ATLANTA, Oct. 26 /PRNewswire-FirstCall/ -- Carter's, Inc. (NYSE: CRI), the largest branded marketer of apparel for babies and young children in the United States, today reported its third quarter results for fiscal 2004.
Net sales in the third quarter of fiscal 2004 increased 18% to $251.4 million from $212.1 million in the third quarter of fiscal 2003. The increase in net sales for the third quarter of fiscal 2004 includes a $10.6 million, or 10%, increase in sales to the wholesale channel from $103.3 million to $113.9 million and a $19.9 million, or 64%, increase in sales to the mass channel from $31.3 million to $51.2 million.
The Company's retail store sales in the third quarter of fiscal 2004 increased $8.7 million, or 11%, to $86.2 million from $77.5 million in the third quarter of fiscal 2003 due to an increase of 6.1% in comparable store sales and incremental sales from 13 new store openings since September of 2003. As of October 2, 2004, Carter's had a total of 177 retail stores, including three stores opened during the third quarter. Carter's plans to open three stores and close four stores in the fourth quarter of fiscal 2004.
Fred Rowan, Chairman of the Board of Directors and Chief Executive Officer of Carter's said, "We are very pleased with our strong performance in the third quarter of 2004 in all channels of distribution. We continue to produce great quality, essential core products at attractive price points that have enabled us to increase our market share. We are on track to achieve our 2004 financial goals and our growth initiatives have positioned us for continued strong performance in 2005."
In the third quarter of fiscal 2004, net income increased 45% to $18.4 million, or $0.62 per diluted share, from $12.7 million, or $0.52 per diluted share, in the third quarter of fiscal 2003. Compared to pro forma net income of $14.2 million, or $0.48 per diluted share in the third quarter of fiscal 2003, further described below, pro forma net income in the third quarter of fiscal 2004 increased 30%.
Net sales in the first nine months of fiscal 2004 increased 14% to $590.4 million from $518.1 million in the first nine months of fiscal 2003. In our wholesale channel, net sales increased $12.4 million, or 5%, in the first nine months of fiscal 2004 to $278.0 million from $265.6 million in the first nine months of fiscal 2003.
Net sales to the mass channel in the first nine months of fiscal 2004 increased $45.4 million to $106.9 million from $61.6 million in the first nine months of fiscal 2003. This increase reflects growth in sales of our Child of Mine brand to Wal-Mart, which we began shipping in June of 2003, and growth of the Tykes brand sold to Target.
The Company's retail store sales in the first nine months of fiscal 2004 increased $14.4 million, or 8%, to $205.4 million from $191.0 million in the first nine months of fiscal 2003 due to incremental sales from new store openings and a comparable store sales increase of 3.5%. During the first nine months of fiscal 2004, the Company opened eight stores.
For the first nine months of fiscal 2004, net income increased 60% to $34.6 million, or $1.16 per diluted share, from $21.7 million, or $0.90 per diluted share for the first nine months of fiscal 2003. Pro forma net income, further described below, increased 39% to $35.0 million, or $1.17 per diluted share for the first nine months of fiscal 2004 compared to pro forma net income of $25.2 million, or $0.86 per diluted share for the first nine months of fiscal 2003.
Net cash used in operations was $14.1 million in the first nine months of fiscal 2004 compared to net cash provided by operations of $9.4 million in the first nine months of fiscal 2003. Net cash used in operations in the first nine months of fiscal 2004 reflects growth in accounts receivable driven by the timing of wholesale and mass channel sales and the growth in inventory to support higher levels of demand.
Carter's Business Outlook
This outlook is based on current expectations and includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Although the Company believes the comments reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct.
($ in millions, except EPS) Fourth Quarter 2004 Fiscal Year 2004
Net sales $210 +13%(1) $800 +14%(3)
Diluted EPS $0.45 +22%(2) $1.63 +34%(4)
(1) Comparison to fourth quarter of fiscal 2003.
