Document
false--01-02Q120200001060822468251000523848000542158000P20YP5Y40930006354000106200009000000.010.010.01150000000150000000150000000453798274396310343610725453798274396310343610725155350009283000355970000.010.010.011000001000001000000000001600000 0001060822 2019-12-29 2020-03-28 0001060822 2020-04-29 0001060822 2020-03-28 0001060822 2019-03-30 0001060822 2019-12-28 0001060822 2018-12-30 2019-03-30 0001060822 cri:InternationalMember 2019-12-29 2020-03-28 0001060822 us-gaap:RoyaltyMember 2019-12-29 2020-03-28 0001060822 us-gaap:RoyaltyMember 2018-12-30 2019-03-30 0001060822 us-gaap:RetainedEarningsMember 2018-12-30 2019-03-30 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-30 2019-03-30 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-29 0001060822 us-gaap:CommonStockMember 2018-12-30 2019-03-30 0001060822 us-gaap:AdditionalPaidInCapitalMember 2018-12-30 2019-03-30 0001060822 us-gaap:CommonStockMember 2018-12-29 0001060822 us-gaap:RetainedEarningsMember 2018-12-29 0001060822 us-gaap:AdditionalPaidInCapitalMember 2018-12-29 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-30 0001060822 2018-12-29 0001060822 us-gaap:AdditionalPaidInCapitalMember 2019-03-30 0001060822 us-gaap:CommonStockMember 2019-03-30 0001060822 us-gaap:RetainedEarningsMember 2019-03-30 0001060822 us-gaap:RetainedEarningsMember 2019-12-29 2020-03-28 0001060822 us-gaap:AdditionalPaidInCapitalMember 2019-12-29 2020-03-28 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-28 0001060822 us-gaap:AdditionalPaidInCapitalMember 2019-12-28 0001060822 us-gaap:RetainedEarningsMember 2019-12-28 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-29 2020-03-28 0001060822 us-gaap:CommonStockMember 2019-12-29 2020-03-28 0001060822 us-gaap:CommonStockMember 2020-03-28 0001060822 us-gaap:RetainedEarningsMember 2020-03-28 0001060822 us-gaap:CommonStockMember 2019-12-28 0001060822 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-28 0001060822 us-gaap:AdditionalPaidInCapitalMember 2020-03-28 0001060822 cri:InventoryandfabricpurchasecommitmentsMember 2020-03-28 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember 2019-12-29 2020-03-28 0001060822 us-gaap:RoyaltyMember cri:WholesaleMember 2019-12-29 2020-03-28 0001060822 cri:WholesaleMember 2019-12-29 2020-03-28 0001060822 cri:RetailApparelandAccessoryStoresMemberMember us-gaap:RetailMember 2019-12-29 2020-03-28 0001060822 us-gaap:RoyaltyMember us-gaap:RetailMember 2019-12-29 2020-03-28 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 cri:RetailApparelandAccessoryStoresMemberMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 cri:RetailApparelandAccessoryStoresMemberMember 2019-12-29 2020-03-28 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember us-gaap:RetailMember 2019-12-29 2020-03-28 0001060822 cri:RetailApparelandAccessoryStoresMemberMember cri:WholesaleMember 2019-12-29 2020-03-28 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember cri:WholesaleMember 2019-12-29 2020-03-28 0001060822 us-gaap:RoyaltyMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 us-gaap:RetailMember 2019-12-29 2020-03-28 0001060822 cri:RetailApparelandAccessoryStoresMemberMember 2018-12-30 2019-03-30 0001060822 us-gaap:RoyaltyMember us-gaap:RetailMember 2018-12-30 2019-03-30 0001060822 cri:RetailApparelandAccessoryStoresMemberMember cri:InternationalMember 2018-12-30 2019-03-30 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember us-gaap:RetailMember 2018-12-30 2019-03-30 0001060822 cri:RetailApparelandAccessoryStoresMemberMember us-gaap:RetailMember 2018-12-30 2019-03-30 0001060822 cri:InternationalMember 2018-12-30 2019-03-30 0001060822 cri:WholesaleMember 2018-12-30 2019-03-30 0001060822 us-gaap:RoyaltyMember cri:WholesaleMember 2018-12-30 2019-03-30 0001060822 cri:RetailApparelandAccessoryStoresMemberMember cri:WholesaleMember 2018-12-30 2019-03-30 0001060822 us-gaap:RoyaltyMember cri:InternationalMember 2018-12-30 2019-03-30 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember cri:WholesaleMember 2018-12-30 2019-03-30 0001060822 us-gaap:RetailMember 2018-12-30 2019-03-30 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember cri:InternationalMember 2018-12-30 2019-03-30 0001060822 cri:WholesaleApparelPieceGoodsandNotionsMemberMember 2018-12-30 2019-03-30 0001060822 cri:TenantAllowancesAndOtherReceivablesMember 2019-03-30 0001060822 us-gaap:AllowanceForCreditLossMember 2020-03-28 0001060822 us-gaap:TradeAccountsReceivableMember 2019-12-28 0001060822 cri:RoyaltiesReceivableMember 2020-03-28 0001060822 us-gaap:TradeAccountsReceivableMember 2020-03-28 0001060822 us-gaap:AllowanceForCreditLossMember 2019-12-28 0001060822 cri:RoyaltiesReceivableMember 2019-12-28 0001060822 us-gaap:AllowanceForCreditLossMember 2019-03-30 0001060822 us-gaap:TradeAccountsReceivableMember 2019-03-30 0001060822 cri:TenantAllowancesAndOtherReceivablesMember 2020-03-28 0001060822 cri:TenantAllowancesAndOtherReceivablesMember 2019-12-28 0001060822 cri:RoyaltiesReceivableMember 2019-03-30 0001060822 srt:MinimumMember 2020-03-28 0001060822 srt:MaximumMember 2019-12-29 2020-03-28 0001060822 srt:MaximumMember 2020-03-28 0001060822 srt:MinimumMember 2019-12-29 2020-03-28 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-29 2020-03-28 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-30 2019-12-28 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-30 2019-03-30 0001060822 us-gaap:AccumulatedTranslationAdjustmentMember 2020-03-28 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-28 0001060822 us-gaap:AccumulatedTranslationAdjustmentMember 2019-12-28 0001060822 us-gaap:AccumulatedTranslationAdjustmentMember 2019-03-30 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2020-03-28 0001060822 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-03-30 0001060822 cri:OtherTradenamesMember 2020-03-28 0001060822 cri:OshkoshTradeNameMember 2019-12-28 0001060822 cri:CartersMexicoCustomerRelationshipsMember 2019-12-29 2020-03-28 0001060822 us-gaap:CustomerRelationshipsMember 2020-03-28 0001060822 cri:CartersTradeNameMember 2019-12-28 0001060822 cri:OtherTradenamesMember 2019-12-28 0001060822 us-gaap:TradeNamesMember 2019-12-28 0001060822 us-gaap:CustomerRelationshipsMember 2019-12-28 0001060822 cri:CartersMexicoCustomerRelationshipsMember 2019-12-28 0001060822 cri:SkipHopCustomerRelationshipsMember 2020-03-28 0001060822 cri:CartersMexicoCustomerRelationshipsMember 2020-03-28 0001060822 cri:SkipHopCustomerRelationshipsMember 2019-12-29 2020-03-28 0001060822 cri:OshkoshTradeNameMember 2020-03-28 0001060822 cri:SkipHopCustomerRelationshipsMember 2019-12-28 0001060822 us-gaap:TradeNamesMember 2020-03-28 0001060822 cri:SkipHopTradeNameMember 2019-12-28 0001060822 cri:SkipHopTradeNameMember 2020-03-28 0001060822 cri:CartersTradeNameMember 2020-03-28 0001060822 cri:WholesaleMember 2019-03-30 0001060822 us-gaap:RetailMember 2019-12-28 0001060822 cri:InternationalMember 2018-12-29 0001060822 