ATLANTA, April 24, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Carter's, Inc. (NYSE: CRI), the largest branded marketer in the United States of apparel exclusively for babies and young children, reported its first quarter fiscal 2007 results.
First Quarter of Fiscal 2007 compared to First Quarter of Fiscal 2006
Consolidated net sales increased 8.0% to $320.1 million. Net sales of the Company's Carter's brands increased 10.6% to $249.3 million. Net sales of the Company's OshKosh brand decreased 0.2% to $70.8 million.
The Company's wholesale sales increased 5.0% to $137.6 million. Carter's wholesale sales, excluding off-price sales of $5.7 million in each of the first quarters of fiscal 2007 and 2006, increased 10.7% to $107.0 million. OshKosh wholesale sales, excluding off-price sales of $0.9 million in the first quarter of fiscal 2007 and $2.6 million in the first quarter of fiscal 2006, decreased 7.9% to $24.0 million.
The Company's mass channel sales, which are comprised of sales of its Child of Mine brand to Wal-Mart and Just One Year brand to Target, increased 14.4% to $61.8 million.
Total retail store sales increased 8.3% to $120.7 million. Carter's retail store sales increased 8.3% to $74.8 million driven by sales of $6.7 million from new Carter's stores opened since the first quarter of fiscal 2006 and a comparable store sales increase of $0.4 million, or 0.7%, offset by the impact of store closures of $1.4 million. OshKosh retail store sales increased 8.4% to $45.9 million driven by sales of $3.5 million from new OshKosh stores opened since the first quarter of fiscal 2006 and a comparable store sales increase of $0.3 million, or 0.8%, offset by the impact of store closures of $0.3 million.
In the first quarter of fiscal 2007, the Company opened one Carter's retail store. As of March 31, 2007, the Company had 220 Carter's and 157 OshKosh retail stores. The Company plans to open ten Carter's and five OshKosh retail stores during fiscal 2007. The Company also plans to close six Carter's and three OshKosh retail stores during fiscal 2007.
In February 2007, the Company announced its plans to close its distribution facility located in White House, Tennessee. During the first quarter of fiscal 2007, the Company recorded pre-tax charges of approximately $6.0 million, or $0.06 per diluted share, related to this closure. The Company expects to incur an additional $3.0 million in pre-tax charges related to this closure. The estimated annual savings resulting from the closure of this facility is approximately $4.0 million beginning in the second half of fiscal 2007.
In the first quarter of fiscal 2007, net income was $9.6 million, or $0.16 per diluted share, compared to $15.8 million, or $0.26 per diluted share, in the first quarter of fiscal 2006. Excluding the costs related to the closure of our White House, Tennessee distribution facility, adjusted first quarter net income decreased 15.4% to $13.3 million, and adjusted diluted earnings per share decreased 15.4% to $0.22. The reconciliation of income as reported under generally accepted accounting principles ("GAAP") to income adjusted for these closure costs is shown below.
(dollars in millions, except EPS) Three-month period ended March 31, 2007 Income Before Net Diluted Taxes Income EPS Income, as reported (GAAP) $15.4 $9.6 $0.16 Distribution facility closure costs (a) 4.5 2.8 0.05 Accelerated depreciation (b) 1.5 0.9 0.01 Income, as adjusted (c) $21.4 $13.3 $0.22 (a) Costs associated with the closure of our White House, Tennessee distribution facility. (b) Accelerated depreciation charges (included in selling, general, and administrative expenses) related to the closure of our White House, Tennessee distribution facility. (c) In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present income before taxes, net income, and net income on a diluted share basis excluding the adjustments discussed above. We believe these adjustments provide a more meaningful comparison of the Company's results. These 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 information is presented for informational purposes only and is not necessarily indicative of the Company's future condition or results of operations.
"Our first quarter consolidated sales and earnings were better than planned," noted Fred Rowan, Chairman and CEO. "We continue to realize strong sales growth in our Carter's wholesale and mass channel businesses, and I'm pleased with the progress we're making to improve the performance of our Retail and OshKosh wholesale segments. We're on track to realize the benefits from our product sourcing initiatives, and we expect our operating margin will improve in the second half of this year."
Net cash provided by operating activities during the first quarter of fiscal 2007 was $6.7 million compared to net cash used in operating activities of $14.0 million in the first quarter of fiscal 2006. Net cash flow from operations in the first quarter of fiscal 2006 was impacted by significant reductions in accounts payable and accrued liabilities as a result of the payment of acquisition-related liabilities, the payment of increased levels of incentive compensation, and the timing of payments to vendors.
In February 2007, the Company's Board of Directors authorized a $100 million share repurchase program. During the first quarter of fiscal 2007, the Company repurchased 1,252,832 shares of its common stock for approximately $30 million at an average price of $23.95 per share.
Our business outlook is based on our current expectations and includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the Company believes the comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.
(dollars in millions, except for share data) Second Quarter 2007 Fiscal 2007 Consolidated Net Sales $290 +4%(a) $1,420 to $1,430 +6%(c) Consolidated Adjusted Diluted EPS $0.11 (27%)(b) $1.47 to $1.52 +4% to +7%(d) (a) Comparison to the second quarter of fiscal 2006. (b) Second quarter of fiscal 2007 excludes $1.0 million, or $0.02 per diluted share, in estimated after-tax costs related to the closure of our White House, Tennessee distribution facility. (c) Comparison to fiscal 2006. (d) Fiscal 2007 excludes $5.3 million, or $0.09 per diluted share, in estimated after-tax costs related to the closure of our White House, Tennessee distribution facility.