(2) Estimated increase as compared to pro forma fourth quarter fiscal 2003
results adjusted to reflect $0.7 million in after-tax interest
savings, $1.3 million in after-tax closure costs, $5.8 million in
after-tax expenses related to the Initial Public Offering, and
$1.6 million in after-tax management fee settlement charges.
(3) Comparison to fiscal 2003.
(4) Estimated increase in projected 2004 net income per share, as compared
to pro forma fiscal 2003 results of $1.22 per diluted share as
previously described in our earnings release filed March 1, 2004 on
Form 8-K.
Carter's will broadcast its quarterly conference call on October 27, 2004 at 8:30 a.m. EDT. To participate in the call, please dial 1-800-289-0493. For international calls, please dial 1-913-981-5510. To listen to the live broadcast over the internet, please log on to http://www.carters.com, go to "Investor Relations" and then click on the link, "Third Quarter Conference Call." A replay of the call will be available shortly after the broadcast through midnight EST, November 5, at 1-888-203-1112, pass code 826187, and archived on the Company's website at the same location as the live webcast.
For more information on Carter's, please visit http://www.carters.com.
Cautionary Language
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 2004 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, deflationary trends in prices, disruptions in foreign supply sources, negative publicity, the loss of one or more of the Company's major suppliers for raw materials, competition in the baby and young children's apparel market, the Company's leverage which increases the Company's exposure to interest rate risk and could require the Company to dedicate a substantial portion of its cash flow to repay principal, the impact of governmental regulations and environmental risks applicable to the Company's business, and seasonal fluctuations in the children's apparel business. These risks are described in the Company's prospectus dated September 23, 2004 under the headings "Risk Factors," "Business-Competition; Certain Risks," and "Statement Regarding 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.
Pro forma Net Income
Pro forma results for the first nine months of fiscal 2004 exclude $0.4 million in after-tax restructuring charges related to the closures of the Company's sewing facilities in Costa Rica and a distribution facility in Leola, Pennsylvania. Pro forma results for the third quarter and first nine months of fiscal 2003 exclude $0.9 million and $3.0 million, net of tax, respectively, to reflect pro forma interest savings associated with the Company's debt reduction completed in the fourth quarter of fiscal 2003 as if it had occurred at the beginning of fiscal 2003. Also included in the pro forma results for the third quarter and first nine months of fiscal 2003 are $0.6 million in after-tax costs related to the closure of the Company's offshore operations in Costa Rica, including accelerated depreciation. These adjustments are set forth in the reconciliation of results in accordance with generally accepted accounting principles (GAAP) to the pro forma results shown in the table below. The number of weighted average shares in the third quarter and first nine months of fiscal 2003 has been adjusted in the pro forma earnings per share calculations to give effect to the initial public offering and to treat the incremental shares sold as if they were outstanding for the periods presented. The Company believes that the pro forma information in this release provides a meaningful comparison of its operational and financial results.
In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided pro forma, non-GAAP financial measurements that present net income and net income on a per share basis excluding certain adjustments discussed above. Details of these items are presented in the table below, which reconciles the GAAP results to pro forma net income and pro forma net income per share. The pro forma, 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 pro forma, non-GAAP financial information is presented for informational purposes only and is not necessarily indicative of our future condition or results of operations. Also, this earnings release and the reconciliation from GAAP results to pro forma results can be found on the Company's website at http://www.carters.com.
CARTER'S, INC.
