- Net sales $733 million, growth of
1%
- Diluted EPS $0.95, decline of 9%;
adjusted diluted EPS $0.97, decline of 8%
- Returned $65 million to shareholders
through share repurchases and dividends
- 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 first quarter fiscal 2017
results.
“We achieved our sales and earnings objectives in the first
quarter,” said Michael D. Casey, Chairman and Chief Executive
Officer. “Stronger than planned demand in our wholesale and
eCommerce businesses helped to offset the effects of delayed tax
refunds to families with young children and a later Easter holiday.
We have seen a meaningful improvement in sales trends in April,
driven by Easter holiday shopping, and expect good growth in sales
and earnings in the balance of the year.”
Consolidated Results (First Quarter of Fiscal 2017 compared
to First Quarter of Fiscal 2016)
Net sales increased $8.7 million, or 1.2%, to $732.8 million,
reflecting growth in the Company’s domestic retail and wholesale
sales, which was partially offset by a decline in International
sales. Skip Hop, a global lifestyle brand for families with young
children acquired by the Company in February 2017, contributed
$10.4 million to consolidated net sales in the first quarter of
fiscal 2017. Changes in foreign currency exchange rates in the
first quarter of fiscal 2017 compared to the first quarter of
fiscal 2016 favorably affected consolidated net sales in the first
quarter of fiscal 2017 by $1.4 million, or 0.2%. On a constant
currency basis (a non-GAAP measure), consolidated net sales
increased 1.0% in the first quarter of fiscal 2017.
Operating income in the first quarter of fiscal 2017 decreased
$14.4 million, or 15.5%, to $78.6 million, compared to $93.0
million in the first quarter of fiscal 2016. Operating margin
decreased 210 basis points to 10.7%, compared to 12.8% in the first
quarter of fiscal 2016. Adjusted operating income (a non-GAAP
measure) decreased $13.9 million, or 14.8%, to $80.1 million,
compared to $94.0 million in the first quarter of fiscal 2016.
Adjusted operating margin (a non-GAAP measure) decreased 210 basis
points to 10.9%, compared to 13.0% in the first quarter of fiscal
2016, which reflected increased investments in retail operations,
marketing, and technology, partially offset by improved gross
profit margin.
Net income in the first quarter of fiscal 2017 decreased $7.3
million, or 13.6%, to $46.7 million, or $0.95 per diluted share,
compared to $54.0 million, or $1.04 per diluted share, in the first
quarter of fiscal 2016. Adjusted net income (a non-GAAP measure)
decreased $7.0 million, or 12.8%, to $47.6 million, compared to
$54.6 million in the first quarter of fiscal 2016. Adjusted
earnings per diluted share (a non-GAAP measure) in the first
quarter of fiscal 2017 decreased 7.8% to $0.97, compared to $1.05
in the first quarter of fiscal 2016.
Cash flow from operations in the first quarter of fiscal 2017
was $84.2 million compared to $128.3 million in the first quarter
of fiscal 2016. The decrease reflected unfavorable changes in net
working capital and lower net income.
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 2017
compared to First Quarter of Fiscal 2016)
At the beginning of fiscal 2017, we combined our Carter’s Retail
and OshKosh Retail into a single U.S. Retail operating segment, and
our Carter’s Wholesale and OshKosh Wholesale 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. Our International segment was not
affected by these changes. Our reportable segments are now U.S.
Retail, U.S. Wholesale, and International. Prior periods have been
conformed to reflect our current segment structure.
U.S. Retail Segment
U.S. Retail segment sales increased $9.7 million, or 2.7%, to
$363.8 million. U.S. Retail comparable sales decreased 3.5%,
comprised of a stores comparable sales decline of 10.4%, partially
offset by eCommerce comparable sales growth of 19.9%. Skip Hop
contributed $0.4 million to segment net sales in the first quarter
of fiscal 2017.
In the first quarter of fiscal 2017, the Company opened 15
stores and closed five stores in the United States. As of the end
of the first quarter of fiscal 2017, the Company operated 802
retail stores in the United States, comprised of 622 stand-alone
and 180 dual-branded locations.
U.S. Wholesale Segment
U.S. wholesale segment net sales increased $0.5 million, or
0.2%, to $292.6 million, reflecting the benefit of the Skip Hop
acquisition offset by a decrease in demand for Carter’s and OshKosh
products. Skip Hop contributed $6.8 million to segment net sales in
the first quarter of fiscal 2017.
International Segment
International segment net sales decreased $1.5 million, or 1.9%,
to $76.4 million, reflecting decreased wholesale demand, partially
offset by growth in retail sales in Canada, increased eCommerce
sales in China, and the benefit of the Skip Hop acquisition. Skip
Hop contributed $3.3 million to segment net sales in the first
quarter of fiscal 2017.