The Company will broadcast its quarterly conference call on April 25, 2007 at 8:30 a.m. Eastern Time. To participate in the call, please dial 1-913-981-5523. To listen to the live broadcast over the internet, please log on to http://www.carters.com, go to "About Carter's," click on "Investor Relations," and click on the link "First Quarter Conference Call." A replay of the call will be available shortly after the broadcast through May 4, 2007, at 1-719-457-0820, passcode 7222347. This replay will also be archived on the Company's website at the same location.
For more information on Carter's, Inc., please visit http://www.carters.com.
Vice President, Investor Relations
Statements contained herein that relate to the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results for fiscal 2007 or any other future period, are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Factors that could cause actual results to materially differ include a decrease in sales to, or the loss of one or more of the Company's key customers; increased competition in the baby and young children's apparel market; the acceptance of our products in the marketplace; deflationary pressures on our prices; disruptions in foreign supply sources; negative publicity; our substantial leverage, which increases our exposure to interest rate risk and could require us to dedicate a substantial portion of our cash flow to repay principal; changes in consumer preference and fashion trends; a decrease in the overall level of consumer spending; the impact of governmental regulations and environmental risks applicable to the Company's business; our ability to adequately forecast demand, which could create significant levels of excess inventory; our ability to identify new retail store locations, and negotiate appropriate lease terms for our retail stores; our ability to improve the performance of our retail and OshKosh wholesale segments; our ability to attract and retain key individuals within the organization; failure to realize the revenue growth, cost savings and other benefits that we expect will result from our acquisition of OshKosh B'Gosh, Inc., which could impact the carrying value of our intangible assets; and seasonal fluctuations in the children's apparel business. These risks are further described in our most recently filed Annual Report on Form 10-K and other reports filed with the SEC under the headings "Risk Factors" and "Forward-Looking Statements." The Company undertakes no obligation to publicly update or revise any forward- looking statements, whether as a result of new information, future events, or otherwise.
CARTER'S, INC. CONSOLIDATED STATEMENT OF INCOME (dollars in thousands, except for share data) (unaudited) Three-month periods ended March 31, April 1, 2007 2006 Net sales: Wholesale - Carter's $112,653 $102,361 Wholesale - OshKosh 24,993 28,680 Total Wholesale sales 137,646 131,041 Retail - Carter's 74,826 69,068 Retail - OshKosh 45,848 42,312 Total Retail sales 120,674 111,380 Mass Channel 61,808 54,026 Total net sales 320,128 296,447 Cost of goods sold 213,748 188,283 Gross profit 106,380 108,164 Selling, general, and administrative expenses 88,246 82,982 Facility closure costs 4,507 81 Royalty income (7,545) (7,174) Operating income 21,172 32,275 Interest expense, net 5,728 6,884 Income before income taxes 15,444 25,391 Provision for income taxes 5,833 9,606 Net income $9,611 $15,785 Basic net income per common share $ 0.16 $ 0.27 Diluted net income per common share $ 0.16 $ 0.26 Basic weighted-average number of shares outstanding 58,447,494 57,709,034 Diluted weighted-average number of shares outstanding 61,210,621 61,135,278 CARTER'S, INC. CONSOLIDATED BALANCE SHEET (dollars in thousands, except for share data) (unaudited) March 31, December 30, April 1, 2007 2006 2006 ASSETS Current assets: Cash and cash equivalents $ 41,750 $ 68,545 $ 59,662 Accounts receivable, net 116,864 110,615 108,014 Inventories, net 159,574 193,588 154,341 Prepaid expenses and other current 11,919 7,296 8,741 assets Deferred income taxes 18,905 22,377 21,818 Total current assets 349,012 402,421 352,576 Property, plant, and equipment, net 80,972 87,940 76,166 Tradenames 322,233 322,233 322,233 Cost in excess of fair value of net assets acquired 279,756 279,756 283,394 Deferred debt issuance costs, net 5,611 5,903 7,788 Licensing agreements, net 11,831 12,895 16,086 Leasehold interests, net 1,035 1,151 1,502 Other assets 10,540 10,892 6,154 Total assets $1,060,990 $1,123,191 $1,065,899 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 2,627 $ 2,627 $ 4,231 Accounts payable 41,605 70,878 24,511 Other current liabilities 43,007 63,012 66,022 Total current liabilities 87,239 136,517 94,764 Long-term debt 341,529 342,405 415,720 Deferred income taxes 120,640 125,784 128,639 Other long-term liabilities 32,347 22,994 20,917 Total liabilities 581,755 627,700 660,040 Commitments and contingencies Stockholders' equity: Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at March 31, 2007, December 30, 2006, and April 1, 2006 -- -- -- Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 57,790,640 and 58,927,280 shares issued and outstanding at March 31, 2007 and December 30, 2006; 40,000,000 shares authorized; 28,988,029 shares issued and outstanding at April 1, 2006 578 589 290 Additional paid-in capital 247,075 275,045 260,053 Accumulated other comprehensive income 4,827 5,301 2,395 Retained earnings 226,755 214,556 143,121 Total stockholders' equity 479,235 495,491 405,859 Total liabilities and stockholders' equity $1,060,990 $1,123,191 $1,065,899
SOURCE Carter's, Inc.
Vice President, Investor Relations of Carter's, Inc.,