Carter's, Inc. Reports Fourth Quarter and Fiscal 2018 Results
Business Wire 25-Feb-2019 6:15 AM
-
Fourth quarter fiscal 2018 results
-
Net sales $1.1 billion, growth of 6%
-
Diluted EPS $2.83; adjusted diluted EPS $2.84, growth of 22%
-
Full year fiscal 2018 results
-
Net sales $3.5 billion, growth of 2%
-
Diluted EPS $6.00; adjusted diluted EPS $6.29, growth of 9%
-
Returned $277 million to shareholders through share repurchases and
dividends in fiscal 2018
-
Board of Directors authorizes 11% increase in quarterly dividend to
$0.50 per share
-
Full year fiscal 2019 outlook: net sales growth of 1% to 2%;
adjusted diluted EPS growth of 4% to 6%
Carter's, Inc. (NYSE:CRI), the largest branded marketer in North America
of apparel exclusively for babies and young children, today reported its
fourth quarter and fiscal 2018 results.
"We saw good demand for our brands in the final months of 2018, with
growth driven by our retail and wholesale businesses," said Michael D.
Casey, Chairman and Chief Executive Officer. "In the fourth quarter, our
retail sales in the United States grew 7% reflecting, we believe, the
strength of our brands and less discretionary nature of young children's
apparel purchases.
"For the year, Carter's achieved its 30th consecutive year of sales
growth, and a record level of profitability enabled by the significant
benefits from the Tax Cuts and Jobs Act of 2017.
"We believe Carter's is well-positioned to achieve good growth in sales
and earnings in the years ahead. Carter's is the market leader in young
children's apparel in North America, and we are extending the reach of
our brands throughout the world through eCommerce capabilities and
strategic relationships.
"Given our strong balance sheet and cash flow, we plan to continue
investing in strategies which we believe will enable us to outperform
market trends and deliver attractive returns to shareholders."
Consolidated Results
Fourth Quarter of Fiscal 2018 compared to Fourth Quarter of Fiscal
2017
Consolidated net sales increased $58.5 million, or 5.7%, to $1.1
billion, principally driven by growth in the Company's U.S. Retail and
U.S. Wholesale segments. Changes in foreign currency exchange rates in
the fourth quarter of fiscal 2018 compared to the fourth quarter of
fiscal 2017 adversely affected consolidated net sales in the fourth
quarter of fiscal 2017 by $3.9 million. On a constant currency basis (a
non-GAAP measure), consolidated net sales increased 6.1% in the fourth
quarter of fiscal 2018.
Operating income in the fourth quarter of fiscal 2018 increased $24.2
million, or 16.5%, to $170.6 million, compared to $146.4 million in the
fourth quarter of fiscal 2017. Fourth quarter fiscal 2017 results
include pre-tax expense of $21.2 million for special compensation and
related payroll taxes awarded as a result of the Tax Cuts and Jobs Act
of 2017 ("TCJA"). Operating margin in the fourth quarter of fiscal 2018
increased 150 basis points to 15.7%, compared to 14.2% in the fourth
quarter of fiscal 2017.
Adjusted operating income (a non-GAAP measure) increased $2.5 million,
or 1.5%, to $170.5 million, compared to $168.0 million in the fourth
quarter of fiscal 2017. Adjusted operating margin (a non-GAAP measure)
decreased 60 basis points to 15.7%, compared to 16.3% in the fourth
quarter of fiscal 2017, reflecting higher eCommerce shipping costs and
promotions, the adverse impact of the Toys "R" Us bankruptcy, and an
increase in the mix of lower margin new businesses.
Net income in the fourth quarter of fiscal 2018 decreased $5.6 million,
or 4.1%, to $130.6 million, or $2.83 per diluted share, compared to
$136.1 million, or $2.85 per diluted share, in the fourth quarter of
fiscal 2017. Fourth quarter fiscal 2017 results include a net tax
benefit of $40.0 million related to TCJA and after-tax expense of $15.1
million for special compensation and related payroll taxes awarded as a
result of this tax reform legislation.
Adjusted net income (a non-GAAP measure) increased $19.5 million, or
17.5%, to $130.9 million, compared to $111.4 million in the fourth
quarter of fiscal 2017, reflecting the benefit of lower tax provisions
resulting from TCJA. Adjusted earnings per diluted share (a non-GAAP
measure) increased 21.8% to $2.84, compared to $2.33 in the fourth
quarter of fiscal 2017.
Fiscal 2018 compared to Fiscal 2017
Consolidated net sales increased $61.8 million, or 1.8%, to $3.5
billion, reflecting growth in the Company's U.S. Retail and
International segments, partially offset by a decline in the U.S.
Wholesale segment. The decline in U.S. Wholesale sales was largely
attributable to the closures of Toys "R" Us and Bon-Ton. Changes in
foreign currency exchange rates in fiscal 2018 compared to fiscal 2017
adversely affected consolidated net sales in fiscal 2017 by $2.6
million. On a constant currency basis, consolidated net sales increased
1.9% in fiscal 2018.
Operating income in fiscal 2018 decreased $28.2 million, or 6.7%, to
$391.4 million, compared to $419.6 million in fiscal 2017. Fiscal 2018
results include pre-tax expenses totaling $16.2 million related to
wholesale customer bankruptcy charges and the Company's business model
transition in China. Fiscal 2017 results include pre-tax expense of
$21.2 million for special compensation and related payroll taxes awarded
as a result of TCJA. Operating margin in fiscal 2018 decreased 100 basis
points to 11.3%, compared to 12.3% in fiscal 2017.
Adjusted operating income decreased $37.6 million, or 8.4%, to $407.3
million, compared to $444.8 million in fiscal 2017. Adjusted operating
margin decreased 130 basis points to 11.8%, compared to 13.1% in fiscal
2017, reflecting increased investments in marketing and eCommerce
fulfillment capabilities, higher distribution expenses, the adverse
impact of the Toys "R" Us and Bon-Ton bankruptcies, and an increase in
the mix of lower margin new businesses.
Net income in fiscal 2018 decreased $20.8 million, or 6.9%, to $282.1
million, or $6.00 per diluted share, compared to $302.8 million, or
$6.24 per diluted share, in fiscal 2017. Fiscal 2018 results include
after-tax expenses totaling $13.6 million related to wholesale customer
bankruptcy charges and the Company's business model transition in China.