Changes in foreign currency exchange rates in the first quarter
of fiscal 2017 compared to the first quarter of fiscal 2016
favorably affected international segment net sales in the first
quarter of fiscal 2017 by $1.4 million, or 1.8%. On a constant
currency basis (a non-GAAP measure), international segment net
sales declined 3.7%.
For the first quarter of fiscal 2017, Canada retail comparable
sales decreased 8.0%, comprised of a stores comparable sales
decline of 11.7%, partially offset by eCommerce comparable sales
growth of 40.1%. In the first quarter of fiscal 2017, the Company
closed one store in Canada. As of the end of the first quarter of
fiscal 2017, the Company operated 163 retail stores in Canada.
Return of Capital
In the first quarter of fiscal 2017, the Company returned a
total of $64.6 million to shareholders through share repurchases
and cash dividends, as described below.
During the first quarter of fiscal 2017, the Company repurchased
and retired 543,944 shares of its common stock for $46.6 million at
an average price of $85.72 per share. Fiscal year-to-date through
April 26, 2017, the Company repurchased and retired a total of
694,744 shares for $60.1 million at an average price of $86.57 per
share. All shares were repurchased in open market transactions
pursuant to applicable regulations for such transactions. As of
April 26, 2017, the total remaining capacity under the Company’s
previously announced repurchase authorizations was approximately
$214 million.
During the first quarter of fiscal 2017, the Company paid a cash
dividend of $0.37 per share totaling $18.0 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% over 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 $3.0 million related
to the Skip Hop acquisition, and approximately $0.5 million related
to the Company's direct sourcing initiative, which includes
severance and relocation costs.
For the second quarter of fiscal 2017, the Company projects net
sales to increase approximately 6% to 8% compared to the second
quarter of fiscal 2016 and adjusted earnings per diluted share to
be approximately $0.65 to $0.70 compared to adjusted earnings per
diluted share of $0.72 in the second quarter of fiscal 2016. This
projection contemplates net sales growth in all segments and
increased spending to support the Company’s long-term growth
strategies compared to the prior-year period. The forecast for
second quarter fiscal 2017 adjusted earnings per diluted share
excludes anticipated expenses of approximately $1.0 million related
to the Skip Hop acquisition, and approximately $0.2 million related
to the Company's direct sourcing initiative.
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 first quarter fiscal 2017 results and its business outlook
on April 27, 2017 at 8:30 a.m. Eastern Daylight Time. To
participate in the call, please dial 719-457-1506. To listen to a
live broadcast via the internet, please visit www.carters.com and
select the “Q1 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
May 6, 2017, at 888-203-1112 (U.S. / Canada) or 719-457-0820
(international), passcode 5525821. 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.oshkoshbgosh.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 second
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 April 1,
2017 April 2, 2016 Net sales $ 732,755 $
724,085 Cost of goods sold 416,953 413,156 Gross
profit 315,802 310,929 Selling, general, and administrative
expenses 247,794 228,996 Royalty income (10,558 ) (11,075 )
Operating income 78,566 93,008 Interest expense 7,104 6,739
Interest income (139 ) (207 ) Other (income) expense, net (221 )
3,193 Income before income taxes 71,822 83,283 Provision for
income taxes 25,158 29,303 Net income $ 46,664
$ 53,980 Basic net income per common share $ 0.96 $
1.05 Diluted net income per common share $ 0.95 $ 1.04 Dividend
declared and paid per common share $ 0.37 $ 0.33
CARTER’S, INC. BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended
April 1, 2017
% ofTotal
NetSales
April 2, 2016
% ofTotal
NetSales
Net
sales:
U.S. Wholesale $ 292,555 39.9 % $ 292,054 40.3 % U.S. Retail (a)
363,771 49.6 % 354,089 48.9 % International (b) 76,429 10.5
% 77,942 10.8 % Total net sales $ 732,755 100.0 % $
724,085 100.0 %
Operating income
(loss):
% ofSegment Net
Sales
% ofSegment Net
Sales
U.S. Wholesale $ 69,695 23.8 % $ 68,411 23.4 % U.S. Retail (a)
29,900 8.2 % 39,469 11.1 % International (b) 3,685 4.8 % 8,441 10.8
%
Corporate expenses (c) (d) (e) (f)
(24,714 ) (23,313 ) Total operating income $ 78,566 10.7 % $
93,008 12.8 %
(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, building 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 $1.0 million for the
fiscal quarter ended April 2, 2016.
(e) Includes expenses related to the acquisition of Skip Hop of
approximately $1.3 million for the fiscal quarter ended April 1,
2017.
