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):  July 28, 2004

 

CARTER’S, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001-31829

 

13-3912933

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(I.R.S. Employer
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 July 28, 2004

 

Item 12.                                                    Results of Operations and Financial Condition.

 

On July 28, 2004, Carter’s, Inc. issued a press release announcing its financial results for its second quarter ended July 3, 2004.  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.

 

2



 

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

 

 

 

 

 

Dated:         July 28, 2004

 

 

3



 

EXHIBIT INDEX

 

Exhibit No.

 

Description of Exhibit

 

 

 

99.1

 

Press Release of Carter’s, Inc. dated July 28, 2004.

 

4


Exhibit 99.1

 

 

 

 

 

Contact:

 

 

Eric Martin, Director of Investor Relations

 

 

(404) 745-2889

 

CARTER’S REPORTS A 12% INCREASE IN NET SALES FOR THE SECOND QUARTER OF 2004; NET INCOME MORE THAN DOUBLES

 

ATLANTA, July 28, 2004/ 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 second quarter results for fiscal 2004.

 

Net sales in the second quarter of fiscal 2004 increased 12% to $156.3 million from $140.0 million for the second quarter of fiscal 2003. The increase in net sales for the second quarter of fiscal 2004 includes a $7.9 million, or 12%, increase in wholesale sales from $65.6 million to $73.5 million and a $5.0 million, or 28%, increase in sales to the mass channel from $17.8 million to $22.8 million. Growth in wholesale sales was driven by increases in all product categories, including strong sleepwear product performance.  Growth in the mass channel reflects the benefit from a full three-months of sales of our Child of Mine brand to Wal-Mart, which launched in June of 2003, and growth in sales of the Tykes brand to Target stores.

 

The Company’s retail store sales in the second quarter of fiscal 2004 increased $3.4 million, or 6%, to $60.0 million from $56.6 million in the second quarter of fiscal 2003 due to incremental sales from 15 new store openings since June of 2003. Comparable store sales for the second quarter of fiscal 2004 were flat to the second quarter of fiscal 2003.  As of July 3, 2004, Carter’s had a total of 174 retail stores, and we plan to open five stores and close four stores during the balance 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 performance in the second quarter of 2004 despite a challenging retail environment. We continue to focus on product leadership in all channels of distribution.  We continue to successfully demonstrate the strength of our growth initiatives, and we are on track to achieve our financial goals for 2004.”

 

For the second quarter ended July 3, 2004, net income increased 183% to $5.9 million, or $0.20 per diluted share, from $2.1 million, or $0.09 per diluted share, for the second quarter ended July 5, 2003.  Net income in the second quarter includes a benefit of $933,000, or $0.03 per diluted share, which represents the cumulative effect of a correction in the cost of inventory.

 

Compared to pro forma net income of $3.1 million, or $0.11 per diluted share for the second quarter ended July 5, 2003, further described below, net income for the second quarter ended July 3, 2004 increased 91% to $5.9 million, or $0.20 per diluted share.  Excluding the effect of the inventory adjustment of $0.03 per diluted share described above, diluted earnings per share for the second quarter ended July 3, 2004 would have been $0.17 per diluted share, an increase of 55% as compared to pro forma diluted earnings per share of $0.11 for the second quarter ended July 5, 2003.

 

Net sales in the first half of fiscal 2004 increased 11% to $339.0 million from $306.0 million for the first half of fiscal 2003.  In our wholesale channel, net sales increased $1.9 million, or 1%, in the first half of fiscal 2004 to $164.1 million from $162.2 million in the first half of fiscal 2003.  As expected, wholesale net sales growth in the second quarter of fiscal 2004 more than offset the 6% decline in wholesale net sales experienced during the first quarter of fiscal 2004.

 

2



 

Net sales to the mass channel in the first half of fiscal 2004 increased $25.5 million to $55.7 million from $30.2 million in the first half of fiscal 2003.  This growth reflects sales of our Child of Mine brand to Wal-Mart, which launched in June of 2003, and growth in sales of the Tykes brand to Target stores.

