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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Carters Inc | NYSE:CRI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-1.77 | -2.51% | 68.675 | 70.06 | 68.61 | 69.73 | 274,509 | 18:50:48 |
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 1, 2017 OR
|
|
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____
TO ______
|
Delaware
|
|
13-3912933
|
(state or other jurisdiction of
|
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
|
Common Stock
|
|
Outstanding Shares at July 21, 2017
|
|
Common stock, par value $0.01 per share
|
|
47,834,177
|
|
|
|
|
Page
|
|
|||
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||
|
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Unaudited Condensed Consolidated Balance Sheets as of July 1, 2017, December 31, 2016 and July 2, 2016
|
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|
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Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter and two fiscal quarters ended July 1, 2017 and July 2, 2016
|
|
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter and two fiscal quarters ended July 1, 2017 and July 2, 2016
|
|
|
|
Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity for the two fiscal quarters ended July 1, 2017
|
|
|
|
Unaudited Condensed Consolidated Statements of Cash Flows for the two fiscal quarters ended July 1, 2017 and July 2, 2016
|
|
|
|
||
|
|||
|
|||
|
|||
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|||
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Item 1
|
||
|
|||
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|||
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Item 3
|
Defaults upon Senior Securities
|
|
|
|||
|
|||
|
|||
|
|
|
|
|
|
|
|
|
|
July 1, 2017
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||
ASSETS
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
173,564
|
|
|
$
|
299,358
|
|
|
$
|
205,080
|
|
Accounts receivable, net
|
165,183
|
|
|
202,471
|
|
|
150,633
|
|
|||
Finished goods inventories
|
610,423
|
|
|
487,591
|
|
|
587,434
|
|
|||
Prepaid expenses and other current assets
|
44,527
|
|
|
32,180
|
|
|
46,189
|
|
|||
Deferred income taxes
|
—
|
|
|
35,486
|
|
|
32,816
|
|
|||
Total current assets
|
993,697
|
|
|
1,057,086
|
|
|
1,022,152
|
|
|||
Property, plant, and equipment, net of accumulated depreciation of $384,881, $345,907, and $317,580, respectively
|
382,472
|
|
|
385,874
|
|
|
386,034
|
|
|||
Tradenames and other intangible assets, net
|
400,735
|
|
|
308,928
|
|
|
309,017
|
|
|||
Goodwill
|
231,709
|
|
|
176,009
|
|
|
177,540
|
|
|||
Other assets
|
23,246
|
|
|
18,700
|
|
|
17,749
|
|
|||
Total assets
|
$
|
2,031,859
|
|
|
$
|
1,946,597
|
|
|
$
|
1,912,492
|
|
|
|
|
|
|
|
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
217,340
|
|
|
$
|
158,432
|
|
|
$
|
190,366
|
|
Other current liabilities
|
94,644
|
|
|
119,177
|
|
|
80,595
|
|
|||
Total current liabilities
|
311,984
|
|
|
277,609
|
|
|
270,961
|
|
|||
|
|
|
|
|
|
||||||
Long-term debt, net
|
661,846
|
|
|
580,376
|
|
|
580,678
|
|
|||
Deferred income taxes
|
133,251
|
|
|
130,656
|
|
|
128,682
|
|
|||
Other long-term liabilities
|
174,867
|
|
|
169,832
|
|
|
165,469
|
|
|||
Total liabilities
|
$
|
1,281,948
|
|
|
$
|
1,158,473
|
|
|
$
|
1,145,790
|
|
|
|
|
|
|
|
||||||
Commitments and contingencies - Note 13
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Stockholders' equity:
|
|
|
|
|
|
||||||
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at July 1, 2017, December 31, 2016, and July 2, 2016
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 47,971,577, 48,948,670 and 50,194,955 shares issued and outstanding at July 1, 2017, December 31, 2016 and July 2, 2016, respectively
|
480
|
|
|
489
|
|
|
502
|
|
|||
Accumulated other comprehensive loss
|
(30,653
|
)
|
|
(34,740
|
)
|
|
(30,533
|
)
|
|||
Retained earnings
|
780,084
|
|
|
822,375
|
|
|
796,733
|
|
|||
Total stockholders' equity
|
749,911
|
|
|
788,124
|
|
|
766,702
|
|
|||
Total liabilities and stockholders' equity
|
$
|
2,031,859
|
|
|
$
|
1,946,597
|
|
|
$
|
1,912,492
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Net sales
|
$
|
692,117
|
|
|
$
|
639,471
|
|
|
$
|
1,424,872
|
|
|
$
|
1,363,556
|
|
Cost of goods sold
|
388,660
|
|
|
357,289
|
|
|
805,613
|
|
|
770,445
|
|
||||
Gross profit
|
303,457
|
|
|
282,182
|
|
|
619,259
|
|
|
593,111
|
|
||||
Selling, general, and administrative expenses
|
250,146
|
|
|
228,464
|
|
|
497,940
|
|
|
457,460
|
|
||||
Royalty income
|
(11,210
|
)
|
|
(9,525
|
)
|
|
(21,768
|
)
|
|
(20,600
|
)
|
||||
Operating income
|
64,521
|
|
|
63,243
|
|
|
143,087
|
|
|
156,251
|
|
||||
Interest expense
|
7,194
|
|
|
6,803
|
|
|
14,298
|
|
|
13,542
|
|
||||
Interest income
|
(79
|
)
|
|
(178
|
)
|
|
(218
|
)
|
|
(385
|
)
|
||||
Other (income) expense, net
|
(544
|
)
|
|
516
|
|
|
(765
|
)
|
|
3,709
|
|
||||
Income before income taxes
|
57,950
|
|
|
56,102
|
|
|
129,772
|
|
|
139,385
|
|
||||
Provision for income taxes
|
20,025
|
|
|
19,904
|
|
|
45,183
|
|
|
49,207
|
|
||||
Net income
|
$
|
37,925
|
|
|
$
|
36,198
|
|
|
$
|
84,589
|
|
|
$
|
90,178
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per common share
|
$
|
0.79
|
|
|
$
|
0.72
|
|
|
$
|
1.75
|
|
|
$
|
1.77
|
|
Diluted net income per common share
|
$
|
0.78
|
|
|
$
|
0.71
|
|
|
$
|
1.73
|
|
|
$
|
1.75
|
|
Dividend declared and paid per common share
|
$
|
0.37
|
|
|
$
|
0.33
|
|
|
$
|
0.74
|
|
|
$
|
0.66
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Net income
|
$
|
37,925
|
|
|
$
|
36,198
|