cri:WholesaleMember 2018-12-29 0001060822 us-gaap:RetailMember 2019-03-30 0001060822 cri:InternationalMember 2019-12-28 0001060822 cri:WholesaleMember 2019-12-28 0001060822 cri:WholesaleMember 2020-03-28 0001060822 us-gaap:RetailMember 2020-03-28 0001060822 us-gaap:RetailMember 2018-12-29 0001060822 cri:InternationalMember 2020-03-28 0001060822 cri:InternationalMember 2019-03-30 0001060822 cri:SkipHopCustomerRelationshipsMember 2018-12-30 2019-03-30 0001060822 cri:SkipHopCustomerRelationshipsMember 2019-03-30 0001060822 us-gaap:TradeNamesMember 2019-03-30 0001060822 cri:OtherTradenamesMember 2019-03-30 0001060822 cri:CartersTradeNameMember 2019-03-30 0001060822 cri:CartersMexicoCustomerRelationshipsMember 2019-03-30 0001060822 cri:OshkoshTradeNameMember 2019-03-30 0001060822 cri:SkipHopTradeNameMember 2019-03-30 0001060822 cri:CartersMexicoCustomerRelationshipsMember 2018-12-30 2019-03-30 0001060822 cri:CartersMexicoMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopTradeNameMember cri:InternationalSegmentMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopTradeNameMember cri:WholesaleSegmentMember 2019-12-29 2020-03-28 0001060822 cri:OshkoshTradeNameMember cri:RetailSegmentMember 2019-12-29 2020-03-28 0001060822 cri:OshkoshTradeNameMember cri:InternationalSegmentMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopTradeNameMember 2018-12-30 2019-12-28 0001060822 cri:OshkoshTradeNameMember cri:WholesaleSegmentMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopTradeNameMember 2019-12-29 2020-03-28 0001060822 cri:CartersMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopTradeNameMember cri:RetailSegmentMember 2019-12-29 2020-03-28 0001060822 cri:OshkoshTradeNameMember 2019-12-29 2020-03-28 0001060822 cri:SkipHopMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 srt:MaximumMember cri:OtherTradenamesMember 2019-12-29 2020-03-28 0001060822 srt:MinimumMember cri:OtherTradenamesMember 2019-12-29 2020-03-28 0001060822 srt:MinimumMember us-gaap:SubsequentEventMember 2020-05-05 2020-05-05 0001060822 us-gaap:RevolvingCreditFacilityMember 2020-03-23 2020-03-25 0001060822 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-29 2020-03-28 0001060822 srt:MinimumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-29 2020-03-28 0001060822 us-gaap:RevolvingCreditFacilityMember us-gaap:SubsequentEventMember us-gaap:BaseRateMember 2020-05-05 0001060822 srt:MaximumMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-12-29 2020-03-28 0001060822 srt:MaximumMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-05-05 2020-05-05 0001060822 srt:MaximumMember us-gaap:BaseRateMember 2019-12-29 2020-03-28 0001060822 cri:FivePointSixTwoFivePercentSeniorNotesdueTwentyTwentySevenDomain us-gaap:SeniorNotesMember 2020-03-28 0001060822 currency:USD us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-28 0001060822 srt:MinimumMember us-gaap:SubsequentEventMember us-gaap:BaseRateMember 2020-05-05 2020-05-05 0001060822 us-gaap:RevolvingCreditFacilityMember 2020-03-28 0001060822 srt:MaximumMember us-gaap:SubsequentEventMember 2020-05-05 2020-05-05 0001060822 us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-05-05 0001060822 srt:MinimumMember us-gaap:SubsequentEventMember us-gaap:LondonInterbankOfferedRateLIBORMember 2020-05-05 2020-05-05 0001060822 us-gaap:LondonInterbankOfferedRateLIBORMember 2020-03-28 0001060822 us-gaap:RevolvingCreditFacilityMember us-gaap:BaseRateMember 2020-03-28 0001060822 srt:MinimumMember us-gaap:BaseRateMember 2019-12-29 2020-03-28 0001060822 cri:FivePointSixTwoFivePercentSeniorNotesdueTwentyTwentySevenDomain us-gaap:SeniorNotesMember 2019-03-14 0001060822 us-gaap:SubsequentEventMember 2020-05-05 2020-05-05 0001060822 srt:MaximumMember us-gaap:SubsequentEventMember us-gaap:BaseRateMember 2020-05-05 2020-05-05 0001060822 us-gaap:RevolvingCreditFacilityMember 2019-03-30 0001060822 us-gaap:SeniorNotesMember 2019-12-28 0001060822 us-gaap:SeniorNotesMember 2019-03-30 0001060822 cri:FivePointSixTwoFivePercentSeniorNotesdueTwentyTwentySevenDomain us-gaap:SeniorNotesMember 2019-12-28 0001060822 us-gaap:RevolvingCreditFacilityMember 2019-12-28 0001060822 us-gaap:SeniorNotesMember 2020-03-28 0001060822 cri:FivePointSixTwoFivePercentSeniorNotesdueTwentyTwentySevenDomain us-gaap:SeniorNotesMember 2019-03-30 0001060822 cri:TimebasedrestrictedstockMember 2018-12-30 2019-03-30 0001060822 us-gaap:EmployeeStockOptionMember 2018-12-30 2019-03-30 0001060822 us-gaap:PerformanceSharesMember 2018-12-30 2019-03-30 0001060822 us-gaap:EmployeeStockOptionMember 2019-12-29 2020-03-28 0001060822 us-gaap:PerformanceSharesMember 2019-12-29 2020-03-28 0001060822 cri:TimebasedrestrictedstockMember 2019-12-29 2020-03-28 0001060822 us-gaap:PerformanceSharesMember 2020-02-12 0001060822 2020-02-12 0001060822 cri:TimebasedrestrictedstockMember 2020-02-12 0001060822 us-gaap:FairValueInputsLevel1Member 2019-12-28 0001060822 us-gaap:FairValueInputsLevel1Member 2020-03-28 0001060822 us-gaap:FairValueInputsLevel2Member us-gaap:EstimateOfFairValueFairValueDisclosureMember us-gaap:SeniorNotesMember 2020-03-28 0001060822 us-gaap:FairValueInputsLevel1Member 2019-03-30 0001060822 us-gaap:RestrictedStockMember 2019-12-29 2020-03-28 0001060822 us-gaap:CorporateNonSegmentMember 2018-12-30 2019-03-30 0001060822 us-gaap:OperatingSegmentsMember us-gaap:RetailMember 2018-12-30 2019-03-30 0001060822 us-gaap:OperatingSegmentsMember cri:WholesaleMember 2018-12-30 2019-03-30 0001060822 us-gaap:OperatingSegmentsMember cri:InternationalMember 2018-12-30 2019-03-30 0001060822 us-gaap:OperatingSegmentsMember cri:WholesaleMember 2019-12-29 2020-03-28 0001060822 us-gaap:OperatingSegmentsMember cri:InternationalMember 2019-12-29 2020-03-28 0001060822 us-gaap:CorporateNonSegmentMember 2019-12-29 2020-03-28 0001060822 us-gaap:OperatingSegmentsMember 2018-12-30 2019-03-30 0001060822 us-gaap:OperatingSegmentsMember 2019-12-29 2020-03-28 0001060822 us-gaap:OperatingSegmentsMember us-gaap:RetailMember 2019-12-29 2020-03-28 0001060822 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-12-29 2020-03-28 0001060822 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:OtherRestructuringMember 2019-12-29 2020-03-28 0001060822 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:EmployeeRelocationMember 2019-12-29 2020-03-28 0001060822 us-gaap:SellingGeneralAndAdministrativeExpensesMember cri:EmployeeseveranceandotherbenefitsterminationMember 2019-12-29 2020-03-28 0001060822 us-gaap:SellingGeneralAndAdministrativeExpensesMember cri:LeaseexitcostsMember 2019-12-29 2020-03-28 0001060822 cri:EmployeeseveranceandotherbenefitsterminationMember 2020-03-28 iso4217:USD xbrli:shares xbrli:pure iso4217:USD xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 2020
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to         
Commission file number:
001-31829
CARTER’S, INC.
(Exact name of Registrant as specified in its charter)                            
Delaware
 
