Carter’s, Inc. Reports Third Quarter Fiscal 2020 Results
- Third quarter results show progress recovering from market disruption
- Net sales $865 million, decline of 8%
- U.S. Retail comparable sales down 3.5%, including 17% increase in eCommerce sales
- Sales of exclusive brands to Target, Walmart and Amazon grew 10%
- Operating income $114 million, growth of 35%; adjusted operating income $120 million, growth of 4%
- Diluted EPS $1.85, growth of 38%; adjusted diluted EPS $1.96, growth of 5%
- $1.6 billion in liquidity at quarter end
ATLANTA–(BUSINESS WIRE)–Carter’s, Inc. (NYSE:CRI), the largest branded marketer in North America of apparel exclusively for babies and young children, today reported its third quarter fiscal 2020 results.
“We exceeded our sales and earnings goals in the third quarter,” said Michael D. Casey, Chairman and Chief Executive Officer. “The quarter got off to a strong start with our Fourth of July holiday retail sales up 7%. We saw less robust demand in August during the back-to-school shopping period with many children beginning their school year at home and learning virtually. We had the strongest level of demand in September with our Labor Day holiday retail sales up 15%, our best performance in three years.
“Earnings in the quarter were driven by the strength of our product offerings, more effective brand marketing, fewer promotions, curtailed spending and growth in eCommerce sales. eCommerce continues to be our fastest growing and highest margin business.
“We believe our third quarter performance reflects the strength of our brands, our strong value proposition, broad market distribution and the less discretionary nature of children’s apparel.
“As we enter the final weeks of the year, consumer demand is less predictable this holiday season given the lingering effects and, in some markets, resurgence of the coronavirus. That said, we believe we are well-positioned to outperform the market in the balance of 2020 and years ahead by providing the best value and experience in young children’s apparel.”
Adjustments to Reported GAAP Results
In addition to the results presented in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements, as presented below. 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. These measures are presented for informational purposes only. See “Reconciliation of GAAP to Adjusted Results” section of this release for additional disclosures and reconciliations regarding these non-GAAP financial measures.
|
|
Third Fiscal Quarter |
|||||||||||||||||||||||||||||
|
|
2020 |
|
|
2019 |
||||||||||||||||||||||||||
|
(In millions, except earnings per share) |
Operating |
|
% Net |
|
Net |
|
Diluted |
|
|
Operating |
|
% Net |
|
Net |
|
Diluted |
||||||||||||||
|
As reported (GAAP) |
$ |
113.5 |
|
|
13.1 |
% |
|
$ |
81.2 |
|
|
$ |
1.85 |
|
|
|
$ |
83.9 |
|
|
8.9 |
% |
|
$ |
60.3 |
|
|
$ |
1.34 |
|
|
COVID-19 expenses |
3.3 |
|
|
|
|
2.5 |
|
|
0.06 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
Retail store operating leases and other long-lived asset impairments, net |
1.5 |
|
|
|
|
1.1 |
|
|
0.03 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
Productivity/restructuring costs |
1.2 |
|
|
|
|
1.0 |
|
|
0.02 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
Intangible asset impairment |
— |
|
|
|
|
— |
|
|
— |
|
|
|
30.8 |
|
|
|
|
23.7 |
|
|
0.53 |
|
||||||||
|
As adjusted |
$ |
119.5 |
|
|
13.8 |
% |
|
$ |
85.9 |
|
|
$ |
1.96 |
|
|
|
$ |
114.7 |
|
|
12.2 |
% |
|
$ |
83.9 |
|
|
$ |
1.87 |
|
|
|
First Three Fiscal Quarters |
|||||||||||||||||||||||||||||
|
|
2020 |
|
|
2019 |
||||||||||||||||||||||||||
|
