 million, or 3.1%, to $755.8 million,
principally driven by growth in the Company’s U.S. Retail and
International segments including contributions from the 2017 Skip
Hop and Mexico licensee acquisitions, partially offset by a net
sales decline in the U.S. Wholesale segment. Changes in foreign
currency exchange rates in the first quarter of fiscal 2018
compared to the first quarter of fiscal 2017 favorably affected
consolidated net sales in the first quarter of fiscal 2018 by $2.8
million, or 0.4%. On a constant currency basis (a non-GAAP
measure), consolidated net sales increased 2.8% in the first
quarter of fiscal 2018.
Operating income in the first quarter of fiscal 2018 decreased
$18.1 million, or 23.1%, to $60.3 million, compared to $78.5
million in the first quarter of fiscal 2017. 2018 results include
$12.8 million in charges related to the bankruptcy of a wholesale
customer, Toys “R” Us. Operating margin decreased 270 basis points
to 8.0%, compared to 10.7% in the first quarter of fiscal 2017.
Adjusted operating income (a non-GAAP measure which excludes the
$12.8 million charge noted above and other unusual items in the
first quarters of fiscal 2018 and 2017) decreased $7.6 million, or
9.5%, to $72.7 million, compared to $80.3 million in the first
quarter of fiscal 2017. Adjusted operating margin (a non-GAAP
measure) decreased 140 basis points to 9.6%, compared to 11.0% in
the first quarter of fiscal 2017, which principally reflects a
higher mix of retail sales, deleverage from acquisitions, and
increased investments in marketing.
Net income in the first quarter of fiscal 2018 decreased $4.1
million, or 8.9%, to $42.5 million, or $0.89 per diluted share,
compared to $46.6 million, or $0.95 per diluted share, in the first
quarter of fiscal 2017.
Adjusted net income (a non-GAAP measure) increased $4.2 million,
or 8.8%, to $52.0 million, compared to $47.8 million in the first
quarter of fiscal 2017. Adjusted earnings per diluted share (a
non-GAAP measure) in the first quarter of fiscal 2018 increased
12.2% to $1.09, compared to $0.97 in the first quarter of fiscal
2017.
Cash flow from operations in the first quarter of fiscal 2018
was $64.1 million compared to $84.2 million in the first quarter of
fiscal 2017. The decrease was principally driven by an increase in
working capital.
See the “Reconciliation of GAAP to Adjusted Results” section of
this release for additional disclosures and reconciliations
regarding non-GAAP measures.
Business Segment Results
First Quarter of Fiscal 2018 compared to First Quarter of Fiscal
2017
U.S. Retail Segment
U.S. Retail segment sales increased $19.9 million, or 5.5%, to
$383.7 million. U.S. Retail comparable sales increased 3.0%, driven
by eCommerce sales growth.
In the first quarter of fiscal 2018, the Company opened nine
stores and closed 21 stores in the United States. As of the end of
the first quarter of fiscal 2018, the Company operated 818 retail
stores in the United States.
U.S. Wholesale Segment
U.S. Wholesale segment net sales decreased $11.7 million, or
4.0%, to $280.8 million, reflecting lower demand for Carter’s and
OshKosh products, partially offset by contributions from the Skip
Hop acquisition.
International Segment
International segment net sales increased $14.8 million, or
19.3%, to $91.2 million, driven by contributions from the Mexico
and Skip Hop acquisitions and growth in Canada, partially offset by
decreased wholesale demand across various markets outside of the
U.S.
Changes in foreign currency exchange rates in the first quarter
of fiscal 2018 compared to the first quarter of fiscal 2017
favorably affected International segment net sales in the first
quarter of fiscal 2018 by $2.8 million, or 3.6%. On a constant
currency basis (a non-GAAP measure), International segment net
sales increased 15.7%.
For the first quarter of fiscal 2018, Canada retail comparable
sales increased 3.6%. As of the end of the first quarter of fiscal
2018, the Company operated 179 retail stores in Canada and 42
retail stores in Mexico.
Return of Capital
In the first quarter of fiscal 2018, the Company returned to
shareholders, through share repurchases and cash dividends, a total
of $46.4 million.
During the first quarter, the Company repurchased and retired
221,313 shares of its common stock for $25.2 million at an average
price of $113.84 per share. Fiscal year-to-date through April 25,
2018, the Company has repurchased and retired a total of 426,768
shares for $46.8 million at an average price of $109.64 per share.
All shares were repurchased in open market transactions pursuant to
applicable regulations for such transactions. As of April 25, 2018,
the total remaining capacity under the Company’s previously
announced repurchase authorizations was approximately $539
million.
