falsedesktopCRI2020-09-26000106082220000019{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Part I. Financial Information\t\tPage\nItem 1\tFinancial Statements\t\n\tUnaudited Condensed Consolidated Balance Sheets as of September 26 2020 December 28 2019 and September 28 2019\t1\n\tUnaudited Condensed Consolidated Statements of Operations for the fiscal quarter and three fiscal quarters ended September 26 2020 and September 28 2019\t2\n\tUnaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter and three fiscal quarters ended September 26 2020 and September 28 2019\t3\n\tUnaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the fiscal quarters ended September 26 2020 June 27 2020 March 28 2020 September 28 2019 June 29 2019 and March 30 2019\t4\n\tUnaudited Condensed Consolidated Statements of Cash Flows for the three fiscal quarters ended September 26 2020 and September 28 2019\t6\n\tNotes to the Unaudited Condensed Consolidated Financial Statements\t7\nItem 2\tManagement's Discussion and Analysis of Financial Condition and Results of Operations\t23\nItem 3\tQuantitative and Qualitative Disclosures about Market Risk\t37\nItem 4\tControls and Procedures\t37\nPart II. Other Information\t\t\nItem 1\tLegal Proceedings\t39\nItem 1A\tRisk Factors\t39\nItem 2\tUnregistered Sales of Equity Securities and Use of Proceeds\t39\nItem 3\tDefaults upon Senior Securities\t39\nItem 4\tMine Safety Disclosures\t39\nItem 5\tOther Information\t39\nItem 6\tExhibits\t40\nSignatures\t\t41\nCertifications\t\t\n", "q10k_tbl_1": "\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nASSETS\t\t\t\nCurrent assets:\t\t\t\nCash and cash equivalents\t831175\t214311\t153936\nAccounts receivable net of allowance for credit losses of $7675 $6354 $4591 respectively\t263231\t251005\t293203\nFinished goods inventories net of inventory reserves of $30053 $9283 and $19583 respectively\t646608\t593987\t723242\nPrepaid expenses and other current assets\t56493\t48454\t53264\nTotal current assets\t1797507\t1107757\t1223645\nProperty plant and equipment net of accumulated depreciation of $576123 $523848 and $504833 respectively\t274574\t320168\t330371\nOperating lease assets\t619057\t687024\t709523\nTradenames net\t307955\t334642\t334705\nGoodwill\t209507\t229026\t228235\nCustomer relationships net\t38147\t41126\t41890\nOther assets\t34874\t33374\t31211\nTotal assets\t3281621\t2753117\t2899580\nLIABILITIES AND STOCKHOLDERS' EQUITY\t\t\t\nCurrent liabilities:\t\t\t\nAccounts payable\t473473\t183641\t205782\nCurrent operating lease liabilities\t172364\t160228\t158524\nOther current liabilities\t115069\t131631\t119862\nTotal current liabilities\t760906\t475500\t484168\nLong-term debt net\t989086\t594672\t769525\nDeferred income taxes\t60160\t74370\t78916\nLong-term operating lease liabilities\t587099\t664372\t691717\nOther long-term liabilities\t62489\t64073\t62520\nTotal liabilities\t2459740\t1872987\t2086846\nCommitments and contingencies - Note 14\t\t\t\nStockholders' equity:\t\t\t\nPreferred stock; par value $.01 per share; 100000 shares authorized; none issued or outstanding at September 26 2020 December 28 2019 and September 28 2019\t0\t0\t0\nCommon stock voting; par value $.01 per share; 150000000 shares authorized; 43648671 43963103 and 44287636 shares issued and outstanding at September 26 2020 December 28 2019 and September 28 2019 respectively\t436\t440\t443\nAdditional paid-in capital\t9258\t0\t0\nAccumulated other comprehensive loss\t(41402)\t(35634)\t(38908)\nRetained earnings\t853589\t915324\t851199\nTotal stockholders' equity\t821881\t880130\t812734\nTotal liabilities and stockholders' equity\t3281621\t2753117\t2899580\n", "q10k_tbl_2": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nNet sales\t865080\t943322\t2034437\t2418764\nCost of goods sold\t483333\t540808\t1170778\t1376336\nAdverse purchase commitments (inventory and raw materials) net\t(1968)\t303\t16166\t1354\nGross profit\t383715\t402211\t847493\t1041074\nRoyalty income net\t9063\t9192\t19989\t27371\nSelling general and administrative expenses\t279251\t296733\t767237\t828540\nGoodwill impairment\t0\t0\t17742\t0\nIntangible asset impairment\t0\t30800\t26500\t30800\nOperating income\t113527\t83870\t56003\t209105\nInterest expense\t16347\t9966\t40523\t28667\nInterest income\t(330)\t(200)\t(1217)\t(937)\nOther (income) expense net\t(2758)\t483\t2647\t474\nLoss on extinguishment of debt\t0\t0\t0\t7823\nIncome before income taxes\t100268\t73621\t14050\t173078\nIncome tax provision\t19027\t13369\t3347\t34423\nNet income\t81241\t60252\t10703\t138655\nBasic net income per common share\t1.86\t1.35\t0.25\t3.08\nDiluted net income per common share\t1.85\t1.34\t0.24\t3.06\nDividend declared and paid per common share\t0\t0.50\t0.60\t1.50\n", "q10k_tbl_3": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nNet income\t81241\t60252\t10703\t138655\nOther comprehensive income (loss):\t\t\t\t\nForeign currency translation adjustments\t3643\t(2347)\t(5768)\t3431\nComprehensive income\t84884\t57905\t4935\t142086\n", "q10k_tbl_4": "\tCommon stock - shares\tCommon stock - $\tAdditional paid-in capital\tAccumulated other comprehensive loss\tRetained earnings\tTotal stockholders' equity\nBalance at December 29 2018\t45629014\t456\t0\t(40839)\t909816\t869433\nExercise of stock options\t72192\t1\t4779\t0\t0\t4780\nWithholdings from vesting of restricted stock)\t(43844\t0\t(4077)\t0\t0\t(4077)\nRestricted stock activity\t182722\t2\t(2)\t0\t0\t0\nStock-based compensation expense\t0\t0\t4613\t0\t0\t4613\nRepurchase of common stock)\t(460257\t(5)\t(5313)\t0\t(34648)\t(39966)\nCash