|
|
$
|
84,589
|
|
|
$
|
90,178
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
3,140
|
|
|
548
|
|
|
4,087
|
|
|
5,834
|
|
||||
Comprehensive income
|
$
|
41,065
|
|
|
$
|
36,746
|
|
|
$
|
88,676
|
|
|
$
|
96,012
|
|
|
Common stock - shares
|
|
Common
stock - $
|
|
Additional
paid-in
capital
|
|
Accumulated other comprehensive
loss
|
|
Retained
earnings
|
|
Total
stockholders’
equity
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2016
|
48,948,670
|
|
|
$
|
489
|
|
|
$
|
—
|
|
|
$
|
(34,740
|
)
|
|
$
|
822,375
|
|
|
$
|
788,124
|
|
Exercise of stock options
|
60,660
|
|
|
1
|
|
|
3,121
|
|
|
—
|
|
|
—
|
|
|
3,122
|
|
|||||
Withholdings from vesting of restricted stock
|
(65,804
|
)
|
|
(1
|
)
|
|
(5,589
|
)
|
|
—
|
|
|
—
|
|
|
(5,590
|
)
|
|||||
Restricted stock activity
|
145,600
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
8,464
|
|
|
—
|
|
|
—
|
|
|
8,464
|
|
|||||
Issuance of common stock
|
13,860
|
|
|
1
|
|
|
1,181
|
|
|
—
|
|
|
—
|
|
|
1,182
|
|
|||||
Repurchase of common stock
|
(1,131,409
|
)
|
|
(11
|
)
|
|
(7,176
|
)
|
|
—
|
|
|
(91,049
|
)
|
|
(98,236
|
)
|
|||||
Cash dividends declared and paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,831
|
)
|
|
(35,831
|
)
|
|||||
Comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
4,087
|
|
|
84,589
|
|
|
88,676
|
|
|||||
Balance at July 1, 2017
|
47,971,577
|
|
|
$
|
480
|
|
|
$
|
—
|
|
|
$
|
(30,653
|
)
|
|
$
|
780,084
|
|
|
$
|
749,911
|
|
|
Two fiscal quarters ended
|
||||||
|
July 1, 2017
|
|
July 2, 2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
84,589
|
|
|
$
|
90,178
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
39,705
|
|
|
34,916
|
|
||
Amortization of tradenames
|
892
|
|
|
1,831
|
|
||
Amortization of fair value step up of inventory
|
400
|
|
|
—
|
|
||
Amortization of debt issuance costs
|
749
|
|
|
725
|
|
||
Non-cash stock-based compensation expense
|
9,646
|
|
|
9,250
|
|
||
Foreign currency (gain) loss, net
|
(555
|
)
|
|
3,130
|
|
||
Income tax benefit from stock-based compensation
|
—
|
|
|
(3,684
|
)
|
||
Loss on disposal of property, plant, and equipment
|
221
|
|
|
133
|
|
||
Deferred income taxes
|
3,227
|
|
|
1,258
|
|
||
Effect of changes in operating assets and liabilities, net of acquisition:
|
|
|
|
||||
Accounts receivable, net
|
57,215
|
|
|
57,229
|
|
||
Finished goods inventories
|
(91,846
|
)
|
|
(114,817
|
)
|
||
Prepaid expenses and other assets
|
(13,871
|
)
|
|
(12,643
|
)
|
||
Accounts payable and other liabilities
|
16,961
|
|
|
18,093
|
|
||
Net cash provided by operating activities
|
107,333
|
|
|
85,599
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(34,276
|
)
|
|
(49,698
|
)
|
||
Acquisition of Skip Hop Holdings, Inc., net of cash acquired
|
(143,704
|
)
|
|
—
|
|
||
Proceeds from sale of property, plant, and equipment
|
—
|
|
|
193
|
|
||
Net cash used in investing activities
|
(177,980
|
)
|
|
(49,505
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Borrowings under secured revolving credit facility
|
100,000
|
|
|
—
|
|
||
Payments on secured revolving credit facility
|
(18,965
|
)
|
|
—
|
|
||
Repurchases of common stock
|
(98,236
|
)
|
|
(180,209
|
)
|
||
Dividends paid
|
(35,831
|
)
|
|
(33,679
|
)
|
||
Income tax benefit from stock-based compensation
|
—
|
|
|
3,684
|
|
||
Withholdings from vestings of restricted stock
|
(5,590
|
)
|
|
(8,508
|
)
|
||
Proceeds from exercises of stock options
|
3,122
|
|
|
5,101
|
|
||
Net cash used in financing activities
|
(55,500
|
)
|
|
(213,611
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
353
|
|
|
1,388
|
|
||
Net decrease in cash and cash equivalents
|
(125,794
|
)
|
|
(176,129
|
)
|
||
Cash and cash equivalents, beginning of period
|
299,358
|
|
|
381,209
|
|
||
Cash and cash equivalents, end of period
|
$
|
173,564
|
|
|
$
|
205,080
|
|
(dollars in thousands)
|
July 1, 2017
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||
Cumulative foreign currency translation adjustments
|
$
|
(23,537
|
)
|
|
$
|
(27,624
|
)
|
|
$
|
(23,752
|
)
|
Pension and post-retirement obligations (1)
|
(7,116
|
)
|
|
(7,116
|
)
|
|
(6,781
|
)
|
|||
Total accumulated other comprehensive loss
|
$
|
(30,653
|
)
|
|
$
|
(34,740
|
)
|
|
$
|
(30,533
|
)
|
|
|
|
July 1, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
(dollars in thousands)
|
Weighted-average useful life
|
|
Gross fair value
|
|
Accumulated amortization
|
|
Net amount
|
|
Gross fair value
|
|
Accumulated amortization
|
|
Net amount
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Carter's goodwill
|
Indefinite
|
|
$
|
136,570
|
|
|
$
|
—
|
|
|
$
|
136,570
|
|
|
$
|
136,570
|
|
|
$
|
—
|
|
|
$
|
136,570
|
|
Canada acquisition
|
Indefinite
|
|
40,897
|
|
|
—
|
|
|
40,897
|
|
|
39,439
|
|
|
—
|
|
|
39,439
|
|
||||||
Skip Hop acquisition
(1)
|
Indefinite
|
|
54,242
|
|
|
—
|
|
|
54,242
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total goodwill
|
|
|
$
|
231,709
|
|
|
$
|
—
|
|
|
$
|
231,709
|
|
|
$
|
176,009
|
|
|
$
|
—
|
|
|
$
|
176,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Carter's
tradename
|
Indefinite
|
|
$
|
220,233
|
|
|
$
|
—
|
|
|
$
|
220,233
|
|
|
$
|
220,233
|
|
|
$
|
—
|
|
|
$
|
220,233
|
|
OshKosh
tradename
|
Indefinite
|
|
85,500
|
|
|
—
|
|
|
85,500
|
|
|
85,500
|
|
|
—
|
|
|
85,500
|
|
||||||
Skip Hop
tradename
(1)
|
Indefinite
|
|
56,800
|
|
|
—
|
|
|
56,800
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Finite-life tradenames
|
2-20 years
|
|
42,021
|
|
|
38,915
|
|
|
3,106
|
|
|
42,005
|
|
|
38,810
|
|
|
3,195
|
|
||||||
Total tradenames
|
|
|
$
|
404,554
|
|
|
$
|
38,915
|
|
|
$
|
365,639
|
|
|
$
|
347,738
|
|
|
$
|
38,810
|
|
|
$
|
308,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Skip Hop customer relationships
(1)
|
15 years
|
|
35,900
|
|
|
804
|
|
|
35,096
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total tradenames and other intangibles, net
|
|
|
$
|
440,454
|
|
|
$
|
39,719
|
|
|
$
|
400,735
|
|
|
$
|
347,738
|
|
|
$
|
38,810
|
|
|
$
|
308,928
|
|
|
|
|
July 2, 2016
|
||||||||||
(dollars in thousands)
|
Weighted-average useful life
|
|
Gross amount
|
|
Accumulated amortization
|
|
Net amount
|
||||||
|
|
|
|
|
|
|
|
||||||
Carter's goodwill
|
Indefinite
|
|
$
|
136,570
|
|
|
$
|
—
|
|
|
$
|
136,570
|
|
Canadian acquisition
|
Indefinite
|
|
40,970
|
|
|
—
|
|
|
40,970
|
|
|||
Total goodwill
|
|
|
$
|
177,540
|
|
|
$
|
—
|
|
|
$
|
177,540
|
|
|
|
|
|
|
|
|
|
||||||
Carter's
tradename
|
Indefinite
|
|
$
|
220,233
|
|
|
$
|
—
|
|
|
$
|
220,233
|
|
OshKosh
tradename
|
Indefinite
|
|
85,500
|
|
|
—
|
|
|
85,500
|
|
|||
Finite-life tradenames
|
2-20 years
|
|
42,022
|
|
|
38,738
|
|
|
3,284
|
|
|||
Total tradenames
|
|
|
$
|
347,755
|
|
|
$
|
38,738
|
|
|
$
|
309,017
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Number of shares repurchased
|
587,465
|
|
|
1,049,483
|
|
|
1,131,409
|
|
|
1,771,847
|
|
||||
Aggregate cost of shares repurchased (dollars in thousands)
|
$
|
51,605
|
|
|
$
|
108,648
|
|
|
$
|
98,236
|
|
|
$
|
180,209
|
|
Average price per share
|
$
|
87.84
|
|
|
$
|
103.52
|
|
|
$
|
86.82
|
|
|
$
|
101.71
|
|
(dollars in thousands)
|
July 1, 2017
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||
Senior notes at amounts repayable
|
$
|
400,000
|
|
|
$
|
400,000
|
|
|
$
|
400,000
|
|
Less unamortized issuance-related costs for senior notes
|
(4,154
|
)
|
|
(4,601
|
)
|
|
(5,036
|
)
|
|||
Senior notes, net
|
395,846
|
|
|
395,399
|
|
|
394,964
|
|
|||
Secured revolving credit facility
|
266,000
|
|
|
184,977
|
|
|
185,714
|
|
|||
Total long-term debt, net
|
$
|
661,846
|
|
|
$
|
580,376
|
|
|
$
|
580,678
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
(dollars in thousands)
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Stock options
|
$
|
955
|
|
|
$
|
981
|
|
|
$
|
2,199
|
|
|
$
|
2,277
|
|
Restricted stock:
|
|
|
|
|
|
|
|
||||||||
Time-based awards
|
2,832
|
|
|
1,717
|
|
|
5,144
|
|
|
3,862
|
|
||||
Performance-based awards
|
1,080
|
|
|
832
|
|
|
2,303
|
|
|
1,947
|
|
||||
Stock awards
|
—
|
|
|
1,164
|
|
|
—
|
|
|
1,164
|
|
||||
Total
|
$
|
4,867
|
|
|
$
|
4,694
|
|
|
$
|
9,646
|
|
|
$
|
9,250
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
(dollars in thousands)
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Interest cost
|
$
|
611
|
|
|
$
|
629
|
|
|
$
|
1,222
|
|
|
$
|
1,258
|
|
Expected return on plan assets
|
(650
|
)
|
|
(676
|
)
|
|
(1,300
|
)
|
|
(1,352
|
)
|
||||
Recognized actuarial loss
|
170
|
|
|
145
|
|
|
340
|
|
|
290
|
|
||||
Net periodic pension cost
|
$
|
131
|
|
|
$
|
98
|
|
|
$
|
262
|
|
|
$
|
196
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
(dollars in thousands)
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
Service cost – benefits attributed to service during the period
|
$
|
7
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
62
|
|
Interest cost on accumulated post-retirement benefit obligation
|
34
|
|
|
44
|
|
|
68
|
|
|
88
|
|
||||
Amortization net actuarial gain
|
(76
|
)
|
|
(49
|
)
|
|
(152
|
)
|
|
(98
|
)
|
||||
Total net periodic post-retirement (benefit) cost
|
$
|
(35
|
)
|
|
$
|
26
|
|
|
$
|
(70
|
)
|
|
$
|
52
|
|
|
July 1, 2017
|
|
|
December 31, 2016
|
|
|
July 2, 2016
|
|||||||||||||||||||||||||||
(dollars in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Investments (1)
|
$
|
15.3
|
|
|
—
|
|
|
—
|
|
|
|
$
|
12.3
|
|
|
—
|
|
|
—
|
|
|
|
$
|
10.9
|
|
|
—
|
|
|
—
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Contingent consideration (2)
|
—
|
|
|
—
|
|
|
$
|
3.6
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
Foreign exchange forward contracts (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1.3
|
|
|
—
|
|
•
|
As of
July 1, 2017
, the fair value of the Company's
$266.0 million
in outstanding borrowings under its secured revolving credit facility approximated carrying value. On July 19, 2017, the Company borrowed an additional
$100 million
under its secured revolving credit facility primarily for seasonal working capital needs, bringing total outstanding borrowings under this facility to
$366 million
. Fair value approximates carrying value of
$366 million
.
|
•
|
The fair value of the Company's senior notes at
July 1, 2017
was approximately
$412 million
. The fair value of these senior notes with a notional value and carrying value of
$400 million
was estimated using a quoted price as provided in the secondary market, which considers
the Company's credit risk and market related conditions, and is therefore within Level 2 of the fair value hierarchy.
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||
|
July 1, 2017
|
|
July 2, 2016
|
|
July 1, 2017
|
|
July 2, 2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of common and common equivalent shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic number of common shares outstanding
|
47,863,618
|
|
|
50,143,568
|
|
|
48,093,155
|
|
|
50,660,278
|
|
||||
Dilutive effect of equity awards
|
550,726
|
|
|
469,114
|
|
|
552,866
|
|
|
468,632
|
|
||||
Diluted number of common and common equivalent shares outstanding
|
48,414,344
|
|
|
50,612,682
|
|
|
48,646,021
|
|
|
51,128,910
|
|
||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Basic net income per common share (in thousands, except per share data):
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
37,925
|
|
|
$
|
36,198
|
|
|
$
|
84,589
|
|
|
$
|
90,178
|
|
Income allocated to participating securities
|
(291
|
)
|
|
(279
|
)
|
|
(660
|
)
|
|
(720
|
)
|
||||
Net income available to common shareholders
|
$
|
37,634
|
|
|
$
|
35,919
|
|
|
$
|
83,929
|
|
|
$
|
89,458
|
|
|
|
|
|
|
|
|
|
||||||||
Basic net income per common share
|
$
|
0.79
|
|
|
$
|
0.72
|
|
|
$
|
1.75
|
|
|
$
|
1.77
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per common share (in thousands, except per share data):
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
37,925
|
|
|
$
|
36,198
|
|
|
$
|
84,589
|
|
|
$
|
90,178
|
|
Income allocated to participating securities
|
(289
|
)
|
|
(278
|
)
|
|
(656
|
)
|
|
(715
|
)
|
||||
Net income available to common shareholders
|
$
|
37,636
|
|
|
$
|
35,920
|
|
|
$
|
83,933
|
|
|
$
|
89,463
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per common share
|
$
|
0.78
|
|
|
$
|
0.71
|
|
|
$
|
1.73
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive shares excluded from diluted earnings per share computation
|
663,531
|
|
|
233,570
|
|
|
596,297
|
|
|
233,570
|
|
(dollars in thousands)
|
July 1, 2017
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||
Accrued bonuses and incentive compensation
|
$
|
5,959
|
|
|
$
|
16,834
|
|
|
$
|
6,694
|
|
Accrued employee benefits
|
10,227
|
|
|
17,165
|
|
|
8,718
|
|
|||
Accrued and deferred rent
|
17,767
|
|
|
15,632
|
|
|
13,930
|
|
(dollars in thousands)
|
July 1, 2017
|
|
December 31, 2016
|
|
July 2, 2016
|
||||||
Deferred lease incentives
|
$
|
74,344
|
|
|
$
|
74,015
|
|
|
$
|
71,884
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||||||||||||||
(dollars in thousands)
|
July 1,
2017 |
|
% of
Total Net Sales |
|
July 2,
2016 |
|
% of
Total Net Sales |
|
July 1,
2017 |
|
% of
Total Net Sales |
|
July 2,
2016 |
|
% of
Total Net Sales |
||||||||||||
Net sales
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Wholesale
|
$
|
217,710
|
|
|
31.5
|
%
|
|
$
|
215,122
|
|
|
33.6
|
%
|
|
$
|
510,265
|
|
|
35.8
|
%
|
|
$
|
507,176
|
|
|
37.2
|
%
|
U.S. Retail (a)
|
391,822
|
|
|
56.6
|
%
|
|
352,782
|
|
|
55.2
|
%
|
|
755,593
|
|
|
53.0
|
%
|
|
706,871
|
|
|
51.8
|
%
|
||||
International (b)
|
82,585
|
|
|
11.9
|
%
|
|
71,567
|
|
|
11.2
|
%
|
|
159,014
|
|
|
11.2
|
%
|
|
149,509
|
|
|
11.0
|
%
|
||||
Total net sales
|
$
|
692,117
|
|
|
100.0
|
%
|
|
$
|
639,471
|
|
|
100.0
|
%
|
|
$
|
1,424,872
|
|
|
100.0
|
%
|
|
$
|
1,363,556
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Operating income (loss)
:
|
|
|
% of
Segment
Net Sales
|
|
|
|
% of
Segment
Net Sales
|
|
|
|
% of
Segment Net Sales |
|
|
|
% of
Segment Net Sales |
||||||||||||
U.S. Wholesale (g)
|
$
|
35,806
|
|
|
16.4
|
%
|
|
$
|
41,509
|
|
|
19.3
|
%
|
|
$
|
105,501
|
|
|
20.7
|
%
|
|
$
|
109,920
|
|
|
21.7
|
%
|
U.S. Retail (a) (g)
|
42,342
|
|
|
10.8
|
%
|
|
36,952
|
|
|
10.5
|
%
|
|
72,242
|
|
|
9.6
|
%
|
|
76,421
|
|
|
10.8
|
%
|
||||
International (b) (g)
|
7,597
|
|
|
9.2
|
%
|
|
9,105
|
|
|
12.7
|
%
|
|
11,282
|
|
|
7.1
|
%
|
|
17,546
|
|
|
11.7
|
%
|
||||
Corporate expenses (c) (d) (e) (f)
|
(21,224
|
)
|
|
|
|
|
(24,323
|
)
|
|
|
|
|
(45,938
|
)
|
|
|
|
|
(47,636
|
)
|
|
|
|
||||
Total operating income
|
$
|
64,521
|
|
|
9.3
|
%
|
|
$
|
63,243
|
|
|
9.9
|
%
|
|
$
|
143,087
|
|
|
10.0
|
%
|
|
$
|
156,251
|
|
|
11.5
|
%
|
(a)
|
Includes retail store and eCommerce results.
|
(b)
|
Net sales include international retail, eCommerce, and wholesale sales.
|
(c)
|
Corporate expenses include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, office occupancy, information technology, certain legal fees, consulting, and audit fees.
|
(d)
|
Includes expenses related to the amortization of the H.W. Carter and Sons tradenames of approximately
$0.8 million
and
$1.7 million
for the fiscal quarter and two fiscal quarters ended
July 2, 2016
, respectively.
|
(e)
|
Includes acquisition-related expenses of approximately
$0.6 million
and
$1.8 million
for fiscal quarter the two fiscal quarters ended July 1, 2017, respectively.
|
(f)
|
Includes charges related to the Company's direct sourcing initiative of approximately
$0.1
and
$0.3 million
for the fiscal quarter and two fiscal quarters ended July 1, 2017, respectively.
|
(g)
|
A total of
$0.4 million
of certain costs related to inventory acquired from Skip Hop is included in operating income between U.S. Wholesale, U.S. Retail, and International for the fiscal quarter and two fiscal quarters ended July 1, 2017.
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
352,814
|
|
|
$
|
435,321
|
|
|
$
|
71,886
|
|
|
$
|
(167,904
|
)
|
|
$
|
692,117
|
|
Cost of goods sold
|
—
|
|
|
260,902
|
|
|
257,323
|
|
|
37,019
|
|
|
(166,584
|
)
|
|
388,660
|
|
||||||
Gross profit
|
—
|
|
|
91,912
|
|
|
177,998
|
|
|
34,867
|
|
|
(1,320
|
)
|
|
303,457
|
|
||||||
Selling, general, and administrative expenses
|
—
|
|
|
38,295
|
|
|
193,865
|
|
|
26,292
|
|
|
(8,306
|
)
|
|
250,146
|
|
||||||
Royalty income
|
—
|
|
|
(8,905
|
)
|
|
(4,882
|
)
|
|
—
|
|
|
2,577
|
|
|
(11,210
|
)
|
||||||
Operating income (loss)
|
—
|
|
|
62,522
|
|
|
(10,985
|
)
|
|
8,575
|
|
|
4,409
|
|
|
64,521
|
|
||||||
Interest expense
|
—
|
|
|
7,138
|
|
|
1,377
|
|
|
6
|
|
|
(1,327
|
)
|
|
7,194
|
|
||||||
Interest income
|
—
|
|
|
(1,400
|
)
|
|
—
|
|
|
(6
|
)
|
|
1,327
|
|
|
(79
|
)
|
||||||
(Income) loss in subsidiaries
|
(37,925
|
)
|
|
7,022
|
|
|
(6,807
|
)
|
|
—
|
|
|
37,710
|
|
|
—
|
|
||||||
Other (income) expense, net
|
—
|
|
|
(257
|
)
|
|
280
|
|
|
(567
|
)
|
|
—
|
|
|
(544
|
)
|
||||||
Income (loss) before income taxes
|
37,925
|
|
|
50,019
|
|
|
(5,835
|
)
|
|
9,142
|
|
|
(33,301
|
)
|
|
57,950
|
|
||||||
Provision for income taxes
|
—
|
|
|
16,503
|
|
|
1,186
|
|
|
2,336
|
|
|
—
|
|
|
20,025
|
|
||||||
Net income (loss)
|
$
|
37,925
|
|
|
$
|
33,516
|
|
|
$
|
(7,021
|
)
|
|
$
|
6,806
|
|
|
$
|
(33,301
|
)
|
|
$
|
37,925
|
|
|
Parent
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
361,366
|
|
|
$
|
374,806
|
|
|
$
|
66,218
|
|
|
$
|
(162,919
|
)
|
|
$
|
639,471
|
|
Cost of goods sold
|
—
|
|
|
264,791
|
|
|
220,976
|
|
|
30,976
|
|
|
(159,454
|
)
|
|
357,289
|
|
||||||
Gross profit
|
—
|
|
|
96,575
|
|
|
153,830
|
|
|
35,242
|
|
|
(3,465
|
)
|
|
282,182
|
|
||||||
Selling, general, and administrative expenses
|
—
|
|
|
40,434
|
|
|
173,924
|
|
|
22,514
|
|
|
(8,408
|
)
|
|
228,464
|
|
||||||
Royalty income
|
—
|
|
|
(7,057
|
)
|
|
(4,514
|
)
|
|
—
|
|
|
2,046
|
|
|
(9,525
|
)
|
||||||
Operating income (loss)
|
—
|
|
|
63,198
|
|
|
(15,580
|
)
|
|
12,728
|
|
|
2,897
|
|
|
63,243
|
|
||||||
Interest expense
|
—
|
|
|
6,667
|
|
|
1,861
|
|
|
112
|
|
|
(1,837
|
)
|
|
6,803
|
|
||||||
Interest income
|
—
|
|
|
(1,989
|
)
|
|
—
|
|
|
(26
|
)
|
|
1,837
|
|
|
(178
|
)
|
||||||
(Income) loss in subsidiaries
|
(36,198
|
)
|
|
10,335
|
|
|
(9,397
|
)
|
|
—
|
|
|
35,260
|
|
|
—
|
|
||||||
Other (income) expense, net
|
—
|
|
|
(373
|
)
|
|
387
|
|
|
502
|
|
|
—
|
|
|
516
|
|
||||||
Income (loss) before income taxes
|
36,198
|
|
|
48,558
|
|
|
(8,431
|
)
|
|
12,140
|
|
|
(32,363
|
)
|
|
56,102
|
|
||||||
Provision for income taxes
|
—
|
|
|
15,258
|
|
|
1,903
|
|
|
2,743
|
|
|
—
|
|
|
19,904
|
|
||||||
Net income (loss)
|
$
|
36,198
|
|
|
$
|
33,300
|
|
|
$
|
(10,334
|
)
|
|
$
|
9,397
|
|
|
$
|
(32,363
|
)
|
|
$
|
36,198
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
806,329
|
|
|
$
|
831,100
|
|
|
$
|
132,917
|
|
|
$
|
(345,474
|
)
|
|
$
|
1,424,872
|
|
Cost of goods sold
|
—
|
|
|
591,535
|
|
|
486,089
|
|
|
74,448
|
|
|
(346,459
|
)
|
|
805,613
|
|
||||||
Gross profit
|
—
|
|
|
214,794
|
|
|
345,011
|
|
|
58,469
|
|
|
985
|
|
|
619,259
|
|
||||||
Selling, general, and administrative expenses
|
—
|
|
|
79,227
|
|
|
383,369
|
|
|
52,563
|
|
|
(17,219
|
)
|
|
497,940
|
|
||||||
Royalty income
|
—
|
|
|
(17,335
|
)
|
|
(9,007
|
)
|
|
—
|
|
|
4,574
|
|
|
(21,768
|
)
|
||||||
Operating income (loss)
|
—
|
|
|
152,902
|
|
|
(29,351
|
)
|
|
5,906
|
|
|
13,630
|
|
|
143,087
|
|
||||||
Interest expense
|
—
|
|
|
14,111
|
|
|
2,746
|
|
|
95
|
|
|
(2,654
|
)
|
|
14,298
|
|
||||||
Interest income
|
—
|
|
|
(2,839
|
)
|
|
—
|
|
|
(33
|
)
|
|
2,654
|
|
|
(218
|
)
|
||||||
(Income) loss in subsidiaries
|
(84,589
|
)
|
|
28,053
|
|
|
(4,358
|
)
|
|
—
|
|
|
60,894
|
|
|
—
|
|
||||||
Other (income) expense, net
|
—
|
|
|
(625
|
)
|
|
648
|
|
|
(788
|
)
|
|
—
|
|
|
(765
|
)
|
||||||
Income (loss) before income taxes
|
84,589
|
|
|
114,202
|
|
|
(28,387
|
)
|
|
6,632
|
|
|
(47,264
|
)
|
|
129,772
|
|
||||||
Provision for (benefit from) income taxes
|
—
|
|
|
43,243
|
|
|
(334
|
)
|
|
2,274
|
|
|
—
|
|
|
45,183
|
|
||||||
Net income (loss)
|
$
|
84,589
|
|
|
$
|
70,959
|
|
|
$
|
(28,053
|
)
|
|
$
|
4,358
|
|
|
$
|
(47,264
|
)
|
|
$
|
84,589
|
|
|
Parent
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
||||||||||||
Net sales
|
$
|
—
|
|
|
$
|
812,562
|
|
|
$
|
756,086
|
|
|
$
|
122,048
|
|
|
$
|
(327,140
|
)
|
|
$
|
1,363,556
|
|
Cost of goods sold
|
—
|
|
|
585,891
|
|
|
432,004
|
|
|
64,067
|
|
|
(311,517
|
)
|
|
770,445
|
|
||||||
Gross profit
|
—
|
|
|
226,671
|
|
|
324,082
|
|
|
57,981
|
|
|
(15,623
|
)
|
|
593,111
|
|
||||||
Selling, general, and administrative expenses
|
—
|
|
|
83,021
|
|
|
346,066
|
|
|
45,891
|
|
|
(17,518
|
)
|
|
457,460
|
|
||||||
Royalty income
|
—
|
|
|
(16,129
|
)
|
|
(8,725
|
)
|
|
—
|
|
|
4,254
|
|
|
(20,600
|
)
|
||||||
Operating income (loss)
|
—
|
|
|
159,779
|
|
|
(13,259
|
)
|
|
12,090
|
|
|
(2,359
|
)
|
|
156,251
|
|
||||||
Interest expense
|
—
|
|
|
13,275
|
|
|
2,706
|
|
|
215
|
|
|
(2,654
|
)
|
|
13,542
|
|
||||||
Interest income
|
—
|
|
|
(2,974
|
)
|
|
—
|
|
|
(65
|
)
|
|
2,654
|
|
|
(385
|
)
|
||||||
(Income) loss in subsidiaries
|
(90,178
|
)
|
|
16,831
|
|
|
(6,057
|
)
|
|
—
|
|
|
79,404
|
|
|
—
|
|
||||||
Other expense (income), net
|
—
|
|
|
(173
|
)
|
|
173
|
|
|
3,709
|
|
|
—
|
|
|
3,709
|
|
||||||
Income (loss) before income taxes
|
90,178
|
|
|
132,820
|
|
|
(10,081
|
)
|
|
8,231
|
|
|
(81,763
|
)
|
|
139,385
|
|
||||||
Provision for income taxes
|
—
|
|
|
40,284
|
|
|
6,749
|
|
|
2,174
|
|
|
—
|
|
|
49,207
|
|
||||||
Net income (loss)
|
$
|
90,178
|
|
|
$
|
92,536
|
|
|
$
|
(16,830
|
)
|
|
$
|
6,057
|
|
|
$
|
(81,763
|
)
|
|
$
|
90,178
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net income (loss)
|
|
$
|
37,925
|
|
|
$
|
33,516
|
|
|
$
|
(7,021
|
)
|
|
$
|
6,806
|
|
|
$
|
(33,301
|
)
|
|
$
|
37,925
|
|
Foreign currency translation adjustments
|
|
3,140
|
|
|
3,140
|
|
|
3,140
|
|
|
3,140
|
|
|
(9,420
|
)
|
|
3,140
|
|
||||||
Comprehensive income (loss)
|
|
$
|
41,065
|
|
|
$
|
36,656
|
|
|
$
|
(3,881
|
)
|
|
$
|
9,946
|
|
|
$
|
(42,721
|
)
|
|
$
|
41,065
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net income (loss)
|
|
$
|
36,198
|
|
|
$
|
33,300
|
|
|
$
|
(10,334
|
)
|
|
$
|
9,397
|
|
|
$
|
(32,363
|
)
|
|
$
|
36,198
|
|
Foreign currency translation adjustments
|
|
548
|
|
|
548
|
|
|
548
|
|
|
548
|
|
|
(1,644
|
)
|
|
548
|
|
||||||
Comprehensive income (loss)
|
|
$
|
36,746
|
|
|
$
|
33,848
|
|
|
$
|
(9,786
|
)
|
|
$
|
9,945
|
|
|
$
|
(34,007
|
)
|
|
$
|
36,746
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net income (loss)
|
|
$
|
84,589
|
|
|
$
|
70,959
|
|
|
$
|
(28,053
|
)
|
|
$
|
4,358
|
|
|
$
|
(47,264
|
)
|
|
$
|
84,589
|
|
Foreign currency translation adjustments
|
|
4,087
|
|
|
4,087
|
|
|
4,087
|
|
|
4,087
|
|
|
(12,261
|
)
|
|
4,087
|
|
||||||
Comprehensive income (loss)
|
|
$
|
88,676
|
|
|
$
|
75,046
|
|
|
$
|
(23,966
|
)
|
|
$
|
8,445
|
|
|
$
|
(59,525
|
)
|
|
$
|
88,676
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Net income (loss)
|
|
$
|
90,178
|
|
|
$
|
92,536
|
|
|
$
|
(16,830
|
)
|
|
$
|
6,057
|
|
|
$
|
(81,763
|
)
|
|
$
|
90,178
|
|
Foreign currency translation adjustments
|
|
5,834
|
|
|
5,834
|
|
|
5,834
|
|
|
5,834
|
|
|
(17,502
|
)
|
|
5,834
|
|
||||||
Comprehensive income (loss)
|
|
$
|
96,012
|
|
|
$
|
98,370
|
|
|
$
|
(10,996
|
)
|
|
$
|
11,891
|
|
|
$
|
(99,265
|
)
|
|
$
|
96,012
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Cash flows provided by (used in) operating activities:
|
|
$
|
—
|
|
|
$
|
120,884
|
|
|
$
|
(13,661
|
)
|
|
$
|
110
|
|
|
$
|
—
|
|
|
$
|
107,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
|
—
|
|
|
(10,594
|
)
|
|
(19,719
|
)
|
|
(3,963
|
)
|
|
—
|
|
|
(34,276
|
)
|
||||||
Intercompany investing activity
|
|
136,535
|
|
|
(2,468
|
)
|
|
—
|
|
|
—
|
|
|
(134,067
|
)
|
|
—
|
|
||||||
Acquisition of business, net of cash acquired
|
|
—
|
|
|
(144,520
|
)
|
|
746
|
|
|
70
|
|
|
—
|
|
|
(143,704
|
)
|
||||||
Net cash provided by (used in) investing activities
|
|
136,535
|
|
|
(157,582
|
)
|
|
(18,973
|
)
|
|
(3,893
|
)
|
|
(134,067
|
)
|
|
(177,980
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intercompany financing activity
|
|
—
|
|
|
(164,451
|
)
|
|
32,252
|
|
|
(1,868
|
)
|
|
134,067
|
|
|
—
|
|
||||||
Borrowings under secured revolving credit facility
|
|
—
|
|
|
100,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
||||||
Payments on secured revolving credit facility
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,965
|
)
|
|
—
|
|
|
(18,965
|
)
|
||||||
Dividends paid
|
|
(35,831
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(35,831
|
)
|
||||||
Repurchases of common stock
|
|
(98,236
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(98,236
|
)
|
||||||
Withholdings from vestings of restricted stock
|
|
(5,590
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,590
|
)
|
||||||
Proceeds from exercises of stock options
|
|
3,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,122
|
|
||||||
Net cash (used in) provided by financing activities
|
|
(136,535
|
)
|
|
(64,451
|
)
|
|
32,252
|
|
|
(20,833
|
)
|
|
134,067
|
|
|
(55,500
|
)
|
||||||
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
353
|
|
|
—
|
|
|
353
|
|
||||||
Net decrease in cash and cash equivalents
|
|
—
|
|
|
(101,149
|
)
|
|
(382
|
)
|
|
(24,263
|
)
|
|
—
|
|
|
(125,794
|
)
|
||||||
Cash and cash equivalents, beginning of period
|
|
—
|
|
|
229,056
|
|
|
11,817
|
|
|
58,485
|
|
|
—
|
|
|
299,358
|
|
||||||
Cash and cash equivalents, end of period
|
|
$
|
—
|
|
|
$
|
127,907
|
|
|
$
|
11,435
|
|
|
$
|
34,222
|
|
|
$
|
—
|
|
|
$
|
173,564
|
|
|
|
Parent
|
|
Subsidiary Issuer
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Consolidating Adjustments
|
|
Consolidated
|
||||||||||||
Cash flows provided by (used in) operating activities:
|
|
$
|
—
|
|
|
$
|
75,255
|
|
|
$
|
12,749
|
|
|
$
|
(2,405
|
)
|
|
$
|
—
|
|
|
$
|
85,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capital expenditures
|
|
—
|
|
|
(15,895
|
)
|
|
(30,274
|
)
|
|
(3,529
|
)
|
|
—
|
|
|
(49,698
|
)
|
||||||
Intercompany investing activity
|
|
217,295
|
|
|
(1,784
|
)
|
|
(1,623
|
)
|
|
—
|
|
|
(213,888
|
)
|
|
—
|
|
||||||
Proceeds from sale of property, plant and equipment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
193
|
|
|
—
|
|
|
193
|
|
||||||
Net cash provided by (used in) investing activities
|
|
217,295
|
|
|
(17,679
|
)
|
|
(31,897
|
)
|
|
(3,336
|
)
|
|
(213,888
|
)
|
|
(49,505
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intercompany financing activity
|
|
—
|
|
|
(226,217
|
)
|
|
14,106
|
|
|
(1,777
|
)
|
|
213,888
|
|
|
—
|
|
||||||
Dividends Paid
|
|
(33,679
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,679
|
)
|
||||||
Income tax benefit from stock-based compensation
|
|
—
|
|
|
2,061
|
|
|
1,623
|
|
|
—
|
|
|
—
|
|
|
3,684
|
|
||||||
Repurchases of common stock
|
|
(180,209
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(180,209
|
)
|
||||||
Withholdings from vestings of restricted stock
|
|
(8,508
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,508
|
)
|
||||||
Proceeds from exercises of stock options
|
|
5,101
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,101
|
|
||||||
Net cash (used in) provided by financing activities
|
|
(217,295
|
)
|
|
(224,156
|
)
|
|
15,729
|
|
|
(1,777
|
)
|
|
213,888
|
|
|
(213,611
|
)
|
||||||
Effect of exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,388
|
|
|
—
|
|
|
1,388
|
|
||||||
Net decrease in cash and cash equivalents
|
|
—
|
|
|
(166,580
|
)
|
|
(3,419
|
)
|
|
(6,130
|
)
|
|
—
|
|
|
(176,129
|
)
|
||||||
Cash and cash equivalents, beginning of period
|
|
—
|
|
|
325,771
|
|
|
14,652
|
|
|
40,786
|
|
|
—
|
|
|
381,209
|
|
||||||
Cash and cash equivalents, end of period
|
|
$
|
—
|
|
|
$
|
159,191
|
|
|
$
|
11,233
|
|
|
$
|
34,656
|
|
|
$
|
—
|
|
|
$
|
205,080
|
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||
|
July 1,
2017 |
|
July 2,
2016 |
|
July 1,
2017 |
|
July 2,
2016 |
||||
|
|
|
|
|
|
|
|
||||
Net sales
|
|
|
|
|
|
|
|
||||
U.S. Wholesale
|
31.5
|
%
|
|
33.6
|
%
|
|
35.8
|
%
|
|
37.2
|
%
|
U.S. Retail
|
56.6
|
%
|
|
55.2
|
%
|
|
53.0
|
%
|
|
51.8
|
%
|
International
|
11.9
|
%
|
|
11.2
|
%
|
|
11.2
|
%
|
|
11.0
|
%
|
|
|
|
|
|
|
|
|
||||
Consolidated net sales
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
Cost of goods sold
|
56.2
|
%
|
|
55.9
|
%
|
|
56.5
|
%
|
|
56.5
|
%
|
|
|
|
|
|
|
|
|
||||
Gross margin
|
43.8
|
%
|
|
44.1
|
%
|
|
43.5
|
%
|
|
43.5
|
%
|
Selling, general, and administrative expenses
|
36.1
|
%
|
|
35.7
|
%
|
|
34.9
|
%
|
|
33.5
|
%
|
Royalty income
|
(1.6
|
)%
|
|
(1.5
|
)%
|
|
(1.5
|
)%
|
|
(1.5
|
)%
|
|
|
|
|
|
|
|
|
||||
Operating income
|
9.3
|
%
|
|
9.9
|
%
|
|
10.0
|
%
|
|
11.5
|
%
|
Interest expense
|
1.0
|
%
|
|
1.1
|
%
|
|
1.0
|
%
|
|
1.0
|
%
|
Interest income
|
n/m
|
|
|
n/m
|
|
|
n/m
|
|
|
n/m
|
|
Other (income) expense, net
|
n/m
|
|
|
n/m
|
|
|
n/m
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
||||
Income before income taxes
|
8.4
|
%
|
|
8.8
|
%
|
|
9.1
|
%
|
|
10.2
|
%
|
Provision for income taxes
|
2.9
|
%
|
|
3.1
|
%
|
|
3.2
|
%
|
|
3.6
|
%
|
Net income
|
5.5
|
%
|
|
5.7
|
%
|
|
5.9
|
%
|
|
6.6
|
%
|
|
Fiscal quarter ended
|
|
Two fiscal quarters ended
|
||||||||||||||||||||||||
(dollars in thousands)
|
July 1, 2017
|
|
% of
Total |
|
July 2, 2016
|
|
% of
Total |
|
July 1, 2017
|
|
% of
Total |
|
July 2, 2016
|
|
% of
Total |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Wholesale
|
$
|
217,710
|
|
|
31.5
|
%
|
|
$
|
215,122
|
|
|
33.6
|
%
|
|
$
|
510,265
|
|
|
35.8
|
%
|
|
$
|
507,176
|
|
|
37.2
|
%
|
U.S. Retail
|
391,822
|
|
|
56.6
|
%
|
|
352,782
|
|
|
55.2
|
%
|
|
755,593
|
|
|
53.0
|
%
|
|
706,871
|
|
|
51.8
|
%
|
||||
International
|
82,585
|
|
|
11.9
|
%
|
|
71,567
|
|
|
11.2
|
%
|
|
159,014
|
|
|
11.2
|
%
|
|
149,509
|
|
|
11.0
|
%
|
||||
Total net sales
|
$
|
692,117
|
|
|
100.0
|
%
|
|
$
|
639,471
|
|
|
100.0
|
%
|
|
$
|
1,424,872
|
|
|
100.0
|
%
|
|
$
|
1,363,556
|
|
|
100.0
|
%
|
|
|
U.S. Retail Stores
|
|
|
|
|
|
Store count at December 31, 2016
|
|
792
|
|
Openings
|
|
26
|
|
Closings
|
|
(8
|
)
|
Store count at July 1, 2017
|
|
810
|
|
|
|
|
|
Approximate new store projections for all of fiscal 2017:
|
|
|
|
Openings
|
|
58
|
|
Closings
|
|
(13
|
)
|
Increase (Decrease)
|
|
Change for Second Fiscal Quarter from 2016 to 2017
|
|
Change for First Two Fiscal Quarters from 2016 to 2017
|
|
|
|
|
|
Retail stores
|
|
+0.4%
|
|
(5.0)%
|
eCommerce
|
|
+27.6%
|
|
+23.5%
|
Total
|
|
+6.0%
|
|
+1.1%
|
•
|
Increase of
$20.7 million
from new and non-comparable store sales;
|
•
|
Increase of
$19.6 million
from eCommerce sales, including Skip Hop;
|
•
|
Increase of
$0.6 million
in comparable store sales; and
|
•
|
Decrease of
$2.8 million
due to the impact of store closings.
|
•
|
Increase of $41.3 million from new and non-comparable store sales;
|
•
|
Increase of $37.2 million from eCommerce sales, including Skip Hop;
|
•
|
Decrease of $27.1 million in comparable store sales; and
|
•
|
Decrease of $5.6 million due to the impact of store closings.
|
•
|
Increase of $9.7
million
primarily from our Skip Hop wholesale businesses;
|
•
|
Decrease of $3.7 million from our other international wholesale partners in certain markets;
|
•
|
Increase of $3.8 million from our retail stores in Canada; and
|
•
|
Increase of
$1.2 million
from eCommerce, primarily from our websites in Canada and China.
|
•
|
Increase of $14.3
million
primarily from our Skip Hop and China wholesale businesses;
|
•
|
Decrease of $11.6 million from our other international wholesale partners in certain markets;
|
•
|
Increase of $3.7 million from our retail stores in Canada; and
|
•
|
Increase of $3.1 million from eCommerce, primarily from our websites in Canada and China.
|
|
|
Canada Retail Stores
|
|
|
|
|
|
Store count at December 31, 2016
|
|
164
|
|
Openings
|
|
6
|
|
Closings
|
|
(2
|
)
|
Store count at July 1, 2017
|
|
168
|
|
|
|
|
|
Approximate new store projections for all of fiscal 2017:
|
|
|
|
Openings
|
|
16
|
|
Closings
|
|
2
|
|
•
|
$11.5 million
increase in expenses related to retail store operations, primarily due to new store openings;
|
•
|
$7.8 million increase in expenses related to selling, distribution, and administrative expenses for Skip Hop;
|
•
|
$2.8 million increase in expenses related to eCommerce operations;
|
•
|
$2.4 million increase in expenses related to marketing and brand management;
|
•
|
$2.1 million increase in performance-based compensation expenses; and
|
•
|
$0.6 million increase in expenses related to business development.
|
•
|
$2.8 million decrease in other general and administrative expenses;
|
•
|
$1.9 million decrease in information technology and systems costs; and
|
•
|
$0.8 million decrease in amortization of the H.W.Carter & Sons trademarks.
|
•
|
$21.8 million increase in expenses related to retail store operations, primarily due to new store openings;
|
•
|
$10.5 million increase in expenses related to selling, distribution, and administrative expenses for Skip Hop;
|
•
|
$6.1 million increase in expenses related to eCommerce operations;
|
•
|
$3.9 million increase in expenses related to marketing and brand management;
|
•
|
$2.7 million increase in expenses related to Skip Hop acquisition costs, direct sourcing initiatives and business
|
•
|
$0.4 million increase in performance-based compensation expenses.
|
•
|
$2.2 million decrease in information technology and systems costs;
|
•
|
$1.7 million decrease in amortization of the H.W.Carter & Sons trademarks; and
|
•
|
$1.0 million decrease in other general and administrative expenses.
|
(dollars in thousands)
|
|
U.S. Wholesale
|
|
U.S. Retail
|
|
International
|
|
Corporate Expenses
|
|
Total
|
||||||||||
Operating income (loss) for second quarter of fiscal 2016
|
|
$
|
41,509
|
|
|
$
|
36,952
|
|
|
$
|
9,105
|
|
|
$
|
(24,323
|
)
|
|
$
|
63,243
|
|
Favorable (unfavorable) change in the second quarter of fiscal 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross profit
|
|
(946
|
)
|
|
18,216
|
|
|
4,225
|
|
|
(220
|
)
|
|
21,275
|
|
|||||
Royalty income
|
|
(314
|
)
|
|
1,971
|
|
|
28
|
|
|
—
|
|
|
1,685
|
|
|||||
SG&A expenses
|
|
(4,443
|
)
|
|
(14,797
|
)
|
|
(5,761
|
)
|
|
3,319
|
|
|
(21,682
|
)
|
|||||
Operating income (loss) for second quarter of fiscal 2017
|
|
$
|
35,806
|
|
|
$
|
42,342
|
|
|
$
|
7,597
|
|
|
$
|
(21,224
|
)
|
|
$
|
64,521
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
U.S. Wholesale
|
|
U.S. Retail
|
|
International
|
|
Corporate Expenses
|
|
Total
|
||||||||||
Operating income (loss) for two quarters of fiscal 2016
|
|
$
|
109,920
|
|
|
$
|
76,421
|
|
|
$
|
17,546
|
|
|
$
|
(47,636
|
)
|
|
$
|
156,251
|
|
Favorable (unfavorable) change in the two quarters of fiscal 2017
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross profit
|
|
1,469
|
|
|
22,221
|
|
|
2,294
|
|
|
164
|
|
|
26,148
|
|
|||||
Royalty income
|
|
(515
|
)
|
|
2,490
|
|
|
(807
|
)
|
|
—
|
|
|
1,168
|
|
|||||
SG&A expenses
|
|
(5,373
|
)
|
|
(28,890
|
)
|
|
(7,751
|
)
|
|
1,534
|
|
|
(40,480
|
)
|
|||||
Operating income (loss) for two quarters of fiscal 2017
|
|
$
|
105,501
|
|
|
$
|
72,242
|
|
|
$
|
11,282
|
|
|
$
|
(45,938
|
)
|
|
$
|
143,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Wholesale
|
|
U.S. Retail
|
|
International
|
|||
Operating margin for the second quarter of fiscal 2016
|
|
19.3
|
%
|
|
10.5
|
%
|
|
12.7
|
%
|
Favorable (unfavorable) bps change in the second quarter of fiscal 2017
|
|
|
|
|
|
|
|||
Gross profit
|
|
(80) bps
|
|
|
(60) bps
|
|
|
(140) bps
|
|
Royalty income
|
|
(20) bps
|
|
|
40 bps
|
|
|
(20) bps
|
|
SG&A expenses
|
|
(190) bps
|
|
|
50 bps
|
|
|
(190) bps
|
|
Operating margin for the second quarter of fiscal 2017
|
|
16.4
|
%
|
|
10.8
|
%
|
|
9.2
|
%
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
U.S. Wholesale
|
|
U.S. Retail
|
|
International
|
|||
Operating margin for the first two quarters of fiscal 2016
|
|
21.7
|
%
|
|
10.8
|
%
|
|
11.7
|
%
|
Favorable (unfavorable) bps change in the first two quarters of fiscal 2017
|
|
|
|
|
|
|
|||
Gross profit
|
|
10 bps
|
|
|
(50) bps
|
|
|
(130) bps
|
|
Royalty income
|
|
(10) bps
|
|
|
30 bps
|
|
|
(60) bps
|
|
SG&A expenses
|
|
(100) bps
|
|
|
(100) bps
|
|
|
(270) bps
|
|
Operating margin for the first two quarters of fiscal 2017
|
|
20.7
|
%
|
|
9.6
|
%
|
|
7.1
|
%
|
|
|
(aa)
|
|
(bb)
|
|
(cc)
|
•
|
80 bps decrease in gross profit primarily due to higher customer support and sourcing costs;
|
•
|
190 bps increase in SG&A expenses, primarily due to a:
|
◦
|
120bps increase in administrative, distribution, and selling expenses;
|
◦
|
40 bps increase in marketing and brand management expenses;
|
◦
|
20 bps increase in provisions for accounts receivable; and
|
•
|
20 bps decrease in royalty income due to the insourcing of formerly licensed product categories.
|
•
|
10 bps increase in gross profit;
|
•
|
100 bps increase in SG&A expenses, primarily due to a:
|
◦
|
100 bps increase in distribution, selling, and administrative expenses;
|
◦
|
20 bps increase in marketing and brand management expenses; and
|
◦
|
10 bps decrease in provisions for accounts receivable.
|
•
|
60 bps decrease in gross profit due to increased promotional activity and provisions for inventory, partially offset by lower product costs;
|
•
|
50 bps decrease in SG&A expenses, primarily due to a:
|
•
|
100 bps decrease in expenses associated with new retail stores;
|
•
|
20 bps increase in marketing and brand management expenses.
|
•
|
20 bps increase in expenses related to eCommerce expansion; and
|
•
|
40 bps increase in royalty income due to sales growth from our domestic licensees.
|
•
|
50 bps decrease in gross profit due to increased promotional activity and provisions for inventory, partially offset by lower products costs;
|
•
|
100 bps increase in SG&A expenses, primarily due to a:
|
•
|
40 bps increase in expenses associated with eCommerce expansion;
|
•
|
20 bps increase in expenses associated with new retail stores;
|
•
|
20 bps increase in distribution and freight expenses;
|
•
|
20 bps increase in marketing and brand management expenses; and
|
•
|
30 bps increase in royalty income due to sales growth from our domestic licensees.
|
•
|
140 bps decrease in gross profit primarily due to a lower average gross margin for wholesale business and unfavorable foreign currency impacts, partially offset by lower provisions for inventory;
|
•
|
190 bps increase in SG&A expenses, primarily due to a:
|
•
|
90 bps increase in expenses associated with new retail stores;
|
•
|
90 bps increase in provisions for accounts receivable;
|
•
|
80 bps increase in selling and marketing expenses;
|
•
|
30 bps increase in general and administrative expenses;
|
•
|
10 bps increase in expenses associated with eCommerce;
|
•
|
140 bps decrease in distribution and freight expenses; and
|
•
|
20 bps decrease in royalty income due to a reduction in the number of licensees.
|
•
|
130 bps decrease in gross profit, primarily due to a lower average gross margin for wholesale business and unfavorable foreign currency exchange impacts;
|
•
|
270 bps increase in SG&A expenses, primarily due to a:
|
•
|
170 bps increase in expenses associated with new retail stores;
|
•
|
70 bps increase in expenses associated with eCommerce;
|
•
|
60 bps increase in selling and marketing expenses;
|
•
|
50 bps increase in provisions for accounts receivable;
|
•
|
30 bps decrease in general and administrative expenses;
|
•
|
100 bps decrease in distribution expenses; and
|
•
|
60 bps decrease in royalty income due to a reduction in the number of licensees.
|
Period
|
|
Total number
of shares
purchased
(1)
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs (2)
|
|
Approximate
dollar value of shares that may
yet be
purchased
under the plans
or programs (3)
|
|
|
|
|
|
|
|
|
|
April 2, 2017 through April 29, 2017
|
|
168,100
|
|
$89.88
|
|
168,100
|
|
$212,665,846
|
|
|
|
|
|
|
|
|
|
April 30, 2017 through May 27, 2017
|
|
181,401
|
|
$88.97
|
|
180,985
|
|
$196,562,961
|
|
|
|
|
|
|
|
|
|
May 28, 2017 through July 1, 2017
|
|
238,380
|
|
$85.55
|
|
238,380
|
|
$176,169,921
|
|
|
|
|
|
|
|
|
|
Total
|
|
587,881
|
|
|
|
587,465
|
|
|
(1)
|
Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards. There were
416
shares surrendered between
April 2, 2017
and
July 1, 2017
.
|
(2)
|
Share purchases during the
second
quarter of fiscal 2017 were made in compliance with all applicable rules and regulations and in accordance with the share repurchase authorizations described in Note 5 to our accompanying unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
|
(3)
|
Under share repurchase authorizations approved by our Board of Directors.
|
Exhibit Number
|
Description of Exhibits
|
|
|
3.1
|
Certificate of Incorporation of Carter's, Inc., as amended on May 22, 2017 (incorporated by reference to Exhibit 3.1 of Carter's, Inc.'s Current Report on Form 8-K filed on May 23, 2017).
|
3.2
|
Amended and Restated By-Laws of Carter's, Inc. (incorporated by reference to Exhibit 3.2 of Carter's, Inc.'s Current Report on Form 8-K filed on May 23, 2017).
|
31.1
|
Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.
|
31.2
|
Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.
|
32
|
Section 1350 Certification.
|
101
|
Interactive Data File.
|
July 27, 2017
|
/s/ MICHAEL D. CASEY
|
|
Michael D. Casey
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
July 27, 2017
|
/s/ RICHARD F. WESTENBERGER
|
|
Richard F. Westenberger
|
|
Executive Vice President and
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
1 Year Carters Chart |
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