In the first quarter, the Company paid a cash dividend of $0.45
per share totaling $21.2 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.
2018 Business Outlook
For the second quarter of fiscal 2018, the Company projects net
sales to be approximately $680 million and adjusted diluted
earnings per share to be approximately $0.53 compared to adjusted
diluted earnings per share of $0.79 in the second quarter of fiscal
2017. Net sales and adjusted earnings in the second quarter of
fiscal 2018 are expected to be affected by: 1) discontinued sales
to Toys “R” Us; 2) the earlier Easter holiday, which shifted
holiday-related demand into the Company’s first quarter of 2018;
and 3) slower sales trends due to unseasonably cold weather.
For fiscal 2018, the Company projects net sales to increase
approximately 3% compared to fiscal 2017 and adjusted diluted
earnings per share to increase approximately 12% compared to
adjusted diluted earnings per share of $5.77 in fiscal 2017.
Forecasted net sales and adjusted earnings for fiscal 2018 assume:
1) the Company recaptures approximately half of the lost sales
previously planned to Toys “R” Us; 2) a reduction in discretionary
spending from originally planned levels; and 3) an estimated
effective tax rate of approximately 22%. This adjusted earnings
forecast excludes the unusual charge of approximately $12.8 million
related to the Toys “R” Us bankruptcy and a benefit of
approximately $0.4 million related to an insurance recovery
associated with unusual storm-related store closures, both of which
were recorded in the first quarter of fiscal 2018.
The Company believes these non-GAAP measurements 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 first quarter fiscal 2018 results and its business outlook
on April 26, 2018 at 8:30 a.m. Eastern Daylight Time. To
participate in the call, please dial 719-457-2630. To listen to a
live broadcast via the internet, please visit www.carters.com and
select the “Q1 2018 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
May 5, 2018, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 5039151. 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 North America
of apparel exclusively for babies and young children. The Company
owns the Carter’s and OshKosh B'gosh brands, two of the most
recognized brands in the marketplace. These brands are sold in
leading department stores, national chains, and specialty retailers
domestically and internationally. They are also sold through more
than 1,000 Company-operated stores in the United States, Canada,
and Mexico and online at www.carters.com, www.oshkoshbgosh.com, and
www.cartersoshkosh.ca. The Company’s Just One You 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. 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 second
quarter of fiscal 2018 and fiscal year 2018, 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; our products not being accepted in the
marketplace due to quality concerns, changes in consumer preference
and fashion trends, or otherwise; a failure to meet regulatory
requirements, including those relating to product quality and
safety; negative publicity, including as a result of product
recalls or otherwise; a 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;
slow-downs, disruptions, or strikes in 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; failure to
successfully integrate acquired businesses; fluctuations in foreign
currency exchange rates; 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 March 31, 2018
April 1, 2017 Net sales $ 755,786 $ 732,827 Cost of goods
sold 423,309 417,135 Gross profit 332,477 315,692
Royalty income, net 7,994 10,558 Selling, general, and
administrative expenses 280,162 247,794 Operating
income 60,309 78,456 Interest expense 7,985 7,104 Interest income
(166 ) (139 ) Other income, net (382 ) (221 ) Income before income
taxes 52,872 71,712 Provision for income taxes 10,403 25,117
Net income $ 42,469 $ 46,595 Basic net
income per common share $ 0.90 $ 0.96 Diluted net income per common
share $ 0.89 $ 0.95 Dividend declared and paid per common share $
0.45 $ 0.37
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended March 31, 2018
% ofTotal
NetSales
April 1, 2017
% ofTotal
NetSales
Net
sales:
U.S. Retail (a) $ 383,742 50.8 % $ 363,843 49.7 % U.S. Wholesale
280,832 37.1 % 292,555 39.9 % International (b) 91,212 12.1
% 76,429 10.4 % Total net sales $ 755,786 100.0 % $
732,827 100.0 %
Operating income
(loss):
% ofSegment Net Sales %
ofSegment Net Sales U.S. Retail (d) $ 29,518 7.7
% $ 29,790 8.2 % U.S. Wholesale (c) 50,272 17.9 % 69,695 23.8 %
International (e) 3,762 4.1 % 3,685 4.8 % Corporate expenses (f)
(g) (h) (23,243 ) (24,714 ) Total operating income $ 60,309
8.0 % $ 78,456 10.7 %
(a)
Includes retail store and eCommerce
results.
(b)
Net sales includes international retail,
eCommerce, and wholesale sales.
(c)
Includes $12.8 million of charges related
to a customer bankruptcy.