(In millions, except earnings per share) |
Operating |
|
% Net |
|
Net |
|
Diluted |
|
|
Operating |
|
% Net |
|
Net |
|
Diluted |
||||||||||||||
|
As reported (GAAP) |
$ |
56.0 |
|
|
2.8 |
% |
|
$ |
10.7 |
|
|
$ |
0.24 |
|
|
|
$ |
209.1 |
|
|
8.6 |
% |
|
$ |
138.7 |
|
|
$ |
3.06 |
|
|
Intangible asset impairment |
26.5 |
|
|
|
|
20.2 |
|
|
0.46 |
|
|
|
30.8 |
|
|
|
|
23.7 |
|
|
0.52 |
|
||||||||
|
Goodwill impairment |
17.7 |
|
|
|
|
17.7 |
|
|
0.40 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
COVID-19 expenses |
18.8 |
|
|
|
|
14.3 |
|
|
0.34 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
Productivity/restructuring costs |
8.8 |
|
|
|
|
6.8 |
|
|
0.15 |
|
|
|
1.6 |
|
|
|
|
1.3 |
|
|
0.03 |
|
||||||||
|
Retail store operating leases and other long-lived asset impairments, net |
6.5 |
|
|
|
|
4.9 |
|
|
0.11 |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
||||||||
|
Debt extinguishment loss |
— |
|
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
6.0 |
|
|
0.13 |
|
||||||||
|
Store restructuring costs |
— |
|
|
|
|
— |
|
|
— |
|
|
|
(0.7 |
) |
|
|
|
(0.6 |
) |
|
(0.01 |
) |
||||||||
|
China business model change |
— |
|
|
|
|
— |
|
|
— |
|
|
|
(2.1 |
) |
|
|
|
(2.1 |
) |
|
(0.05 |
) |
||||||||
|
As adjusted |
$ |
134.3 |
|
|
6.6 |
% |
|
$ |
74.7 |
|
|
$ |
1.70 |
|
|
|
$ |
238.7 |
|
|
9.9 |
% |
|
$ |
166.9 |
|
|
$ |
3.68 |
|
|
Note: Results may not be additive due to rounding. |
||||||||||||||||||||||||||||||
Consolidated Results
The discussion of results below is presented on an adjusted (non-GAAP) basis where noted.
Third Quarter of Fiscal 2020 compared to Third Quarter of Fiscal 2019
Net sales decreased $78.2 million, or 8.3%, to $865.1 million, compared to $943.3 million in the third quarter of fiscal 2019. The decline reflects decreased sales to certain wholesale customers, decreased traffic to Company-operated stores, and decreased back-to-school sales (all a result of ongoing disruptions related to the COVID-19 pandemic), partially offset by strong eCommerce channel growth. U.S. Retail segment comparable sales declined 3.5%, reflecting a retail store decline, partially offset by eCommerce growth of 17.2%.
Operating income increased $29.7 million, or 35.4%, to $113.5 million, compared to $83.9 million in the third quarter of fiscal 2019. Operating margin increased 420 basis points to 13.1%. Adjusted operating income (a non-GAAP measure) increased $4.9 million, or 4.2%, to $119.5 million, compared to $114.7 million in the third quarter of fiscal 2019. Adjusted operating margin increased 160 basis points to 13.8%, reflecting improved gross margin and strong management of spending.
Net income increased $21.0 million, or 34.8%, to $81.2 million, or $1.85 per diluted share, compared to $60.3 million, or $1.34 per diluted share, in the third quarter of fiscal 2019. Adjusted net income (a non-GAAP measure) increased $2.0 million, or 2.3%, to $85.9 million, compared to $83.9 million in the third quarter of fiscal 2019. Adjusted earnings per diluted share (a non-GAAP measure) increased 4.8% to $1.96, compared to $1.87 in the third quarter of fiscal 2019.
First Three Quarters of Fiscal 2020 compared to First Three Quarters of Fiscal 2019
Net sales decreased $384.3 million, or 15.9%, to $2.03 billion. This decrease reflects the temporary closure of the Company’s retail stores earlier this year, largely in the months of March, April, and May, and decreased sales to certain wholesale customers (both a result of disruptions related to COVID-19), partially offset by strong growth in eCommerce sales. Comparable eCommerce sales in the U.S. increased 39%.
