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 28, 2010
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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 October 28, 2010, Carter’s, Inc. issued a press release announcing its financial results for its third quarter ended October 2, 2010. 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 October 28, 2010
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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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October 28, 2010
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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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Senior Vice President of Legal & Corporate Affairs, General Counsel,
and Secretary
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Contact:
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Richard F. Westenberger
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Executive Vice President &
Chief Financial Officer
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(404) 745-2889
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| CARTER’S, INC. REPORTS THIRD QUARTER 2010 RESULTS | |
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·
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NET SALES OF $518 MILLION, +8%
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·
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EARNINGS PER SHARE OF $0.83, DOWN 1%
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REPURCHASED 1.8 MILLION SHARES FOR $44 MILLION
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Atlanta, Georgia, October 28, 2010 / Business Wire -- 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 2010 results.
“We achieved good growth in sales in the third quarter; however, higher transportation expenses resulted in a slight decline in earnings,” said Michael D. Casey, Chairman and Chief Executive Officer. “While we expect to achieve a record level of sales and earnings in fiscal 2010 and expect continued growth in sales, we believe rising product costs, particularly historically high cotton prices, will negatively impact earnings in the fourth quarter and through 2011.”
Third Quarter of Fiscal 2010 compared to Third Quarter of Fiscal 2009
Consolidated net sales increased $36.4 million, or 7.6%, to $517.9 million. Net sales of the Company’s Carter’s brands increased $30.3 million, or 7.9%, to $412.3 million. Net sales of the Company’s OshKosh B’gosh brand increased $6.1 million, or 6.1%, to $105.6 million.
Carter’s wholesale sales increased $20.7 million, or 12.5%, to $186.4 million due to earlier demand for seasonal product and strong over-the-counter performance, primarily in the Company’s baby replenishment business. OshKosh wholesale sales increased $2.3 million, or 8.9%, to $27.7 million, largely due to timing of 2010 shipments.
Consolidated retail sales increased $17.0 million, or 8.0%, to $228.8 million. Carter’s retail segment sales increased $13.1 million, or 9.5%, to $150.8 million driven by incremental sales of $11.9 million generated by new store openings and eCommerce sales, and a comparable store sales increase of $2.0 million, or 1.4%. OshKosh retail segment sales increased $3.8 million, or 5.2%, to $77.9 million, driven by incremental sales of $5.4 million generated by new store openings and eCommerce sales, and a comparable store sales increase of $0.4 million, or 0.6%.
In the third quarter of fiscal 2010, the Company opened eight Carter’s and three OshKosh retail stores. The Company also closed one OshKosh retail store. As of the end of the third quarter, the Company operated 297 Carter’s and 177 OshKosh retail stores.
The Company’s mass channel sales, which are comprised of sales of its Child of Mine brand to Walmart and Just One You (formerly Just One Year) brand to Target, decreased $3.5 million, or 4.5%, to $75.1 million. This decrease reflects lower Child of Mine brand sales largely due to merchandising assortment changes and the timing of shipments, and increased Just One You brand sales driven by the addition of new programs and improved product performance.
Operating income in the third quarter of fiscal 2010 was $79.9 million, a decrease of $1.1 million, or 1.4%, from $81.0 million in the third quarter of fiscal 2009, primarily due to higher supply chain costs and lower earnings from sales of our Child of Mine brand.
Net income increased $0.3 million, or 0.5%, to $49.7 million, or $0.83 per diluted share, compared to $49.4 million, or $0.84 per diluted share, in the third quarter of fiscal 2009.
2
First Nine Months of Fiscal 2010 compared to First Nine Months of Fiscal 2009
Consolidated net sales increased $89.0 million, or 7.6%, to $1.3 billion. Net sales of the Company’s Carter’s brands increased $81.3 million, or 8.8%, to $1.0 billion. Net sales of the Company’s OshKosh B’gosh brand increased $7.7 million, or 3.2%, to $245.7 million.
Carter’s wholesale sales increased $48.4 million, or 12.2%, to $443.9 million due to strong over-the-counter performance. OshKosh wholesale sales increased $0.8 million, or 1.3%, to $60.7 million.