Fiscal 2017 results include a net tax benefit of $40.0 million related
to TCJA and after-tax expense of $15.1 million for special compensation
and related payroll taxes awarded as a result of this tax reform
legislation.
Adjusted net income increased $15.6 million, or 5.6%, to $295.4 million,
compared to $279.8 million in fiscal 2017, reflecting the benefit of
lower tax provisions resulting from TCJA. Adjusted earnings per diluted
share increased 9.0%, to $6.29, compared to $5.77 in fiscal 2017.
Cash flow from operations in fiscal 2018 was $356.2 million compared to
$329.6 million in fiscal 2017. The increase primarily reflected a
reduction in federal income taxes, partially offset by unfavorable
changes in net working capital.
See the "Reconciliation of GAAP to Adjusted Results" section of this
release for additional disclosures and reconciliations regarding
non-GAAP measures.
U.S. Retail Segment
Fourth Quarter of Fiscal 2018 compared to Fourth Quarter of Fiscal
2017
U.S. Retail segment sales increased $40.1 million, or 7.1%, to $606.3
million. U.S. Retail comparable sales increased 5.7%, reflecting growth
in both eCommerce and retail store sales.
In the fourth quarter of fiscal 2018, the Company opened 19 stores and
closed five stores in the United States.
Fiscal 2018 compared to Fiscal 2017
U.S. Retail segment sales increased $75.8 million, or 4.3%, to $1.9
billion. U.S. Retail comparable sales increased 2.8%, driven by growth
in eCommerce sales.
In fiscal 2018, the Company opened 55 stores and closed 41 stores in the
United States.
As of the end of the fourth quarter of fiscal 2018, the Company operated
844 retail stores1 in the United States.
1 Excludes five temporary Skip Hop stores that were
closed in January 2019.
U.S. Wholesale Segment
Fourth Quarter of Fiscal 2018 compared to Fourth Quarter of Fiscal
2017
U.S. Wholesale segment sales increased $21.6 million, or 6.5%, to $351.4
million, reflecting increased shipments of Carter's products,
partially offset by the loss of sales to Toys "R" Us and Bon-Ton. Toys
"R" Us and Bon-Ton contributed $32 million to net sales in the fourth
quarter of fiscal 2017.
Fiscal 2018 compared to Fiscal 2017
U.S. Wholesale segment sales decreased $29.0 million, or 2.4%, to $1.2
billion, reflecting lower shipments principally due to a decline in
sales to Toys "R" Us and Bon-Ton. Toys "R" Us and Bon-Ton contributed
$13 million and $107 million to net sales in fiscal years 2018 and 2017,
respectively.
International Segment
Fourth Quarter of Fiscal 2018 compared to Fourth Quarter of Fiscal
2017
International segment sales decreased $3.2 million, or 2.4%, to $128.6
million. This decrease was principally driven by lower demand in China
and unfavorable movements in foreign currency exchange rates, partially
offset by increased demand in Mexico.
Changes in foreign currency exchange rates in the fourth quarter of
fiscal 2018 as compared to the fourth quarter of fiscal 2017 adversely
affected International segment net sales in the fourth quarter of fiscal
2018 by $3.9 million. On a constant currency basis, International
segment net sales increased 0.6%.
Fiscal 2018 compared to Fiscal 2017
International segment sales increased $14.9 million, or 3.6%, to $430.4
million, driven by growth in Mexico, Canada, and various other markets
outside of North America, partially offset by lower demand in China.
Changes in foreign currency exchange rates in fiscal 2018 as compared to
fiscal 2017 adversely affected International segment net sales in fiscal
2018 by $2.6 million. On a constant currency basis, International
segment net sales increased 4.2%.
As of the end of fiscal 2018, the Company operated 188 retail stores in
Canada and 42 retail stores in Mexico.
Return of Capital
In the fourth quarter and fiscal year 2018, the Company returned to
shareholders a total of $68.1 million and $276.7 million, respectively,
through share repurchases and cash dividends as described below.
From the beginning of fiscal 2007 through fiscal 2018, the Company has
returned a total of $1.8 billion to shareholders through share
repurchases and dividends, and retired approximately 38% of its
outstanding shares.
Stock Repurchase Activity
During the fourth quarter of fiscal 2018, the Company repurchased and
retired 515,109 shares of its common stock for $47.5 million at an
average price of $92.28 per share.
During fiscal 2018, the Company repurchased and retired 1,879,529 shares
for $193.0 million at an average price of $102.70 per share.
Fiscal 2019 year-to-date through February 22, 2019, the Company has
repurchased and retired a total of 303,611 shares for $25.0 million at
an average price of $82.34 per share.
All shares were repurchased in open market transactions pursuant to
applicable regulations for open market share repurchases. As of February
22, 2019, the total remaining capacity under the Company's
previously-announced repurchase authorizations was approximately $368
million.
Dividends
During the fourth quarter of fiscal 2018, the Company paid a cash
dividend of $0.45 per share totaling $20.6 million.
In fiscal 2018, the Company paid quarterly cash dividends of $0.45 per
share each quarter totaling $83.7 million.
On February 14, 2019, the Company's Board of Directors authorized an 11%
increase ($0.05 per share) to its quarterly cash dividend, to $0.50 per
share, for payment on March 22, 2019, to shareholders of record at the
close of business on March 12, 2019.
Future declarations of quarterly dividends and the establishment of
related record and payment dates will be at the discretion of the
Company's Board of Directors based on a number of factors, including the
Company's future financial performance and other considerations.
2019 Business Outlook
For fiscal 2019, the Company projects net sales will increase
approximately 1% to 2% and adjusted diluted earnings per share will
increase approximately 4% to 6% compared to adjusted diluted earnings
per share of $6.29 in fiscal 2018. This forecast for fiscal 2019
adjusted diluted earnings per share excludes anticipated expenses of
approximately $2.5 million related to organizational restructuring.
Net sales and adjusted earnings growth in the first quarter of fiscal
2019 are expected to be affected by comparisons to discontinued sales to
Toys "R" Us and Bon-Ton in the prior year and a later Easter holiday in
2019 than in 2018. As a result, the Company projects first quarter
fiscal 2019 net sales will decline approximately 4% to 5% and adjusted
diluted earnings per share to be approximately $0.65 to $0.70 compared
to adjusted diluted earnings per share of $1.09 in the first quarter of
fiscal 2018. This forecast for first quarter fiscal 2019 adjusted
diluted earnings per share excludes anticipated expenses of
approximately $2.5 million related to organizational restructuring.
The Company believes these non-GAAP measurements provide investors with
a meaningful view of the Company's core operating results, and are the
same measurements used by the Company's executive management to assess
the Company's performance. See the "Reconciliation of GAAP to Adjusted
Results" section of this release for additional disclosures and
reconciliations regarding non-GAAP measures.
Adoption of New Accounting Standards
Beginning in fiscal 2018, the Company adopted the Financial Accounting
Standards Board's Accounting Standards Codification No. 606, Revenue
from Contracts with Customers, and related amendments ("ASC 606")
using the full retrospective adoption method. All periods in fiscal 2017
and fiscal 2016 were amended to reflect these provisions, and retained
earnings at January 2, 2016 (beginning of fiscal 2016) were adjusted for
the cumulative effect of periods prior to fiscal 2016. The adoption of
ASC 606 had no material effect on the Company's consolidated financial
position, results of operations, or cash flows.
In fiscal 2019, the Company will adopt the Financial Accounting
Standards Board's Accounting Standards Codification No. 842, Leases ("ASC
842"), which will require substantially all leases to be recorded on the
balance sheet as a right-of-use asset ("ROU asset") and lease liability.
The Company expects to recognize lease liabilities for its operating
leases totaling between $800 million to $900 million and ROU assets
totaling between $650 million to $750 million, upon adoption. The
adoption of ASC 842 will not have a material effect on the Company's
consolidated results of operations or cash flows.
Conference Call
The Company will hold a conference call with investors to discuss fourth
quarter and fiscal 2018 results and its business outlook on February 25,
2019 at 8:30 a.m. Eastern Standard Time. To participate in the call,
please dial 323-794-2423. To listen to a live broadcast of the call on
the internet, please visit ir.carters.com and select the "Fourth Quarter
2018 Earnings Conference Call" link in the "Upcoming Events" section.
Presentation materials for the call can be accessed from the same page
by selecting links for "News & Events" followed by "Webcasts &
Presentations". A replay of the call will be available shortly after the
broadcast through March 6, 2019, at 888-203-1112 (U.S. / Canada) or
719-457-0820 (international), passcode 3216835. The replay will also be
archived on the Company's website under the "Investor Relations" tab.
About Carter's, Inc.
Carter's, Inc. is the largest branded marketer in North America of
apparel exclusively for babies and young children. The Company owns the Carter's
and OshKosh B'gosh brands, two of the most recognized brands
in the marketplace. These brands are sold in leading department stores,
national chains, and specialty retailers domestically and
internationally. They are also sold through more than 1,000
Company-operated stores in the United States, Canada, and Mexico and
online at www.carters.com,
www.oshkosh.com,
and www.cartersoshkosh.ca.
The Company's Just One You and Genuine Kids brands are
available at Target, its Child of Mine brand is available at
Walmart, and its Simple Joys brand is available on Amazon. The
Company also owns Skip Hop, a global lifestyle brand for families
with young children. Carter's is headquartered in Atlanta, Georgia.
Additional information may be found at www.carters.com.
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 first quarter of
fiscal 2019 and fiscal year 2019, or any other future period,
assessments 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 not materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated, or projected. Certain of the risks and
uncertainties that could cause actual results and performance to differ
materially are described in the Company's most recently filed Annual
Report on Form 10-K and other reports filed with the Securities and
Exchange Commission from time to time under the headings "Risk Factors".
Included among the risks and uncertainties that may impact future
results are the risks of: financial difficulties for one or more of the
Company's major customers, vendors, or licensees, or an overall decrease
in consumer spending; our products not being accepted in the marketplace
due to quality concerns, changes in consumer preference and fashion
trends, or otherwise; losing one or more major customers, vendors, or
licensees due to competition, inadequate quality of the Company's
products, or otherwise; negative publicity, including as a result of
product recalls or otherwise; a failure to protect the Company's
intellectual property; a failure to meet regulatory requirements,
including those relating to product quality and safety; extreme or
unseasonable weather conditions; various types of litigation, including
class action litigation brought under various consumer protection,
employment, and privacy and information security laws; a breach of the
Company's consumer databases, systems, or processes; deflationary
pressures on our selling price and increases in production costs;
unsuccessful expansion into international markets or failure to
successfully manage legal, regulatory, political and economic risks of
the Company's existing operations, including unexpected changes in
regulatory requirements and maintaining compliance with worldwide
anti-bribery laws; disruptions, slow-downs, or strikes in the Company's
supply chain, including disruptions resulting from increases in the cost
of raw materials or labor, foreign supply sources, the Company's
distribution centers, or in-sourcing capabilities; failure to
successfully integrate acquired businesses; fluctuations in foreign
currency exchange rates; the imposition of new regulations relating to
imports, tariffs, duties, or taxes; and an inability to obtain
additional financing on favorable terms. The Company does not undertake
any obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
|
|
|
|
|
|
|
CARTER'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except for share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the fiscal quarter ended
|
|
For the fiscal year ended
|
|
|
|
December 29, 2018
|
|
December 30, 2017
|
|
December 29, 2018
|
|
December 30, 2017
|
|
Net sales
|
|
$
|
1,086,379
|
|
|
$
|
1,027,880
|
|
|
$
|
3,462,269
|
|
|
$
|
3,400,504
|
|
|
Cost of goods sold
|
|
618,781
|
|
|
567,043
|
|
|
1,964,786
|
|
|
1,917,150
|
|
|
Gross profit
|
|
467,598
|
|
|
460,837
|
|
|
1,497,483
|
|
|
1,483,354
|
|
|
Royalty income, net
|
|
10,357
|
|
|
11,063
|
|
|
38,930
|
|
|
43,181
|
|
|
Selling, general, and administrative expenses
|
|
307,358
|
|
|
325,508
|
|
|
1,144,980
|
|
|
1,106,928
|
|
|
Operating income
|
|
170,597
|
|
|
146,392
|
|
|
391,433
|
|
|
419,607
|
|
|
Interest expense
|
|
8,779
|
|
|
7,685
|
|
|
34,569
|
|
|
30,044
|
|
|
Interest income
|
|
(53
|
)
|
|
(86
|
)
|
|
(527
|
)
|
|
(345
|
)
|
|
Other expense (income), net
|
|
888
|
|
|
416
|
|
|
1,416
|
|
|
(1,164
|
)
|
|
Income before income taxes
|
|
160,983
|
|
|
138,377
|
|
|
355,975
|
|
|
391,072
|
|
|
Provision for income taxes
|
|
30,422
|
|
|
2,233
|
|
|
73,907
|
|
|
88,224
|
|
|
Net income
|
|
$
|
130,561
|
|
|
$
|
136,144
|
|
|
$
|
282,068
|
|
|
$
|
302,848
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
$
|
2.85
|
|
|
$
|
2.88
|
|
|
$
|
6.06
|
|
|
$
|
6.31
|
|
|
Diluted net income per common share
|
|
$
|
2.83
|
|
|
$
|
2.85
|
|
|
$
|
6.00
|
|
|
$
|
6.24
|
|
|
Dividend declared and paid per common share
|
|
$
|
0.45
|
|
|
$
|
0.37
|
|
|
$
|
1.80
|
|
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
CONDENSED BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the fiscal quarter ended
|
|
|
For the fiscal year ended
|
|
|
|
December 29, 2018
|
|
% oftotal sales
|
|
December 30, 2017
|
|
% oftotal sales
|
|
|
December 29, 2018
|
|
% oftotal sales
|
|
December 30, 2017
|
|
% oftotal sales
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Retail (a)
|
|
$606,330
|
|
|
55.8
|
%
|
|
$566,236
|
|
|
55.1
|
%
|
|
|
$
|
1,851,193
|
|
|
53.5
|
%
|
|
$
|
1,775,378
|
|
|
52.2
|
%
|
|
U.S. Wholesale
|
|
351,415
|
|
|
32.3
|
%
|
|
329,821
|
|
|
32.1
|
%
|
|
|
1,180,687
|
|
|
34.1
|
%
|
|
1,209,663
|
|
|
35.6
|
%
|
|
International (b)
|
|
128,634
|
|
|
11.9
|
%
|
|
131,822
|
|
|
12.8
|
%
|
|
|
430,389
|
|
|
12.4
|
%
|
|
415,463
|
|
|
12.2
|
%
|
|
Total net sales
|
|
$1,086,379
|
|
|
100.0
|
%
|
|
$1,027,879
|
|
|
100.0
|
%
|
|
|
$
|
3,462,269
|
|
|
100.0
|
%
|
|
$
|
3,400,504
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
Operatingmargin
|
|
|
|
Operating
margin
|
|
|
|
|
Operatingmargin
|
|
|
|
Operatingmargin
|
|
U.S. Retail (c) (d) (j)
|
|
$102,698
|
|
|
16.9
|
%
|
|
$88,200
|
|
|
15.6
|
%
|
|
|
$
|
224,784
|
|
|
12.1
|
%
|
|
$
|
215,640
|
|
|
12.1
|
%
|
|
U.S. Wholesale (e) (f) (j)
|
|
75,799
|
|
|
21.6
|
%
|
|
68,017
|
|
|
20.6
|
%
|
|
|
224,194
|
|
|
19.0
|
%
|
|
252,090
|
|
|
20.8
|
%
|
|
International (g) (h) (i) (j)
|
|
18,746
|
|
|
14.6
|
%
|
|
18,418
|
|
|
14.0
|
%
|
|
|
39,253
|
|
|
9.1
|
%
|
|
46,426
|
|
|
11.2
|
%
|
|
Corporate expenses (k) (l)
|
|
(26,646
|
)
|
|
|
|
(28,243
|
)
|
|
|
|
|
(96,798
|
)
|
|
|
|
(94,549
|
)
|
|
|
|
Total operating income
|
|
$170,597
|
|
|
15.7
|
%
|
|
$146,392
|
|
|
14.2
|
%
|
|
|
$
|
391,433
|
|
|
11.3
|
%
|
|
$
|
419,607
|
|
|
12.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes retail stores and eCommerce results.
|
|
(b)
|
Includes international retail, eCommerce, and wholesale sales.
|
|
(c)
|
Fiscal 2018 includes insurance recovery of approximately $0.4
million associated with unusual storm-related store closures in 2017.
|
|
(d)
|
Fiscal 2017 includes approximately $2.7 million of expenses related
to store restructuring and approximately $12.7 million for a
provision for special employee compensation.
|
|
(e)
|
Fiscal quarter ended December 29, 2018 includes a $1.9 million
recovery related to a customer bankruptcy claim settlement. Fiscal
year ended December 29, 2018 includes $10.9 million of net charges
related to a customer bankruptcy recorded in the first quarter of
fiscal 2018.
|
|
(f)
|
Fiscal 2017 includes approximately $3.3 million for a provision for
special employee compensation.
|
|
(g)
|
Includes international licensing royalty income.
|
|
(h)
|
Includes costs associated with changes to the Company's business
model in China of approximately $1.8 million and $5.3 million in the
fiscal quarter and fiscal year ended December 29, 2018, respectively.
|
|
(i)
|
Fiscal 2017 includes approximately $2.3 million for a provision for
special employee compensation.
|
|
(j)
|
$1.2 million of certain costs related to inventory acquired from
Skip Hop are included in the operating income of U.S. Wholesale,
U.S. Retail, and International for fiscal 2017.
|
|
(k)
|
Includes expenses related to incentive compensation, stock-based
compensation, executive management, severance and relocation,
finance, building occupancy, information technology, and certain
legal, consulting, and audit fees.
|
|
(l)
|
Corporate expenses (not allocated to segments) include the following
charges:
|
|
|
|
|
|
|
|
|
|
For the fiscal quarter ended
|
|
For the fiscal year ended
|
|
(dollars in millions)
|
|
December 29, 2018
|
|
December 30, 2017
|
|
December 29, 2018
|
|
December 30, 2017
|
|
Provisions for special employee compensation
|
|
$
|
—
|
|
|
$
|
2.9
|
|
|
$
|
—
|
|
|
$
|
2.9
|
|
|
Amortization of H.W. Carter and Sons tradenames
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Adjustment to Skip Hop contingent consideration
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3.6
|
)
|
|
Direct sourcing initiative
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.3
|
|
|
Acquisition-related costs
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except for share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
December 29, 2018
|
|
December 30, 2017
|
|
ASSETS
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
170,077
|
|
|
$
|
178,494
|
|
|
Accounts receivable, net
|
|
258,259
|
|
|
240,561
|
|
|
Finished goods inventories
|
|
574,226
|
|
|
548,722
|
|
|
Prepaid expenses and other current assets
|
|
40,396
|
|
|
52,935
|
|
|
Total current assets
|
|
1,042,958
|
|
|
1,020,712
|
|
|
Property, plant, and equipment, net
|
|
350,437
|
|
|
377,924
|
|
|
Tradenames, net
|
|
365,692
|
|
|
365,551
|
|
|
Goodwill
|
|
227,101
|
|
|
230,424
|
|
|
Customer relationships, net
|
|
44,511
|
|
|
47,996
|
|
|
Other assets
|
|
28,159
|
|
|
28,435
|
|
|
Total assets
|
|
$
|
2,058,858
|
|
|
$
|
2,071,042
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
199,076
|
|
|
$
|
182,114
|
|
|
Other current liabilities
|
|
128,345
|
|
|
149,134
|
|
|
Total current liabilities
|
|
327,421
|
|
|
331,248
|
|
|
|
|
|
|
|
|
Long-term debt, net
|
|
593,264
|
|
|
617,306
|
|
|
Deferred income taxes
|
|
87,347
|
|
|
84,944
|
|
|
Other long-term liabilities
|
|
181,393
|
|
|
180,128
|
|
|
Total liabilities
|
|
1,189,425
|
|
|
1,213,626
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
Preferred stock; par value $.01 per share; 100,000 shares
authorized; none issued or outstanding at December 29, 2018 and
December 30, 2017
|
|
—
|
|
|
—
|
|
|
Common stock, voting; par value $.01 per share; 150,000,000 shares
authorized; 45,629,014 and 47,178,346 shares issued and outstanding
at December 29, 2018 and December 30, 2017, respectively
|
|
456
|
|
|
472
|
|
|
Accumulated other comprehensive loss
|
|
(40,839
|
)
|
|
(29,093
|
)
|
|
Retained earnings
|
|
909,816
|
|
|
886,037
|
|
|
Total stockholders' equity
|
|
869,433
|
|
|
857,416
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
2,058,858
|
|
|
$
|
2,071,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
For the fiscal year ended
|
|
|
|
December 29, 2018
|
|
December 30, 2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
282,068
|
|
|
$
|
302,848
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
85,936
|
|
|
81,796
|
|
|
Amortization of intangible assets
|
|
3,717
|
|
|
2,616
|
|
|
Adjustment and accretion of contingent consideration
|
|
—
|
|
|
(3,600
|
)
|
|
Amortization of debt issuance costs
|
|
1,746
|
|
|
1,572
|
|
|
Non-cash stock-based compensation
|
|
14,673
|
|
|
17,549
|
|
|
Unrealized foreign currency exchange loss (gain), net
|
|
271
|
|
|
(624
|
)
|
|
Provisions for doubtful accounts receivable from customers
|
|
15,801
|
|
|
4,663
|
|
|
Loss on disposal of property, plant, and equipment
|
|
995
|
|
|
1,572
|
|
|
Deferred income taxes
|
|
(1,018
|
)
|
|
(54,936
|
)
|
|
Effect of changes in operating assets and liabilities, net of
acquisitions:
|
|
|
|
|
|
Accounts receivable, net
|
|
(34,448
|
)
|
|
(22,709
|
)
|
|
Inventories
|
|
(30,646
|
)
|
|
(20,922
|
)
|
|
Prepaid expenses and other assets
|
|
12,121
|
|
|
(21,791
|
)
|
|
Accounts payable and other liabilities
|
|
4,982
|
|
|
41,587
|
|
|
Net cash provided by operating activities
|
|
356,198
|
|
|
329,621
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Capital expenditures
|
|
(63,783
|
)
|
|
(69,473
|
)
|
|
Acquisition of businesses, net of cash acquired
|
|
96
|
|
|
(158,457
|
)
|
|
Disposals of property, plant, and equipment
|
|
380
|
|
|
15
|
|
|
Net cash used in investing activities
|
|
(63,307
|
)
|
|
(227,915
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Payments of debt issuance costs
|
|
(968
|
)
|
|
(2,119
|
)
|
|
Borrowings under secured revolving credit facility
|
|
290,000
|
|
|
200,000
|
|
|
Payments on secured revolving credit facility
|
|
(315,000
|
)
|
|
(163,965
|
)
|
|
Repurchases of common stock
|
|
(193,028
|
)
|
|
(188,762
|
)
|
|
Dividends paid
|
|
(83,717
|
)
|
|
(70,914
|
)
|
|
Withholdings of taxes from vesting of restricted stock
|
|
(6,830
|
)
|
|
(5,753
|
)
|
|
Proceeds from exercises of stock options
|
|
10,597
|
|
|
8,438
|
|
|
Net cash used in financing activities
|
|
(298,946
|
)
|
|
(223,075
|
)
|
|
|
|
|
|
|
|
Net effect of exchange rate changes on cash
|
|
(2,362
|
)
|
|
505
|
|
|
Net decrease in cash and cash equivalents
|
|
(8,417
|
)
|
|
(120,864
|
)
|
|
Cash and cash equivalents, beginning of fiscal year
|
|
178,494
|
|
|
299,358
|
|
|
Cash and cash equivalents, end of fiscal year
|
|
$
|
170,077
|
|
|
$
|
178,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
(dollars in millions, except earnings per share)
(unaudited)
|
|
|
|
|
|
|
|
Fiscal quarter ended December 29, 2018
|
|
|
|
GrossMargin
|
|
% NetSales
|
|
SG&A
|
|
% NetSales
|
|
OperatingIncome
|
|
% NetSales
|
|
NetIncome
|
|
DilutedEPS
|
|
As reported (GAAP) (a)
|
|
$
|
467.6
|
|
|
43.0
|
%
|
|
$
|
307.4
|
|
|
28.3
|
%
|
|
$
|
170.6
|
|
|
15.7
|
%
|
|
$
|
130.6
|
|
|
$
|
2.83
|
|
|
China business model change (c) (k)
|
|
1.5
|
|
|
|
|
(0.3
|
)
|
|
|
|
1.8
|
|
|
|
|
1.8
|
|
|
0.04
|
|
|
Customer bankruptcy charges (d) (k)
|
|
—
|
|
|
|
|
1.9
|
|
|
|
|
(1.9
|
)
|
|
|
|
(1.4
|
)
|
|
(0.03
|
)
|
|
As adjusted (b)
|
|
$
|
469.1
|
|
|
43.2
|
%
|
|
$
|
308.9
|
|
|
28.4
|
%
|
|
$
|
170.5
|
|
|
15.7
|
%
|
|
$
|
130.9
|
|
|
$
|
2.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 29, 2018
|
|
|
|
GrossMargin
|
|
% NetSales
|
|
SG&A
|
|
% NetSales
|
|
OperatingIncome
|
|
% NetSales
|
|
NetIncome
|
|
DilutedEPS
|
|
As reported (GAAP) (a)
|
|
$
|
1,497.5
|
|
|
43.3
|
%
|
|
$
|
1,145.0
|
|
|
33.1
|
%
|
|
$
|
391.4
|
|
|
11.3
|
%
|
|
$
|
282.1
|
|
|
$
|
6.00
|
|
|
Customer bankruptcy charges, net (d) (k)
|
|
—
|
|
|
|
|
(10.9
|
)
|
|
|
|
10.9
|
|
|
|
|
8.3
|
|
|
0.18
|
|
|
China business model change (c) (k)
|
|
3.9
|
|
|
|
|
(1.4
|
)
|
|
|
|
5.3
|
|
|
|
|
5.3
|
|
|
0.11
|
|
|
Store restructuring costs (e) (k)
|
|
—
|
|
|
|
|
0.4
|
|
|
|
|
(0.4
|
)
|
|
|
|
(0.3
|
)
|
|
(0.01
|
)
|
|
As adjusted (b)
|
|
$
|
1,501.4
|
|
|
43.4
|
%
|
|
$
|
1,133.1
|
|
|
32.7
|
%
|
|
$
|
407.3
|
|
|
11.8
|
%
|
|
$
|
295.4
|
|
|
$
|
6.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal quarter ended December 30, 2017
|
|
|
|
GrossMargin
|
|
% NetSales
|
|
SG&A
|
|
% NetSales
|
|
OperatingIncome
|
|
% NetSales
|
|
NetIncome
|
|
DilutedEPS
|
|
As reported (GAAP) (a)
|
|
$
|
460.8
|
|
|
44.8
|
%
|
|
$
|
325.5
|
|
|
31.7
|
%
|
|
$
|
146.4
|
|
|
14.2
|
%
|
|
$
|
136.1
|
|
|
$
|
2.85
|
|
|
Special employee compensation provision (f) (k)
|
|
—
|
|
|
|
|
(21.2
|
)
|
|
|
|
21.2
|
|
|
|
|
15.1
|
|
|
0.32
|
|
|
Acquisition costs (g) (k)
|
|
0.4
|
|
|
|
|
(0.1
|
)
|
|
|
|
0.5
|
|
|
|
|
0.3
|
|
|
0.01
|
|
|
Store restructuring costs (h) (k)
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.2
|
)
|
|
(0.01
|
)
|
|
Tax reform (i)
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(40.0
|
)
|
|
(0.84
|
)
|
|
As adjusted (b)
|
|
$
|
461.2
|
|
|
44.9
|
%
|
|
$
|
304.3
|
|
|
29.6
|
%
|
|
$
|
168.0
|
|
|
16.3
|
%
|
|
$
|
111.4
|
|
|
$
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended December 30, 2017
|
|
|
|
GrossMargin
|
|
% NetSales
|
|
SG&A
|
|
% NetSales
|
|
OperatingIncome
|
|
% NetSales
|
|
NetIncome
|
|
DilutedEPS
|
|
As reported (GAAP) (a)
|
|
$
|
1,483.4
|
|
|
43.6
|
%
|
|
$
|
1,106.9
|
|
|
32.6
|
%
|
|
$
|
419.6
|
|
|
12.3
|
%
|
|
$
|
302.8
|
|
|
$
|
6.24
|
|
|
Special employee compensation provision (f) (k)
|
|
—
|
|
|
|
|
(21.2
|
)
|
|
|
|
21.2
|
|
|
|
|
15.1
|
|
|
0.31
|
|
|
Store restructuring costs, net (k)
|
|
—
|
|
|
|
|
(2.7
|
)
|
|
|
|
2.7
|
|
|
|
|
1.5
|
|
|
0.03
|
|
|
Acquisition costs (g) (k)
|
|
1.2
|
|
|
|
|
0.2
|
|
|
|
|
1.0
|
|
|
|
|
0.2
|
|
|
—
|
|
|
Direct sourcing initiative (j) (k)
|
|
—
|
|
|
|
|
(0.3
|
)
|
|
|
|
0.3
|
|
|
|
|
0.2
|
|
|
—
|
|
|
Tax reform (i)
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(40.0
|
)
|
|
(0.83
|
)
|
|
As adjusted (b)
|
|
$
|
1,484.6
|
|
|
43.7
|
%
|
|
$
|
1,082.9
|
|
|
31.8
|
%
|
|
$
|
444.8
|
|
|
13.1
|
%
|
|
$
|
279.8
|
|
|
$
|
5.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
(dollars in millions, except earnings per share)
(unaudited)
|
|
|
|
|
|
|
|
Fiscal quarter ended March 31, 2018
|
|
|
|
GrossMargin
|
|
% NetSales
|
|
SG&A
|
|
% NetSales
|
|
OperatingIncome
|
|
% Net
Sales
|
|
NetIncome
|
|
DilutedEPS
|
|
As reported (GAAP) (a)
|
|
$
|
332.5
|
|
|
44.0
|
%
|
|
$
|
280.2
|
|
|
37.1
|
%
|
|
$
|
60.3
|
|
|
8.0
|
%
|
|
$
|
42.5
|
|
|
$
|
0.89
|
|
|
Customer bankruptcy charges (d) (k)
|
|
—
|
|
|
|
|
(12.8
|
)
|
|
|
|
12.8
|
|
|
|
|
9.8
|
|
|
0.20
|
|
|
Store restructuring costs (e) (k)
|
|
—
|
|
|
|
|
0.4
|
|
|
|
|
(0.4
|
)
|
|
|
|
(0.3
|
)
|
|
(0.01
|
)
|
|
As adjusted (b)
|
|
$
|
332.5
|
|
|
44.0
|
%
|
|
$
|
267.8
|
|
|
35.4
|
%
|
|
$
|
72.7
|
|
|
9.6
|
%
|
|
$
|
52.0
|
|
|
$
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Beginning in fiscal 2018, the Company adopted the Financial
Accounting Standards Board's Accounting Standards Codification No.
606, Revenue from Contracts with Customers, and related amendments
("ASC 606") using the full retrospective adoption method. All
periods in fiscal 2017 and fiscal 2016 were amended to reflect these
provisions, and retained earnings at January 2, 2016 (beginning of
fiscal 2016) were adjusted for the cumulative effect of periods
prior to fiscal 2016. The adoption of ASC 606 had no material effect
on the Company's consolidated financial position, results of
operations, and cash flows.
|
|
(b)
|
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 gross margin, SG&A, operating
income, net income, and net income on a diluted share basis
excluding the adjustments discussed above. The Company believes
these adjustments provide a meaningful comparison of the Company's
results and afford investors a view of what management considers to
be the Company's core performance. 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.
|
|
(c)
|
Costs associated with transitioning retail and wholesale operations
to a full licensing model in China.
|
|
(d)
|
Related to the Toys "R" Us bankruptcy.
|
|
(e)
|
Insurance recovery associated with unusual storm-related store
closures.
|
|
(f)
|
Special employee compensation provided as a result of the
significant benefit related to the enactment of the Tax Cuts and
Jobs Act of 2017.
|
|
(g)
|
Non-recurring costs related to the Skip Hop and Mexico acquisitions.
|
|
(h)
|
Tax credit received for certain payroll costs incurred during
unusual storm-related closures.
|
|
(i)
|
Reflects the net benefit of the Tax Cuts and Jobs Act of 2017.
|
|
(j)
|
Costs associated with the Company's direct sourcing initiative,
which include severance and relocation.
|
|
(k)
|
The difference between the impacts on operating income and net
income represents the income taxes related to the adjustment item
(calculated using the applicable tax rate of the underlying
jurisdiction).
|
|
|
|
|
Note: Results may not be additive due to rounding.
|
|
|
|
|
|
|
|
|
|
CARTER'S, INC.
RECONCILIATION OF NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the fiscal quarter ended
|
|
For the fiscal year ended
|
|
|
|
December 29, 2018
|
|
December 30, 2017
|
|
December 29, 2018
|
|
December 30, 2017
|
|
Weighted-average number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic number of common shares outstanding
|
|
45,437,536
|
|
|
46,883,462
|
|
|
46,160,935
|
|
|
47,593,211
|
|
|
Dilutive effect of equity awards
|
|
348,316
|
|
|
575,843
|
|
|
487,485
|
|
|
552,864
|
|
|
Diluted number of common and common equivalent shares outstanding
|
|
45,785,852
|
|
|
47,459,305
|
|
|
46,648,420
|
|
|
48,146,075
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported on a GAAP Basis:
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Basic net income per common share:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
130,561
|
|
|
$
|
136,144
|
|
|
$
|
282,068
|
|
|
$
|
302,848
|
|
|
Income allocated to participating securities
|
|
(1,004
|
)
|
|
(1,094
|
)
|
|
(2,148
|
)
|
|
(2,407
|
)
|
|
Net income available to common shareholders
|
|
$
|
129,557
|
|
|
$
|
135,050
|
|
|
$
|
279,920
|
|
|
$
|
300,441
|
|
|
Basic net income per common share
|
|
$
|
2.85
|
|
|
$
|
2.88
|
|
|
$
|
6.06
|
|
|
$
|
6.31
|
|
|
Diluted net income per common share:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
130,561
|
|
|
$
|
136,144
|
|
|
$
|
282,068
|
|
|
$
|
302,848
|
|
|
Income allocated to participating securities
|
|
(998
|
)
|
|
(1,082
|
)
|
|
(2,132
|
)
|
|
(2,386
|
)
|
|
Net income available to common shareholders
|
|
$
|
129,563
|
|
|
$
|
135,062
|
|
|
$
|
279,936
|
|
|
$
|
300,462
|
|
|
Diluted net income per common share
|
|
$
|
2.83
|
|
|
$
|
2.85
|
|
|
$
|
6.00
|
|
|
$
|
6.24
|
|
|
As adjusted (a):
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Basic net income per common share:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
130,921
|
|
|
$
|
111,438
|
|
|
$
|
295,445
|
|
|
$
|
279,806
|
|
|
Income allocated to participating securities
|
|
(1,009
|
)
|
|
(893
|
)
|
|
(2,253
|
)
|
|
(2,220
|
)
|
|
Net income available to common shareholders
|
|
$
|
129,912
|
|
|
$
|
110,545
|
|
|
$
|
293,192
|
|
|
$
|
277,586
|
|
|
Basic net income per common share
|
|
$
|
2.86
|
|
|
$
|
2.36
|
|
|
$
|
6.35
|
|
|
$
|
5.83
|
|
|
Diluted net income per common share:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
130,921
|
|
|
$
|
111,438
|
|
|
$
|
295,445
|
|
|
$
|
279,806
|
|
|
Income allocated to participating securities
|
|
(1,002
|
)
|
|
(884
|
)
|
|
(2,236
|
)
|
|
(2,201
|
)
|
|
Net income available to common shareholders
|
|
$
|
129,919
|
|
|
$
|
110,554
|
|
|
$
|
293,209
|
|
|
$
|
277,605
|
|
|
Diluted net income per common share
|
|
$
|
2.84
|
|
|
$
|
2.33
|
|
|
$
|
6.29
|
|
|
$
|
5.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
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 per share data excluding the
adjustments presented above. The Company excluded approximately $0.4
million and $13.4 million in after-tax expenses from these results
for the quarter and fiscal year ended December 29, 2018,
respectively. The Company excluded approximately $15.3 million and
$17.0 million in after-tax expenses from these results for the
quarter and fiscal year ended December 30, 2017, respectively. In
addition, a $40.0 million preliminary income tax benefit related to
the accounting for the implementation of the Tax Cuts and Jobs Act
of 2017 was excluded from these results for the fourth quarter and
full fiscal year 2017.
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
(unaudited)
|
|
|
|
The following table provides a reconciliation of EBITDA and
Adjusted EBITDA for the periods indicated to net income, which is
the most directly comparable financial measure presented in
accordance with GAAP:
|
|
|
|
|
|
|
|
|
|
Fiscal quarter ended
|
|
Fiscal year ended
|
|
(dollars in millions)
|
|
December 29, 2018
|
|
December 30, 2017
|
|
December 29, 2018
|
|
December 30, 2017
|
|
Net income
|
|
$
|
130.6
|
|
|
$
|
136.1
|
|
|
$
|
282.1
|
|
|
$
|
302.8
|
|
|
Interest expense
|
|
8.8
|
|
|
7.7
|
|
|
34.6
|
|
|
30.0
|
|
|
Interest income
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
(0.3
|
)
|
|
Tax expense
|
|
30.4
|
|
|
2.2
|
|
|
73.9
|
|
|
88.2
|
|
|
Depreciation and amortization
|
|
23.4
|
|
|
22.3
|
|
|
89.7
|
|
|
84.4
|
|
|
EBITDA
|
|
$
|
193.1
|
|
|
$
|
168.2
|
|
|
$
|
479.7
|
|
|
$
|
505.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to EBITDA
|
|
|
|
|
|
|
|
|
|
China business model change (a)
|
|
1.8
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
Customer bankruptcy charges, net (b)
|
|
(1.9
|
)
|
|
—
|
|
|
10.9
|
|
|
—
|
|
|
Revaluation of contingent consideration (c)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.6
|
)
|
|
Store restructuring costs (d)
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
2.7
|
|
|
Special employee compensation provision (e)
|
|
—
|
|
|
21.2
|
|
|
—
|
|
|
21.2
|
|
|
Direct sourcing initiative (f)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
Acquisition-related costs (g)
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
4.6
|
|
|
Adjusted EBITDA
|
|
$
|
193.1
|
|
|
$
|
189.9
|
|
|
$
|
495.5
|
|
|
$
|
530.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Costs associated with transitioning retail and wholesale operations
to a full licensing model in China.
|
|
(b)
|
Related to the Toys "R" Us bankruptcy
|
|
(c)
|
Revaluation of the contingent consideration liability associated
with the Company's acquisition of Skip Hop.
|
|
(d)
|
Net costs arising from unusual storm damage and related closures.
|
|
(e)
|
Special employee compensation provision related to significant
benefit related to the enactment of the Tax Cuts and Jobs Act of
2017; includes $1.2 million in related payroll taxes.
|
|
(f)
|
Costs associated with the Company's direct sourcing initiative,
which includes severance and relocation.
|
|
(g)
|
Non-recurring costs incurred in connection with the Skip Hop and
Mexico business acquisitions.
|
|
|
|
|
Note: Results may not be additive due to rounding.
|
|
|
EBITDA and Adjusted EBITDA are supplemental financial measures that are
not defined or prepared in accordance with GAAP. We define EBITDA as net
income before interest, income taxes and depreciation and amortization.
Adjusted EBITDA is EBITDA adjusted for the items described in the
footnotes (a) - (g) to the table above.
We present EBITDA and Adjusted EBITDA because we consider them to be
important supplemental measures of our performance and believe they are
frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry. These measures
are used by the Company's executive management to assess the Company's
performance.
The use of EBITDA and Adjusted EBITDA instead of net income or cash
flows from operations has limitations as an analytical tool, and you
should not consider them in isolation, or as a substitute for analysis
of our results as reported under GAAP. EBITDA and Adjusted EBITDA do not
represent net income or cash flow from operations as those terms are
defined by GAAP and do not necessarily indicate whether cash flows will
be sufficient to fund cash needs. While EBITDA, Adjusted EBITDA and
similar measures are frequently used as measures of operations and the
ability to meet debt service requirements, these terms are not
necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of
calculation. EBITDA and Adjusted EBITDA do not reflect the impact of
earnings or charges resulting from matters that we consider not to be
indicative of our ongoing operations. Because of these limitations,
EBITDA and Adjusted EBITDA should not be considered as discretionary
cash available to us for working capital, debt service and other
purposes.
|
|
|
|
|
RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
(dollars in millions)
(unaudited)
|
|
|
|
|
|
The tables below reflect the calculation of constant currency for
total net sales of the International segment and consolidated net
sales for the fiscal quarter and fiscal year ended December 29,
2018:
|
|
|
|
|
|
Fiscal Quarter Ended
|
|
|
|
ReportedNet SalesDecember 29,2018
|
|
Impact ofForeignCurrencyTranslation
|
|
Constant-CurrencyNet SalesDecember 29,2018
|
|
ReportedNet SalesDecember 30,2017
|
|
ReportedNet Sales% Change
|
|
Constant-CurrencyNet Sales% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
$
|
1,086.4
|
|
|
$
|
(3.9
|
)
|
|
$
|
1,090.3
|
|
|
$
|
1,027.9
|
|
|
5.7
|
%
|
|
6.1
|
%
|
|
International segment net sales
|
|
$
|
128.6
|
|
|
$
|
(3.9
|
)
|
|
$
|
132.6
|
|
|
$
|
131.8
|
|
|
(2.4
|
)%
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
ReportedNet SalesDecember 29,2018
|
|
Impact ofForeignCurrencyTranslation
|
|
Constant-CurrencyNet SalesDecember 29,2018
|
|
ReportedNet SalesDecember 30,2017
|
|
ReportedNet Sales% Change
|
|
Constant-CurrencyNet Sales% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
|
|
$
|
3,462.3
|
|
|
$
|
(2.6
|
)
|
|
$
|
3,464.9
|
|
|
$
|
3,400.5
|
|
|
1.8
|
%
|
|
1.9
|
%
|
|
International segment net sales
|
|
$
|
430.4
|
|
|
$
|
(2.6
|
)
|
|
$
|
433.0
|
|
|
$
|
415.5
|
|
|
3.6
|
%
|
|
4.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company evaluates its net sales on both an "as reported" and a
"constant currency" basis. The constant currency presentation, which is
a non-GAAP measure, excludes the impact of fluctuations in foreign
currency exchange rates that occurred between the comparative periods.
Constant currency net sales results are calculated by translating
current period net sales in local currency to the U.S. dollar amount by
using the currency conversion rate for the prior comparative period. The
Company consistently applies this approach to net sales for all
countries where the functional currency is not the U.S. dollar. The
Company believes that the presentation of net sales on a constant
currency basis provides useful supplemental information regarding
changes in our net sales that were not due to fluctuations in currency
exchange rates and such information is consistent with how the Company
assesses changes in its net sales between comparative periods.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190225005445/en/