Operating income was $56.0 million, compared to $209.1 million in the first three quarters of fiscal 2019. Adjusted operating income (a non-GAAP measure) was $134.3 million, compared to $238.7 million in the first three quarters of fiscal 2019. The decrease reflects the decline in net sales, increased inventory provisions, and lower royalty income, partially offset by decreased selling, general, and administrative expenses.
Net income was $10.7 million, or $0.24 per diluted share, compared to $138.7 million, or $3.06 per diluted share, in the first three quarters of fiscal 2019. Adjusted net income (a non-GAAP measure) was $74.7 million, compared to $166.9 million in the first three quarters of fiscal 2019. Adjusted earnings per diluted share (a non-GAAP measure) was $1.70, compared to $3.68 in the first three quarters of fiscal 2019.
Net cash provided by operations in the first three quarters of fiscal 2020 was $320.1 million compared to $73.4 million in the first three quarters of fiscal 2019. The increase reflects the extension of vendor payment terms, deferrals of retail store lease and other cash payments, and a reduction in inventory, partially offset by lower earnings related to COVID-19 disruptions.
See the “Business Segment Results” and “Reconciliation of GAAP to Adjusted Results” sections of this release for additional disclosures regarding business segment performance and non-GAAP measures.
Liquidity and Financial Position
During the third quarter of fiscal 2020, the Company repaid $244 million in outstanding borrowings under its $750 million secured revolving credit facility using cash on hand. The Company’s total liquidity at the end of the third quarter of fiscal 2020 was $1.6 billion, comprised of cash and cash equivalents of $831 million and approximately $740 million in available borrowing capacity (exclusive of $7 million of outstanding letters of credit) on its secured revolving credit facility.
Earlier this year, the Company announced that, in connection with the COVID-19 pandemic, it temporarily suspended its common stock share repurchase program and quarterly cash dividend. No distributions of capital occurred in the third quarter of fiscal 2020. Provisions in the Company’s secured revolving credit facility restrict the Company’s ability to pay cash dividends or repurchase its common stock through the third fiscal quarter of 2021, and could have the effect of restricting the Company’s ability to do so thereafter. The Company’s Board of Directors will evaluate future distributions of capital, including share repurchases and dividends, based on a number of factors, including restrictions under the Company’s revolving credit facility, business conditions, the Company’s financial performance, and other considerations.
The Company continues to believe it has sufficient liquidity for the foreseeable future to maintain its operations and manage through the disruption caused by the COVID-19 pandemic.
2020 Business Outlook
Given the market disruption caused by the COVID-19 pandemic, recent spikes in confirmed cases of the coronavirus, and related uncertainty on timing and extent of the market recovery, the Company is not providing fiscal 2020 sales and earnings guidance at this time.
Conference Call
The Company will hold a conference call with investors to discuss third quarter fiscal 2020 results and its business outlook on October 23, 2020 at 8:30 a.m. Eastern Daylight Time. To participate in the call, please dial 334-777-6978. To listen to a live broadcast via the internet and view the accompanying presentation materials, please visit ir.carters.com and select links for “News & Events” followed by “Webcasts & Presentations”. A replay of the call will be available shortly after the broadcast through November 6, 2020, at 888-203-1112 (U.S. / Canada) or 719-457-0820 (international), passcode 9393867. The replay will also be archived online on the “Webcasts & Presentations” page noted above.