(f) Includes charges related to the Company's direct sourcing
initiative of $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)
April 1,
2017 December 31, 2016 April 2, 2016
ASSETS Current assets: Cash and cash equivalents $ 154,278 $
299,358 $ 395,141 Accounts receivable, net 206,707 202,471 192,569
Finished goods inventories 434,712 487,591 376,499 Prepaid expenses
and other current assets 46,153 32,180 36,791 Deferred income taxes
— 35,486 31,841 Total current assets 841,850
1,057,086 1,032,841
Property, plant, and equipment, net of
accumulated depreciation of $365,733, $345,907, and $307,449,
respectively
386,275 385,874 377,273 Tradenames and other intangible assets, net
401,379 308,928 309,853 Goodwill 232,925 176,009 177,238 Other
assets 23,034 18,700 15,258 Total assets $
1,885,463 $ 1,946,597 $ 1,912,463
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 101,386 $ 158,432 $ 90,387 Other current
liabilities 123,661 119,177 102,494 Total
current liabilities 225,047 277,609 192,881 Long-term debt,
net 581,621 580,376 580,319 Deferred income taxes 133,552 130,656
128,815 Other long-term liabilities 173,280 169,832
161,731 Total liabilities 1,113,500 1,158,473 1,063,746
Commitments and contingencies Stockholders' equity:
Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at April 1, 2017, December
31, 2016, and April 2, 2016 — — — Common stock, voting; par value
$.01 per share; 150,000,000 shares authorized; 48,517,417,
48,948,670 and 51,206,395 shares issued and outstanding at April 1,
2017, December 31, 2016 and April 2, 2016, respectively 485 489 512
Accumulated other comprehensive loss (33,793 ) (34,740 ) (31,081 )
Retained earnings 805,271 822,375 879,286
Total stockholders' equity 771,963 788,124 848,717
Total liabilities and stockholders' equity $ 1,885,463
$ 1,946,597 $ 1,912,463
CARTER’S, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended April 1,
2017 April 2, 2016 Cash flows from
operating activities: Net income $ 46,664 $ 53,980 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 19,513 17,177 Amortization of
tradenames 250 995 Amortization of debt issuance costs 373 361
Non-cash stock-based compensation expense 4,779 4,556 Foreign
currency (gain) loss, net (62 ) 3,780 Income tax benefit from
stock-based compensation — (3,144 ) Loss on disposal of property,
plant, and equipment 189 192 Deferred income taxes 3,491 2,226
Effect of changes in operating assets and liabilities, net of
acquisition: Accounts receivable, net 16,247 15,247 Finished goods
inventories 82,086 96,056 Prepaid expenses and other assets (15,350
) (576 ) Accounts payable and other liabilities (74,000 ) (62,568 )
Net cash provided by operating activities 84,180 128,282
Cash flows from investing activities: Capital
expenditures (17,991 ) (25,552 ) Acquisition of Skip Hop Holdings,
Inc., net of cash acquired (143,704 ) — Net cash used in
investing activities (161,695 ) (25,552 ) Cash flows from
financing activities: Borrowing under secured revolving credit
facility 20,000 — Payment on secured revolving credit facility
(18,965 ) — Repurchases of common stock (46,627 ) (71,561 )
Dividends paid (17,998 ) (17,032 ) Income tax benefit from
stock-based compensation — 3,144
Withholdings from vestings of restricted
stock
(5,552 ) (8,454 )
Proceeds from exercises of stock
options
1,626 3,747 Net cash used in financing activities
(67,516 ) (90,156 ) Effect of exchange rate changes on cash
and cash equivalents (49 ) 1,358 Net (decrease) increase in
cash and cash equivalents (145,080 ) 13,932 Cash and cash
equivalents, beginning of period 299,358 381,209 Cash
and cash equivalents, end of period $ 154,278 $ 395,141
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED
RESULTS
(dollars in millions, except earnings per share)
(unaudited)
Fiscal Quarter Ended April 1, 2017
GrossMargin
% NetSales
SG&A
% NetSales
OperatingIncome
% NetSales
NetIncome
DilutedEPS
As reported (GAAP) $ 315.8 43.1 % $ 247.8 33.8 % $ 78.6 10.7
% $ 46.7 $ 0.95 Acquisition-related costs (b) (c) — (1.3 ) 1.3 0.8
0.02 Direct sourcing initiative (b) (d) — (0.2 ) 0.2
0.2 —
As adjusted (a) $ 315.8 43.1 % $ 246.3
33.6 % $ 80.1 10.9 % $ 47.6 $ 0.97
Fiscal Quarter Ended April 2, 2016
GrossMargin
% NetSales
SG&A
% NetSales
OperatingIncome
% NetSales
NetIncome
DilutedEPS
As reported (GAAP) $ 310.9 42.9 % $ 229.0 31.6 % $ 93.0 12.8
% $ 54.0 $ 1.04 Amortization of tradenames (b) — (1.0 ) 1.0
0.6 0.01
As adjusted (a) $ 310.9 42.9 %
$ 228.0 31.5 % $ 94.0 13.0 % $ 54.6 $ 1.05
(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) Transaction costs associated with the Skip Hop
acquisition.
(d) 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 July 2, 2016
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported (GAAP) $
282.2 $ 228.5 $ 63.2 $ 36.2 $ 0.71 Amortization of tradenames (b) —
(0.8 ) 0.8 0.5 0.01
As adjusted (a) $
282.2 $ 227.7 $ 64.0 $ 36.7 $ 0.72
Fiscal Year Ended December 31, 2016
GrossMargin
SG&A
OperatingIncome
Net Income Diluted EPS As reported (GAAP) $
1,379.1 $ 995.4 $ 426.6 $ 258.1 $ 5.08 Amortization of tradenames
(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) (d) — (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.
(d) Advisory fees incurred in connection with announced Skip Hop
transaction.
Note: Results may not be additive due to rounding.
CARTER’S, INC. RECONCILIATION OF NET INCOME
ALLOCABLE TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended
April 1, 2017
April 2, 2016
Weighted-average number of common and common equivalent shares
outstanding: Basic number of common shares outstanding 48,322,692
51,176,987 Dilutive effect of equity awards 554,994 467,103
Diluted number of common and common equivalent shares
outstanding 48,877,686 51,644,090
As reported on a
GAAP Basis:
(dollars in thousands, except per share data) Basic net income per
common share: Net income $ 46,664 $ 53,980 Income allocated to
participating securities (370 ) (444 ) Net income available to
common shareholders $ 46,294 $ 53,536 Basic net
income per common share $ 0.96 $ 1.05 Diluted net income per common
share: Net income $ 46,664 $ 53,980 Income allocated to
participating securities (367 ) (441 ) Net income available to
common shareholders $ 46,297 $ 53,539 Diluted net
income per common share $ 0.95 $ 1.04
As adjusted
(a):
Basic net income per common share: Net income $ 47,608 $ 54,578
Income allocated to participating securities (377 ) (448 ) Net
income available to common shareholders $ 47,230 $ 54,130
Basic net income per common share $ 0.98 $ 1.06 Diluted net
income per common share: Net income $ 47,608 $ 54,578 Income
allocated to participating securities (375 ) (445 ) Net income
available to common shareholders $ 47,233 $ 54,133
Diluted net income per common share $ 0.97 $ 1.05
(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
$0.9 million and $0.6 million in after-tax expenses from these
results for the fiscal quarters ended April 1, 2017 and
April 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
Four FiscalQuarters
Ended
April 1, 2017 April 2, 2016 April 1,
2017 (dollars in millions) Net income $ 46.7 $ 54.0 $ 250.8
Interest expense 7.1 6.7 27.4 Interest income (0.1 ) (0.2 ) (0.5 )
Income tax expense 25.2 29.3 133.8 Depreciation and amortization
(a) 19.8 18.2 75.0 EBITDA $ 98.5 $
108.0 $ 486.6
Adjustments to EBITDA
Acquisition-related costs (b) $ 1.3 $ — $ 3.6 Direct sourcing
initiative (c) 0.2 — 1.0
Adjusted
EBITDA $ 100.0 $ 108.0 $ 491.1
(a) Includes amortization of acquired tradenames.
(b) Transaction costs related to Skip Hop transaction.
(c) 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 item described in footnotes (b) and (c) 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 tables below reflect the calculation of constant currency
for total net sales of the International segment and consolidated
net sales for the fiscal quarter ended April 1, 2017:
Fiscal Quarter Ended
ReportedNet SalesApril
1,2017
Impact
ofForeignCurrencyTranslation
Constant-CurrencyNet
SalesApril 1,2017
ReportedNet SalesApril
2,2016
ReportedNet Sales%
Change
Constant-CurrencyNet
Sales% Change
Consolidated net sales $ 732.8 $ 1.4 $ 731.4 $ 724.1 1.2 %
1.0 % International segment net sales $ 76.4 $ 1.4 $ 75.1 $ 77.9
(1.9 )% (3.7 )%
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.
Note: Results may not be additive due to rounding.
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version on businesswire.com: http://www.businesswire.com/news/home/20170427005762/en/
Carter’s, Inc.Sean McHugh, 678-791-7615Vice President &
Treasurer
Carters (NYSE:CRI)
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