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): October 23,
2007
|
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
No.)
|
|
|
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)
|
||||
|
(Former
name or former address, if changed since last
report.)
|
||||
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Registrant under any of the following
provisions:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Item
2.02. Results
of Operations and Financial Condition.
On
October 23, 2007, Carter’s, Inc. issued a press release announcing its financial
results for its third quarter ended September 29, 2007. 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.
Item
9.01. Financial
Statements and Exhibits.
|
(d)
|
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 October 23,
2007
|
||
Signature
Pursuant
to the requirements of the Securities Exchange Act of 1934, Carter’s, Inc. has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
October
23, 2007
| CARTER’S, INC. | ||
| |
|
|
| By: | /S/ MICHAEL D. CASEY | |
|
Name: Michael D. Casey |
||
|
Title:
Executive Vice President and
Chief Financial
Officer
|
||
 |
|
|
Contact:
|
|
|
Eric
Martin
|
|
|
Vice
President, Investor Relations
|
|
|
(404)
745-2889
|
CARTER’S,
INC. REPORTS 5% GROWTH IN THIRD QUARTER SALES
ATLANTA,
Oct. 23 /PRNewswire-FirstCall/ -- Carter’s, Inc. (NYSE: CRI), the largest
branded marketer in the United States of apparel exclusively for babies
and
young children, today reported its third quarter fiscal 2007
results.
Third
Quarter of Fiscal 2007 compared to Third Quarter of Fiscal
2006
Consolidated
net sales increased 4.8% to approximately $410.9 million. Net sales of the
Company’s Carter’s
brands
increased 5.4% to $320.0 million. Net sales of the Company’s OshKosh
brand
increased 2.8% to $91.0 million.
The
Company’s wholesale sales increased 5.1% to $178.1 million. Carter’s wholesale
sales, excluding off-price sales of $6.0 million in the third quarter of
fiscal
2007 and $9.0 million in the third quarter of fiscal 2006, increased 6.9%
to
$144.0 million. OshKosh wholesale sales, excluding off-price sales of $1.0
million in each of the third quarters of fiscal 2007 and 2006, increased
9.9% to
$27.2 million.
The
Company’s mass channel sales, which are comprised of sales of its Child
of Mine
brand to
Wal-Mart and Just
One Year
brand to
Target, increased $1.3 million, or 1.9% to $67.6 million. This increase was
driven by a 6.5% increase in sales of our Just
One Year brand,
or
$1.5 million. Sales from our Child
of Mine brand
were comparable to the third quarter of fiscal 2006.
Consolidated
retail store sales increased 5.8% to $165.2 million. Carter’s retail store sales
increased 9.6% to $102.4 million, driven by sales of $5.4 million from new
stores and a comparable store sales increase of $3.8 million, or 4.1%. OshKosh
retail store sales of $62.8 million were comparable to last year and included
$3.3 million of sales from new stores, partially offset by a comparable store
sales decrease of $3.1 million, or 5.0%.
In
the
third quarter of fiscal 2007, the Company opened one Carter’s retail store and
three OshKosh retail stores. As of September 29, 2007, the Company had 222
Carter’s and 162 OshKosh retail stores. In
the
fourth quarter, the Company plans to open seven Carter’s and three OshKosh
retail stores resulting in a total of ten store openings for Carter’s and eight
store openings for OshKosh in fiscal 2007.
For
the
third quarter of fiscal 2007, the Company’s net income was $34.6 million, or
$0.58 per diluted share, compared to net income of $35.0 million, or $0.57
per
diluted share, in the third quarter of fiscal 2006.
“Despite
a very challenging retail environment, our results for the third quarter
were
consistent with our expectations,” noted Fred Rowan, Chairman and CEO. “We
expect the market will continue to be difficult given the macroeconomic concerns
impacting consumers. Accordingly, we continue to have a cautious outlook
for the
balance of the year.
“We’re
fortunate to own two of the strongest brands in young children’s apparel,
marketed to the best performing retailers in the country,” added Mr. Rowan. “We
believe our multiple brand and channel growth strategies, together with the
significant investments made in 2007 in talent, product competitiveness,
branding, and consumer research, will enable us to deliver better performance
for our shareholders in 2008.”
First
Nine Months of Fiscal 2007 compared to First Nine Months of Fiscal
2006
Consolidated
net sales increased 5.5% to approximately $1.0 billion. Net sales of the
Company’s Carter’s
brands
increased 8.5% to $797.9 million. Net sales of the Company’s OshKosh
brand
decreased 4.2% to $221.0 million.
The
Company’s wholesale sales increased 3.5% to $419.3 million. Carter’s wholesale
sales, excluding off-price sales of $19.5 million in the first nine months
of
fiscal 2007 and $22.8 million in the first nine months of fiscal 2006, increased
9.5% to $336.3 million. OshKosh wholesale sales, excluding off-price sales
of
$2.2 million and $5.9 million in the first nine months of fiscal 2007 and
2006,
decreased 11.3% to $61.2 million.
2
The
Company’s mass channel sales increased 10.0% to $188.5 million. This increase
was driven by a $10.8 million, or 9.9%, increase in sales of our Child
of Mine brand
and
a $6.3 million, or 10.1%, increase in sales of our Just
One Year brand.
Total
retail store sales increased 5.5% to $411.1 million. Carter’s retail store sales
increased 8.4% to $253.5 million, driven by sales of $17.4 million from new
stores and a comparable store sales increase of $4.8 million, or 2.1%, partially
offset by the impact of store closures of $2.6
million. OshKosh retail store sales of $157.5 million increased 1.1% driven
by
sales of $10.2 million from new stores, partially offset by a comparable
store
sales decrease of $7.6 million, or 4.9%, and by the impact of store closures
of
$0.8 million. In the first nine months of fiscal 2007, the Company opened
three
Carter’s and five OshKosh retail stores.
In
connection with the closure of the Company’s distribution facility located in
White House, Tennessee, the Company recorded total pre-tax charges of
approximately $7.4 million, or $0.08 per diluted share, during the first
nine
months of fiscal 2007. These charges include accelerated depreciation of
$2.1
million. The Company expects to incur an additional $0.8 million in pre-tax
charges related to this closure during the balance of fiscal 2007 and the
first
half of fiscal 2008. The estimated annualized savings resulting from the
closure
of this facility are approximately $4.0
million.
During
the second quarter of fiscal 2007, the Company conducted a review of the
value
of the intangible assets that the Company recorded in connection with the
acquisition of OshKosh B'Gosh, Inc. As a result of this analysis, the OshKosh
Tradename asset was adjusted from $102 million to $90 million and the OshKosh
Cost in Excess of Fair Value of Net Assets Acquired asset of $142.9 million
was
written off. Results for the first nine months of fiscal 2007 include non-cash,
pre-tax intangible asset impairment charges of approximately $154.9
million.
3
In
the
first nine months of fiscal 2007, the Company’s net loss was $99.2 million, or
$1.71 per diluted share, compared to net income of $59.8 million, or $0.98
per
diluted share, in the first nine months of fiscal 2006. Excluding the charges
related to the impairment of the OshKosh intangible assets and costs related
to
the closure of our White House, Tennessee distribution facility, adjusted
net
income for the first nine months of fiscal 2007 decreased 6.5% to $55.9 million,
and adjusted diluted earnings per share decreased 6.1% to $0.92. The
reconciliation of the loss as reported under generally accepted accounting
principles (“GAAP”) to income adjusted for the impairment charges and closure
costs is shown below.
|
(dollars
in millions, except EPS)
|
||||||||||
|
Nine-month
period ended September 29, 2007
|
||||||||||
|
(Loss)
Income
Before
|
Net
(Loss)
|
Diluted
|
||||||||
|
Taxes
|
Income
|
EPS
|
||||||||
|
Loss,
as reported (GAAP)
|
$
|
(74.1
|
)
|
$
|
(99.2
|
)
|
$
|
(1.71
|
)
|
|
|
Intangible
asset impairment (a)
|
154.9
|
150.5
|
2.59
|
|||||||
|
Distribution
facility closure costs (b)
|
5.2
|
3.3
|
0.06
|
|||||||
|
Accelerated
depreciation (c)
|
2.1
|
1.3
|
0.02
|
|||||||
|
Diluted
share count impact (d)
|
--
|
--
|
(0.04
|
)
|
||||||
|
Income,
as adjusted (e)
|
$
|
88.1
|
$
|
55.9
|
$
|
0.92
|
||||
| (a) |
OshKosh-related
intangible asset impairment charges.
|
| (b) |
Costs
associated with the closure of the White House, Tennessee distribution
facility.
|
| (c) |
Accelerated
depreciation charges (included in selling, general, and administrative
expenses) related to the closure of the White House, Tennessee
distribution facility.
|
| (d) |
When
reporting a loss in accordance with GAAP, the number of diluted weighted
average shares is equal to the number of basic weighted average shares.
This adjustment reflects the impact of the difference between the
number
of diluted shares used for calculating GAAP EPS (58.0 million shares)
and
the number of diluted shares used for calculating adjusted EPS (60.5
million shares).
|
| (e) |
In
addition to the results provided in this earnings release in accordance
with GAAP, the Company has provided adjusted, non-GAAP financial
measurements that present income before taxes, net income, and net
income
on a diluted share basis excluding the adjustments discussed above.
We
believe these adjustments provide a more meaningful comparison of
the
Company’s results. These adjusted, 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 adjusted, non-GAAP financial
information is presented for informational purposes only and is not
necessarily indicative of the Company’s future condition or results of
operations.
|
4
Net
cash
used in operating activities during the first nine months of fiscal 2007
was
$38.6 million compared to $5.2 million in the first nine months of fiscal
2006.
Net cash flow used in operations in the first nine months of fiscal 2007
was
driven primarily by increases in inventory levels due to the timing of receipts
of playwear product inventory, carrying higher levels of inventory to better
support our retail stores, and increased levels of Carter’s baby product
inventory to support higher demand.
In
connection with the Company’s $100 million share repurchase program, during the
first nine months of fiscal 2007, the Company repurchased 1,985,519 shares
of
its common stock for approximately $47.4 million at an average price of $23.88
per share.
Business
Outlook
Our
business outlook is based on our 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.
|
(dollars
in millions, except for per share data)
|
|||||||||||||
|
Fourth
Quarter 2007 (a)
|
Fiscal
Year 2007 (c)
|
||||||||||||
|
Consolidated
Net Sales
|
$
|
388
|
+
3%
|
|
$
|
1,407
|
+5%
|
|
|||||
|
Consolidated
Adjusted Diluted EPS
|
$
|
0.50
|
+11%
(b)
|
|
$
|
1.42
|
0%
(d)
|
|
|||||
| (a) |
Comparison
to the fourth quarter of fiscal 2006.
|
| (b) |
Fourth
quarter of fiscal 2007 excludes $0.2 million in estimated after-tax
costs
related to the closure of our White House, Tennessee distribution
facility.
|
| (c) |
Comparison
to fiscal 2006.
|
| (d) |
Fiscal
2007 excludes approximately $150.5 million of non-cash, after-tax
impairment charges, or $2.59 per diluted share, and $4.8 million,
or $0.08
per diluted share, in estimated after-tax costs related to the closure
of
the White House, Tennessee distribution facility.
|
The
Company will broadcast its quarterly conference call on October 24, 2007
at
8:30
a.m.
Eastern Time. To participate in the call, please dial 1-913-981-5543. To
listen
to the live broadcast over the internet, please log on to www.carters.com,
go to
“About Carter’s,” click on “Investor Relations,” and click on the link “Third
Quarter Conference Call.” A replay of the call will be available shortly after
the broadcast through October 30, 2007, at 1-719-457-0820, passcode 7498164.
This replay will also be archived on the Company’s website at the same
location.
For
more
information on Carter’s, Inc., please visit www.carters.com.
5
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 2007 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; increased competition in the baby and young
children’s apparel market; the acceptance of our products in the marketplace;
deflationary pressures on our prices; disruptions in foreign supply sources;
negative publicity; our substantial leverage, which increases our exposure
to
interest rate risk and could require us to dedicate a substantial portion
of our
cash flow to repay principal; changes in consumer preference and fashion
trends;
a decrease in the overall level of consumer spending; the impact of governmental
regulations and environmental risks applicable to the Company’s business; our
ability to adequately forecast demand, which could create significant levels
of
excess inventory; our ability to identify new retail store locations, and
negotiate appropriate lease terms for our retail stores; our ability to improve
the performance of our retail and OshKosh wholesale segments; our ability
to
attract and retain key individuals within the organization; failure to realize
the revenue growth, cost savings and other benefits that we expect will result
from our acquisition of OshKosh B’Gosh, Inc., which could further impact the
carrying value of our intangible assets; and seasonal fluctuations in the
children’s apparel business. These risks are further described in our most
recently filed Quarterly Report on Form 10-Q and other reports filed with
the
Securities and Exchange Commission under the headings “Risk Factors” and
“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.
Contact:
Eric
Martin
Vice
President, Investor Relations
(404)
745-2889
6
CARTER’S,
INC.
CONSOLIDATED
STATEMENT OF OPERATIONS
(dollars
in thousands, except for share data)
(unaudited)
|
Three-month
periods ended
|
Nine-month
periods ended
|
||||||||||||
|
September
29,
2007
|
September
30,
2006
|
September
29,
2007
|
September
30,
2006
|
||||||||||
|
Net
Sales:
|
|||||||||||||
|
Wholesale:
|
|||||||||||||
|
Carter’s
|
$
|
149,918
|
$
|
143,624
|
$
|
355,865
|
$
|
330,080
|
|||||
|
OshKosh
|
28,197
|
25,778
|
63,417
|
74,870
|
|||||||||
|
Total
Wholesale sales
|
178,115
|
169,402
|
419,282
|
404,950
|
|||||||||
|
Retail:
|
|||||||||||||
|
Carter’s
|
102,429
|
93,493
|
253,530
|
233,956
|
|||||||||
|
OshKosh
|
62,800
|
62,739
|
157,533
|
155,754
|
|||||||||
|
Total
Retail sales
|
165,229
|
156,232
|
411,063
|
389,710
|
|||||||||
|
Mass
Channel
|
67,605
|
66,343
|
188,507
|
171,341
|
|||||||||
|
Total
net sales
|
410,949
|
391,977
|
1,018,852
|
966,001
|
|||||||||
|
Cost
of goods sold
|
265,093
|
244,757
|
671,198
|
613,382
|
|||||||||
|
Gross
profit
|
145,856
|
147,220
|
347,654
|
352,619
|
|||||||||
|
Selling,
general, and administrative expenses
|
94,241
|
93,496
|
267,122
|
258,944
|
|||||||||
|
Intangible
asset impairment
|
--
|
--
|
154,886
|
--
|
|||||||||
|
Closure
costs
|
256
|
--
|
5,233
|
91
|
|||||||||
|
Royalty
income
|
(8,649
|
)
|
(7,782
|
)
|
(22,894
|
)
|
(21,610
|
)
|
|||||
|
Operating
income (loss)
|
60,008
|
61,506
|
(56,693
|
)
|
115,194
|
||||||||
|
Interest
expense, net
|
6,021
|
6,554
|
17,453
|
20,367
|
|||||||||
|
Income
(loss) before income taxes
|
53,987
|
54,952
|
(74,146
|
)
|
94,827
|
||||||||
|
Provision
for income taxes
|
19,369
|
19,975
|
25,074
|
35,046
|
|||||||||
|
Net
income (loss)
|
$
|
34,618
|
$
|
34,977
|
$
|
(99,220
|
)
|
$
|
59,781
|
||||
|
Basic
net income (loss) per common share
|
$
|
0.60
|
$
|
0.60
|
$
|
(1.71
|
)
|
$
|
1.03
|
||||
|
Diluted
net income (loss) per common share
|
$
|
0.58
|
$
|
0.57
|
$
|
(1.71
|
)
|
$
|
0.98
|
||||
|
Basic
weighted-average number of shares outstanding
|
57,745,717
|
57,949,783
|
58,010,633
|
57,845,521
|
|||||||||
|
Diluted
weighted-average number of shares outstanding
|
59,975,130
|
61,094,141
|
58,010,633
|
61,173,247
|
|||||||||
7
CARTER’S,
INC.
CONSOLIDATED
BALANCE SHEET
(dollars
in thousands, except for share data)
(unaudited)
|
September
29, 2007
|
December
30, 2006
|
September
30, 2006
|
||||||||
|
ASSETS
|
||||||||||
|
Current
assets:
|
||||||||||
|
Cash
and cash equivalents
|
$
|
9,254
|
$
|
68,545
|
$
|
29,956
|
||||
|
Accounts
receivable, net
|
160,069
|
110,615
|
150,835
|
|||||||
|
Inventories,
net
|
246,529
|
193,588
|
199,849
|
|||||||
|
Prepaid
expenses and other current assets
|
13,385
|
7,296
|
9,696
|
|||||||
|
Assets
held for sale
|
6,109
|
--
|
--
|
|||||||
|
Deferred
income taxes
|
20,729
|
22,377
|
19,739
|
|||||||
|
Total
current assets
|
456,075
|
402,421
|
410,075
|
|||||||
|
Property,
plant, and equipment, net
|
72,829
|
87,940
|
79,863
|
|||||||
|
Tradenames
|
308,233
|
322,233
|
322,233
|
|||||||
|
Cost
in excess of fair value of net assets acquired
|
136,570
|
279,756
|
279,756
|
|||||||
|
Deferred
debt issuance costs, net
|
5,031
|
5,903
|
6,797
|
|||||||
|
Licensing
agreements, net
|
9,829
|
12,895
|
13,959
|
|||||||
|
Leasehold
interests, net
|
801
|
1,151
|
1,268
|
|||||||
|
Other
assets
|
8,234
|
10,892
|
5,144
|
|||||||
|
Total
assets
|
$
|
997,602
|
$
|
1,123,191
|
$
|
1,119,095
|
||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||||
|
Current
liabilities:
|
||||||||||
|
Current
maturities of long-term debt
|
$
|
2,627
|
$
|
2,627
|
$
|
2,984
|
||||
|
Accounts
payable
|
69,971
|
70,878
|
44,395
|
|||||||
|
Other
current liabilities
|
51,454
|
63,012
|
79,151
|
|||||||
|
Total
current liabilities
|
124,052
|
136,517
|
126,530
|
|||||||
|
Revolving
loan facility
|
21,600
|
--
|
--
|
|||||||
|
Long-term
debt
|
339,778
|
342,405
|
389,915
|
|||||||
|
Deferred
income taxes
|
114,481
|
125,784
|
126,145
|
|||||||
|
Other
long-term liabilities
|
32,443
|
22,994
|
22,111
|
|||||||
|
Total
liabilities
|
632,354
|
627,700
|
664,701
|
|||||||
|
Commitments
and contingencies
|
||||||||||
|
Stockholders’
equity:
|
||||||||||
|
Preferred
stock; par value $.01 per share; 100,000 shares authorized; none
issued or
outstanding at September 29, 2007,
December
30, 2006, and September 30, 2006
|
--
|
--
|
--
|
|||||||
|
Common
stock, voting; par value $.01 per share; 150,000,000 shares authorized;
57,926,790, 58,927,280, and 58,179,118 shares issued and outstanding
at
September 29, 2007, December
30, 2006, and September 30, 2006
|
579
|
589
|
582
|
|||||||
|
Additional
paid-in capital
|
242,780
|
275,045
|
265,345
|
|||||||
|
Accumulated
other comprehensive income
|
3,965
|
5,301
|
1,350
|
|||||||
|
Retained
earnings
|
117,924
|
214,556
|
187,117
|
|||||||
|
Total
stockholders’ equity
|
365,248
|
495,491
|
454,394
|
|||||||
|
Total
liabilities and stockholders’ equity
|
$
|
997,602
|
$
|
1,123,191
|
$
|
1,119,095
|
||||
8