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 approximately 1,100 Company-operated stores in the United States, Canada, and Mexico and online at www.carters.com, www.oshkosh.com, www.cartersoshkosh.ca, and www.carters.com.mx. The Company’s Child of Mine brand is available at Walmart, its Just One You brand is available at Target, 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.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws relating to our future performance, including statements with respect to the potential effects of the COVID-19 pandemic and the Company’s liquidity. 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, Quarterly Report on Form 10-Q for the quarter ended March 28, 2020, and other reports filed with the Securities and Exchange Commission from time to time under the headings “Risk Factors”. Included among those risks are those related to: the effects of the current coronavirus outbreak; financial difficulties for one or more of our major customers; an overall decrease in consumer spending; our products not being accepted in the marketplace; increased competition in the market place; diminished value of our brands; the failure to protect our intellectual property; the failure to comply with applicable quality standards or regulations; unseasonable or extreme weather conditions; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data; increased margin pressures, including increased cost of materials and labor; our foreign sourcing arrangements; disruptions in our supply chain; the management and expansion of our business domestically and internationally; the acquisition and integration of other brands and businesses; and changes in our tax obligations, including additional customs, duties or tariffs. 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 |
|
Three Fiscal Quarters Ended |
||||||||||||
|
|
September 26, |
|
September 28, |
|
September 26, |
|
September 28, |
||||||||
|
Net sales |
$ |
865,080 |
|
|
$ |
943,322 |
|
|
$ |
2,034,437 |
|
|
$ |
2,418,764 |
|
|
Cost of goods sold |
483,333 |
|
|
540,808 |
|
|
1,170,778 |
|
|
1,376,336 |
|
||||
|
Adverse purchase commitments (inventory and raw materials), net |
(1,968 |
) |
|
303 |
|
|
16,166 |
|
|
1,354 |
|
||||
|
Gross profit |
383,715 |
|
|
402,211 |
|
|
847,493 |
|
|
1,041,074 |
|
||||
|
Royalty income, net |
9,063 |
|
|
9,192 |
|
|
19,989 |
|
|
27,371 |
|
||||
|
Selling, general, and administrative expenses |
279,251 |
|
|
296,733 |
|
|
767,237 |
|
|
828,540 |
|
||||
|
Goodwill impairment |
— |
|
|
— |
|
|
17,742 |
|
|
— |
|
||||
|
Intangible asset impairment |
— |
|
|
30,800 |
|
|
26,500 |
|
|
30,800 |
|
||||
|
Operating income |
113,527 |
|
|
83,870 |
|
|
56,003 |
|
|
209,105 |
|
||||
|
Interest expense |
16,347 |
|
|
9,966 |
|
|
40,523 |
|
|
28,667 |
|
||||
|
Interest income |
(330 |
) |
|
(200 |
) |
|
(1,217 |
) |
|
(937 |
) |
||||
|
Other (income) expense, net |
(2,758 |
) |
|
483 |
|
|
2,647 |
|
|
474 |
|
||||
|
Loss on extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