Consolidated retail sales increased $39.8 million, or 7.5%, to $567.6 million. Carter’s retail segment sales increased $32.8 million, or 9.4%, to $382.6 million, driven by incremental sales of $28.6 million generated by new store openings and eCommerce sales, and a comparable store sales increase of $5.5 million, or 1.6%. OshKosh retail segment sales increased $7.0 million, or 3.9%, to $185.1 million, driven by incremental sales of $10.3 million generated by new store openings and eCommerce sales, partially offset by a comparable store sales decline of $0.2 million, or 0.2%. In the first nine months of fiscal 2010, the Company opened 21 Carter’s and eight OshKosh retail stores. In addition, the Company closed one OshKosh retail store.
The Company’s mass channel sales increased $0.1 million, or 0.1%, to $181.8 million. This increase was driven by increased sales of the Company’s Just One You brand resulting from the addition of new programs and improved product performance, and was largely offset by decreased sales of the Company’s Child of Mine brand attributable to merchandising assortment changes made by Walmart and a related reduction in floor space.
Results for the first nine months of fiscal 2009 included pre-tax charges of approximately $11.6 million related to severance and other benefits, asset impairment, accelerated depreciation, and other closure costs, incurred in connection with the workforce reduction and distribution facility closure that occurred during the first half of fiscal 2009. Results for the first nine months of fiscal 2009 also included a $0.7 million write-down in the second quarter of the carrying value of the White House, Tennessee distribution facility which was sold during the third quarter of fiscal 2009.
3
Operating income in the first nine months of fiscal 2010 was $184.5 million, an increase of $45.2 million, or 32.5%, from $139.3 million in the first nine months of fiscal 2009. Excluding the effect of the workforce reduction, distribution facility closure, asset impairment charges, and facility write-down, adjusted operating income increased $32.8 million, or 21.7%, to $184.5 million from $151.6 million in the first nine months of fiscal 2009.
Net income increased $28.9 million, or 35.0%, to $111.6 million, or $1.86 per diluted share, compared to $82.6 million, or $1.41 per diluted share, in the first nine months of fiscal 2009. Excluding the effect of the workforce reduction, distribution facility closure, asset impairment charges, and facility write-down, adjusted net income increased $21.1 million, or 23.4%, to $111.6 million, or $1.86 per diluted share, compared to $90.4 million, or $1.54 per adjusted diluted share in the first nine months of fiscal 2009.
A reconciliation of income as reported under accounting principles generally accepted in the United States of America ("GAAP") to income adjusted for certain items is provided at the end of this release.
Cash flow from operations in the first nine months of fiscal 2010 was $5.2 million, a decrease of $55.9 million, or 91.5%, over the first nine months of fiscal 2009 primarily due to net changes in working capital, partially offset by increased earnings.
Stock Repurchase Program
On June 15, 2010, the Company’s Board of Directors authorized the Company to repurchase up to $100 million of its outstanding common shares (in addition to $8.9 million available for repurchases under the Company’s repurchase authorization approved in February 2007). Neither of these share repurchase authorizations have expiration dates. Purchases may be made in the open market or in privately negotiated transactions, with the level and timing of activity at the discretion of the Company’s management depending on market conditions, stock price, other investment priorities, and other factors.
4
During the third quarter, the Company repurchased 1,837,450 shares of its common stock for approximately $44.1 million at an average price of $24.00 per share. Subsequent to the third quarter, the Company repurchased an additional 221,380 shares of its common stock for approximately $5.9 million at an average price of $26.70 per share, which brought the year-to-date total through October 19, 2010 to approximately $50 million.
All repurchases were executed pursuant to a trading plan that meets the safe harbor requirements of Rule 10b5-1 of the Securities Act of 1933.
New Credit Facility
On October 15, 2010, the Company entered into a new $375 million ($130 million sub-limit for letters of credit) revolving credit facility (the “Revolver”) with Bank of America, N.A., as sole lead arranger and administrative agent, JP Morgan Chase, and certain other financial institutions. The Revolver was immediately drawn upon to pay off the Company’s existing term loan of $232.2 million and pay transaction fees and expenses of approximately $3.8 million, leaving approximately $130 million available under the Revolver for future borrowings (net of letters of credit of approximately $8.6 million). In connection with the pay off of the term loan, the Company expects to expense approximately $1.2 million in unamortized debt issuance costs in the fourth quarter.