dividends declared and paid\t0\t0\t0\t0\t(22756)\t(22756)\nComprehensive income\t0\t0\t0\t2911\t34466\t37377\nReclassification of tax effects(*)\t0\t0\t0\t(1500)\t1500\t0\nBalance at March 30 2019\t45379827\t454\t0\t(39428)\t888378\t849404\nExercise of stock options\t26264\t0\t1566\t0\t0\t1566\nWithholdings from vesting of restricted stock)\t(505\t0\t(49)\t0\t0\t(49)\nRestricted stock activity\t8597\t0\t0\t0\t0\t0\nStock-based compensation expense\t0\t0\t5194\t0\t0\t5194\nRepurchase of common stock)\t(545620\t(5)\t(6711)\t0\t(45761)\t(52477)\nCash dividends declared and paid\t0\t0\t0\t0\t(22545)\t(22545)\nComprehensive income\t0\t0\t0\t2867\t43937\t46804\nBalance at June 29 2019\t44868563\t449\t0\t(36561)\t864009\t827897\nExercise of stock options\t8490\t0\t535\t0\t0\t535\nWithholdings from vesting of restricted stock)\t(1013\t0\t(88)\t0\t0\t(88)\nRestricted stock activity\t13639\t0\t0\t0\t0\t0\nStock-based compensation expense\t0\t0\t3733\t0\t0\t3733\nRepurchase of common stock)\t(602043\t(6)\t(4180)\t0\t(50835)\t(55021)\nCash dividends declared and paid\t0\t0\t0\t0\t(22227)\t(22227)\nComprehensive income\t0\t0\t0\t(2347)\t60252\t57905\nBalance at September 28 2019\t44287636\t443\t0\t(38908)\t851199\t812734\n", "q10k_tbl_5": "\tCommon stock - shares\tCommon stock - $\tAdditional paid-in capital\tAccumulated other comprehensive loss\tRetained earnings\tTotal stockholders' equity\nBalance at December 28 2019\t43963103\t440\t0\t(35634)\t915324\t880130\nExercise of stock options\t33158\t0\t1840\t0\t0\t1840\nWithholdings from vesting of restricted stock)\t(43611\t0\t(4712)\t0\t0\t(4712)\nRestricted stock activity\t132759\t1\t(1)\t0\t0\t0\nStock-based compensation expense\t0\t0\t1945\t0\t0\t1945\nRepurchase of common stock)\t(474684\t(5)\t928\t0\t(46178)\t(45255)\nCash dividends declared and paid\t0\t0\t0\t0\t(26260)\t(26260)\nComprehensive loss\t0\t0\t0\t(12992)\t(78694)\t(91686)\nBalance at March 28 2020\t43610725\t436\t0\t(48626)\t764192\t716002\nExercise of stock options\t14180\t0\t1076\t0\t0\t1076\nWithholdings from vesting of restricted stock)\t(1016\t0\t(77)\t0\t0\t(77)\nRestricted stock activity\t12287\t0\t0\t0\t0\t0\nStock-based compensation expense\t0\t0\t4540\t0\t0\t4540\nComprehensive income\t0\t0\t0\t3581\t8156\t11737\nBalance at June 27 2020\t43636176\t436\t5539\t(45045)\t772348\t733278\nExercise of stock options\t12811\t0\t812\t0\t0\t812\nWithholdings from vesting of restricted stock)\t(1744\t0\t(139)\t0\t0\t(139)\nRestricted stock activity\t1428\t0\t0\t0\t0\t0\nStock-based compensation expense\t0\t0\t3046\t0\t0\t3046\nComprehensive income\t0\t0\t0\t3643\t81241\t84884\nBalance at September 26 2020\t43648671\t436\t9258\t(41402)\t853589\t821881\n", "q10k_tbl_6": "\tThree fiscal quarters ended\t\n\tSeptember 26 2020\tSeptember 28 2019\nCash flows from operating activities:\t\t\nNet income\t10703\t138655\nAdjustments to reconcile net income to net cash provided by operating activities:\t\t\nDepreciation of property plant and equipment\t66985\t68005\nAmortization of intangible assets\t2784\t2810\nProvisions for (recoveries of) excess and obsolete inventory\t20912\t4567\nGoodwill impairment\t17742\t0\nIntangible asset impairments\t26500\t30800\nOther asset impairments and loss on disposal of property plant and equipment net of recoveries\t9395\t407\nAmortization of debt issuance costs\t1641\t1087\nStock-based compensation expense\t9531\t13540\nUnrealized foreign currency exchange loss net\t1354\t176\nProvisions for (recoveries of) doubtful accounts receivable from customers\t7702\t(2063)\nLoss on extinguishment of debt\t0\t7823\nDeferred income tax (benefit) expense\t(16697)\t8300\nEffect of changes in operating assets and liabilities:\t\t\nAccounts receivable\t(21576)\t(32792)\nFinished goods inventories\t(76739)\t(152023)\nPrepaid expenses and other assets\t(7660)\t(16688)\nAccounts payable and other liabilities\t267551\t751\nNet cash provided by operating activities\t320128\t73355\nCash flows from investing activities:\t\t\nCapital expenditures\t(25212)\t(46138)\nDisposals and recoveries from property plant and equipment\t0\t749\nNet cash used in investing activities\t(25212)\t(45389)\nCash flows from financing activities:\t\t\nProceeds from senior notes due 2025\t500000\t0\nProceeds from senior notes due 2027\t0\t500000\nPayment of senior notes due 2021\t0\t(400000)\nPremiums paid to extinguish debt\t0\t(5252)\nPayment of debt issuance costs\t(7639)\t(5793)\nBorrowings under secured revolving credit facility\t644000\t265000\nPayments on secured revolving credit facility\t(744000)\t(186000)\nRepurchases of common stock\t(45255)\t(147464)\nDividends paid\t(26260)\t(67528)\nWithholdings from vestings of restricted stock\t(4928)\t(4214)\nProceeds from exercises of stock options\t3728\t6881\nNet cash provided by (used in) financing activities\t319646\t(44370)\nNet effect of exchange rate changes on cash and cash equivalents\t2302\t263\nNet increase (decrease) in cash and cash equivalents\t616864\t(16141)\nCash and cash equivalents beginning of period\t214311\t170077\nCash and cash equivalents end of period\t831175\t153936\n", "q10k_tbl_7": "\tFiscal quarter ended September 26 2020\t\t\t\n(dollars in thousands)\tU.S. Retail\tU.S. Wholesale\tInternational\tTotal\nWholesale channel\t0\t302135\t37838\t339973\nDirect-to-consumer\t449150\t0\t75957\t525107\n\t449150\t302135\t113795\t865080\nRoyalty income\t3902\t3986\t1175\t9063\n", "q10k_tbl_8": "\tThree fiscal quarters ended September 26 2020\t\t\t\n(dollars in thousands)\tU.S. Retail\tU.S. Wholesale\tInternational\tTotal\nWholesale