7,823 |
|
||||
|
Income before income taxes |
100,268 |
|
|
73,621 |
|
|
14,050 |
|
|
173,078 |
|
||||
|
Income tax provision |
19,027 |
|
|
13,369 |
|
|
3,347 |
|
|
34,423 |
|
||||
|
Net income |
$ |
81,241 |
|
|
$ |
60,252 |
|
|
$ |
10,703 |
|
|
$ |
138,655 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic net income per common share |
$ |
1.86 |
|
|
$ |
1.35 |
|
|
$ |
0.25 |
|
|
$ |
3.08 |
|
|
Diluted net income per common share |
$ |
1.85 |
|
|
$ |
1.34 |
|
|
$ |
0.24 |
|
|
$ |
3.06 |
|
|
Dividend declared and paid per common share |
$ |
— |
|
|
$ |
0.50 |
|
|
$ |
0.60 |
|
|
$ |
1.50 |
|
|
CARTER’S, INC. BUSINESS SEGMENT RESULTS (dollars in thousands) (unaudited) |
||||||||||||||||||||||||||||
|
|
Fiscal Quarter Ended |
|
|
Three Fiscal Quarters Ended |
||||||||||||||||||||||||
|
|
September 26, |
|
% of |
|
September 28, |
|
% of |
|
|
September 26, |
|
% of |
|
September 28, |
|
% of |
||||||||||||
|
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
U.S. Retail |
$ |
449,150 |
|
|
51.9 |
% |
|
$ |
464,100 |
|
|
49.2 |
% |
|
|
$ |
1,085,883 |
|
|
53.4 |
% |
|
$ |
1,264,283 |
|
|
52.3 |
% |
|
U.S. Wholesale |
302,135 |
|
|
34.9 |
% |
|
352,256 |
|
|
37.3 |
% |
|
|
706,009 |
|
|
34.7 |
% |
|
856,713 |
|
|
35.4 |
% |
||||
|
International |
113,795 |
|
|
13.2 |
% |
|
126,966 |
|
|
13.5 |
% |
|
|
242,545 |
|
|
11.9 |
% |
|
297,768 |
|
|
12.3 |
% |
||||
|
Total net sales |
$ |
865,080 |
|
|
100.0 |
% |
|
$ |
943,322 |
|
|
100.0 |
% |
|
|
$ |
2,034,437 |
|
|
100.0 |
% |
|
$ |
2,418,764 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
Operating income (loss): |
|
|
% of |
|
|
|
% of |
|
|
|
|
% of |
|
|
|
% of |
||||||||||||
|
U.S. Retail |
$ |
47,559 |
|
|
10.6 |
% |
|
$ |
49,472 |
|
|
10.7 |
% |
|
|
$ |
38,902 |
|
|
3.6 |
% |
|
$ |
124,567 |
|
|
9.9 |
% |
|
U.S. Wholesale |
65,718 |
|
|
21.8 |
% |
|
54,391 |
|
|
15.4 |
% |
|
|
89,141 |
|
|
12.6 |
% |
|
145,181 |
|
|
16.9 |
% |
||||
|
International |
17,400 |
|
|
15.3 |
% |
|
6,136 |
|
|
4.8 |
% |
|
|
(15,819 |
) |
|
(6.5 |
)% |
|
15,351 |
|
|
5.2 |
% |
||||
|
Corporate expenses (*) |
(17,150 |
) |
|
n/a |
|
|
(26,129 |
) |
|
n/a |
|
|
|
(56,221 |
) |
|
n/a |
|
|
(75,994 |
) |
|
n/a |
|
||||
|
Total operating income |
$ |
113,527 |
|
|
13.1 |
% |
|
$ |
83,870 |
|
|
8.9 |
% |
|
|
$ |
56,003 |
|
|
2.8 |
% |
|
$ |
209,105 |
|
|
8.6 |
% |
|
(*) |
Corporate expenses include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, office occupancy, information technology, certain legal fees, consulting fees, and audit fees. |
|
|
Fiscal Quarter Ended September 26, 2020 |
|
|
Three Fiscal Quarters Ended September 26, 2020 |
||||||||||||||||||||
|
Charges: |
U.S. Retail |
|
U.S. Wholesale |
|
International |
|
|
U.S. Retail |
|
U.S. Wholesale |
|
International |
||||||||||||
|
Productivity/restructuring costs(1) |
$ |
0.3 |
|
|
$ |
0.2 |
|
|
$ |
0.3 |
|
|
|
$ |
3.4 |
|
|
$ |
1.5 |
|
|
$ |
1.9 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
17.7 |
|
||||||
|
Skip Hop tradename impairment charge |
— |
|
|
— |
|
|
— |
