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): April 22, 2008
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Carter’s,
Inc.
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(Exact
name of Registrant as specified in its
charter)
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Delaware
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001-31829
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13-3912933
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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The
Proscenium,
1170
Peachtree Street NE, Suite 900
Atlanta,
Georgia 30309
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(Address
of principal executive offices, including zip code)
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(404)
745-2700
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(Registrant’s
telephone number, including area code)
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(Former
name or former address, if changed since last
report.)
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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:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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o
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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o
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02. Results
of Operations and Financial Condition.
On April
22, 2008, Carter’s, Inc. issued a press release announcing its financial results
for its first quarter ended March 29, 2008. 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.
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Exhibits
– The following exhibit is furnished as part of this Current Report on
Form 8-K.
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Exhibit
Number
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Description
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99.1
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Press
Release of Carter’s, Inc., dated April 22, 2008, announcing its financial
results for its first quarter ended March 29,
2008
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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.
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April
22, 2008
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CARTER’S,
INC.
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By:
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/s/ BRENDAN
M. GIBBONS
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Name:
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Brendan
M. Gibbons
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Title:
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Vice
President, General Counsel,
and
Secretary
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Exhibit
99.1
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Contact:
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Eric
Martin
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Vice
President, Investor Relations
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(404)
745-2889
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CARTER’S,
INC. REPORTS FIRST QUARTER RESULTS
Atlanta,
Georgia, April 22, 2008 / PRNewswire -- FirstCall / -- Carter’s, Inc.
(NYSE:CRI), the
largest branded marketer in the United States of apparel exclusively for babies
and young children, reported its first quarter fiscal 2008 results.
First
Quarter of Fiscal 2008 compared to First Quarter of Fiscal 2007
Consolidated
net sales increased 3.1% to $330.0 million. Net sales of the
Company’s Carter’s brands increased 7.2% to $267.2 million. Net sales
of the Company’s OshKosh brand decreased 11.3% to $62.8 million.
Consolidated
retail store sales increased 8.4% to $130.8 million. Carter’s retail
store sales increased 15.5% to $86.4 million, driven by a comparable store sales
increase of 12.3%, or $9.2 million, and sales of $2.7 million from new Carter’s
stores opened since the first quarter of fiscal 2007. OshKosh retail
store sales decreased 3.2% to $44.4
million, due to a comparable store sales decrease of 6.6%, or $3.0 million,
partially offset by sales of $1.9 million from new OshKosh stores opened since
the first quarter of fiscal 2007.
In the
first quarter of fiscal 2008, the Company opened one Carter’s retail
store. As of March 29, 2008, the Company had 229 Carter’s stores and
163 OshKosh stores. The Company plans to open a total of 25 Carter’s
stores and two OshKosh stores during fiscal 2008. The Company also
plans to close five Carter’s stores and three OshKosh stores during fiscal
2008.
1
The
Company’s wholesale sales decreased 1.0% to $136.3 million. Carter’s
wholesale sales increased $5.2 million, or 4.6%, to $117.8 million, due
primarily to the timing of demand. OshKosh wholesale sales decreased
$6.5 million, or 26.2%, to $18.4 million.
The
Company’s mass channel sales, which are comprised of sales of our Just One Year brand to Target
and Child of Mine brand
to Wal-Mart, increased 1.8% to $62.9 million. Sales of our Just One Year brand increased
$4.8 million, or 21.1%, to $27.5 million, while sales of our Child of Mine
brand decreased $3.7 million, or 9.4%, to $35.4 million.
Consolidated
operating income in the first quarter of fiscal 2008 decreased $0.6 million, or
2.9%, to $20.6 million compared to the first quarter of fiscal
2007. Compared to our adjusted operating income in the first quarter
of fiscal 2007, which excludes facility closure costs of $6.0 million, as
reconciled below, our first quarter fiscal 2008 operating income decreased $6.6
million, or 24%. This decrease was due primarily to a decline in
gross margin in our OshKosh retail stores resulting from Fall and Holiday
product performance, higher provisions for excess inventory, particularly in our
OshKosh retail and mass channel segments, and lower margins on certain mass
channel products.
Income tax expense
for the first quarter of fiscal 2008 includes a benefit of $1.6 million
resulting from the reversal of income tax reserves following the completion of
recent tax audits.