channel\t0\t706009\t92110\t798119\nDirect-to-consumer\t1085883\t0\t150435\t1236318\n\t1085883\t706009\t242545\t2034437\nRoyalty income\t7648\t9576\t2765\t19989\n", "q10k_tbl_9": "\tFiscal quarter ended September 28 2019\t\t\t\n(dollars in thousands)\tU.S. Retail\tU.S. Wholesale\tInternational\tTotal\nWholesale channel\t0\t352256\t56101\t408357\nDirect-to-consumer\t464100\t0\t70865\t534965\n\t464100\t352256\t126966\t943322\nRoyalty income\t4244\t4038\t910\t9192\n", "q10k_tbl_10": "\tThree fiscal quarters ended September 28 2019\t\t\t\n(dollars in thousands)\tU.S. Retail\tU.S. Wholesale\tInternational\tTotal\nWholesale channel\t0\t856713\t121631\t978344\nDirect-to-consumer\t1264283\t0\t176137\t1440420\n\t1264283\t856713\t297768\t2418764\nRoyalty income\t10688\t14051\t2632\t27371\n", "q10k_tbl_11": "(dollars in thousands)\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nTrade receivables from wholesale customers net(1)\t255214\t239059\t277234\nRoyalties receivable\t8596\t6982\t9128\nTenant allowances and other receivables\t12064\t16247\t16281\nTotal gross receivables\t275874\t262288\t302643\nLess:\t\t\t\nWholesale accounts receivable reserves(2)\t(12643)\t(11283)\t(9440)\nAccounts receivable net(1)\t263231\t251005\t293203\n", "q10k_tbl_12": "(dollars in thousands)\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nContract liabilities - current:\t\t\t\nUnredeemed gift cards\t15977\t17563\t14264\nUnredeemed customer loyalty rewards\t5510\t5615\t5109\nCarter's credit card - upfront bonus(1)\t714\t714\t714\nTotal contract liabilities - current(2)\t22201\t23892\t20087\n", "q10k_tbl_13": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n(dollars in thousands)\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nOperating lease cost\t44230\t45584\t136180\t133491\nVariable lease cost (*)\t19635\t15492\t55139\t46692\nNet lease cost\t63865\t61076\t191319\t180183\n", "q10k_tbl_14": "\tFiscal quarter ended\t\n\tSeptember 26 2020\tSeptember 28 2019\nWeighted average remaining operating lease term (years)\t5.6\t6.1\nWeighted average discount rate for operating leases\t3.71%\t4.39%\n", "q10k_tbl_15": "(dollars in thousands)\tOperating leases\nRemainder of 2020\t48575\n2021\t194335\n2022\t158594\n2023\t130414\n2024\t105059\n2025\t76501\nAfter 2025\t128220\nTotal lease payments\t841698\nLess: Interest\t(82235)\nPresent value of lease liabilities(*)\t759463\n", "q10k_tbl_16": "(dollars in thousands)\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nCumulative foreign currency translation adjustments\t(32290)\t(26522)\t(29533)\nPension and post-retirement obligations(*)\t(9112)\t(9112)\t(9375)\nTotal accumulated other comprehensive loss\t(41402)\t(35634)\t(38908)\n", "q10k_tbl_17": "(dollars in thousands)\tU.S. Retail\tU.S. Wholesale\tInternational\tTotal\nBalance at December 29 2018\t83934\t74454\t68713\t227101\nForeign currency impact\t0\t0\t1134\t1134\nBalance at September 28 2019\t83934\t74454\t69847\t228235\nBalance at December 28 2019\t83934\t74454\t70638\t229026\nGoodwill impairment(*)\t0\t0\t(17742)\t(17742)\nForeign currency impact\t0\t0\t(1777)\t(1777)\nBalance at September 26 2020\t83934\t74454\t51119\t209507\n", "q10k_tbl_18": "\t\tSeptember 26 2020\t\t\tDecember 28 2019\t\t\n(dollars in thousands)\tWeighted-average useful life\tGross amount\tAccumulated amortization\tNet amount\tGross amount\tAccumulated amortization\tNet amount\nCarter's tradename\tIndefinite\t220233\t0\t220233\t220233\t0\t220233\nOshKosh tradename(1)\tIndefinite\t70000\t0\t70000\t85500\t0\t85500\nSkip Hop tradename(2)\tIndefinite\t15000\t0\t15000\t26000\t0\t26000\nFinite-life tradenames\t5-20 years\t3911\t1189\t2722\t3911\t1002\t2909\nTotal tradenames net\t\t309144\t1189\t307955\t335644\t1002\t334642\nSkip Hop customer relationships\t15 years\t47300\t11039\t36261\t47300\t8657\t38643\nCarter's Mexico customer relationships\t10 years\t2875\t989\t1886\t3258\t775\t2483\nTotal customer relationships net\t\t50175\t12028\t38147\t50558\t9432\t41126\n", "q10k_tbl_19": "\t\tSeptember 28 2019\t\t\n(dollars in thousands)\tWeighted-average useful life\tGross amount\tAccumulated amortization\tNet amount\nCarter's tradename\tIndefinite\t220233\t0\t220233\nOshKosh tradename\tIndefinite\t85500\t0\t85500\nSkip Hop tradename(3)\tIndefinite\t26000\t0\t26000\nFinite-life tradenames\t5-20 years\t3911\t939\t2972\nTotal tradenames net\t\t335644\t939\t334705\nSkip Hop customer relationships\t15 years\t47300\t7863\t39437\nCarter's Mexico customer relationships\t10 years\t3148\t695\t2453\nTotal customer relationships net\t\t50448\t8558\t41890\n", "q10k_tbl_20": "(dollars in thousands)\tAmortization expense\n2021\t3702\n2022\t3702\n2023\t3660\n2024\t3630\n2025\t3630\n", "q10k_tbl_21": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nNumber of shares repurchased\t0\t602043\t474684\t1607920\nAggregate cost of shares repurchased (dollars in thousands)\t0\t55021\t45255\t147464\nAverage price per share\t0\t91.39\t95.34\t91.71\n", "q10k_tbl_22": "(dollars in thousands)\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\n5.500% Senior Notes due 2025\t500000\t0\t0\n5.625% Senior Notes due 2027\t500000\t500000\t500000\nTotal senior notes\t1000000\t500000\t500000\nLess unamortized issuance-related costs for senior notes\t(10914)\t(5328)\t(5475)\nSenior notes net\t989086\t494672\t494525\nSecured revolving credit facility\t0\t100000\t275000\nTotal long-term debt net\t989086\t594672\t769525\n", "q10k_tbl_23": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n(dollars in thousands)\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nStock