|
|
|
0.5 |
|
|
6.8 |
|
|
3.7 |
|
||||||
|
OshKosh tradename impairment charge |
— |
|
|
— |
|
|
— |
|
|
|
13.6 |
|
|
1.6 |
|
|
0.3 |
|
||||||
|
Incremental costs associated with COVID-19 pandemic |
1.6 |
|
|
1.4 |
|
|
0.3 |
|
|
|
8.3 |
|
|
8.5 |
|
|
2.0 |
|
||||||
|
Retail store operating leases and other long-lived asset impairments, net of gain(2) |
1.5 |
|
|
— |
|
|
— |
|
|
|
6.3 |
|
|
— |
|
|
0.2 |
|
||||||
|
Total charges |
$ |
3.4 |
|
|
$ |
1.6 |
|
|
$ |
0.6 |
|
|
|
$ |
32.1 |
|
|
$ |
18.4 |
|
|
$ |
25.8 |
|
|
(1) |
The third fiscal quarter ended September 26, 2020, the three fiscal quarters ended September 26, 2020, and the three fiscal quarters ended September 28, 2019 also include corporate charges related to organizational restructuring of $0.4 million, $2.0 million, and $1.6 million, respectively. |
|
(2) |
Impairments include an immaterial gain on the remeasurement of retail store operating leases. |
|
Fiscal Quarter Ended September 28, 2019 |
|
|
Three Fiscal Quarters Ended September 28, 2019 |
|||||||||||||||||||||
|
Charges: |
U.S. Retail |
|
U.S. Wholesale |
|
International |
|
|
U.S. Retail |
|
U.S. Wholesale |
|
International |
||||||||||||
|
Benefit related to sale of inventory previously reserved in China |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(2.1 |
) |
|
Reversal of store restructuring costs previously recorded during the third quarter of fiscal 2017 |
— |
|
|
— |
|
|
— |
|
|
|
(0.7 |
) |
|
— |
|
|
— |
|
||||||
|
Skip Hop tradename impairment charge |
1.2 |
|
|
19.1 |
|
|
10.5 |
|
|
|
1.2 |
|
|
19.1 |
|
|
10.5 |
|
||||||
|
Total charges |
$ |
1.2 |
|
|
$ |
19.1 |
|
|
$ |
10.5 |
|
|
|
$ |
0.5 |
|
|
$ |
19.1 |
|
|
$ |
8.4 |
|
|
Note: Results may not be additive due to rounding. |
||||||||||||||||||||||||
|
CARTER’S, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data) (unaudited) |
|||||||||||
|
|
September 26, 2020 |
|
December 28, 2019 |
|
September 28, 2019 |
||||||
|
ASSETS |
|
|
|
|
|
||||||
|
Current assets: |
|
|
|
|
|
||||||
|
Cash and cash equivalents |
$ |
831,175 |
|
|
$ |
214,311 |
|
|
$ |
153,936 |
|
|
Accounts receivable, net of allowance for credit losses of $7,675, $6,354, $4,591, respectively |
263,231 |
|
|
251,005 |
|
|
293,203 |
|
|||
|
Finished goods inventories, net of inventory reserves of $30,053, $9,283, and $19,583, respectively |
646,608 |
|
|
593,987 |
|
|
723,242 |
|
|||
|
Prepaid expenses and other current assets |
56,493 |
|
|
48,454 |
|
|
53,264 |
|
|||
|
Total current assets |
1,797,507 |
|
|
1,107,757 |
|
|
1,223,645 |
|
|||
|
Property, plant, and equipment, net of accumulated depreciation of $576,123, $523,848, and $504,833, respectively |
274,574 |
|
|
320,168 |
|
|
330,371 |
|
|||
|
Operating lease assets |
619,057 |
|
|
687,024 |
|
|
709,523 |
|
|||
|
Tradenames, net |
307,955 |
|
|
334,642 |
|
|
334,705 |
|
|||
|
Goodwill |
209,507 |
|
|
229,026 |
|
|
228,235 |
|
|||
|
Customer relationships, net |
38,147 |
|
|
41,126 |
|
|
41,890 |
|
|||
|
Other assets |
34,874 |
|
|
33,374 |
|
|
31,211 |
|
|||
|
Total assets |
$ |
3,281,621 |
|
|
$ |
2,753,117 |
|
|
$ |
2,899,580 |
|
|
|
|
|
|
|
|
||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
||||||
|
Current liabilities: |
|
|
|
|
|
||||||
|
Accounts payable |
$ |
473,473 |
|
|
$ |
183,641 |
|
|
$ |
205,782 |
|
|
Current operating lease liabilities |
172,364 |
|
|
160,228 |
|
|
158,524 |
|
|||
|
Other current liabilities |
115,069 |
|
|
131,631 |
|
|
119,862 |
|
|||
|
Total current liabilities |
760,906 |
|
|
475,500 |
|
|
484,168 |
|
|||
|
|
|
|
|
|
|
||||||
|
Long-term debt, net |
989,086 |
|
|
594,672 |
|
|
769,525 |
|
|||
|
Deferred income taxes |
60,160 |
|
|
74,370 |
|
|
78,916 |
|
|||
|
Long-term operating lease liabilities |
587,099 |
|
|
664,372 |
|
|
691,717 |
|
|||
|
Other long-term liabilities |
62,489 |
|
|
64,073 |
|
|
62,520 |
|
|||
|
Total liabilities |
$ |
2,459,740 |
|
|
$ |
1,872,987 |
|
|
$ |
2,086,846 |
|
|
|
|
|
|
|
|
||||||
|
Commitments and contingencies |
|
|
|
|
|
||||||
|
|
|
|
|
|
|
||||||
|
Stockholders’ equity: |
|
|
|
|
|
||||||
|
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at September 26, 2020, December 28, 2019, and September 28, 2019 |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 43,648,671, 43,963,103 and 44,287,636 shares issued and outstanding at September 26, 2020, December 28, 2019, and September 28, 2019, respectively |
436 |
|
|
440 |
|
|
443 |
|
|||
|
Additional paid-in capital |
9,258 |
|
|
— |
|
|
— |
|
|||
|
Accumulated other comprehensive loss |
(41,402 |
) |
|
(35,634 |
) |
|
(38,908 |
) |
|||
|
Retained earnings |
853,589 |
|
|
915,324 |
|
|
851,199 |
|
|||
|
Total stockholders’ equity |
821,881 |
|
|
880,130 |
|
|
812,734 |
|
|||
|
Total liabilities and stockholders’ equity |
$ |
3,281,621 |
|
|
$ |
2,753,117 |
|
|
$ |
2,899,580 |
|
|
CARTER’S, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) |
|||||||
|
|
Three Fiscal Quarters Ended |
||||||
|
|
September 26, 2020 |
|
September 28, 2019 |
||||
|
Cash flows from operating activities: |
|
|
|
||||
|
Net income |
$ |
10,703 |
|
|
$ |
138,655 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
||||
|
Depreciation of property, plant, and equipment |
66,985 |
|
|
68,005 |
|
||
|
Amortization of intangible assets |
2,784 |
|
|
2,810 |
|
||
|
Provisions for (recoveries of) excess and obsolete inventory |
20,912 |
|
|
4,567 |
|
||
|
Goodwill impairment |
17,742 |
|
|
— |
|
||
|
Intangible asset impairments |
26,500 |
|
|
30,800 |
|
||
|
Other asset impairments and loss on disposal of property, plant and equipment, net of recoveries |
9,395 |
|
|
407 |
|
||
|
Amortization of debt issuance costs |
1,641 |
|
|
1,087 |
|
||
|
Stock-based compensation expense |
9,531 |
|
|
13,540 |
|
||
|
Unrealized foreign currency exchange loss, net |
1,354 |
|
|
176 |
|
||
|
Provisions for (recoveries of) doubtful accounts receivable from customers |
7,702 |
|
|
(2,063 |
) |
||
|
Loss on extinguishment of debt |
— |
|
|
7,823 |
|
||
|
Deferred income tax (benefit) expense |
(16,697 |
) |
|
8,300 |
|
||
|
Effect of changes in operating assets and liabilities: |
|
|
|
||||
|
Accounts receivable |
(21,576 |
) |
|
(32,792 |
) |
||
|
Finished goods inventories |
(76,739 |
) |
|
(152,023 |
) |
||
|
Prepaid expenses and other assets |
(7,660 |
) |
|
(16,688 |
) |
||
|
Accounts payable and other liabilities |
267,551 |
|
|
751 |
|
||
|
Net cash provided by operating activities |
320,128 |
|
|
73,355 |
|
||
|
|
|
|
|
||||
|
Cash flows from investing activities: |
|
|
|
||||
|
Capital expenditures |
(25,212 |
) |
|
(46,138 |
) |
||
|
Disposals and recoveries from property, plant, and equipment |
— |
|
|
749 |
|
||
|
Net cash used in investing activities |
(25,212 |
) |
|
(45,389 |
) |
||
|
|
|
|
|
||||
|
Cash flows from financing activities: |
|
|
|
||||
|
Proceeds from senior notes due 2025 |
500,000 |
|
|
— |
|
||
|
Proceeds from senior notes due 2027 |
— |
|
|
500,000 |
|
||
|
Payment of senior notes due 2021 |
— |
|
|
(400,000 |
) |
||
|
Premiums paid to extinguish debt |
— |
|
|
(5,252 |
) |
||
|
Payment of debt issuance costs |
(7,639 |
) |
|
(5,793 |
) |
||
|
Borrowings under secured revolving credit facility |
644,000 |
|
|
265,000 |
|
||
|
Payments on secured revolving credit facility |
(744,000 |
) |
|
(186,000 |
) |
||
|
Repurchases of common stock |
(45,255 |
) |
|
(147,464 |
) |
||
|
Dividends paid |
(26,260 |
) |
|
(67,528 |
) |
||
|
Withholdings from vestings of restricted stock |
(4,928 |
) |
|
(4,214 |
) |
||
|
Proceeds from exercises of stock options |
3,728 |
|
|
6,881 |
|
||
|
Net cash provided by (used in) financing activities |
319,646 |
|
|
(44,370 |
) |
||
|
|
|
|
|
||||
|
Effect of exchange rate changes on cash and cash equivalents |
2,302 |
|
|
263 |
|
||
|
Net increase (decrease) in cash and cash equivalents |
616,864 |
|
|
(16,141 |
) |
||
|
Cash and cash equivalents, beginning of period |
214,311 |
|
|
170,077 |
|
||
|
Cash and cash equivalents, end of period |
$ |
831,175 |
|
|
$ |
153,936 |
|
|
CARTER’S, INC. RECONCILIATION OF GAAP TO ADJUSTED RESULTS (dollars in millions, except earnings per share) (unaudited) |
||||||||||||||||||||||||||||||||
|
|
Fiscal Quarter Ended September 26, 2020 |
|||||||||||||||||||||||||||||||
|
|
Gross |
|
% Net |
|
SG&A |
|
% Net |
|
Operating |
|
% Net |
|
Income |
|
Net |
|
Diluted |
|||||||||||||||
|
As reported (GAAP) |
$ |
383.7 |
|
|
44.4 |
% |
|
$ |
279.3 |
|
|
32.3 |
% |
|
$ |
113.5 |
|
|
13.1 |
% |
|
$ |
19.0 |
|
|
$ |
81.2 |
|
|
$ |
1.85 |
|
|
COVID-19 expenses (b) |
— |
|
|
|
|
(3.3 |
) |
|
|
|
3.3 |
|
|
|
|
0.8 |
|
|
2.5 |
|
|
0.06 |
|
|||||||||
|
Retail store operating leases and other long-lived asset impairments, net (c) |
— |
|
|
|
|
(1.5 |
) |
|
|
|
1.5 |
|
|
|
|
0.4 |
|
|
1.1 |
|
|
0.03 |
|
|||||||||
|
Productivity/restructuring costs (d) |
— |
|
|
|
|
(1.2 |
) |
|
|
|
1.2 |
|
|
|
|
0.2 |
|
|
1.0 |
|
|
0.02 |
|
|||||||||
|
As adjusted (a) |
$ |
383.7 |
|
|
44.4 |
% |
|
$ |
273.2 |
|
|
31.6 |
% |
|
$ |
119.5 |
|
|
13.8 |
% |
|
$ |
20.4 |
|
|
$ |
85.9 |
|
|
$ |
1.96 |
|
Contacts
Sean McHugh
Vice President & Treasurer
sean.mchugh@carters.com