In the first quarter of fiscal 2008, net income was $11.6 million, or $0.19 per diluted share, compared to $9.6 million, or $0.16 per diluted share, in the first quarter of fiscal 2007. Excluding facility closure costs, as reconciled below, our adjusted net income for the first quarter of fiscal 2007 was $13.3 million, or $0.22 per diluted share. Net income for the first quarter of fiscal 2008, as compared to adjusted net income for the first quarter of fiscal 2007 decreased $1.8 million, or 13.5%, and diluted earnings per share decreased 13.6%.
2
“The
retail environment continues to be very uncertain. Most of our
wholesale customers have taken a more cautious outlook for 2008, which has
impacted their demand for our products. While we believe spending in
the young children’s segment is less discretionary than other apparel segments,
it has been impacted by the overall downturn in the economy and slowdown in
consumer spending,” noted Fred Rowan, Chairman and CEO.
“We
continue to be very encouraged by the performance of our Carter’s retail segment
in this environment, with comparable store sales up over 12%. Our
Carter’s retail store performance helped to partially offset the continued
weakness in our OshKosh segments and disappointing performance of our Child of Mine brand,”
continued Mr. Rowan.
“We’ve
made significant investments in our OshKosh merchandising and retail teams to
successfully execute the OshKosh turnaround strategy and have a better Child of Mine product
offering launching in June 2008. It’s unclear how long this market
will remain uncertain. In the meantime, we will continue to focus on
the things we can improve, including executing a far more comprehensive and
impactful model to improve the competitiveness of
our business.”
3
The
reconciliation of income as reported under accounting principles generally
accepted in the United States of America (“GAAP”) to income adjusted for closure
costs is as follows:
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(dollars
in millions, except EPS)
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||||||||||||
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Three-month period ended March 31,
2007
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Operating
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Net
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Diluted
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Income
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Income
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EPS
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Income,
as reported (GAAP)
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$ | 21.2 | $ | 9.6 | $ | 0.16 | ||||||
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Distribution
facility closure costs (a)
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4.5 | 2.8 | 0.05 | |||||||||
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Accelerated
depreciation (b)
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1.5 | 0.9 | 0.01 | |||||||||
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Income, as adjusted
(c)
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$ | 27.2 | $ | 13.3 | $ | 0.22 | ||||||
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(a)
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Costs
associated with the closure of the OshKosh distribution
facility.
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(b)
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Accelerated
depreciation charges (included in selling, general, and administrative
expenses) related to the closure of the OshKosh distribution
facility.
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(c)
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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 operating income, 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. The 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.
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Net cash
provided by operating activities in the first quarter of fiscal 2008 was
$28.9
million compared to $6.7 million in the first quarter of fiscal 2007, driven
largely by changes in inventory levels.
In
connection with the Company’s $100 million share repurchase program, during the
first quarter of fiscal 2008, the Company repurchased 674,358 shares of its
common stock for approximately $10 million at an average price of $14.86 per
share.
4
Quarterly
Conference Call
The
Company will broadcast its quarterly conference call on April 23, 2008 at
8:30 a.m.
Eastern Time. To participate in the call, please dial
1-913-981-5588. To listen to the live broadcast over the internet,
please log on to www.carters.com, click on “Investor Relations,” and click on
the link “First Quarter Conference Call.” A replay of the call will
be available shortly after the broadcast through May 2, 2008, at 1-719-457-0820,
passcode 5470912. This replay will 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 2008 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 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 from our
acquisition of OshKosh B’Gosh, Inc., which could 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 Annual Report on Form 10-K and other reports filed with the Securities and
Exchange Commission under the heading “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.