options\t597\t904\t2065\t3146\nRestricted stock:\t\t\t\t\nTime-based awards\t2449\t2288\t7798\t7034\nPerformance-based awards\t0\t299\t(1927)\t1957\nStock awards\t0\t242\t1595\t1403\nTotal\t3046\t3733\t9531\t13540\n", "q10k_tbl_24": "\tFiscal quarter ended\t\tThree fiscal quarters ended\t\n\tSeptember 26 2020\tSeptember 28 2019\tSeptember 26 2020\tSeptember 28 2019\nWeighted-average number of common and common equivalent shares outstanding:\t\t\t\t\nBasic number of common shares outstanding\t43193752\t44144135\t43237319\t44640413\nDilutive effect of equity awards\t156878\t287904\t174351\t302832\nDiluted number of common and common equivalent shares outstanding\t43350630\t44432039\t43411670\t44943245\nBasic net income per common share (in thousands except per share data):\t\t\t\t\nNet income\t81241\t60252\t10703\t138655\nIncome allocated to participating securities\t(837)\t(565)\t(88)\t(1244)\nNet income available to common shareholders\t80404\t59687\t10615\t137411\nBasic net income per common share\t1.86\t1.35\t0.25\t3.08\nDiluted net income per common share (in thousands except per share data):\t\t\t\t\nNet income\t81241\t60252\t10703\t138655\nIncome allocated to participating securities\t(834)\t(563)\t(89)\t(1239)\nNet income available to common shareholders\t80407\t59689\t10614\t137416\nDiluted net income per common share\t1.85\t1.34\t0.24\t3.06\nAnti-dilutive awards excluded from diluted earnings per share computation\t729476\t691707\t744499\t505642\n", "q10k_tbl_25": "(dollars in thousands)\tSeptember 26 2020\tDecember 28 2019\tSeptember 28 2019\nIncome taxes payable\t18744\t23269\t26909\n", "q10k_tbl_26": "\tFiscal quarter ended\t\t\t\tThree fiscal quarters ended\t\t\t\n(dollars in thousands)\tSeptember 26 2020\t% of Total Net Sales\tSeptember 28 2019\t% of Total Net Sales\tSeptember 26 2020\t% of Total Net Sales\tSeptember 28 2019\t% of Total Net Sales\nNet sales:\t\t\t\t\t\t\t\t\nU.S. Retail\t449150\t51.9%\t464100\t49.2%\t1085883\t53.4%\t1264283\t52.3%\nU.S. Wholesale\t302135\t34.9%\t352256\t37.3%\t706009\t34.7%\t856713\t35.4%\nInternational\t113795\t13.2%\t126966\t13.5%\t242545\t11.9%\t297768\t12.3%\nTotal net sales\t865080\t100.0%\t943322\t100.0%\t2034437\t100.0%\t2418764\t100.0%\nOperating income (loss):\t\t% of Segment Net Sales\t\t% of Segment Net Sales\t\t% of Segment Net Sales\t\t% of Segment Net Sales\nU.S. Retail\t47559\t10.6%\t49472\t10.7%\t38902\t3.6%\t124567\t9.9%\nU.S. Wholesale\t65718\t21.8%\t54391\t15.4%\t89141\t12.6%\t145181\t16.9%\nInternational\t17400\t15.3%\t6136\t4.8%\t(15819)\t(6.5)%\t15351\t5.2%\nCorporate expenses(*)\t(17150)\tn/a\t(26129)\tn/a\t(56221)\tn/a\t(75994)\tn/a\nTotal operating income\t113527\t13.1%\t83870\t8.9%\t56003\t2.8%\t209105\t8.6%\n", "q10k_tbl_27": "(dollars in millions)\tFiscal quarter ended September 26 2020\t\t\tThree fiscal quarters ended September 26 2020\t\t\nCharges:\tU.S. Retail\tU.S. Wholesale\tInternational\tU.S. Retail\tU.S. Wholesale\tInternational\nOrganizational restructuring(1)\t0.3\t0.2\t0.3\t3.4\t1.5\t1.9\nGoodwill impairment\t0\t0\t0\t0\t0\t17.7\nSkip Hop tradename impairment charge\t0\t0\t0\t0.5\t6.8\t3.7\nOshKosh tradename impairment charge\t0\t0\t0\t13.6\t1.6\t0.3\nIncremental costs associated with COVID-19 pandemic\t1.6\t1.4\t0.3\t8.3\t8.5\t2.0\nRetail store operating leases and other long-lived asset impairments net of gain(2)\t1.5\t0\t0\t6.3\t0\t0.2\nTotal charges\t3.4\t1.6\t0.6\t32.1\t18.4\t25.8\n", "q10k_tbl_28": "(dollars in millions)\tFiscal quarter ended September 28 2019\t\t\tThree fiscal quarters ended September 28 2019\t\t\nCharges:\tU.S. Retail\tU.S. Wholesale\tInternational\tU.S. Retail\tU.S. Wholesale\tInternational\nBenefit related to sale of inventory previously reserved in China\t0\t0\t0\t0\t0\t(2.1)\nReversal of store restructuring costs previously recorded during the third quarter of fiscal 2017\t0\t0\t0\t(0.7)\t0\t0\nSkip Hop tradename impairment charge\t1.2\t19.1\t10.5\t1.2\t19.1\t10.5\nTotal charges\t1.2\t19.1\t10.5\t0.5\t19.1\t8.4\n", "q10k_tbl_29": "\tFiscal quarter ended\tThree fiscal quarters ended\n(dollars in thousands)\tSeptember 26 2020\tSeptember 26 2020\nSeverance and other termination benefits\t181\t4423\nLease exit costs\t780\t2495\nRelocation and recruiting\t253\t1755\nOther closure costs\t0\t80\nTotal\t1214\t8753\n", "q10k_tbl_30": "\tFiscal quarter ended\t\t\t\n(dollars in thousands except per share data)\tSeptember 26 2020\tSeptember 28 2019\t Change\t% / bps Change\nConsolidated net sales\t865080\t943322\t(78242)\t(8.3)%\nCost of goods sold\t483333\t540808\t(57475)\t(10.6)%\nAdverse purchase commitments (inventory and raw materials) net\t(1968)\t303\t(2271)\tnm\nGross profit\t383715\t402211\t(18496)\t(4.6)%\nGross profit as % of consolidated net sales\t44.4%\t42.6%\t\t180 bps\nRoyalty income net\t9063\t9192\t(129)\t(1.4)%\nRoyalty income as % of consolidated net sales\t1.0%\t1.0%\t\t0 bps\nSelling general and administrative expenses\t279251\t296733\t(17482)\t(5.9)%\nSG&A expenses as % of consolidated net sales\t32.3%\t31.5%\t\t80 bps\nIntangible asset impairment\t0\t30800\t(30800)\tnm\nOperating income\t113527\t83870\t29657\t35.4%\nOperating income as % of consolidated net sales\t13.1%\t8.9%\t\t420 bps\nInterest expense\t16347\t9966\t6381\t64.0%\nInterest income\t(330)\t(200)\t(130)\t65.0%\nOther (income) expense net\t(2758)\t483\t(3241)\tnm\nIncome before income taxes\t100268\t73621\t26647\t36.2%\nIncome tax provision\t19027\t13369\t5658\t42.3%\nEffective tax rate(*)\t19.0%\t18.2%\t\t80 bps\nNet income\t81241\t60252\t20989\t34.8%\nBasic net income per common share\t1.86\t1.35\t0.51\t37.8%\nDiluted