 

The Company’s retail store sales in the first half of fiscal 2004 increased $5.7 million, or 5%, to $119.2 million from $113.5 million in the first half of fiscal 2003 due to incremental sales from new store openings and a comparable store sales increase of 1.8%.  During the first half of fiscal 2004, the Company opened five stores.

 

For the first half of fiscal 2004, net income increased 80% to $16.2 million, or $0.54 per diluted share, from $9.0 million, or $0.38 per diluted share for the first half of fiscal 2003.  Pro forma net income increased 50% to $16.6 million, or $0.55 per diluted share for the first half of fiscal 2004 compared to pro forma net income of $11.0 million, or $0.38 per diluted share for the first half of fiscal 2003.  Excluding the effect of the inventory adjustment of $0.03 per diluted share described above, pro forma diluted earnings per share for the first half of fiscal 2004 would have been $0.52 per diluted share, an increase of 37% as compared to pro forma diluted earnings per share of $0.38 for the first half of fiscal 2003.

 

Net cash used in operations was $5.4 million in the first half of fiscal 2004 compared to net cash used in operations of $21.9 million in the first half of fiscal 2003.  Net cash used in operations in the first half of fiscal 2004 reflects the growth in earnings and favorable changes in working capital.

 

3



 

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)

 

Third Quarter 2004

 

Fiscal Year 2004

 

Net sales

 

$

234.0

 

+10

%(1)

$775.0

 

+10

%(3)

Diluted EPS

 

$

0.57

 

+19

%(2)

$1.56 to $1.58

 

+28% to +30

% (4)

 


(1)                                  Comparison to third quarter of fiscal 2003.

 

(2)                                  Estimated increase as compared to pro forma third quarter fiscal 2003 results adjusted to reflect $0.9 million in after tax interest savings, $0.6 million in after-tax plant closure costs, and increased diluted share count of approximately 5.4 million shares resulting from the initial public offering and associated debt reduction that occurred during the fourth quarter of fiscal 2003.

 

(3)                                  Comparison to fiscal 2003.

 

(4)                                  Estimated increase in projected 2004 net income per share, including $0.03 per share benefit from the cumulative effect of the inventory adjustment, 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 July 29, 2004 at 8:30 a.m. EDT.  To participate in the call, please dial 1-800-810-0924.  For international calls, please dial 1-913-981-4900.  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 “Second Quarter Conference Call.”  A replay of the call will be available shortly after the broadcast through midnight EDT, August 6, at 1-888-203-1112, pass code 511730, and 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.

 

4



 

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 October 23, 2003 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.

 

5



 

Pro forma Net Income
 

Pro forma results for the first half of fiscal 2004 exclude $0.3 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 second quarter and first half of fiscal 2003 include $1.0 million and $2.0 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.  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 second quarter and first half 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 www.carters.com.

 

6



 

 

CARTER’S, INC.

GAAP VS. PRO FORMA RESULTS

(dollars in thousands, except for share data)

(unaudited)

 

 

 

Three-month
periods ended

 

Six-month
periods ended

 

 

 

July 3,
2004

 

July 5,
2003

 

July 3,
2004

 

July 5,
2003

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

 

$

5,917

 

$

2,088

 

$

16,230

 

$

8,998

 

 

 

 

 

 

 

 

 

 

 

Pro forma adjustments (net of tax):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closure costs

 

 

 

329

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma interest expense savings

 

 

1,015

 

 

2,030

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income

 

$

5,917

 

$

3,103

 

$

16,559

 

$

11,028

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares  outstanding, as reported

 

29,890,163

 

24,023,255

 

29,875,271

 

23,974,808

 

 

 

 

 

 

 

 

 

 

 

Adjustment for initial public offering

 

 

5,390,625

 

 

5,390,625

 

 

 

 

 

 

 

 

 

 

 

Pro forma diluted weighted average shares outstanding

 

29,890,163

 

29,413,880

 

29,875,271

 

29,365,433

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per share, as reported

 

$

0.20

 

$

0.09

 

$

0.54

 

$

0.38

 

 

 

 

 

 

 

 

 

 

 

Pro forma diluted net income per share

 

$

0.20

 

$

0.11

 

$

0.55

 

$

0.38

 

 

7



 

CARTER’S, INC.

CONSOLIDATED STATEMENT OF INCOME

(dollars in thousands, except for share data)

(unaudited)

 

 

 

Three-month
periods ended

 

Six-month
periods ended

 

 

 

July 3,
2004

 

July 5,
2003

 

July 3,
2004

 

July 5,
2003

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

156,307

 

$

140,008

 

$

339,027

 

$

306,001

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

96,716

 

90,153

 

213,166

 

195,542

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

59,591

 

49,855

 

125,861

 

110,459

 

Selling, general, and administrative expenses

 

48,030

 

41,843

 

95,394

 

86,764

 

 

 

 

 

 

 

 

 

 

 

Closure costs

 

 

 

540

 

 

 

 

 

 

 

 

 

 

 

 

Royalty income

 

(2,504

)

(1,903

)

(5,668

)

(4,457

)

 

 

 

 

 

 

 

 

 

 

Operating income

 

14,065

 

9,915

 

35,595

 

28,152

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

4,364

 

6,519

 

8,988

 

13,521

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

9,701

 

3,396

 

26,607

 

14,631

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

3,784

 

1,308

 

10,377

 

5,633

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,917

 

$

2,088

 

$

16,230

 

$

8,998

 

 

 

 

 

 

 

 

 

 

 

Basic net income per common share

 

$

0.21

 

$

0.09

 

$

0.58

 

$

0.40

 

Diluted net income per common share

 

$

0.20

 

$

0.09

 

$

0.54

 

$

0.38

 

Basic weighted average number of shares outstanding

 

28,002,221

 

22,552,137

 

27,993,791

 

22,550,452

 

Diluted weighted average number of shares outstanding

 

29,890,163

 

24,023,255

 

29,875,271

 

23,974,808

 

 

8



 

CARTER’S, INC.

CONSOLIDATED BALANCE SHEET

(dollars in thousands, except for share data)

 

 

 

July 3, 2004

 

January 3, 2004

 

July 5, 2003

 

 

 

(unaudited)

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,176

 

$

36,061

 

$

4,959

 

Accounts receivable, net

 

71,982

 

65,318

 

59,904

 

Inventories, net

 

148,423

 

104,760

 

132,910

 

Prepaid expenses and other current assets

 

3,401

 

6,625

 

5,065

 

Deferred income taxes

 

8,301

 

9,045

 

11,096

 

 

 

 

 

 

 

 

 

Total current assets

 

245,283

 

221,809

 

213,934

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

52,627

 

50,502

 

49,952

 

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

 

625

 

3,125

 

5,625

 

Deferred debt issuance costs, net

 

6,837

 

7,666

 

10,433

 

Other assets

 

2,943

 

3,485

 

3,659

 

 

 

 

 

 

 

 

 

Total assets

 

$

667,830

 

$

646,102

 

$

643,118

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

927

 

$

3,336

 

$

1,201

 

Accounts payable

 

50,428

 

30,436

 

34,253

 

Other current liabilities

 

30,429

 

37,405

 

35,538

 

 

 

 

 

 

 

 

 

Total current liabilities

 

81,784

 

71,177

 

70,992

 

 

 

 

 

 

 

 

 

Long-term debt

 

204,002

 

209,377

 

290,742

 

Deferred income taxes

 

82,293

 

83,196

 

82,926

 

Other long-term liabilities

 

9,816

 

9,816

 

10,001

 

 

 

 

 

 

 

 

 

Total liabilities

 

377,895

 

373,566

 

454,661

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at July 3, 2004, January 3, 2004, and July 5, 2003

 

 

 

 

Common stock, voting; par value $.01 per share; 40,000,000 shares authorized; 28,073,103 issued and outstanding at July 3, 2004; 27,985,360 issued and outstanding at January 3, 2004; 22,558,884 issued and outstanding at July 5, 2003

 

281

 

280

 

226

 

Additional paid-in capital

 

242,948

 

241,780

 

147,142

 

Retained earnings

 

46,706

 

30,476

 

41,089

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

289,935

 

272,536

 

188,457

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

667,830

 

$

646,102

 

$

643,118

 

 

9