GAAP VS. PRO FORMA RESULTS
(dollars in thousands, except for share data)
(unaudited)
Three-month Nine-month
periods ended periods ended
October 2, October 4, October 2, October 4,
2004 2003 2004 2003
Net income (GAAP) $18,412 $12,655 $34,642 $21,653
Pro forma adjustments (net
of tax):
Closure costs 29 609 358 609
Pro forma interest expense
savings -- 923 -- 2,953
Pro forma net income $18,441 $14,187 $35,000 $25,215
Diluted weighted average
shares outstanding,
as reported 29,902,137 24,236,255 29,887,853 24,084,183
Adjustment for initial
public offering -- 5,390,625 -- 5,390,625
Pro forma diluted weighted
average shares outstanding 29,902,137 29,626,880 29,887,853 29,474,808
Diluted net income per
share, as reported $0.62 $0.52 $1.16 $0.90
Pro forma diluted net income
per share $0.62 $0.48 $1.17 $0.86
CARTER'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except for share data)
(unaudited)
Three-month Nine-month
periods ended periods ended
October 2, October 4, October 2, October 4,
2004 2003 2004 2003
Net sales $251,357 $212,135 $590,384 $518,136
Cost of goods sold 163,490 136,451 376,656 331,993
Gross profit 87,867 75,684 213,728 186,143
Selling, general, and
administrative expenses 56,280 51,896 151,674 138,660
Closure costs 49 115 589 115
Royalty income (3,589) (3,692) (9,257) (8,149)
Operating income 35,127 27,365 70,722 55,517
Interest expense, net 4,666 6,788 13,654 20,309
Income before income taxes 30,461 20,577 57,068 35,208
Provision for income taxes 12,049 7,922 22,426 13,555
Net income $18,412 $12,655 $34,642 $21,653
Basic net income per
common share $0.65 $0.56 $1.24 $0.96
Diluted net income
per common share $0.62 $0.52 $1.16 $0.90
Basic weighted
average number of
shares outstanding 28,109,978 22,564,856 28,032,520 22,560,872
Diluted weighted
average number of
shares outstanding 29,902,137 24,236,255 29,887,853 24,084,183
CARTER'S, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
(unaudited)
October 2, January 3, October 4,
2004 2004 2003
ASSETS
Current assets:
Cash and cash equivalents $12,004 $36,061 $7,055
Accounts receivable, net 103,108 65,318 70,893
Inventories, net 148,414 104,760 118,080
Prepaid expenses and other current
assets 2,680 6,575 2,583
Assets held for sale 864 50 250
Deferred income taxes 10,692 9,045 8,425
Total current assets 277,762 221,809 207,286
Property, plant, and equipment, net 51,177 50,502 47,679
Tradename 220,233 220,233 220,233
Cost in excess of fair value of net
assets acquired 139,282 139,282 139,282
Licensing agreements, net -- 3,125 4,375
Deferred debt issuance costs, net 6,486 7,666 10,783
Other assets 2,881 3,485 3,703
Total assets $697,821 $646,102 $633,341
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $927 $3,336 $1,180
Accounts payable 42,371 30,436 32,991
Other current liabilities 37,274 37,405 36,100
Total current liabilities 80,572 71,177 70,271
Long-term debt 213,788 209,377 292,401
Deferred income taxes 82,078 83,196 83,717
Other long-term liabilities 9,816 9,816 9,977
Total liabilities 386,254 373,566 456,366
Commitments and contingencies
Stockholders' equity:
Preferred stock; par value $.01 per
share; 100,000 shares authorized;
none issued or outstanding at
October 2, 2004, January 3, 2004,
and October 4, 2003 -- -- --
Common stock, voting; par value
$.01 per share; 40,000,000 shares
authorized; 28,331,337 issued and
outstanding at October 2, 2004;
27,985,360 issued and outstanding
at January 3, 2004; 22,594,735
issued and outstanding at October
4, 2003 283 280 226
Additional paid-in capital 246,166 241,780 147,898
Retained earnings 65,118 30,476 28,851
Total stockholders' equity 311,567 272,536 176,975
Total liabilities and stockholders'
equity $697,821 $646,102 $633,341
Contact:
Eric Martin, Director of Investor Relations
(404) 745-2889
CONTACT:
Eric Martin
Director of Investor Relations of Carter's, Inc.
404-745-2889
Web site: http://www.carters.com