(d)
Includes insurance recovery of
approximately $0.4 million associated with unusual storm-related
store closures.
(e)
Includes international licensing
income.
(f)
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.
(g)
Includes acquisition-related costs of
approximately $1.6 million for the fiscal quarter ended April 1,
2017, of which approximately $0.4 million were not originally
reported as acquisition-related costs.
(h)
Includes charges related to the Company's
direct sourcing initiative of approximately $0.2 million for the
fiscal quarter ended April 1, 2017.
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except per share
data)
(unaudited)
March 31, 2018 December 30, 2017 April 1,
2017 ASSETS Current assets: Cash and cash equivalents $
180,256 $ 178,494 $ 154,278 Accounts receivable, net 221,186
240,561 206,707 Finished goods inventories 479,344 548,722 434,712
Prepaid expenses and other current assets 54,297 52,935
48,396 Total current assets 935,083 1,020,712 844,093
Property, plant, and equipment, net of accumulated depreciation of
$416,153, $404,173, and $365,733, respectively 369,064 377,924
386,275 Tradenames, net 365,506 365,551 365,684 Goodwill 230,008
230,424 232,925 Customer relationships, net 47,369 47,996 35,695
Other assets 28,176 28,435 23,034 Total assets
$ 1,975,206 $ 2,071,042 $ 1,887,706
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 116,310 $ 182,114 $ 101,386 Other current
liabilities 109,626 149,134 125,634 Total
current liabilities 225,936 331,248 227,020 Long-term debt,
net 617,541 617,306 581,621 Deferred income taxes 87,422 84,944
133,652 Other long-term liabilities 189,493 180,128
173,280 Total liabilities 1,120,392 1,213,626 1,115,573
Commitments and contingencies Stockholders' equity:
Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at March 31, 2018, December
30, 2017, and April 1, 2017 — — — Common stock, voting; par
value $.01 per share; 150,000,000 shares authorized; 47,113,576,
47,178,346 and 48,517,417 shares issued and outstanding at March
31, 2018, December 30, 2017 and April 1, 2017, respectively 471 472
485 Accumulated other comprehensive loss (30,855 ) (29,093 )
(33,793 ) Retained earnings 885,198 886,037 805,441
Total stockholders' equity 854,814 857,416
772,133 Total liabilities and stockholders' equity $
1,975,206 $ 2,071,042 $ 1,887,706
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended March 31, 2018
April 1, 2017 Cash flows from operating activities: Net
income $ 42,469 $ 46,595 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation of property,
plant, and equipment 21,137 19,513 Amortization of intangible
assets 921 250 Amortization of debt issuance costs 431 373
Stock-based compensation expense 4,944 4,779 Unrealized foreign
currency exchange gain, net (353 ) (62 ) Provisions for doubtful
accounts receivable 11,051 (1,651 ) Loss on disposal of property,
plant, and equipment, net of recoveries 350 189 Deferred income
taxes 2,968 3,451 Effect of changes in operating assets and
liabilities, net of acquisitions: Accounts receivable 8,623 17,898
Finished goods inventories 68,294 82,086 Prepaid expenses and other
assets (1,970 ) (15,008 ) Accounts payable and other liabilities
(94,758 ) (74,233 ) Net cash provided by operating activities
64,107 84,180 Cash flows from investing
activities: Capital expenditures (14,744 ) (17,991 ) Acquisitions
of businesses, net of cash acquired — (143,704 ) Disposals and
recoveries from property, plant, and equipment 373 —
Net cash used in investing activities (14,371 ) (161,695 )
Cash flows from financing activities: Borrowings under secured
revolving credit facility 50,000 20,000 Payments on secured
revolving credit facility (50,000 ) (18,965 ) Repurchases of common
stock (25,195 ) (46,627 ) Dividends paid (21,244 ) (17,998 )
Withholdings from vestings of restricted stock (6,583 ) (5,552 )
Proceeds from exercises of stock options 4,769 1,626
Net cash used in financing activities (48,253 ) (67,516 )
Effect of exchange rate changes on cash and cash equivalents 279
(49 ) Net increase (decrease) in cash and cash equivalents
1,762 (145,080 ) Cash and cash equivalents, beginning of period
178,494 299,358 Cash and cash equivalents, end of
period $ 180,256 $ 154,278
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended March 31, 2018
GrossMargin
% Net Sales
SG&A
% Net Sales
Operating Income
% Net Sales
NetIncome
Diluted EPS
As reported (GAAP) (a) $ 332.5 44.0 % $ 280.2 37.1 % $ 60.3
8.0 % $ 42.5 $ 0.89 Customer bankruptcy charges (c) (d) — (12.8 )
12.8 9.8 0.20 Store restructuring costs (c) (e) — 0.4
(0.4 ) (0.3 ) 0.01
As adjusted (b) $ 332.5 44.0 % $
267.8 35.4 % $ 72.7 9.6 % $ 52.0 $ 1.09
Fiscal Quarter Ended April 1, 2017
Gross Margin
% Net Sales
SG&A
% NetSales
Operating Income
% Net Sales
NetIncome
Diluted EPS
As reported (GAAP) (a) $ 315.7 43.1 % $ 247.8 33.8 % $ 78.5
10.7 % $ 46.6 $ 0.95 Acquisition-related costs (f) — (1.6 ) 1.6 1.1
0.02 Direct sourcing initiative (c) (g) — (0.2 ) 0.2
0.1 —
As adjusted (b) $ 315.7 43.1 % $ 245.9
33.6 % $ 80.3 11.0 % $ 47.8 $ 0.97 (a)
Beginning in fiscal 2018, the Company adopted the Financial
Accounting Standards Board’s Accounting Standards Codification No.
606, Revenue from Contracts with Customers, and related amendments
(“ASC 606”) using the full retrospective adoption method. All
periods in fiscal 2017 and fiscal 2016 were amended to reflect
these provisions, and retained earnings at January 2, 2016
(beginning of fiscal 2016) were adjusted for the cumulative effect
of periods prior to fiscal 2016. The adoption of ASC 606 had no
material effect on the Company’s consolidated financial position,
results of operations, and cash flows. (b)
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 afford 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.
(c) 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). (d) Related to the Toys "R" Us bankruptcy. (e)
Insurance recovery associated with unusual storm-related store
closures. (f) Non-recurring costs related to the Skip Hop and
Mexico acquisitions. SG&A and operating income include
approximately $0.4 million of costs incurred during the first
quarter of fiscal 2017 that were not originally reported as
acquisition-related costs. (g) 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 GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per
share)
(unaudited)
Fiscal Quarter Ended July 1, 2017
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported
(GAAP) (a) $ 303.2 $ 250.1 $ 64.3 $ 37.8 $ 0.77
Acquisition-related costs (c) 0.4 (0.8 ) 1.2 0.8 0.02 Direct
sourcing initiative (c) (d) — (0.1 ) 0.1 — —
As adjusted (b) $ 303.6 $ 249.3 $ 65.6
$ 38.6 $ 0.79
Fiscal Year Ended
December 30, 2017
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported (GAAP) (a)
$ 1,483.4 $ 1,106.9 $ 419.6 $ 302.8 $ 6.24 Special employee
compensation provision (c) (e) — (21.2 ) 21.2 15.1 0.31 Store
restructuring costs (c) — (2.7 ) 2.7 1.5 0.03 Acquisition costs (c)
1.2 0.2 1.0 0.2 — Direct sourcing initiative (c) (d) — (0.3 ) 0.3
0.2 — Tax reform (f) — — — (40.0 ) (0.83 )
As adjusted (b) $ 1,484.6 $ 1,082.9 $ 444.8
$ 279.8 $ 5.77 (a) Beginning in fiscal
2018, the Company adopted the Financial Accounting Standards
Board’s Accounting Standards Codification No. 606, Revenue from
Contracts with Customers, and related amendments (“ASC 606”) using
the full retrospective adoption method. All periods in fiscal 2017
and fiscal 2016 were amended to reflect these provisions, and
retained earnings at January 2, 2016 (beginning of fiscal 2016)
were adjusted for the cumulative effect of periods prior to fiscal
2016. The adoption of ASC 606 had no material effect on the
Company’s consolidated financial position, results of operations,
and cash flows. (b)
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 afford 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.
(c) 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). (d) Costs associated with the Company's direct
sourcing initiative, which include severance and relocation. (e)
Special employee compensation provided as a result of the
significant benefit related to the enactment of the Tax Cuts and
Jobs Act of 2017. (f) Reflects the $40 million net benefit of the
Tax Cuts and Jobs Act of 2017.
Note: Results may not be additive due to
rounding.
CARTER’S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE
TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended
March 31, 2018
April 1, 2017 Weighted-average number of
common and common equivalent shares outstanding: Basic number of
common shares outstanding 46,772,737 48,322,692 Dilutive effect of
equity awards 618,678 554,994 Diluted number of
common and common equivalent shares outstanding 47,391,415
48,877,686
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 42,469 $ 46,595 Income allocated to
participating securities (325 ) (369 ) Net income available to
common shareholders $ 42,144 $ 46,226 Basic net
income per common share $ 0.90 $ 0.96 Diluted net income per common
share: Net income $ 42,469 $ 46,595 Income allocated to
participating securities (323 ) (367 ) Net income available to
common shareholders $ 42,146 $ 46,228 Diluted net
income per common share $ 0.89 $ 0.95
As adjusted
(a):
Basic net income per common share: Net income $ 51,956 $ 47,774
Income allocated to participating securities (400 ) (379 ) Net
income available to common shareholders $ 51,556 $ 47,395
Basic net income per common share $ 1.10 $ 0.98 Diluted net
income per common share: Net income $ 51,956 $ 47,774 Income
allocated to participating securities (397 ) (376 ) Net income
available to common shareholders $ 51,559 $ 47,398
Diluted net income per common share $ 1.09 $ 0.97 (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 $9.5 million
and $1.2 million in after-tax expenses from these results for the
fiscal quarters ended March 31, 2018, and April 1, 2017,
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
Four FiscalQuarters
Ended
March 31, 2018 April 1, 2017 March
31, 2018 (dollars in millions) Net income $ 42.5 $ 46.6 $ 298.6
Interest expense 8.0 7.1 30.9 Interest income (0.2 ) (0.1 ) (0.4 )
Income tax expense 10.4 25.1 73.4 Depreciation and amortization
22.1 19.8 86.7 EBITDA $ 82.7 $ 98.4
$ 489.2
Adjustments to EBITDA Special
employee compensation provision (a) $ — $ — $ 21.2 Customer
bankruptcy charges (b) 12.8 — 12.8 Acquisition-related costs (c) —
1.6 3.0 Store restructuring costs (d) (0.4 ) — 2.3 Direct sourcing
initiative (e) — 0.2 0.1 Acquisition contingency fair value
adjustment (f) — — (3.6 )
Adjusted EBITDA $
95.2 $ 100.3 $ 524.9 (a) Special
employee compensation provision related to significant benefit
related to the enactment of the Tax Cuts and Jobs Act of 2017;
includes $1.2 million in related payroll taxes. (b) Related to the
Toys "R" Us bankruptcy. (c) Non-recurring costs incurred in
connection with the Skip Hop and Mexico business acquisitions. (d)
Net costs arising from unusual storm damage and related store
closures. (e) Costs associated with the Company's direct sourcing
initiative, which include severance and relocation. (f) Revaluation
of the contingent consideration liability associated with the
Company's acquisition of Skip Hop.
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 footnotes (a) - (f) to the table
above.
We present EBITDA and Adjusted EBITDA because we consider them
important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry.
These measures also afford investors a view of what management
considers to be the Company's core performance.
The use of EBITDA and Adjusted EBITDA instead of net income or
cash flows from operations has limitations as an analytical tool,
and you should not consider them in isolation, or as a substitute
for analysis of our results as reported under GAAP. EBITDA and
Adjusted EBITDA do not represent net income or cash flow from
operations as those terms are defined by GAAP and do not
necessarily indicate whether cash flows will be sufficient to fund
cash needs. While EBITDA, Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements, these terms are not necessarily
comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.
EBITDA and Adjusted EBITDA do not reflect the impact of earnings or
charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as
discretionary cash available to us for working capital, debt
service and other purposes.
RECONCILIATION OF U.S. GAAP AND
NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
The table below reflects the calculation
of constant currency for total net sales of the International
segment and consolidated net sales for the fiscal quarter ended
March 31, 2018:
Fiscal Quarter Ended
ReportedNet SalesMarch
31,2018
Impact
ofForeignCurrencyTranslation
Constant-Currency Net
Sales March 31, 2018
ReportedNet Sales April
1, 2017
Reported Net Sales %
Change
Constant-Currency Net
Sales % Change
Consolidated net sales $ 755.8 $ 2.8 $ 753.0 $ 732.8 3.1 %
2.8 % International segment net sales $ 91.2 $ 2.8 $ 88.4 $ 76.4
19.3 % 15.7 %
The Company evaluates its net sales on both an “as reported” and
a “constant currency” basis. The constant currency presentation,
which is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates that occurred between the
comparative periods. Constant currency net sales results are
calculated by translating current period net sales in local
currency to the U.S. dollar amount by using the currency conversion
rate for the prior comparative period. The Company consistently
applies this approach to net sales for all countries where the
functional currency is not the U.S. dollar. The Company believes
that the presentation of net sales on a constant currency basis
provides useful supplemental information regarding changes in our
net sales that were not due to fluctuations in currency exchange
rates and such information is consistent with how the Company
assesses changes in its net sales between comparative periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180426005733/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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