13-3912933
(State or other jurisdiction of
 
(I.R.S. Employer Identification No.)
incorporation or organization)
 
 

Phipps Tower,
3438 Peachtree Road NE, Suite 1800
Atlanta, Georgia 30326
(Address of principal executive offices, including zip code)
(678) 791-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share
CRI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes No x
As of April 29, 2020, there were 43,606,338 shares of the registrant's common stock outstanding.








CARTER’S, INC.
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
Unaudited Condensed Consolidated Balance Sheets as of March 28, 2020, December 28, 2019 and March 30, 2019
 
 
Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter ended March 28, 2020 and March 30, 2019
 
 
Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter ended March 28, 2020 and March 30, 2019
 
 
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the fiscal quarter ended March 28, 2020 and March 30, 2019
 
 
Unaudited Condensed Consolidated Statements of Cash Flows for the fiscal quarter ended March 28, 2020 and March 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 1
 
 
 
Item 3
Defaults upon Senior Securities
 
 
 
 
 
 
 
 
 
 
 
 




PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
 
March 28, 2020
 
December 28, 2019
 
March 30, 2019
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
759,100

 
$
214,311

 
$
160,149

Accounts receivable, net of allowance for credit losses of $10,620, $6,354, $4,093, respectively
221,884

 
251,005

 
239,239

Finished goods inventories, net of inventory reserves of $35,597, $9,283, and $15,535, respectively
565,932

 
593,987

 
519,752

Prepaid expenses and other current assets
43,349

 
48,454

 
51,887

Total current assets
1,590,265

 
1,107,757

 
971,027

Property, plant, and equipment, net of accumulated depreciation of $542,158, $523,848, and $468,251, respectively
303,919

 
320,168

 
337,475

Operating lease assets
673,301

 
687,024

 
704,554

Tradenames, net
308,080

 
334,642

 
365,630

Goodwill
207,720

 
229,026

 
228,019

Customer relationships, net
39,785

 
41,126

 
43,669

Other assets
30,435

 
33,374

 
29,570

Total assets
$
3,153,505

 
$
2,753,117

 
$
2,679,944

 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable
$
187,199

 
$
183,641

 
$
108,221

Current operating lease liabilities
161,341

 
160,228

 
152,157

Other current liabilities
79,135

 
131,631

 
101,376

Total current liabilities
427,675

 
475,500

 
361,754

 
 
 
 
 
 
Long-term debt, net
1,238,822

 
594,672

 
625,278

Deferred income taxes
65,260

 
74,370

 
90,230

Long-term operating lease liabilities
647,334

 
664,372

 
692,056

Other long-term liabilities
58,412

 
64,073

 
61,222

Total liabilities
$
2,437,503

 
$
1,872,987

 
$
1,830,540

 
 
 
 
 
 
Commitments and contingencies - Note 14

 

 

 
 
 
 
 
 
Stockholders' equity:
 
 
 
 
 
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at March 28, 2020, December 28, 2019, and March 30, 2019
$

 
$

 
$

Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 43,610,725, 43,963,103 and 45,379,827 shares issued and outstanding at March 28, 2020, December 28, 2019, and March 30, 2019, respectively
436

 
440

 
454

Accumulated other comprehensive loss
(48,626
)
 
(35,634
)
 
(39,428
)
Retained earnings
764,192

 
915,324

 
888,378

Total stockholders' equity
716,002

 
880,130

 
849,404

Total liabilities and stockholders' equity
$
3,153,505

 
$
2,753,117

 
$
2,679,944

See accompanying notes to the unaudited condensed consolidated financial statements.

1


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
 
Fiscal quarter ended
 
March 28, 2020
 
March 30, 2019
Net sales
$
654,473

 
$
741,057

Cost of goods sold
403,373

 
425,138

Adverse purchase commitments (inventory, raw materials)
22,837

 
52

Gross profit
228,263

 
315,867

Royalty income, net
7,338

 
8,544

Selling, general, and administrative expenses
269,837

 
263,652

Goodwill impairment
17,742

 

Intangible asset impairment
26,500

 

Operating (loss) income
(78,478
)
 
60,759

Interest expense
8,864

 
9,629

Interest income
(464
)
 
(228
)
Other expense (income), net
4,818

 
(211
)
Loss on extinguishment of debt

 
7,823

(Loss) income before income taxes
(91,696
)
 
43,746

Income tax (benefit) provision
(13,002
)
 
9,280

Net (loss) income
$
(78,694
)
 
$
34,466

 
 
 
 
Basic net (loss) income per common share
$
(1.82
)
 
$
0.76

Diluted net (loss) income per common share
$
(1.82
)
 
$
0.75

Dividend declared and paid per common share
$
0.60

 
$
0.50

See accompanying notes to the unaudited condensed consolidated financial statements.

2


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
(unaudited)
 
Fiscal quarter ended
 
March 28, 2020
 
March 30, 2019
Net (loss) income
$
(78,694
)
 
$
34,466

Other comprehensive (loss) income:
 
 
 
Foreign currency translation adjustments
(12,992
)
 
2,911

Comprehensive (loss) income
$
(91,686
)
 
$
37,377

See accompanying notes to the unaudited condensed consolidated financial statements.

3


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
(unaudited)

Fiscal quarter ended March 30, 2019:
 
Common stock - shares
 
Common
stock - $
 
Additional
paid-in
capital
 
Accumulated other comprehensive
loss
 
Retained
earnings
 
Total
stockholders’
equity
Balance at December 29, 2018
45,629,014

 
$
456

 
$

 
$
(40,839
)
 
$
909,816

 
$
869,433

Exercise of stock options
72,192

 
1

 
4,779

 

 

 
4,780

Withholdings from vesting
of restricted stock
(43,844
)
 

 
(4,077
)
 

 

 
(4,077
)
Restricted stock activity
182,722

 
2

 
(2
)
 

 

 

Stock-based compensation expense

 

 
4,613

 

 

 
4,613

Repurchase of common stock
(460,257
)
 
(5
)
 
(5,313
)
 

 
(34,648
)
 
(39,966
)
Cash dividends declared and paid

 

 

 

 
(22,756
)
 
(22,756
)
Comprehensive income

 

 

 
2,911

 
34,466

 
37,377

Reclassification of tax effects(*)

 

 

 
(1,500
)
 
1,500

 

Balance at March 30, 2019
45,379,827

 
$
454

 
$

 
$
(39,428
)
 
$
888,378

 
$
849,404

(*)
The Company reclassified $1.5 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" for the tax effects resulting from the December 22, 2017 enactment of the Tax Cut and Jobs Act in accordance with the adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in the first quarter of fiscal 2019.
Fiscal quarter ended March 28, 2020:
 
Common stock - shares
 
Common
stock - $
 
Additional
paid-in
capital
 
Accumulated other comprehensive
loss
 
Retained
earnings
 
Total
stockholders’
equity
Balance at December 28, 2019
43,963,103

 
$
440

 
$

 
$
(35,634
)
 
$
915,324

 
$
880,130

Exercise of stock options
33,158

 

 
1,840

 

 

 
1,840

Withholdings from vesting
of restricted stock
(43,611
)
 

 
(4,712
)
 

 

 
(4,712
)
Restricted stock activity
132,759

 
1

 
(1
)
 

 

 

Stock-based compensation expense

 

 
1,945

 

 

 
1,945

Repurchase of common stock
(474,684
)
 
(5
)
 
928

 

 
(46,178
)
 
(45,255
)
Cash dividends declared and paid

 

 

 

 
(26,260
)
 
(26,260
)
Comprehensive loss

 

 

 
(12,992
)
 
(78,694
)
 
(91,686
)
Balance at March 28, 2020
43,610,725

 
$
436

 
$

 
$
(48,626
)
 
$
764,192

 
$
716,002


See accompanying notes to the unaudited condensed consolidated financial statements

4


CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
 
Fiscal quarter ended
 
March 28, 2020
 
March 30, 2019
Cash flows from operating activities:
 
 
 
Net (loss) income
$
(78,694
)
 
$
34,466

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
 
 
 
Depreciation of property, plant, and equipment
22,433

 
22,629

Amortization of intangible assets
935

 
937

Provisions for excess and obsolete inventory
26,596

 
531

Goodwill impairment
17,742

 

Intangible asset impairments
26,500

 

Other asset impairments and loss on disposal of property, plant and equipment, net of recoveries
2,050

 
433

Amortization of debt issuance costs
353

 
367

Stock-based compensation expense
1,945

 
4,613

Unrealized foreign currency exchange loss (gain), net
3,856

 
(210
)
Provisions for (recoveries of) doubtful accounts receivable from customers
4,270

 
(2,562
)
Loss on extinguishment of debt

 
7,823

Deferred income taxes (benefit) expense
(10,053
)
 
3,242

Effect of changes in operating assets and liabilities:
 
 
 
Accounts receivable
22,926

 
21,891

Finished goods inventories
(5,634
)
 
55,321

Prepaid expenses and other assets
14,923

 
(717,808
)
Accounts payable and other liabilities
(64,450
)
 
605,350

Net cash (used in) provided by operating activities
$
(14,302
)
 
$
37,023

 
 
 
 
Cash flows from investing activities:
 
 
 
Capital expenditures
$
(8,068
)
 
$
(9,371
)
Net cash used in investing activities
$
(8,068
)
 
$
(9,371
)
 
 
 
 
Cash flows from financing activities:
 
 
 
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

 
(5,722
)
Borrowings under secured revolving credit facility
644,000

 
70,000

Payments on secured revolving credit facility

 
(135,000
)
Repurchases of common stock
(45,255
)
 
(39,966
)
Dividends paid
(26,260
)
 
(22,756
)
Withholdings from vestings of restricted stock
(4,712
)
 
(4,077
)
Proceeds from exercises of stock options
1,840

 
4,780

Net cash provided by (used in) financing activities
$
569,613

 
$
(37,993
)
 
 
 
 
Net effect of exchange rate changes on cash and cash equivalents
(2,454
)
 
413

Net increase (decrease) in cash and cash equivalents
$
544,789

 
$
(9,928
)
Cash and cash equivalents, beginning of period
214,311

 
170,077

Cash and cash equivalents, end of period
$
759,100

 
$
160,149


5


See accompanying notes to the unaudited condensed consolidated financial statements.

6


CARTER’S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – THE COMPANY
Carter's, Inc. and its wholly owned subsidiaries (collectively, the "Company," "its," "us" and "our") design, source, and market branded childrenswear and accessories under the Carter's, OshKosh B'gosh ("OshKosh"), Skip Hop, Child of Mine, Just One You, Simple JoysPrecious Baby, Little Planet, and other brands. The Company's products are sourced through contractual arrangements with manufacturers worldwide for: 1) wholesale distribution to leading department stores, national chains, and specialty retailers domestically and internationally and 2) distribution to the Company's own retail stores and eCommerce sites that market its brand name merchandise and other licensed products manufactured by other companies.
NOTE 2BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (the "SEC"). All intercompany transactions and balances have been eliminated in consolidation. 
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income (loss), statement of stockholders' equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended March 28, 2020 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 2, 2021.
The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of March 28, 2020 and through the date of this report filing. The accounting matters assessed included, but were not limited to, our allowance for doubtful accounts, inventory reserves, adverse inventory and fabric purchase commitments, stock based compensation, and the carrying value of our goodwill and other long-lived assets. Based on these assessments, the Company recorded inventory related charges of $26.6 million, adverse inventory and fabric purchase commitments of $22.8 million, intangible asset impairments of $26.5 million, and goodwill impairment of $17.7 million as of and for the quarter ended March 28, 2020. Our expectations at that time of the magnitude and duration of COVID-19, as well as other factors, could result in further material impacts to our consolidated financial statements in future reporting periods.
The accompanying condensed consolidated balance sheet as of December 28, 2019 was derived from the Company's audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.
Accounting Policies
The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies. New accounting pronouncements adopted at the beginning of fiscal 2020 are noted below.
Credit Losses (ASU 2016-13)
At the beginning of fiscal 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This new guidance changed how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 replaced the previous "incurred loss" model with an "expected loss" model, that requires an entity to recognize a loss (or allowance) upon initial recognition of the asset that reflects all future events that will lead to a loss being realized, regardless of whether it is probable that the future event will occur. The Company estimates current expected credit losses based on collection history and management’s assessment of the current economic trends,

7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

business environment, customers’ financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses. The effect of the adoption of ASU 2016-13 was not material to the Company's consolidated financial statements.
Goodwill Impairment Testing (ASU 2017-04)
At the beginning of fiscal 2020, the Company adopted ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 does not change the current guidance for completing step 1 of the goodwill impairment test, and an entity can still perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to step 1. The effect of the adoption of ASU 2017-04 had no impact to the Company's consolidated financial statements. During the first quarter of fiscal 2020, the Company conducted an interim quantitative impairment assessment on the goodwill ascribed to the Other International reporting unit. As a result of this assessment and based on the application of ASU 2017-04, a goodwill impairment charge of $17.7 million was recorded to our Other International reporting unit. See Note 6, Goodwill and Intangible Assets, for further details on the impairment charge and valuation methodology.
Simplifying the Accounting for Income Taxes (Topic 740)
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, "Income Taxes," and simplification in several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods therein, with early adoption permitted. The Company elected to early adopt this guidance in the first quarter of fiscal 2020. The Company retrospectively adopted the provision related to the classification of taxes partially based on income and has determined that the adoption of this standard did not have a material impact on its prior period financial statements. The provisions related to intra period tax allocation and interim recognition of enactment of tax laws are being adopted on a prospective basis. The effect of the adoption of ASU 2019-12 was not material to the Company's consolidated financial statements.
NOTE 3 - REVENUE RECOGNITION
The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements as well as arrangements that are implied by customary practices or law.
Disaggregation of Revenue
The Company sells its products directly to consumers ("direct-to-consumer") and to other retail companies and partners that subsequently sell the products directly to their own retail customers. The Company also earns royalties from certain of its licensees. Disaggregated revenues from these sources for the first quarter of fiscal 2020 and 2019 were as follows:
 
 
Fiscal quarter ended March 28, 2020
(dollars in thousands)
 
U.S. Retail
 
U.S. Wholesale
 
International
 
Total
Wholesale channel
 
$

 
$
252,130

 
$
38,730

 
$
290,860

Direct-to-consumer
 
320,717

 

 
42,896

 
363,613

 
 
$
320,717

 
$
252,130

 
$
81,626

 
$
654,473

 
 
 
 
 
 
 
 
 
Royalty income
 
$
2,494

 
$
4,083

 
$
761

 
$
7,338


8


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

 
 
Fiscal quarter ended March 30, 2019
(dollars in thousands)
 
U.S. Retail
 
U.S. Wholesale
 
International
 
Total
Wholesale channel
 
$

 
$
275,367

 
$
40,788

 
$
316,155

Direct-to-consumer
 
377,053

 

 
47,849

 
424,902

 
 
$
377,053

 
$
275,367

 
$
88,637

 
$
741,057

 
 
 
 
 
 
 
 
 
Royalty income
 
$
1,991

 
$
5,850

 
$
703

 
$
8,544


Accounts Receivable from Customers and Licensees
The components of Accounts receivable, net, were as follows:
(dollars in thousands)
 
March 28, 2020
 
December 28, 2019
 
March 30, 2019
Trade receivables from wholesale customers, net
 
$
221,101

 
$
240,750

 
$
226,455

Royalties receivable
 
6,428

 
6,982

 
7,511

Tenant allowances and other receivables
 
11,968

 
16,247

 
15,614

Total gross receivables
 
$
239,497

 
$
263,979

 
$
249,580

Less:
 
 
 
 
 
 
Wholesale accounts receivable reserves
 
(17,613
)
 
(12,974
)
 
(10,341
)
Accounts receivable, net
 
$
221,884

 
$
251,005

 
$
239,239


Contract Assets and Liabilities
The Company's contract assets are not material.
Contract Liabilities
The Company recognizes a contract liability when it has received consideration from a customer and has a future obligation to transfer goods to the customer. Total contract liabilities consisted of the following amounts:        
(dollars in thousands)
March 28, 2020
 
December 28, 2019
 
March 30, 2019
Contract liabilities - current:


 


 
 
Unredeemed gift cards
$
16,758

 
$
17,563

 
$
13,724

Unredeemed customer loyalty rewards
4,503

 
5,615

 
8,520

Carter's credit card - upfront bonus(1)
714

 
714

 
714

Total contract liabilities - current(2)
$
21,975

 
$
23,892

 
$
22,958

(1)
Carter's credit card - upfront bonus - the Company received an upfront signing bonus from a third-party financial institution, which will be recognized as revenue on a straight-line basis over the term of the agreement. This amount reflects the current portion of this bonus to be recognized as revenue over the next twelve months.
(2)
Included with Other current liabilities on the Company's consolidated balance sheet.
NOTE 4 - LEASES
We have operating leases for retail stores, distribution centers, corporate offices, data centers, and certain equipment. The Company's leases generally have initial terms ranging from 1 year to 10 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to early terminate the lease.
As of March 28, 2020, the Company's finance leases were not material to the consolidated balance sheets, consolidated statements of operations, or statements of cash flows.

9


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following components of lease expense are included in Selling, general and administrative expenses on the Company's consolidated statements of operations for the first quarter of fiscal 2020 and 2019:
 
 
Fiscal quarter ended
(dollars in thousands)
 
March 28, 2020
 
March 30, 2019
Operating lease cost
 
$
46,423

 
$
43,219

Variable lease cost (*)
 
16,285

 
16,448

Net lease cost
 
$
62,708

 
$
59,667

(*)
Includes short-term leases, which are immaterial.
Supplemental balance sheet information related to leases was as follows:
 
 
Fiscal quarter ended
 
 
March 28, 2020
 
March 30, 2019
Weighted average remaining operating lease term (years)
 
5.9
 
6.3
Weighted average discount rate for operating leases
 
4.29%
 
4.48%
Supplemental cash flow information related to leases was as follows:
 
 
Fiscal quarter ended
(dollars in thousands)
 
March 28, 2020
 
March 30, 2019
Cash paid for amounts included in the measurement of operating lease liabilities
 
$
50,177

 
$
47,264

Non-cash transactions to recognize operating assets and liabilities for new operating leases
 
$
25,867

 
$
18,004


As of March 28, 2020, the maturities of lease liabilities were as follows:
(dollars in thousands)
Operating leases
Remainder of 2020
$
145,928

2021
180,686

2022
155,957

2023
129,375

2024
104,674

After 2024
202,811

Total lease payments
$
919,431

Less: Interest
(110,756
)
Present value of lease liabilities(*)
$
808,675

(*)
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. We used the incremental borrowing rate on December 30, 2018, for operating leases that commenced prior to that date.
As of March 28, 2020, the minimum rental commitments for additional operating lease contracts that have not yet commenced, primarily for retail stores, are $17.4 million. These operating leases will commence between fiscal year 2020 and fiscal year 2023 with lease terms of 6 years to 10 years.
NOTE 5ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of Accumulated other comprehensive loss consisted of the following:
(dollars in thousands)
March 28, 2020
 
December 28, 2019
 
March 30, 2019
Cumulative foreign currency translation adjustments
$
(39,514
)
 
$
(26,522
)
 
$
(30,053
)
Pension and post-retirement obligations(*)
(9,112
)
 
(9,112
)
 
(9,375
)
Total accumulated other comprehensive loss
$
(48,626
)
 
$
(35,634
)
 
$
(39,428
)

(*)
Net of income taxes of $2.8 million, $2.8 million, and $2.9 million, respectively.

10


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the first quarter of both fiscal 2020 and fiscal 2019, no amounts were reclassified from Accumulated other comprehensive loss to the statement of operations.
NOTE 6GOODWILL AND INTANGIBLE ASSETS
The balances and changes in the carrying amount of goodwill attributable to each segment were as follows:
(dollars in thousands)
U.S. Retail
 
U.S. Wholesale
 
International
 
Total
Balance at December 29, 2018
$
83,934

 
74,454

 
$
68,713

 
$
227,101

Foreign currency impact

 

 
918

 
918

Balance at March 30, 2019
$
83,934

 
$
74,454

 
$
69,631

 
$
228,019

 
 
 
 
 
 
 
 
Balance at December 28, 2019
$
83,934

 
$
74,454

 
$
70,638

 
$
229,026

Goodwill impairment(*)

 

 
(17,742
)
 
(17,742
)
Foreign currency impact

 

 
(3,564
)
 
(3,564
)
Balance at March 28, 2020
$
83,934

 
$
74,454

 
$
49,332

 
$
207,720

(*)
In the first quarter of fiscal 2020, a charge of $17.7 million was recorded to reflect the impairment of the value ascribed to the goodwill in the Other International reporting unit in the International segment.
A summary of the carrying value of the Company's intangible assets were as follows:
 
 
 
March 28, 2020
 
December 28, 2019
(dollars in thousands)
Weighted-average useful life
 
Gross amount
 
Accumulated amortization
 
Net amount
 
Gross amount
 
Accumulated amortization
 
Net amount
Carter's tradename
Indefinite
 
$
220,233

 
$

 
$
220,233

 
$
220,233

 
$

 
$
220,233

OshKosh tradename(1)
Indefinite
 
70,000

 

 
70,000

 
85,500

 

 
85,500

Skip Hop tradename(2)
Indefinite
 
15,000

 

 
15,000

 
26,000

 

 
26,000

Finite-life tradenames
5-20 years
 
3,911

 
1,064

 
2,847

 
3,911

 
1,002

 
2,909

Total tradenames, net
 
 
$
309,144


$
1,064

 
$
308,080

 
$
335,644

 
$
1,002

 
$
334,642

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Skip Hop customer relationships
15 years
 
$
47,300

 
$
9,451

 
$
37,849

 
$
47,300

 
$
8,657

 
$
38,643

Carter's Mexico customer relationships
10 years
 
2,790

 
854

 
1,936

 
3,258

 
775

 
2,483

Total customer relationships, net
 
 
$
50,090

 
$
10,305

 
$
39,785

 
$
50,558

 
$
9,432

 
$
41,126

(1)
In the first quarter of fiscal 2020, a charge of $13.6 million, $1.6 million, and $0.3 million was recorded on our indefinite-lived OshKosh tradename asset in the U.S. Retail, U.S. Wholesale, and International segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived OshKosh tradename asset.
(2)
In the first quarter of fiscal 2020, a charge of $6.8 million, $3.7 million, and $0.5 million was recorded on our indefinite-lived Skip Hop tradename asset in the U.S. Wholesale, International, and U.S. Retail segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived Skip Hop tradename asset. Fiscal 2019 includes a tradename impairment charge of $30.8 million.
 
 
 
March 30, 2019
(dollars in thousands)
Weighted-average useful life
 
Gross amount
 
Accumulated amortization
 
Net amount
Carter's tradename
Indefinite
 
$
220,233

 
$

 
$
220,233

OshKosh tradename
Indefinite
 
85,500

 

 
85,500

Skip Hop tradename
Indefinite
 
56,800

 

 
56,800

Finite-life tradenames
5-20 years
 
3,911

 
814

 
3,097

Total tradenames, net
 
 
$
366,444

 
$
814

 
$
365,630

 
 
 
 
 
 
 
 
Skip Hop customer relationships
15 years
 
$
47,300

 
$
6,274

 
$
41,026

Carter's Mexico customer relationships
10 years
 
3,179

 
536

 
2,643

Total customer relationships, net
 
 
$
50,479

 
$
6,810

 
$
43,669



11


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The carrying values of goodwill and indefinite-lived tradename assets are subject to annual impairment reviews as of the last day of each fiscal year. Between annual assessments, impairment reviews may also be triggered by any significant events or changes in circumstances affecting our business. Due to the decrease in the Company's market capitalization, lower than expected actual sales, and lower projected sales and profitability primarily due to the impacts from the outbreak of a new strain of coronavirus ("COVID-19"), the Company concluded that impairment indicators existed for the first quarter of fiscal 2020. As a result, the Company conducted interim quantitative impairment assessments on the goodwill ascribed to the Other International reporting unit recorded in connection with the allocation of goodwill to the newly created International segment as a result of the acquisition of Bonnie Togs in 2011 and on the value of the Company's indefinite-lived Skip Hop and OshKosh tradename assets that was recorded in connection with the acquisition of Skip Hop Holdings, Inc. in February 2017 and OshKosh B'Gosh Inc. in July 2005, respectively.
The goodwill impairment assessment for the Other International reporting unit was performed in accordance with ASC 350, "Intangibles--Goodwill and Other" ("ASC 350") and compares the carrying value of the Other International reporting unit to its fair value. Consistent with prior practice, the fair value of the Other International reporting unit was determined using discounted cash flows ("income approach") and relevant data from guideline public companies ("market approach"). As a result of this assessment, a goodwill impairment charge of $17.7 million was recorded to our Other International reporting unit in the International segment. The goodwill impairment charge recorded on our Other International reporting unit included charges of $9.4 million, $5.2 million, and $3.1 million to Skip Hop, Carter's, and Carter's Mexico goodwill.
The Skip Hop and OshKosh indefinite-lived tradename asset assessments were performed in accordance with ASC 350 and were determined using a discounted cash flow analysis which examined the hypothetical cost savings that accrue as a result of not having to license the tradename from another owner. Based on these assessments, charges of $11.0 million and $15.5 million were recorded on our indefinite-lived Skip Hop and OshKosh tradename assets, respectively. The charge recorded on our indefinite-lived Skip Hop tradename asset included charges of $6.8 million, $3.7 million, and $0.5 million in the U.S. Wholesale, International, and U.S. Retail segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived Skip Hop tradename asset. The charge recorded on our indefinite-lived OshKosh tradename asset included charges of $13.6 million, $1.6 million, and $0.3 million in the U.S. Retail, U.S. Wholesale, International segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived OshKosh tradename asset. The carrying values of the Company's indefinite-lived Skip Hop and OshKosh tradename assets after the impairment charges were $15.0 million and $70.0 million, respectively.
The interim assessments performed indicated that fair values exceeded carrying amounts for our other reporting units and indefinite-lived intangible assets by at least 50%. Although the Company determined that no impairment exists for the Company's other goodwill or indefinite-lived or definite-lived intangible assets, these assets could be at risk for impairment should global economic conditions continue to deteriorate as a result of COVID-19.
Amortization expense for intangible assets subject to amortization was approximately $0.9 million for both first fiscal quarters ended March 28, 2020 and March 30, 2019.
The estimated amortization expense for the next five fiscal years is as follows:
(dollars in thousands)
Amortization expense
2021
$
3,690

2022
$
3,690

2023
$
3,648

2024
$
3,618

2025
$
3,618


NOTE 7COMMON STOCK
Open Market Share Repurchases
The total aggregate remaining capacity under outstanding repurchase authorizations as of March 28, 2020 was approximately $650.4 million, based on settled repurchase transactions. The authorizations have no expiration date.

12


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company repurchased and retired shares in open market transactions in the following amounts for the fiscal periods indicated:
 
Fiscal quarter ended
 
March 28, 2020
 
March 30, 2019
Number of shares repurchased
474,684

 
460,257

Aggregate cost of shares repurchased (dollars in thousands)
$
45,255

 
$
39,966

Average price per share
$
95.34

 
$
86.83


On March 26, 2020, the Company announced, that in connection with the COVID-19 pandemic, it suspended its common stock share repurchase program. Once the program resumes, future repurchases may occur from time to time in the open market, in negotiated transactions, or otherwise. The timing and amount of any repurchases will be determined by the Company based on its evaluation of market conditions, share price, other investment priorities, and other factors. The share repurchase authorizations have no expiration dates.
Dividends
In the first fiscal quarter ended March 28, 2020 and March 30, 2019, the Company declared and paid cash dividends per share of $0.60 and $0.50, respectively. On May 1, 2020, in connection with the COVID-19 pandemic, the Company's Board of Directors suspended its quarterly cash dividend. The Board of Directors will evaluate future dividend declarations based on a number of factors, including business conditions, the Company's financial performance, and other considerations.
Provisions in the Company's secured revolving credit facility could have the effect of restricting the Company's ability to pay future cash dividends on, or make future repurchases of, its common stock, as described in the Company's Annual Report on Form 10-K for the 2019 fiscal year ended December 28, 2019.
NOTE 8LONG-TERM DEBT
Long-term debt consisted of the following:
(dollars in thousands)
March 28, 2020
 
December 28, 2019
 
March 30, 2019
Senior notes at amounts repayable
$
500,000

 
$
500,000

 
$
500,000

Less unamortized issuance-related costs for senior notes
(5,178
)
 
(5,328
)
 
(5,722
)
      Senior notes, net
$
494,822

 
$
494,672

 
$
494,278

Secured revolving credit facility
744,000

 
100,000

 
131,000

Total long-term debt, net
$
1,238,822

 
$
594,672

 
$
625,278


Secured Revolving Credit Facility
To improve near-term liquidity in light of the uncertainty and disruption related to COVID-19, the Company drew $639.0 million under its secured revolving credit facility in the month of March 2020. As of March 28, 2020, the Company had $744.0 million in outstanding borrowings under its secured revolving credit facility, exclusive of $5.0 million of outstanding letters of credit. As of March 28, 2020, approximately $1.0 million remained available for future borrowing. All outstanding borrowings under the Company's secured revolving credit facility are classified as non-current liabilities on the Company's consolidated balance sheet because of the contractual repayment terms under the credit facility.
As of March 28, 2020, the interest rate margins applicable to the secured revolving credit facility were 1.375% for LIBOR (London Interbank Offered Rate) rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 1.125% to 1.875%) and 0.375% for base rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 0.125% to 0.875%).
As of March 28, 2020, U.S. dollar borrowings outstanding under the secured revolving credit facility accrued interest at a LIBOR rate plus the applicable margin, which resulted in a weighted-average borrowing rate of 2.32%. There were no foreign currency borrowings outstanding on March 28, 2020.
As of March 28, 2020, the Company was in compliance with the financial and other covenants under the secured revolving credit facility. Due to the impact of the COVID-19 pandemic, the Company’s revised business forecasts indicated that the

13


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Company would not be in compliance with debt covenants contained within its revolving credit facility in the second, third and fourth quarters of fiscal year 2020. Accordingly, on May 5, 2020 the Company, through its wholly owned subsidiary, The William Carter Company, successfully amended its revolving credit facility. This amendment provided for, among other things, a waiver of financial covenants through the balance of fiscal year 2020, revised covenant requirements through the third quarter of fiscal year 2021 and the ability to raise additional unsecured financing, at the Company’s discretion. The Company believes, based on its current forecasts for recovery of the business and broader marketplace, that it will be in compliance with the revised covenant requirements as specified in the amendment through fiscal year 2021.  
The terms of the Amendment (i) suspend the Fixed Charge Coverage Ratio and Lease Adjusted Leverage Ratio covenants, in each case, as defined in the 2017 Credit Agreement, for three fiscal quarters until December 26, 2020 ("Specified Test Period") and ii) temporarily replace the suspended covenants with a Minimum Consolidated EBITDA covenant, computed on a trailing four quarters basis and measured quarterly, and a Minimum Liquidity covenant that is measured monthly, each as defined in the Amendment, throughout the Specified Test Period, with the Minimum Liquidity covenant extending through September 26, 2021.
Additionally, Amendment No. 2 provides that, among other things during the period from May 5, 2020 through the date the Company delivers its financial statements and associated certificates relating to the third quarter of fiscal 2021, interest rate margins applicable to the secured revolving credit facility will increase to 2.125% for LIBOR rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 1.125% to 2.375%) and 1.125% for base rate loans (which may be adjusted based on a leverage-based pricing grid ranging from 0.125% to 1.375%). Amendment No. 2 also provides for a commitment fee initially equal to 0.35% per annum and ranging from 0.15% per annum to 0.40% per annum, based upon a leverage-based pricing grid, which is payable quarterly in arrears with respect to the average daily unused portion of the revolving loan commitments.
Senior Notes
As of March 28, 2020, the Company had outstanding $500 million principal amount of senior notes at par, bearing interest at a rate of 5.625% per annum, and maturing on March 15, 2027.
NOTE 9 – STOCK-BASED COMPENSATION
The Company recorded stock-based compensation expense as follows:
 
Fiscal quarter ended
(dollars in thousands)
March 28, 2020
 
March 30, 2019
Stock options
$
883

 
$
1,347

Restricted stock:
 
 
 
   Time-based awards
2,989

 
2,548

   Performance-based awards
(1,927
)
 
718

Total
$
1,945

 
$
4,613


On February 12, 2020, the Company's Board of Directors approved the issuance of the following new awards to certain key employees under the Company's existing stock-based compensation plan, subject to vesting: 138,168 shares of time-based restricted stock awards with a grant-date fair value of $110.35 each; and 55,952 shares of performance-based restricted stock awards with a grant-date fair value of $110.35 each.
During the first quarter of fiscal 2020, a total of 109,345 restricted stock awards (time- and performance-based) vested.
The Company recognizes compensation cost ratably over the applicable performance periods based on the estimated probability of achievement of its performance targets at the end of each period. During the first quarter of fiscal 2020, the achievement of performance target estimates was revised resulting in a $2.8 million reversal of previously recognized stock-based compensation expense.
NOTE 10 – INCOME TAXES
As of March 28, 2020, the Company had gross unrecognized income tax benefits of approximately $13.9 million, of which $11.9 million, if ultimately recognized, may affect the Company's effective income tax rate in the periods settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions.

14


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Included in the reserves for unrecognized tax benefits at March 28, 2020 is approximately $2.1 million of reserves for which the statute of limitations is expected to expire within the next fiscal year. If these tax benefits are ultimately recognized, such recognition, net of federal income taxes, may affect the annual effective income tax rate for fiscal 2020 or fiscal 2021 along with the effective income tax rate in the quarter in which the benefits are recognized.
The Company recognizes interest related to unrecognized tax benefits as a component of interest expense and recognizes penalties related to unrecognized income tax benefits as a component of income tax expense. During the first fiscal quarter ended March 28, 2020 and March 30, 2019, interest expense on uncertain tax positions was not material. The Company had approximately $2.5 million, $2.3 million, and $2.1 million of interest accrued on uncertain tax positions as of March 28, 2020, December 28, 2019, and March 30, 2019, respectively.
The Company early adopted the provisions of ASU 2019-12 in the first quarter of 2020 in order to simplify its income tax accounting disclosures during 2020 as a result of incurring an operating loss. The Company retrospectively adopted the provision related to the classification of taxes partially based on income and has determined that the adoption of this standard did not have a material impact on its prior period financial statements. The provisions related to intra period tax allocation and interim recognition of enactment of tax laws are being adopted on a prospective basis.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, ("CARES Act") was signed into law. This law includes several taxpayer favorable provisions which may impact the Company including an employee retention credit, relaxed interest expense limitations, provides for a carryback of net operating losses, permits accelerated depreciation on certain store build out costs and allows for the deferral of employer FICA taxes. It is likely that this act will reduce the Company’s cash requirement for taxes over the balance of 2020.
NOTE 11FAIR VALUE MEASUREMENTS
Investments
The Company invests in marketable securities, principally equity-based mutual funds, to mitigate the risk associated with the investment return on employee deferrals of compensation. All of the marketable securities are included in Other assets on the accompanying consolidated balance sheets, and their aggregate fair values were approximately $16.7 million, $19.7 million, and $17.3 million at March 28, 2020, December 28, 2019, and March 30, 2019, respectively. These investments are classified as Level 1 within the fair value hierarchy. Loss on the investments in marketable securities were $3.0 million for the first fiscal quarter ended March 28, 2020. Gains on the investments in marketable securities were $1.7 million for the first fiscal quarter ended March 30, 2019. These amounts are included in Other expense (income), net on the Company's consolidated statement of operations.
Borrowings
As of March 28, 2020, the fair value of the Company's $744.0 million in outstanding borrowings under its secured revolving credit facility approximated the carrying value.
The fair value of the Company's senior notes at March 28, 2020 was approximately $479.6 million. The fair value of these senior notes with a notional value and carrying value (gross of debt cost) of $500 million was estimated using a quoted price as provided in the secondary market, which considers the Company's credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.
Goodwill and Intangible Assets
Goodwill and indefinite-lived intangible assets are tested annually or if a triggering event occurs that indicates an impairment loss may have been incurred using fair value measurements with unobservable inputs (Level 3).
Due to the decrease in the Company's market capitalization, lower than expected actual sales, and lower projected sales and profitability due to the impacts from the outbreak of a new strain of coronavirus ("COVID-19"), the Company concluded that impairment indicators existed for the first quarter of fiscal 2020. As a result, the Company conducted interim quantitative impairment assessments on goodwill ascribed to the Other International reporting unit and on the value of the Company's indefinite-lived Skip Hop and OshKosh tradename assets that was recorded in connection with the acquisition of Skip Hop Holdings, Inc. in February 2017 and OshKosh B'Gosh Inc. in July 2005, respectively.
Based on these assessments, a goodwill impairment charge of $17.7 million was recorded to our Other International reporting unit in the International segment and charges of $15.5 million and $11.0 million were recorded on our indefinite-lived OshKosh and Skip Hop tradename assets. The charge recorded on our indefinite-lived Skip Hop tradename asset included charges of

15


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

$6.8 million, $3.7 million, and $0.5 million in the U.S. Wholesale, International, and U.S. Retail segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived Skip Hop tradename asset. The charge recorded on our indefinite-lived OshKosh tradename asset included charges of $13.6 million, $1.6 million, and $0.3 million in the U.S. Retail, U.S. Wholesale, International segments, respectively, to reflect the impairment of the value ascribed to the indefinite-lived OshKosh tradename asset. The carrying values of the Company's indefinite-lived OshKosh and Skip Hop tradename asset after the impairment charge were $70.0 million and $15.0 million, respectively. See Note 6, Goodwill and Intangibles, for further details on the impairment charges and valuation methodologies.
NOTE 12 – EARNINGS PER SHARE
The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:
 
Fiscal quarter ended
 
March 28, 2020
 
March 30, 2019
Weighted-average number of common and common equivalent shares outstanding:
 
 
 
Basic number of common shares outstanding
43,355,635

 
45,070,796

Dilutive effect of equity awards(*)

 
300,239

Diluted number of common and common equivalent shares outstanding
43,355,635

 
45,371,035

 
 
 
 
Basic net (loss) income per common share (in thousands, except per share data):
 
 
 
Net (loss) income
$
(78,694
)
 
$
34,466

Income allocated to participating securities
(254
)
 
(291
)
Net (loss) income available to common shareholders
$
(78,948
)
 
$
34,175

 
 
 
 
Basic net (loss) income per common share
$
(1.82
)
 
$
0.76

 
 
 
 
Diluted net (loss) income per common share (in thousands, except per share data):
 
 
 
Net (loss) income
$
(78,694
)
 
$
34,466

Income allocated to participating securities
(254
)
 
(291
)
Net (loss) income available to common shareholders
$
(78,948
)
 
$
34,175

 
 
 
 
Diluted net (loss) income per common share
$
(1.82
)
 
$
0.75

 
 
 
 
Anti-dilutive awards excluded from diluted earnings per share computation
302,238

 
776,919

(*)
For the quarter ended March 28, 2020, there were 339,841 potentially dilutive equity awards that were excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive.

NOTE 13 – OTHER CURRENT AND LONG-TERM LIABILITIES
Other current liabilities that exceeded five percent of total current liabilities, at the end of any comparable period, were as follows: