UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported):  November 11, 2003

 

 

CARTER’S, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-31829

 

13-3912933

 

 

 

 

 

(State or other jurisdiction

 

(Commission File Number)

 

(I.R.S. Employer

of incorporation)

 

 

 

Identification Number)

 

 

The Proscenium

1170 Peachtree Street NE, Suite 900

Atlanta, Georgia  30309

 

(Address of principal executive offices including zip code)

 

 

 

(404) 745-2700

 

(Registrant’s Telephone number including area code)

 

 

 



 

Item 7.           Financial Statements and Exhibits.

 

(a)          Not applicable.

(b)         Not applicable.

(c)          Exhibits — The following exhibit is furnished as part of this Current Report on Form 8-K.

 

Exhibit Number

 

Description

99.1

 

Press Release of Carter’s, Inc. dated November 11, 2003

 

Item 12.          Results of Operations and Financial Condition.

 

On November 11, 2003, Carter’s, Inc. issued a press release announcing its financial results for its third quarter ended October 4, 2003.  A copy of that press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Current Report on Form 8-K is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section.  The information in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

 

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SIGNATURES

 

                Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

CARTER’S, INC.

 

 

 

 

 

 

By:

/s/ Michael D. Casey

 

Name:

Michael D. Casey

 

Title:

Executive Vice President and

 

 

Chief Financial Officer 

 

 

Date:  November 12, 2003

 

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EXHIBIT INDEX

 

 

Exhibit No.

 

Description of Exhibit

 

 

 

 

99.1

 

Press Release of Carter’s, Inc. dated November 11, 2003.

 

 

 


Contact:

Eric Martin, Director of Investor Relations

(404) 745-2889

 

 

 

CARTER’S REPORTS 20% GROWTH IN NET INCOME FOR THE THIRD QUARTER

 

 

 

Atlanta, GA — November 11, 2003 — Carter’s, Inc. (NYSE:CRI), the largest branded marketer of baby apparel and a leading marketer of young children’s apparel in the United States, today reported net income of $12.7 million, up 20% for the third quarter ended October 4, 2003, compared to net income of $10.6 million for the third quarter ended September 28, 2002.

 

Net sales for the third quarter ended October 4, 2003 were $212.1 million, an increase of 28% compared to net sales of $165.8 million for the third quarter ended September 28, 2002.  These results were driven by a $24.3 million increase in sales to $31.3 million to mass merchant stores reflecting the first full quarter of sales of the Child of Mine brand to Wal-Mart and continued growth of the Tykes brand in Target stores.  Wholesale sales of the Carter’s brand products increased 19% to $103.3 million due to increased demand for fall playclothes and baby products.  Retail store sales for the third quarter increased 7% to $77.5 million driven by incremental revenue from new store openings and a 1.6% increase in comparable store sales.

 

Fred Rowan, Chairman, Chief Executive Officer and President of Carter’s said, “Our third quarter results reflect the strength of the Carter’s, Tykes and Child of Mine brands. Our ability to deliver high-quality products at attractive prices to multiple channels has led to the highest quarterly revenue and earnings in the company’s history.  Due to the strength of our brands and supply chain capabilities, we successfully launched the Child of Mine brand in June to substantially all Wal-Mart doors in the United States.  Our

 

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results demonstrate that we are successfully executing our growth initiatives and we are on track to achieve our performance goals in 2003.”

 

Net income for the nine-month period ended October 4, 2003 increased 62% to $21.7 million compared to net income of $13.4 million for the nine-month period ended September 28, 2002.

 

Net sales for the nine-month period ended October 4, 2003 were $518.1 million, an increase of 27% compared to net sales of $409.5 million in 2002.  These results were driven by a 25% increase in wholesale sales of the Carter’s brand to $265.6 million compared to $211.9 million last year.  The increase in wholesale sales was attributed to the strong demand for baby and playclothes products.  These results also include a $44.6 million increase in sales to $61.6 million to mass merchant stores reflecting the launch of the Child of Mine brand with Wal-Mart in June of 2003 and growth in sales of the Tykes brand to Target stores.  The company’s retail store sales for the first nine months of 2003 increased $10.4 million, or 6%, to $191.0 from $180.6 million due to incremental revenue from new store openings, offset by a 1.6% decline in comparable store sales.

 

For fiscal 2003, the company expects net sales to be $695 million to $700 million.  Net income for fiscal 2003 is expected to be $21 million, including after-tax costs of approximately $7.2 million associated with the company’s initial public offering, completed on October 29, 2003, and approximately $2.5 million in after-tax plant closure costs, of which $0.6 million of closure costs were incurred in the third quarter of 2003.  The costs related to the initial public offering include the premium paid to redeem $61.3 million of senior subordinated notes, the write-off of debt issuance costs associated with the debt repayment and the cost of terminating the management agreement with Berkshire Partners LLC.  Capital expenditures for fiscal 2003 are expected to be approximately $20 to $22 million as compared to $18 million in 2002.   For the full year, the company expects to open 15 retail stores.

 

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On October 29, 2003, the company completed an initial public offering of common stock including the sale of 5,390,625 shares by the company and 1,796,875 shares by the selling stockholders.  Net proceeds to the company from the offering totaled $93.2 million.  On November 28, 2003, the company will use $68.0 million of the proceeds to redeem $61.3 million of the company’s outstanding senior subordinated notes and pay a redemption premium of $6.7 million.  Quarterly and annual after-tax interest savings resulting from the redemption of the senior subordinated notes will be approximately $1.0 million and $4.1 million, respectively.  The company used $2.6 million of the net proceeds to terminate the management agreement with Berkshire Partners LLC.  The company also used 50% of the remaining proceeds of $22.6 million to prepay $11.3 million of term loan indebtedness.  The remaining proceeds of $11.3 million will be utilized for working capital and other general corporate purposes.

 

Carter’s will webcast live its quarterly conference call on November 12, 2003 at 8:30 a.m. EST.  To listen to the live broadcast over the Internet, please log on to 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 19, 2003, at 888-203-1112, pass code 398899, as well as archived on the company’s website at the same location as the live webcast.

 

For more information on Carter’s please visit www.carters.com.

 

###

 

Statements contained herein that relate to the company’s future performance, including, without limitation, statements with respect to the company’s anticipated results of operations or level of business for 2003 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. Among the 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, downward pressure on the company’s prices, disruptions in foreign supply sources, negative publicity, the loss of one or more of the company’s major suppliers for raw materials, increased competition in the baby and young children’s apparel market, the company’s substantial leverage which increases the company’s exposure to interest rate risk and could require us 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 final prospectus dated October 23, 2003 under the headings “Risks 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.

 

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CARTER’S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

 

 

 

For the

 

For the

 

 

 

three-month periods ended

 

nine-month periods ended

 

 

 

October 4,

 

September 28,

 

October 4,

 

September 28,

 

 

 

2003

 

2002

 

2003

 

2002

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

212,135

 

$

165,779

 

$

518,136

 

$

409,469

 

Cost of goods sold

 

136,451

 

100,642

 

331,993

 

250,711

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

75,684

 

65,137

 

186,143

 

158,758

 

Selling, general, and administrative expenses

 

51,896

 

43,118

 

138,660

 

122,031

 

Plant closure costs

 

115

 

 

115

 

 

Royalty income

 

(3,692

)

(2,461

)

(8,149

)

(6,236

)

 

 

 

 

 

 

 

 

 

 

Operating income

 

27,365

 

24,480

 

55,517

 

42,963

 

Interest expense, net

 

6,788

 

7,268

 

20,309

 

21,238

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

20,577

 

17,212

 

35,208

 

21,725

 

Provision for income taxes

 

7,922

 

6,634

 

13,555

 

8,372

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,655

 

$

10,578

 

$

21,653

 

$

13,353

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share

 

$

0.56

 

$

0.47

 

$

0.96

 

$

0.59

 

Diluted net income per common share

 

$

0.52

 

$

0.45

 

$

0.90

 

$

0.57

 

Basic weighted average number of shares outstanding

 

22,564,856

 

22,494,603

 

22,560,872

 

22,476,551

 

Diluted weighted average number of shares outstanding

 

24,236,255

 

23,670,331

 

24,084,183

 

23,536,843

 

 

 

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CARTER’S, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

 

 

 

October 4, 2003

 

December 28, 2002

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

7,055

 

$

35,562

 

Accounts receivable, net

 

70,893

 

53,600

 

Inventories, net

 

118,080

 

105,700

 

Prepaid expenses and other current assets

 

2,833

 

4,903

 

Deferred income taxes

 

8,425

 

10,021

 

 

 

 

 

 

 

Total current assets

 

207,286

 

209,786

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

47,679

 

50,476

 

Tradename

 

220,233

 

220,233

 

Cost in excess of fair value of net assets acquired

 

139,282

 

139,282

 

Licensing agreements, net of accumulated amortization of $10,625 and $6,875

 

4,375

 

8,125

 

Deferred debt issuance costs, net

 

10,783

 

11,248

 

Other assets

 

3,703

 

4,199

 

 

 

 

 

 

 

Total assets

 

$

633,341

 

$

643,349

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

$

1,180

 

$

6,346

 

Accounts payable

 

32,991

 

34,669

 

Other current liabilities

 

36,100

 

37,686

 

 

 

 

 

 

 

Total current liabilities

 

70,271

 

78,701

 

 

 

 

 

 

 

Long-term debt

 

292,401

 

291,276

 

Deferred income taxes

 

83,717

 

83,873

 

Other long-term liabilities

 

9,977

 

10,140

 

 

 

 

 

 

 

Total liabilities

 

456,366

 

463,990

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at October 4, 2003 and December 28, 2002

 

 

 

Common stock, voting; par value $.01 per share; 32,000,000 shares authorized; 22,594,735 shares issued and outstanding at October 4, 2003; 22,548,760 shares issued and outstanding at December 28, 2002

 

226

 

225

 

 

 

Additional paid-in capital

 

147,898

 

147,043

 

Retained earnings

 

28,851

 

32,091

 

 

 

 

 

 

 

Total stockholders’ equity

 

176,975

 

179,359

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

633,341

 

$

643,349

 

 

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