2010 Business Outlook
The Company projects net sales for the fourth quarter to be up in the mid to high teens and adjusted diluted earnings per share for the fourth quarter to be down low teens to high single digits, as compared to the fourth quarter of 2009.
For the year, net sales are expected to be up approximately 10%, with diluted earnings per share up 12% to 14% over 2009 adjusted diluted earnings per share of $2.15.
A reconciliation of income as reported under GAAP to income adjusted for certain items is provided at the end of this release.
5
First Half 2011 Outlook/Fiscal 2011 Operating Margin
The Company expects first half 2011 sales to increase approximately 10% as compared to the first half of 2010. The Company expects that product costs relating to its Spring 2011 merchandise assortment will rise by approximately 11%. Although product costs for the Company’s Fall 2011 merchandise assortment are still being negotiated, the Company expects costs will be significantly higher than the costs negotiated for the Spring 2011 assortment. As a result, the Company projects that its consolidated operating margin in fiscal 2011 could decline substantially.
Conference Call
The Company will hold a conference call with investors to discuss third quarter results on October 28, 2010 at 8:30 a.m. Eastern Time. To participate in the call, please dial 913-227-1353. To listen to a live broadcast of the call on the internet, please log on to www.carters.com and select the “Q3 2010 Earnings Conference Call” link under the “Investor Relations” tab. The conference call will be simultaneously broadcast on the Company’s website at www.carters.com. Presenta
tion materials for the call can be accessed on the Company’s website at www.carters.com by selecting the “Conference Calls & Webcasts” link under the “Investor Relations” tab. A replay of the call will be available shortly after the broadcast through November 6, 2010, at 719-457-0820, passcode 6368984. The 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.
6
Cautionary Language
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to the Company’s future performance, including, without limitation, statements with respect to the Company’s anticipated financial results for the fourth quarter of fiscal 2010, fiscal 2010, the first half of fiscal 2011, and fiscal 2011, or any other future period, assessment of the Company’s performance and financial position, and drivers of the Company’s sales and earnings growth. 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, ac
tual 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 the Company’s products in the marketplace; deflationary pricing pressures; increases in supply chain costs, such as cotton, labor, and transportation costs, which may adversely affect net sales, costs of goods sold, and other items; the Company’s dependence on foreign supply sources; failure of foreign supply sources to meet the Company’s quality standards or regulatory requirements; negative publicity; 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 debt principal; an inability to access suitable financing due to the current econom
ic environment; a continued decrease in the overall value of the United States equity markets due to the current economic environment; a continued decrease in the overall level of consumer spending; changes in consumer preference and fashion trends; seasonal fluctuations in the children’s apparel business; the impact of governmental regulations and environmental risks applicable to the Company’s business; the risk that ongoing litigation and investigations may be resolved adversely; the breach of the Company’s consumer databases; the ability of the Company to adequately forecast demand, which could create significant levels of excess inventory; the ability of the Company to identify new retail store locations, and negotiate appropriate lease terms for the retail stores; the ability to attract and retain key individuals within the organization; failure to achieve sales growth plans, cost savings, and other assumptions that support the carrying value of the Company’s intangible assets;
and the Company’s inability to remediate its material weaknesses in internal control over financial reporting. Many of these risks are further described in the 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.
7
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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Nine-month periods ended
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|||||||||||||||
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October 2,
2010
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October 3,
2009
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October 2,
2010
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October 3,
2009
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Net sales:
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Carter’s:
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Wholesale
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$ | 186,396 | $ | 165,672 | $ | 443,902 | $ | 395,550 | ||||||||
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Retail
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150,838 | 137,708 | 382,570 | 349,765 | ||||||||||||
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Mass Channel
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75,050 | 78,584 | 181,808 | 181,690 | ||||||||||||
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Carter’s net sales
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412,284 | 381,964 | 1,008,280 | 927,005 | ||||||||||||
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OshKosh:
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Retail
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77,946 | 74,103 | 185,050 | 178,091 | ||||||||||||
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Wholesale
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27,698 | 25,439 | 60,656 | 59,901 | ||||||||||||
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OshKosh net sales
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105,644 | 99,542 | 245,706 | 237,992 | ||||||||||||
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Total net sales
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517,928 | 481,506 | 1,253,986 | 1,164,997 | ||||||||||||
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Cost of goods sold
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325,125 | 295,942 | 764,122 | 727,001 | ||||||||||||
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Gross profit
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192,803 | 185,564 | 489,864 | 437,996 | ||||||||||||
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Selling, general, and administrative expenses
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123,321 | 115,225 | 333,084 | 314,198 | ||||||||||||
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Workforce reduction and facility write-down and closure costs
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-- | -- | -- | 11,400 | ||||||||||||
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Royalty income
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(10,396 | ) | (10,637 | ) | (27,690 | ) | (26,871 | ) | ||||||||
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Operating income
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79,878 | 80,976 | 184,470 | 139,269 | ||||||||||||
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Interest expense, net
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1,568 | 2,688 | 6,674 | 8,571 | ||||||||||||
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Income before income taxes
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78,310 | 78,288 | 177,796 | 130,698 | ||||||||||||
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Provision for income taxes
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28,653 | 28,882 | 66,218 | 48,054 | ||||||||||||
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Net income
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$ | 49,657 | $ | 49,406 | $ | 111,578 | $ | 82,644 | ||||||||
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Basic net income per common share
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$ | 0.84 | $ | 0.86 | $ | 1.89 | $ | 1.45 | ||||||||
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Diluted net income per common share
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$ | 0.83 | $ | 0.84 | $ | 1.86 | $ | 1.41 | ||||||||
8
CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(unaudited)
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For the three-month periods ended
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For the nine-month periods ended
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(dollars in thousands)
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October 2,
2010
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% of
Total
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October 3,
2009
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% of
Total
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October 2,
2010
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% of
Total
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October 3,
2009
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% of
Total
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Net sales:
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Carter’s:
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Wholesale
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$ | 186,396 | 36.0 | % | $ | 165,672 | 34.4 | % | $ | 443,902 | 35.4 | % | $ | 395,550 | 34.0 | % | ||||||||||||||||
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Retail (a)
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150,838 | 29.1 | % | 137,708 | 28.6 | % | 382,570 | 30.5 | % | 349,765 | 30.0 | % | ||||||||||||||||||||
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Mass Channel
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75,050 | 14.5 | % | 78,584 | 16.3 | % | 181,808 | 14.5 | % | 181,690 | 15.6 | % | ||||||||||||||||||||
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Carter’s total net sales
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412,284 | 79.6 | % | 381,964 | 79.3 | % | 1,008,280 | 80.4 | % | 927,005 | 79.6 | % | ||||||||||||||||||||
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OshKosh:
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Retail (a)
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77,946 | 15.0 | % | 74,103 | 15.4 | % | 185,050 | 14.8 | % | 178,091 | 15.3 | % | ||||||||||||||||||||
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Wholesale
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27,698 | 5.4 | % | 25,439 | 5.3 | % | 60,656 | 4.8 | % | 59,901 | 5.1 | % | ||||||||||||||||||||
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OshKosh total net sales
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105,644 | 20.4 | % | 99,542 | 20.7 | % | 245,706 | 19.6 | % | 237,992 | 20.4 | % | ||||||||||||||||||||
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Total net sales
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$ | 517,928 | 100.0 | % | $ | 481,506 | 100.0 | % | $ | 1,253,986 | 100.0 | % | $ | 1,164,997 | 100.0 | % | ||||||||||||||||
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Operating income (loss):
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% of
segment
net sales
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% of
segment
net sales
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% of
segment
net sales
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% of
segment
net sales
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Carter’s:
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Wholesale
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$ | 39,843 | 21.4 | % | $ | 37,698 | 22.8 | % | $ | 103,482 | 23.3 | % | $ | 81,122 | 20.5 | % | ||||||||||||||||
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Retail (a)
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31,579 | 20.9 | % | 31,381 | 22.8 | % | 76,405 | 20.0 | % | 64,544 | 18.5 | % | ||||||||||||||||||||
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Mass Channel
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8,356 | 11.1 | % | 13,738 | 17.5 | % | 28,006 | 15.4 | % | 30,557 | 16.8 | % | ||||||||||||||||||||
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Carter’s operating income
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79,778 | 19.4 | % | 82,817 | 21.7 | % | 207,893 | 20.6 | % | 176,223 | 19.0 | % | ||||||||||||||||||||
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OshKosh:
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Retail (a)
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9,420 | 12.1 | % | 10,765 | 14.5 | % | 10,475 | 5.7 | % | 11,220 | 6.3 | % | ||||||||||||||||||||
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Wholesale
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4,955 | 17.9 | % | 4,124 | 16.2 | % | 6,185 | 10.2 | % | 3,607 | 6.0 | % | ||||||||||||||||||||
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Mass Channel (b)
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764 | -- | 709 | -- | 2,003 | -- | 1,853 | -- | ||||||||||||||||||||||||
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OshKosh operating income
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15,139 | 14.3 | % | 15,598 | 15.7 | % | 18,663 | 7.6 | % | 16,680 | 7.0 | % | ||||||||||||||||||||
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Segment operating income
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94,917 | 18.3 | % | 98,415 | 20.4 | % | 226,556 | 18.1 | % | 192,903 | 16.6 | % | ||||||||||||||||||||
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Corporate expenses (c)
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(15,039 | ) | (2.9 | %) | (17,439 | ) | (3.6 | %) | (42,086 | ) | (3.4 | %) | (41,269 | ) | (3.5 | %) | ||||||||||||||||
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Workforce reduction and facility
write-down and closure costs (d)
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-- | -- | -- | -- | -- | -- | (12,365 | ) | (1.1 | %) | ||||||||||||||||||||||
| -- | -- | |||||||||||||||||||||||||||||||
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Net corporate expenses
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(15,039 | ) | (2.9 | %) | (17,439 | ) | (3.6 | %) | (42,086 | ) | (3.4 | %) | (53,634 | ) | (4.6 | %) | ||||||||||||||||
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Total operating income
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$ | 79,878 | 15.4 | % | $ | 80,976 | 16.8 | % | $ | 184,470 | 14.7 | % | $ | 139,269 | 12.0 | % | ||||||||||||||||
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(a)
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Includes eCommerce results.
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(b)
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OshKosh mass channel consists of a licensing agreement with Target Stores. Operating income consists of royalty income, net of related expenses.
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(c)
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Corporate expenses generally include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, building occupancy, information technology, certain legal fees, consulting, and audit fees.
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(d)
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Includes closure costs associated with our Barnesville, Georgia distribution facility and our Oshkosh, Wisconsin facility, write-down of the White House, Tennessee facility, and severance and other benefits related to the corporate workforce reduction.
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9
CARTER’S, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
(unaudited)
|
October 2, 2010
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January 2, 2010
|
October 3, 2009
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ASSETS
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||||||||||||
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Current assets:
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||||||||||||
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Cash and cash equivalents
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$ | 182,329 | $ | 335,041 | $ | 214,339 | ||||||
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Accounts receivable, net
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171,501 | 82,094 | 127,879 | |||||||||
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Finished goods inventories, net
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263,782 | 214,000 | 223,510 | |||||||||
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Prepaid expenses and other current assets
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12,369 | 11,114 | 11,845 | |||||||||
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Deferred income taxes
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25,701 | 33,419 | 32,005 | |||||||||
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Total current assets
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655,682 | 675,668 | 609,578 | |||||||||
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Property, plant, and equipment, net
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92,558 | 86,077 | 84,430 | |||||||||
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Tradenames
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305,733 | 305,733 | 305,733 | |||||||||
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Goodwill
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136,570 | 136,570 | 136,570 | |||||||||
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Deferred debt issuance costs, net
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1,237 | 2,469 | 2,750 | |||||||||
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Licensing agreements, net
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-- | 1,777 | 2,597 | |||||||||
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Other assets
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305 | 305 | 405 | |||||||||
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Total assets
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$ | 1,192,085 | $ | 1,208,599 | $ | 1,142,063 | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||
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Current liabilities:
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||||||||||||
|
Current maturities of long-term debt
|
$ | 2,450 | $ | 3,503 | $ | 3,503 | ||||||
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Accounts payable
|
94,440 | 97,546 | 68,009 | |||||||||
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Other current liabilities
|
62,502 | 69,568 | 69,808 | |||||||||
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Total current liabilities
|
159,392 | 170,617 | 141,320 | |||||||||
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Long-term debt
|
229,709 | 331,020 | 331,896 | |||||||||
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Deferred income taxes
|
109,855 | 110,676 | 106,646 | |||||||||
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Other long-term liabilities
|
45,626 | 40,262 | 43,628 | |||||||||
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Total liabilities
|
544,582 | 652,575 | 623,490 | |||||||||
|
Commitments and contingencies
|
||||||||||||
|
Stockholders’ equity:
|
||||||||||||
|
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at October 2, 2010, January 2, 2010, and October 3, 2009
|
-- | -- | -- | |||||||||
|
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized, 57,696,317, 58,081,822, and 58,037,018 shares issued and outstanding at October 2, 2010, January 2, 2010, and October 3, 2009, respectively
|
577 | 581 | 580 | |||||||||
|
Additional paid-in capital
|
214,547 | 235,330 | 233,565 | |||||||||
|
Accumulated other comprehensive loss
|
(3,378 | ) | (4,066 | ) | (6,755 | ) | ||||||
|
Retained earnings
|
435,757 | 324,179 | 291,183 | |||||||||
|
Total stockholders’ equity
|
647,503 | 556,024 | 518,573 | |||||||||
|
Total liabilities and stockholders’ equity
|
$ | 1,192,085 | $ | 1,208,599 | $ | 1,142,063 | ||||||
10
CARTER’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
|
For the nine-month periods ended
|
||||||||
|
October 2, 2010
|
October 3, 2009
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$ | 111,578 | $ | 82,644 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation and amortization
|
22,730 | 24,396 | ||||||
|
Amortization of debt issuance costs
|
1,232 | 848 | ||||||
|
Non-cash stock-based compensation expense
|
5,397 | 5,200 | ||||||
|
Income tax benefit from exercised stock options
|
(8,973 | ) | (11,374 | ) | ||||
|
Non-cash asset impairment and facility write-down charges
|
-- | 3,662 | ||||||
|
(Gain) loss on sale of property, plant, and equipment
|
(3 | ) | 96 | |||||
|
Deferred income taxes
|
6,974 | 1,310 | ||||||
|
Effect of changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
(89,407 | ) | (42,427 | ) | ||||
|
Inventories
|
(49,782 | ) | (20,024 | ) | ||||
|
Prepaid expenses and other assets
|
(1,255 | ) | (1,876 | ) | ||||
|
Accounts payable and other liabilities
|
6,710 | 18,679 | ||||||
|
Net cash provided by operating activities
|
5,201 | 61,134 | ||||||
|
Cash flows from investing activities:
|
||||||||
|
Capital expenditures
|
(29,483 | ) | (25,783 | ) | ||||
|
Proceeds from sale of property, plant, and equipment
|
286 | 2,805 | ||||||
|
Net cash used in investing activities
|
(29,197 | ) | (22,978 | ) | ||||
|
Cash flows from financing activities:
|
||||||||
|
Payments on term loan
|
(102,364 | ) | (2,627 | ) | ||||
|
Repurchases of common stock
|
(44,090 | ) | -- | |||||
|
Income tax benefit from exercised stock options
|
8,973 | 11,374 | ||||||
|
Proceeds from exercise of stock options
|
8,765 | 5,087 | ||||||
|
Net cash (used in) provided by financing activities
|
(128,716 | ) | 13,834 | |||||
|
Net (decrease) increase in cash and cash equivalents
|
(152,712 | ) | 51,990 | |||||
|
Cash and cash equivalents, beginning of period
|
335,041 | 162,349 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 182,329 | $ | 214,339 | ||||
11
|
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
|
||||||||||||
|
Nine-month period ended October 3, 2009
|
||||||||||||
|
Operating
Income
|
Net
Income
|
Diluted
EPS
|
||||||||||
|
(dollars in millions, except earnings per share)
|
||||||||||||
|
Income, as reported (GAAP)
|
$ | 139.3 | $ | 82.6 | $ | 1.41 | ||||||
|
Workforce reduction (a)
|
5.5 | 3.5 | 0.06 | |||||||||
|
Distribution facility closure costs (b)
|
3.3 | 2.1 | 0.04 | |||||||||
|
Asset impairment charges (c)
|
1.8 | 1.1 | 0.01 | |||||||||
|
Accelerated depreciation (d)
|
1.0 | 0.6 | 0.01 | |||||||||
|
Facility write-down (e)
|
0.7 | 0.5 | 0.01 | |||||||||
|
Income, as adjusted (f)
|
$ | 151.6 | $ | 90.4 | $ | 1.54 | ||||||
|
(a)
|
Severance charges and other benefits associated with the reduction in the Company’s corporate workforce.
|
|
(b)
|
Costs associated with the closure of the Company’s Barnesville, Georgia distribution facility.
|
|
(c)
|
Asset impairment charges associated with the closure of the Company’s Oshkosh, Wisconsin facility.
|
|
(d)
|
Accelerated depreciation charges (included in selling, general, and administrative expenses) related to the closure of the Company’s Barnesville, Georgia distribution facility.
|
|
(e)
|
Charge related to the write-down of the carrying value of the White House, Tennessee distribution facility.
|
|
(f)
|
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. These adjustments, which the Company does not believe to be indicative of on-going business trends, are excluded from these calculations. The Company believes these adjustments provide a 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 measurements are presented for informational purposes
only and are not necessarily indicative of the Company’s future condition or results of operations.
|
12
|
CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
|
||||||||||||||||||||||||
|
Three-month period ended January 2, 2010
|
Twelve-month period ended January 2, 2010
|
|||||||||||||||||||||||
|
(dollars in millions, except earnings per share)
|
||||||||||||||||||||||||
|
Operating
|
Net
|
Diluted
|
Operating
|
Net
|
Diluted
|
|||||||||||||||||||
|
Income
|
Income
|
EPS
|
Income
|
Income
|
EPS
|
|||||||||||||||||||
|
Income, as reported (GAAP)
|
$ | 56.3 | $ | 33.0 | $ | 0.56 | $ | 195.6 | $ | 115.6 | $ | 1.97 | ||||||||||||
|
Workforce reduction (a)
|
-- | -- | -- | 5.5 | 3.5 | 0.06 | ||||||||||||||||||
|
Distribution facility closure costs (b)
|
-- | -- | -- | 3.3 | 2.1 | 0.04 | ||||||||||||||||||
|
Net asset impairment (c)
|
(0.6 | ) | (0.4 | ) | (0.01 | ) | 1.2 | 0.8 | 0.01 | |||||||||||||||
|
Accelerated depreciation (d)
|
-- | -- | -- | 1.0 | 0.6 | 0.01 | ||||||||||||||||||
|
Investigation expenses (e)
|
5.7 | 3.6 | 0.06 | 5.7 | 3.6 | 0.06 | ||||||||||||||||||
|
Facility write-down (f)
|
-- | -- | -- | 0.7 | 0.4 | -- | ||||||||||||||||||
|
Income, as adjusted (g)
|
$ | 61.4 | $ | 36.2 | $ | 0.61 | $ | 213.0 | $ | 126.6 | $ | 2.15 | ||||||||||||
|
(a)
|
Severance charges and other benefits associated with the reduction in the Company’s corporate workforce.
|
|
(b)
|
Costs associated with the closure of the Company’s Barnesville, Georgia distribution facility.
|
|
(c)
|
Asset impairment charges associated with the closure and sale of the Company’s Oshkosh, Wisconsin facility, net of the gain from the sale of this facility.
|
|
(d)
|
Accelerated depreciation charges (included in selling, general, and administrative expenses) related to the closure of the Company’s Barnesville, Georgia distribution facility.
|
|
(e)
|
Professional service fees related to the investigation of customer accommodations.
|
|
(f)
|
Charges related to the write-down of the carrying value of the Company’s White House, Tennessee distribution facility.
|
|
(g)
|
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. These adjustments, which the Company does not believe to be indicative of on-going business trends, are excluded from these calculations. The Company believes these adjustments provide a 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 measurements are presented for informational purposes
only and are not necessarily indicative of the Company’s future condition or results of operations.
|
13