6
CARTER’S,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(dollars
in thousands, except for share data)
(unaudited)
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Three-month
periods ended
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March
29,
2008
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March
31,
2007
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Net
sales:
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Wholesale:
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Carter’s
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$ | 117,832 | $ | 112,653 | ||||
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OshKosh
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18,449 | 24,993 | ||||||
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Total
Wholesale sales
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136,281 | 137,646 | ||||||
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Retail:
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Carter’s
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86,402 | 74,826 | ||||||
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OshKosh
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44,365 | 45,848 | ||||||
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Total
Retail sales
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130,767 | 120,674 | ||||||
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Mass
Channel
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62,924 | 61,808 | ||||||
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Total
net sales
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329,972 | 320,128 | ||||||
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Cost
of goods sold
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225,057 | 213,748 | ||||||
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Gross
profit
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104,915 | 106,380 | ||||||
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Selling,
general, and administrative expenses
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92,276 | 88,246 | ||||||
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Closure
costs
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-- | 4,507 | ||||||
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Royalty
income
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(7,914 | ) | (7,545 | ) | ||||
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Operating
income
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20,553 | 21,172 | ||||||
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Interest
expense, net
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4,520 | 5,728 | ||||||
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Income
before income taxes
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16,033 | 15,444 | ||||||
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Provision
for income taxes
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4,474 | 5,833 | ||||||
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Net
income
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$ | 11,559 | $ | 9,611 | ||||
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Basic
net income per common share
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$ | 0.20 | $ | 0.16 | ||||
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Diluted
net income per common share
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$ | 0.19 | $ | 0.16 | ||||
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Basic
weighted-average number of shares outstanding
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57,215,027 | 58,447,494 | ||||||
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Diluted
weighted-average number of shares outstanding
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59,306,222 | 61,210,621 | ||||||
7
CARTER’S,
INC.
CONSOLIDATED BALANCE
SHEETS
(dollars
in thousands, except for share data)
(unaudited)
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March 29,
2008
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December 29, 2007
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March 31, 2007
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$ | 65,546 | $ | 49,012 | $ | 41,750 | ||||||
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Accounts
receivable, net
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128,501 | 119,707 | 116,864 | |||||||||
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Inventories,
net
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174,232 | 225,494 | 159,574 | |||||||||
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Assets
held for sale
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6,109 | 6,109 | -- | |||||||||
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Prepaid
expenses and other current assets
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10,285 | 9,093 | 11,919 | |||||||||
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Deferred
income taxes
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25,293 | 24,234 | 18,905 | |||||||||
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Total
current assets
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409,966 | 433,649 | 349,012 | |||||||||
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Property,
plant, and equipment, net
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71,557 | 75,053 | 80,972 | |||||||||
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Tradenames
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306,733 | 308,233 | 322,233 | |||||||||
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Cost
in excess of fair value of net assets acquired
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136,570 | 136,570 | 279,756 | |||||||||
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Deferred
debt issuance costs, net
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4,463 | 4,743 | 5,611 | |||||||||
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Licensing
agreements, net
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8,001 | 8,915 | 11,831 | |||||||||
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Leasehold
interests, net
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568 | 684 | 1,035 | |||||||||
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Other
assets
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7,193 | 6,821 | 10,540 | |||||||||
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Total
assets
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$ | 945,051 | $ | 974,668 | $ | 1,060,990 | ||||||
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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Current
liabilities:
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||||||||||||
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Current
maturities of long-term debt
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$ | 4,379 | $ | 3,503 | $ | 2,627 | ||||||
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Accounts
payable
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30,097 | 56,589 | 41,036 | |||||||||
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Other
current liabilities
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45,425 | 46,666 | 43,576 | |||||||||
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Total
current liabilities
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79,901 | 106,758 | 87,239 | |||||||||
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Long-term
debt
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337,150 | 338,026 | 341,529 | |||||||||
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Deferred
income taxes
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114,177 | 113,706 | 120,640 | |||||||||
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Other
long-term liabilities
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30,998 | 34,049 | 32,347 | |||||||||
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Total
liabilities
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562,226 | 592,539 | 581,755 | |||||||||
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Commitments
and contingencies
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Stockholders’
equity:
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Preferred
stock; par value $.01 per share; 100,000 shares authorized; none issued or
outstanding at March 29, 2008, December 29, 2007, and March 31,
2007
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-- | -- | -- | |||||||||
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Common
stock, voting; par value $.01 per share; 150,000,000 shares authorized;
57,008,933, 57,663,315, and 57,790,640 shares issued and outstanding at
March 29, 2008, December 29, 2007, and March 31, 2007,
respectively
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570 | 576 | 578 | |||||||||
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Additional
paid-in capital
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223,778 | 232,356 | 247,075 | |||||||||
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Accumulated
other comprehensive income
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392 | 2,671 | 4,827 | |||||||||
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Retained
earnings
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158,085 | 146,526 | 226,755 | |||||||||
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Total
stockholders’ equity
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382,825 | 382,129 | 479,235 | |||||||||
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Total
liabilities and stockholders’ equity
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$ | 945,051 | $ | 974,668 | $ | 1,060,990 | ||||||
8