net income per common share\t1.85\t1.34\t0.51\t38.1%\nDividend declared and paid per common share\t0\t0.50\t(0.50)\t(100.0)%\n", "q10k_tbl_31": "\tFiscal quarter ended\t\t\t\t\t\n(dollars in thousands)\tSeptember 26 2020\t% of consolidated net sales\tSeptember 28 2019\t% of consolidated net sales\t Change\t% Change\nNet sales:\t\t\t\t\t\t\nU.S. Retail\t449150\t51.9%\t464100\t49.2%\t(14950)\t(3.2)%\nU.S. Wholesale\t302135\t34.9%\t352256\t37.3%\t(50121)\t(14.2)%\nInternational\t113795\t13.2%\t126966\t13.5%\t(13171)\t(10.4)%\nConsolidated net sales\t865080\t100.0%\t943322\t100.0%\t(78242)\t(8.3)%\nOperating income:\t\t% of segment net sales\t\t% of segment net sales\t\t\nU.S. Retail\t47559\t10.6%\t49472\t10.7%\t(1913)\t(3.9)%\nU.S. Wholesale\t65718\t21.8%\t54391\t15.4%\t11327\t20.8%\nInternational\t17400\t15.3%\t6136\t4.8%\t11264\t183.6%\nUnallocated corporate expenses\t(17150)\tn/a\t(26129)\tn/a\t8979\t34.4%\nConsolidated operating income\t113527\t13.1%\t83870\t8.9%\t29657\t35.4%\n", "q10k_tbl_32": "\tThree fiscal quarters ended\t\t\t\n(dollars in thousands except per share data)\tSeptember 26 2020\tSeptember 28 2019\t Change\t% / bps Change\nConsolidated net sales\t2034437\t2418764\t(384327)\t(15.9)%\nCost of goods sold\t1170778\t1376336\t(205558)\t(14.9)%\nAdverse purchase commitments (inventory and raw materials) net\t16166\t1354\t14812\tnm\nGross profit\t847493\t1041074\t(193581)\t(18.6)%\nGross profit as % of consolidated net sales\t41.7%\t43.0%\t\t(130) bps\nRoyalty income net\t19989\t27371\t(7382)\t(27.0)%\nRoyalty income as % of consolidated net sales\t1.0%\t1.1%\t\t(10) bps\nSelling general and administrative expenses\t767237\t828540\t(61303)\t(7.4)%\nSG&A expenses as % of consolidated net sales\t37.7%\t34.3%\t\t340 bps\nGoodwill impairment\t17742\t0\t17742\tnm\nIntangible asset impairment\t26500\t30800\t(4300)\t(14.0)%\nOperating income\t56003\t209105\t(153102)\t(73.2)%\nOperating income as % of consolidated net sales\t2.8%\t8.6%\t\t(580) bps\nInterest expense\t40523\t28667\t11856\t41.4%\nInterest income\t(1217)\t(937)\t(280)\t29.9%\nOther expense net\t2647\t474\t2173\tnm\nLoss on extinguishment of debt\t0\t7823\t(7823)\tnm\nIncome before income taxes\t14050\t173078\t(159028)\t(91.9)%\nIncome tax provision\t3347\t34423\t(31076)\t(90.3)%\nEffective tax rate(*)\t23.8%\t19.9%\t\t390 bps\nNet income\t10703\t138655\t(127952)\t(92.3)%\nBasic net income per common share\t0.25\t3.08\t(2.83)\t(91.9)%\nDiluted net income per common share\t0.24\t3.06\t(2.82)\t(92.2)%\nDividend declared and paid per common share\t0.60\t1.50\t(0.90)\t(60.0)%\n", "q10k_tbl_33": "\tThree fiscal quarters ended\t\t\t\t\t\n(dollars in thousands)\tSeptember 26 2020\t% of consolidated net sales\tSeptember 28 2019\t% of consolidated net sales\t Change\t% Change\nNet sales:\t\t\t\t\t\t\nU.S. Retail\t1085883\t53.4%\t1264283\t52.3%\t(178400)\t(14.1)%\nU.S. Wholesale\t706009\t34.7%\t856713\t35.4%\t(150704)\t(17.6)%\nInternational\t242545\t11.9%\t297768\t12.3%\t(55223)\t(18.5)%\nConsolidated net sales\t2034437\t100.0%\t2418764\t100.0%\t(384327)\t(15.9)%\nOperating income (loss):\t\t% of segment net sales\t\t% of segment net sales\t\t\nU.S. Retail\t38902\t3.6%\t124567\t9.9%\t(85665)\t(68.8)%\nU.S. Wholesale\t89141\t12.6%\t145181\t16.9%\t(56040)\t(38.6)%\nInternational\t(15819)\t(6.5)%\t15351\t5.2%\t(31170)\t(203.0)%\nUnallocated corporate expenses\t(56221)\tn/a\t(75994)\tn/a\t19773\t26.0%\nConsolidated operating income\t56003\t2.8%\t209105\t8.6%\t(153102)\t(73.2)%\n", "q10k_tbl_34": "Period\tTotal number of shares purchased(1)\tAverage price paid per share\tTotal number of shares purchased as part of publicly announced plans or programs(2)\tApproximate dollar value of shares that may yet be purchased under the plans or programs(3)\nJune 28 2020 through July 25 2020\t0\t0\t0\t650447970\nJuly 26 2020 through August 22 2020\t1744\t79.67\t0\t650447970\nAugust 23 2020 through September 26 2020\t0\t0\t0\t650447970\nTotal\t1744\t79.67\t0\t\n", "q10k_tbl_35": "3.1\tCertificate 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).\n3.2\tAmended 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).\n31.1\tRule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.\n31.2\tRule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.\n32\tSection 1350 Certification.\nExhibit No. (101).INS\tXBRL Instance Document - the instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document\nExhibit No. (101).SCH\tXBRL Taxonomy Extension Schema Document\nExhibit No. (101).CAL\tXBRL Taxonomy Extension Calculation Linkbase Document\nExhibit No. (101).DEF\tXBRL Taxonomy Extension Definition Linkbase Document\nExhibit No. (101).LAB\tXBRL Taxonomy Extension Label Linkbase Document\nExhibit No. (101).PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\nExhibit No. 104\tThe cover page from this Current Report on Form 10-Q formatted as Inline XBRL\n"}{"bs": "q10k_tbl_1", "is": "q10k_tbl_2", "cf": "q10k_tbl_6"}None
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 2020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
001-31829
CARTER’S, INC.
(Exact name of Registrant as specified in its charter)
Delaware
13-3912933
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
Phipps Tower,
3438 Peachtree Road NE, Suite 1800
Atlanta, Georgia30326
(Address of principal executive offices, including zip code)
(678) 791-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share
CRI
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No x
As of October 16, 2020, there were 43,647,576 shares of the registrant's common stock outstanding.
Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter and three fiscal quarters ended September 26, 2020 and September 28, 2019
Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter and three fiscal quarters ended September 26, 2020 and September 28, 2019
Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the fiscal quarters ended September 26, 2020, June 27, 2020, March 28, 2020, September 28, 2019, June 29, 2019 and March 30, 2019
Accounts receivable, net of allowance for credit losses of $7,675, $6,354, $4,591, respectively
263,231
251,005
293,203
Finished goods inventories, net of inventory reserves of $30,053, $9,283, and $19,583, respectively
646,608
593,987
723,242
Prepaid expenses and other current assets
56,493
48,454
53,264
Total current assets
1,797,507
1,107,757
1,223,645
Property, plant, and equipment, net of accumulated depreciation of $576,123, $523,848, and $504,833, respectively
274,574
320,168
330,371
Operating lease assets
619,057
687,024
709,523
Tradenames, net
307,955
334,642
334,705
Goodwill
209,507
229,026
228,235
Customer relationships, net
38,147
41,126
41,890
Other assets
34,874
33,374
31,211
Total assets
$
3,281,621
$
2,753,117
$
2,899,580
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
473,473
$
183,641
$
205,782
Current operating lease liabilities
172,364
160,228
158,524
Other current liabilities
115,069
131,631
119,862
Total current liabilities
760,906
475,500
484,168
Long-term debt, net
989,086
594,672
769,525
Deferred income taxes
60,160
74,370
78,916
Long-term operating lease liabilities
587,099
664,372
691,717
Other long-term liabilities
62,489
64,073
62,520
Total liabilities
$
2,459,740
$
1,872,987
$
2,086,846
Commitments and contingencies - Note 14
Stockholders' equity:
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at September 26, 2020, December 28, 2019, and September 28, 2019
$
—
$
—
$
—
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 43,648,671, 43,963,103 and 44,287,636 shares issued and outstanding at September 26, 2020, December 28, 2019, and September 28, 2019, respectively
436
440
443
Additional paid-in capital
9,258
—
—
Accumulated other comprehensive loss
(41,402
)
(35,634
)
(38,908
)
Retained earnings
853,589
915,324
851,199
Total stockholders' equity
821,881
880,130
812,734
Total liabilities and stockholders' equity
$
3,281,621
$
2,753,117
$
2,899,580
See accompanying notes to the unaudited condensed consolidated financial statements.
1
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
Fiscal quarter ended
Three fiscal quarters ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net sales
$
865,080
$
943,322
$
2,034,437
$
2,418,764
Cost of goods sold
483,333
540,808
1,170,778
1,376,336
Adverse purchase commitments (inventory and raw materials), net
(1,968
)
303
16,166
1,354
Gross profit
383,715
402,211
847,493
1,041,074
Royalty income, net
9,063
9,192
19,989
27,371
Selling, general, and administrative expenses
279,251
296,733
767,237
828,540
Goodwill impairment
—
—
17,742
—
Intangible asset impairment
—
30,800
26,500
30,800
Operating income
113,527
83,870
56,003
209,105
Interest expense
16,347
9,966
40,523
28,667
Interest income
(330
)
(200
)
(1,217
)
(937
)
Other (income) expense, net
(2,758
)
483
2,647
474
Loss on extinguishment of debt
—
—
—
7,823
Income before income taxes
100,268
73,621
14,050
173,078
Income tax provision
19,027
13,369
3,347
34,423
Net income
$
81,241
$
60,252
$
10,703
$
138,655
Basic net income per common share
$
1.86
$
1.35
$
0.25
$
3.08
Diluted net income per common share
$
1.85
$
1.34
$
0.24
$
3.06
Dividend declared and paid per common share
$
—
$
0.50
$
0.60
$
1.50
See accompanying notes to the unaudited condensed consolidated financial statements.
2
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(unaudited)
Fiscal quarter ended
Three fiscal quarters ended
September 26, 2020
September 28, 2019
September 26, 2020
September 28, 2019
Net income
$
81,241
$
60,252
$
10,703
$
138,655
Other comprehensive income (loss):
Foreign currency translation adjustments
3,643
(2,347
)
(5,768
)
3,431
Comprehensive income
$
84,884
$
57,905
$
4,935
$
142,086
See accompanying notes to the unaudited condensed consolidated financial statements.
3
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
(unaudited)
Common stock - shares
Common
stock - $
Additional
paid-in
capital
Accumulated other comprehensive
loss
Retained
earnings
Total
stockholders’
equity
Balance at December 29, 2018
45,629,014
$
456
$
—
$
(40,839
)
$
909,816
$
869,433
Exercise of stock options
72,192
1
4,779
—
—
4,780
Withholdings from vesting of restricted stock
(43,844
)
—
(4,077
)
—
—
(4,077
)
Restricted stock activity
182,722
2
(2
)
—
—
—
Stock-based compensation expense
—
—
4,613
—
—
4,613
Repurchase of common stock
(460,257
)
(5
)
(5,313
)
—
(34,648
)
(39,966
)
Cash dividends declared and paid
—
—
—
—
(22,756
)
(22,756
)
Comprehensive income
—
—
—
2,911
34,466
37,377
Reclassification of tax effects(*)
—
—
—
(1,500
)
1,500
—
Balance at March 30, 2019
45,379,827
$
454
$
—
$
(39,428
)
$
888,378
$
849,404
Exercise of stock options
26,264
—
1,566
—
—
1,566
Withholdings from vesting of restricted stock
(505
)
—
(49
)
—
—
(49
)
Restricted stock activity
8,597
—
—
—
—
—
Stock-based compensation expense
—
—
5,194
—
—
5,194
Repurchase of common stock
(545,620
)
(5
)
(6,711
)
—
(45,761
)
(52,477
)
Cash dividends declared and paid
—
—
—
—
(22,545
)
(22,545
)
Comprehensive income
—
—
—
2,867
43,937
46,804
Balance at June 29, 2019
44,868,563
$
449
$
—
$
(36,561
)
$
864,009
$
827,897
Exercise of stock options
8,490
—
535
—
—
535
Withholdings from vesting of restricted stock
(1,013
)
—
(88
)
—
—
(88
)
Restricted stock activity
13,639
—
—
—
—
—
Stock-based compensation expense
—
—
3,733
—
—
3,733
Repurchase of common stock
(602,043
)
(6
)
(4,180
)
—
(50,835
)
(55,021
)
Cash dividends declared and paid
—
—
—
—
(22,227
)
(22,227
)
Comprehensive income
—
—
—
(2,347
)
60,252
57,905
Balance at September 28, 2019
44,287,636
$
443
$
—
$
(38,908
)
$
851,199
$
812,734
(*)
The Company reclassified $1.5 million of tax benefits from "Accumulated other comprehensive loss" to "Retained earnings" for the tax effects resulting from the December 22, 2017 enactment of the Tax Cuts and Jobs Act in accordance with the adoption of ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income in the first quarter of fiscal 2019.
4
Common stock - shares
Common
stock - $
Additional
paid-in
capital
Accumulated other comprehensive
loss
Retained
earnings
Total
stockholders’
equity
Balance at December 28, 2019
43,963,103
$
440
$
—
$
(35,634
)
$
915,324
$
880,130
Exercise of stock options
33,158
—
1,840
—
—
1,840
Withholdings from vesting of restricted stock
(43,611
)
—
(4,712
)
—
—
(4,712
)
Restricted stock activity
132,759
1
(1
)
—
—
—
Stock-based compensation expense
—
—
1,945
—
—
1,945
Repurchase of common stock
(474,684
)
(5
)
928
—
(46,178
)
(45,255
)
Cash dividends declared and paid
—
—
—
—
(26,260
)
(26,260
)
Comprehensive loss
—
—
—
(12,992
)
(78,694
)
(91,686
)
Balance at March 28, 2020
43,610,725
$
436
$
—
$
(48,626
)
$
764,192
$
716,002
Exercise of stock options
14,180
—
1,076
—
—
1,076
Withholdings from vesting of restricted stock
(1,016
)
—
(77
)
—
—
(77
)
Restricted stock activity
12,287
—
—
—
—
—
Stock-based compensation expense
—
—
4,540
—
—
4,540
Comprehensive income
—
—
—
3,581
8,156
11,737
Balance at June 27, 2020
43,636,176
$
436
$
5,539
$
(45,045
)
$
772,348
$
733,278
Exercise of stock options
12,811
—
812
—
—
812
Withholdings from vesting of restricted stock
(1,744
)
—
(139
)
—
—
(139
)
Restricted stock activity
1,428
—
—
—
—
—
Stock-based compensation expense
—
—
3,046
—
—
3,046
Comprehensive income
—
—
—
3,643
81,241
84,884
Balance at September 26, 2020
43,648,671
$
436
$
9,258
$
(41,402
)
$
853,589
$
821,881
See accompanying notes to the unaudited condensed consolidated financial statements
5
CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three fiscal quarters ended
September 26, 2020
September 28, 2019
Cash flows from operating activities:
Net income
$
10,703
$
138,655
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant, and equipment
66,985
68,005
Amortization of intangible assets
2,784
2,810
Provisions for (recoveries of) excess and obsolete inventory
20,912
4,567
Goodwill impairment
17,742
—
Intangible asset impairments
26,500
30,800
Other asset impairments and loss on disposal of property, plant and equipment, net of recoveries
9,395
407
Amortization of debt issuance costs
1,641
1,087
Stock-based compensation expense
9,531
13,540
Unrealized foreign currency exchange loss, net
1,354
176
Provisions for (recoveries of) doubtful accounts receivable from customers
7,702
(2,063
)
Loss on extinguishment of debt
—
7,823
Deferred income tax (benefit) expense
(16,697
)
8,300
Effect of changes in operating assets and liabilities:
Accounts receivable
(21,576
)
(32,792
)
Finished goods inventories
(76,739
)
(152,023
)
Prepaid expenses and other assets
(7,660
)
(16,688
)
Accounts payable and other liabilities
267,551
751
Net cash provided by operating activities
$
320,128
$
73,355
Cash flows from investing activities:
Capital expenditures
$
(25,212
)
$
(46,138
)
Disposals and recoveries from property, plant, and equipment
—
749
Net cash used in investing activities
$
(25,212
)
$
(45,389
)
Cash flows from financing activities:
Proceeds from senior notes due 2025
$
500,000
$
—
Proceeds from senior notes due 2027
—
500,000
Payment of senior notes due 2021
—
(400,000
)
Premiums paid to extinguish debt
—
(5,252
)
Payment of debt issuance costs
(7,639
)
(5,793
)
Borrowings under secured revolving credit facility
644,000
265,000
Payments on secured revolving credit facility
(744,000
)
(186,000
)
Repurchases of common stock
(45,255
)
(147,464
)
Dividends paid
(26,260
)
(67,528
)
Withholdings from vestings of restricted stock
(4,928
)
(4,214
)
Proceeds from exercises of stock options
3,728
6,881
Net cash provided by (used in) financing activities
$
319,646
$
(44,370
)
Net effect of exchange rate changes on cash and cash equivalents
2,302
263
Net increase (decrease) in cash and cash equivalents
$
616,864
$
(16,141
)
Cash and cash equivalents, beginning of period
214,311
170,077
Cash and cash equivalents, end of period
$
831,175
$
153,936
See accompanying notes to the unaudited condensed consolidated financial statements.
6
CARTER’S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – THE COMPANY
Carter's, Inc. and its wholly owned subsidiaries (collectively, the "Company," "its," "us" and "our") design, source, and market branded childrenswear and accessories under the Carter's, OshKosh B'gosh ("OshKosh"), Skip Hop, Child of Mine, Just One You, Simple Joys, Precious Baby, Little Planet, and other brands. The Company's products are sourced through contractual arrangements with manufacturers worldwide for: 1) wholesale distribution to leading department stores, national chains, and specialty retailers domestically and internationally and 2) distribution to the Company's own retail stores and eCommerce sites that market its brand name merchandise and other licensed products manufactured by other companies.
NOTE 2 – BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and the rules and regulations of the Securities and Exchange Commission (the "SEC"). All intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the consolidated financial condition, results of operations, comprehensive income (loss), statement of stockholders' equity, and cash flows of the Company for the interim periods presented. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended September 26, 2020 are not necessarily indicative of the results that may be expected for the current fiscal year ending January 2, 2021.
The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.
The accompanying condensed consolidated balance sheet as of December 28, 2019 was derived from the Company's audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC and the instructions to Form 10-Q.
Revision of Previously Issued Financial Statements
During the second quarter of fiscal year 2020, it was determined that there were amounts presented incorrectly in the statement of cash flows for the annual and interim year to date periods subsequent to the December 30, 2018 adoption of ASC 842, Leases, due to the presentation of the non-cash impact of the initial and subsequent recognition of the Right of Use ("ROU") assets and lease liabilities within the "Prepaid expenses and other assets" and "Accounts payable and other liabilities" line items, respectively, within operating cash flows. This incorrect presentation had no impact on net cash (used in) provided by operating activities for any of the periods. We assessed the materiality of the incorrect presentation and concluded that the previously issued financial statements were not materially misstated. The presentation errors resulted in an offsetting overstatement of cash used for prepaid expenses and other assets and cash provided by accounts payable and other liabilities of $739 million, $773 million and $815 million for the three, six and nine-months ended March 30, 2019, June 29, 2019 and September 28, 2019, respectively, $828 million for the year ended December 28, 2019 and $29 million for the three months ended March 28, 2020. The accompanying unaudited condensed consolidated statement of cash flows appropriately reflect the corrected presentation of these non-cash activities. In addition, the Company has reclassified and will reclassify prior comparable period amounts to present ROU asset amortization and lease liability payment activity on a net basis within the "Accounts payable and other liabilities" line item. The revisions to the year ended December 31, 2019 and three months ended March 31, 2020 will be presented in future Forms 10-Q and 10-K filings. We will continue to provide supplemental noncash cash flow disclosure information in the notes to the financial statements, as well as correct for the omission of such disclosure during the 2019 interim periods in connection with our 2020 quarterly filings.
7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
COVID-19
In December 2019, an outbreak of a new strain of coronavirus ("COVID-19") began in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a pandemic and the President of the United States declared a national emergency. As a result of COVID-19, the Company temporarily closed its retail stores in North America and implemented several actions during fiscal 2020 to enhance liquidity and financial flexibility including the deferral of lease payments, reductions in discretionary spending, amending its revolving credit facility, issuing $500 million principal amount of senior notes, and suspending dividends and share repurchases.
Beginning in April 2020, the Company suspended rent payments under the leases for our temporarily closed stores in North America and has been in discussions with landlords to obtain rent concessions. The Company considered the Financial Accounting Standards Board's ("FASB") recent guidance regarding lease concessions as a result of the effects of the COVID-19 pandemic and has elected to treat these rent concessions as lease modifications. As of September 26, 2020, lease modifications resulting from COVID-19 related rent concessions were not material to the financial statements. The Company continues to negotiate lease concessions with landlords. As of the end of the fiscal quarter, the Company resumed making the required rent payments under these leases.
See Note 4, Leases, for further details on deferral of rent payments under these leases.
On May 4, 2020, the Company, through its wholly owned subsidiary, The William Carter Company ("TWCC"), successfully amended its revolving credit facility. This amendment provided for, among other things, a waiver of financial covenants through the balance of fiscal year 2020, revised covenant requirements through the third quarter of fiscal year 2021, and the ability to raise additional unsecured financing at the Company’s discretion. Additionally, on May 11, 2020, TWCC issued $500 million principal amount of senior notes at par, bearing interest at a rate of 5.500% per annum, and maturing on May 15, 2025. See Note 8, Long-Term Debt, for further details on the amendment to the revolving credit facility and the issuance of $500 million principal amount of senior notes.
The Company announced in the first half of fiscal 2020, that in connection with the COVID-19 pandemic, it suspended its common stock share repurchase program and its quarterly cash dividend. The Company's Board of Directors will evaluate future capital distributions, including dividend declarations, based on a number of factors, including restrictions under our revolving credit facility, business conditions, our financial performance, and other considerations.
The Company also assessed certain accounting matters that generally require consideration of forecasted financialinformation in context with the information reasonably available to us and the unknown future impacts of COVID-19 as of September 26, 2020 and through the date of this report filing. The accounting matters assessed included, but were not limited to, our allowance for credit losses, inventory reserves, adverse inventory and fabric purchase commitments, stock based compensation, and the carrying value of our goodwill and other long-lived assets. Based on these assessments, in the third quarter of fiscal 2020, the Company recorded impairments on operating lease assets and other long-lived assets for our underperforming retail stores of $1.7 million, and a benefit in excess inventory and fabric purchase commitment charges of $8.5 million related to better than expected sales of inventory that were reserved for in the first fiscal quarter of 2020 due to COVID-19 related disruptions. For the three fiscal quarters ending September 26, 2020, the Company recorded impairments on operating lease assets and other long-lived assets for our underperforming retail stores of $6.7 million, incremental inventory reserve related charges of $20.9 million, adverse inventory and fabric purchase commitments of $16.2 million, intangible asset impairments of $26.5 million, and goodwill impairment of $17.7 million. There could be a further material impact to our consolidated financial statements in future reporting periods if, at a future date, the Company determines that these assessments of the magnitude and duration of COVID-19, as well as other factors, were incorrect.
Additional COVID-19 related charges in the third quarter of fiscal 2020 were $3.3 million, which primarily included costs associated with additional protective equipment and cleaning supplies of $2.5 million. COVID-19 related charges for the three fiscal quarters ending September 26, 2020 were $18.8 million, which primarily included incremental payroll continuation and employee related costs of $12.1 million, costs associated with additional protective equipment and cleaning supplies of $6.8 million, and restructuring costs of $2.3 million, partially offset by a payroll tax benefit of $3.5 million.
Accounting Policies
The accounting policies the Company follows are set forth in its most recently filed Annual Report on Form 10-K. There have been no material changes to these accounting policies. New accounting pronouncements adopted at the beginning of fiscal 2020 are noted below.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Credit Losses (ASU 2016-13)
At the beginning of fiscal 2020, the Company adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This new guidance changed how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 replaced the previous "incurred loss" model with an "expected loss" model, that requires an entity to recognize a loss (or allowance) upon initial recognition of the asset that reflects all future events that will lead to a loss being realized, regardless of whether it is probable that the future event will occur. The Company estimates current expected credit losses based on collection history and management’s assessment of the current economic trends, business environment, customers’ financial condition, accounts receivable aging, and customer disputes that may impact the level of future credit losses. The effect of the adoption of ASU 2016-13 was not material to the Company's consolidated financial statements.
Goodwill Impairment Testing (ASU 2017-04)
At the beginning of fiscal 2020, the Company adopted ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (i.e., measure the charge based on the current step 1). Any impairment charge will be limited to the amount of goodwill allocated to an impacted reporting unit. ASU 2017-04 does not change the current guidance for completing step 1 of the goodwill impairment test, and an entity can still perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to step 1. The effect of the adoption of ASU 2017-04 had no impact to the Company's consolidated financial statements. During the first quarter of fiscal 2020, the Company conducted an interim quantitative impairment assessment on the goodwill ascribed to the Other International reporting unit. As a result of this assessment and based on the application of ASU 2017-04, a goodwill impairment charge of $17.7 million was recorded to our Other International reporting unit. See Note 6, Goodwill and Intangible Assets, for further details on the impairment charge and valuation methodology.
Simplifying the Accounting for Income Taxes (Topic 740)
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, "Income Taxes," and simplification in several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods therein, with early adoption permitted. The Company elected to early adopt this guidance in the first quarter of fiscal 2020. The Company retrospectively adopted the provision related to the classification of taxes partially based on income and has determined that the adoption of this standard did not have a material impact on its prior period financial statements. The provisions related to intra period tax allocation and interim recognition of enactment of tax laws are being adopted on a prospective basis. The effect of the adoption of ASU 2019-12 was not material to the Company's consolidated financial statements.
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 - REVENUE RECOGNITION
The Company’s revenues are earned from contracts or arrangements with retail and wholesale customers and licensees. Contracts include written agreements as well as arrangements that are implied by customary practices or law.
Disaggregation of Revenue
The Company sells its products directly to consumers ("direct-to-consumer") and to other retail companies and partners that subsequently sell the products directly to their own retail customers. The Company also earns royalties from certain of its licensees. Disaggregated revenues from these sources for the third quarter and three quarters ended fiscal 2020 and 2019 were as follows: