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Mail Stop 3561
December 23, 2005
Mr. Michael D. Casey
Chief Financial Officer
Carter`s, Inc.
The Proscenium
1170 Peachtree Street NE, Suite 900
Atlanta, GA 30309
Re: Carter`s, Inc.
Form 10-K for Fiscal Year Ended January 1, 2005
Filed March 16, 2005
Forms 10-Q for Fiscal Quarters Ended
April 2, 2005, July 2, 2005, and October 1, 2005
File No. 1-31829
Dear Mr. Casey:
We have reviewed your filings and have the following
comments.
Where indicated, we think you should revise your disclosures in
future filings in response to these comments. If you disagree, we
will consider your explanation as to why our comment is
inapplicable
or a revision is unnecessary. Please be as detailed as necessary
in
your explanation. In some of our comments, we may ask you to
provide
us with information so we may better understand your disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone number
listed
at the end of this letter.
Form 10-K for Fiscal Year Ended January 1, 2005
Item 6. Selected Financial Data, page 14
Notes to Selected Financial Data, page 16
1. Your reconciliation of EBITDA to net income suggests that you
consider EBITDA to be a performance measure. If so, please refer
to
Question 15 of the Staff`s "Frequently Asked Questions Regarding
the
Use of Non-GAAP Financial Measures," which requires the
application
of Question 8 if EBITDA is used as a performance measure. Please
note that pursuant to Question 8, you must justify the usefulness
of
any performance measure that excludes recurring items. As such,
we
believe you should include a discussion that comprehensively
addresses each of the 5 bullet points in Question 8 in crafting a
revised disclosure. Alternatively, if you consider EBITDA to be a
measure of liquidity, please revise to reconcile EBITDA to
operating
cash flows. In either case, disclose how management uses the non-
GAAP measure and why it is meaningful to readers.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 19
Results of Operations, page 20
2. Where you describe two or more business reasons that
contributed
to a material change in a financial statement line item between
periods in total and by segment, please quantify the extent to
which
each change contributed to the overall change in that line item.
For
example, with respect to the increase in net sales from fiscal
2003
to fiscal 2004, you should quantify the extent to which your focus
on
high-quality essential products, retail store growth, productivity
improvements in retail stores, and a full year of revenue from the
Child of Mine brand each contributed to the overall change.
Please
also disclose the extent to which increases in revenues are
attributable to price and/or volume increases. See Item 303(a) of
Regulation S-K and SEC Release No. 33-8350.
3. Please disclose how you determine the stores that are included
in
arriving at your comparable store sales from period to period.
Please also disclose how you treat relocated stores or expansions
in
the square footage of stores in these computations, as well as
stores
that were closed during the period.
Note 2. Summary of Significant Accounting Policies, page 40
Revenue Recognition, page 42
4. You disclose that you classify certain co-operative advertising
payments as a component of selling, general, and administrative
expenses when you are able to determine the fair value of such
payments. Please tell us in detail how these advertising payments
meet the conditions in Issue 1 of EITF 01-9 to be classified as an
expense. In particular, tell us how you were able to conclude
that
you receive an identifiable benefit in exchange for the
cooperative
advertising payment that is sufficiently separable from the
recipient`s purchase of your products. For example, tell us
whether
your customers are required to provide documentation as to how
they
use the advertising payment. Also tell us and disclose in future
filings how you classify co-operative advertising payments that
are
in excess of the fair value of the benefits received. Refer to
examples 2-5 in Appendix A of EITF 01-9.
Earnings Per Share, page 45
5. You disclose on page 12 that you paid a cash dividend of
approximately $24.9 million to the common stockholders of record
as
of July 30, 2003 and a special bonus of approximately $2.5 million
to
your vested option holders. As a portion of your total
distribution
was paid to vested option holders, please tell us whether your
vested
options are participating securities as defined in paragraph 60.a
of
SFAS 128 and why or why not. Also tell us how you considered
vested
options that participate in dividends with common shareholders in
calculating basic earnings per share. Refer to paragraphs 60 and
61
of SFAS 128, as applicable.
Note 5. Long Term Debt, page 47
Senior Credit Facility, page 48
6. Please remove your presentation of Adjusted EBITDA, as this
represents a non-GAAP measure. Non-GAAP measures may not be
presented on the face of the financial statements or in the
accompanying notes. Refer to Item 10(e)(1)(ii)(C) of Regulation
S-K.
Note 12. Valuation and Qualifying Accounts, page 61
7. Please revise to include your allowance for sales returns in
your
table of valuation and qualifying accounts. Refer to Rules 5-
04(c)
and 12-09 of Regulation S-X.
* * * *
As appropriate, please respond to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Staff Accountant Sarah Goldberg at (202)
551-
3340, or in her absence, Robyn Manuel at (202) 551-3823 if you
have
questions regarding comments on the financial statements and
related
matters. Please contact me at (202) 551-3843 with any other
questions.
Sincerely,
George F. Ohsiek, Jr.
Branch Chief
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Mr. Casey
Carter's, Inc.
December 23, 2005
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