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Carters Inc (CRI) SEC Filing 8-K Material Event for the period ending Friday, April 30, 2021

Carters Inc

CIK: 1060822 Ticker: CRI

                                                EXHIBIT 99.1
                                                
carters_logoa01a01a01a01a1.jpg
Contact:
Sean McHugh
Vice President & Treasurer
 (678) 791-7615

Carters, Inc. Reports First Quarter Fiscal 2021 Results
Net sales $787 million, growth of 20%
Double-digit growth in all business segments
Strong online demand - U.S. eCommerce net sales increased 38%
Net sales in March grew 59%
Strong improvement in profitability
Operating margin 16.2%; adjusted operating margin 16.3%
Diluted EPS $1.96 vs. loss per diluted share of $1.82 last year
Adjusted diluted EPS $1.98 vs. adjusted loss per diluted share of $0.81 last year
Company raises full year fiscal 2021 outlook
Net sales growth of approximately 10%
Adjusted diluted EPS growth of approximately 40%
$1.8 billion in total liquidity at quarter end
Board of Directors authorizes resumption of quarterly dividend at $0.40 per share
ATLANTA, April 30, 2021 - Carter’s, Inc. (NYSE:CRI), the largest branded marketer in North America of apparel exclusively for babies and young children, today reported its first quarter fiscal 2021 results.
“Our first quarter sales and earnings meaningfully exceeded our expectations, with growth in each of our retail, wholesale, and international business segments,” said Michael D. Casey, Chairman and Chief Executive Officer. “We saw demand for our brands surge in March driven by the strength of our Spring product offerings, unprecedented government stimulus supporting families with young children, and progress with vaccinations enabling more children to return to school.
“In the first quarter, we achieved a record gross profit margin and our best operating profit margin in over a decade. This performance reflects our focus on more effective promotions, inventory management, improved price realization, and productivity.
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“Given our strong start to the year, we have raised our sales and earnings forecasts for 2021. We have also amended our credit facility to enable the resumption of capital distributions, which were temporarily suspended in the early days of the pandemic. Accordingly, our Board of Directors has declared a dividend payable to shareholders commencing in the second quarter.
“Despite ongoing pandemic-related challenges, we believe the strength of our brands, unparalleled multi-channel model, depth of relationships with essential retailers, and strong value proposition will enable us to achieve our growth objectives. And, with the continued progress with vaccinations, we believe Carter’s is well positioned to benefit from a global recovery from the pandemic.”
Adjustments to Reported GAAP Result
In addition to the results presented in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements, as presented below. The Company believes these adjustments provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s core performance. These measures are presented for informational purposes only. See “Reconciliation of GAAP to Adjusted Results” section of this release for additional disclosures and reconciliations regarding these non-GAAP financial measures.
Fiscal Quarter Ended
April 3, 2021March 28, 2020
(In millions, except earnings per share)Operating Income% Net SalesNet IncomeDiluted EPSOperating (Loss)% Net SalesNet (Loss)Diluted EPS
As reported (GAAP)$127.5 16.2 %$86.2 $1.96 $(78.5)(12.0)%$(78.7)$(1.82)
COVID-19 expenses 2.1 1.6 0.04 2.8 2.1 0.05 
Restructuring costs 0.5 0.4 0.01 3.9 3.0 0.07 
Retail store operating leases and other long-lived asset impairments, net of gain(1.5)(1.2)(0.03)1.2 0.9 0.02 
Intangible asset impairment — — — 26.5 20.2 0.46 
Goodwill impairment — — — 17.7 17.7 0.40 
As adjusted $128.5 16.3 %$87.0 $1.98 $(26.3)(4.0)%$(34.8)$(0.81)
Note: Results may not be additive due to rounding.

Consolidated Results
First Quarter of Fiscal 2021 compared to First Quarter of Fiscal 2020
Net sales increased $132.9 million, or 20.3%, to $787.4 million, reflecting strong growth in all business segments. The Company’s U.S. Retail, U.S. Wholesale, and International segments grew 27%, 12%, and 19%, respectively. Consolidated net sales in fiscal March increased 59% compared to the prior year period. Demand for the Company’s brands, including traffic to its retail stores, improved meaningfully following the passage of the $1.9 trillion pandemic relief legislation on March 11, 2021. First quarter
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fiscal 2020 results were adversely affected by store closures in North America and lower wholesale customer shipments as a result of the COVID-19 pandemic. Favorable changes in foreign currency exchange rates improved consolidated net sales in the first quarter of fiscal 2021 by $3.1 million.
Operating income increased $206.0 million to $127.5 million, compared to an operating loss of $78.5 million in the first quarter of fiscal 2020. Operating margin improved to 16.2%, compared to (12.0%) in the prior year period. Adjusted operating income (a non-GAAP measure) increased $154.9 million to $128.5 million, compared to an adjusted operating loss of $26.3 million in the first quarter of fiscal 2020. First quarter fiscal 2020 adjusted operating income reflected store closures in North America, lower wholesale customer shipments, and higher inventory and bad debt provisions related to the COVID-19 pandemic. Adjusted operating margin increased to 16.3%, compared to (4.0%) in the prior year period, reflecting the strong performance of the Company’s Spring product offering, including improved price realization, the absence of COVID-related inventory provisions, and expense leverage.
Net income increased $164.9 million to $86.2 million, or $1.96 per diluted share, compared to a net loss of $78.7 million, or $1.82 per diluted share, in the first quarter of fiscal 2020. Adjusted net income (a non-GAAP measure) increased $121.7 million to $87.0 million, compared to a net loss of $34.8 million in the first quarter of fiscal 2020. Adjusted earnings per diluted share (a non-GAAP measure) improved to $1.98, compared to an adjusted loss per diluted share of $0.81 in the first quarter of fiscal 2020.
Net cash used in operations in the first quarter of fiscal 2021 was $39.5 million compared to net cash used in operations of $14.3 million in the first quarter of fiscal 2020. The increase in net cash used in operating activities reflects strong net income offset by changes in vendor payment terms.
See the “Business Segment Results” and “Reconciliation of GAAP to Adjusted Results” sections of this release for additional disclosures regarding business segment performance and non-GAAP measures.
Liquidity and Return of Capital
The Company’s total liquidity at the end of the first quarter of fiscal 2021 was $1.8 billion, comprised of cash and cash equivalents of $1.05 billion and approximately $745 million in available borrowing capacity on its secured revolving credit facility.
On May 4, 2020, the Company entered into an agreement with its lenders to amend its secured revolving credit facility. Among other provisions, the amendment permitted borrowing additional capital and provided financial covenant flexibility through the third fiscal quarter of 2021 while restricting the Company’s ability to pay cash dividends or repurchase its common stock.
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As previously announced, on April 21, 2021, the Company further amended its secured revolving credit agreement to permit the Company, subject to certain restrictions, to pay cash dividends and repurchase common stock in aggregate amounts up to $250 million through the date the Company delivers its financial statements and associated certificates relating to the third fiscal quarter of 2021. Thereafter, provisions of the Company's secured revolving credit facility largely revert to their pre-pandemic terms.
The Company’s Board of Directors on April 27, 2021 approved a quarterly cash dividend of $0.40 per share for payment on May 28, 2021, to shareholders of record at the close of business on May 12, 2021. The Company’s Board of Directors will evaluate future distributions of capital, including share repurchases and dividends, based on a number of factors, including restrictions under the Company’s revolving credit facility, business conditions, the Company’s financial performance, and other considerations.
2021 Business Outlook
The Company’s outlook for the balance of fiscal year 2021 contemplates marketplace risks and opportunities with uncertain potential effects on business results. Marketplace risks include: supply chain disruptions, higher transportation costs, pandemic-related birth count declines, COVID-19 case trends, store traffic, product cost inflation, international consumer demand, and the promotional environment. Opportunities include: share gains resulting from the Company’s market-leading product assortments and differentiated marketing capabilities, accelerated vaccination rates, less restrictive business and social gathering directives, a return to in-person classroom instruction, and the benefit of child tax credits and additional government stimulus.
Factors forecasted to adversely affect the comparability of second half 2021 results to the prior year period include: changes in the timing of wholesale shipments, retail store closures, increased compensation provisions, higher effective tax rates, and in 2020, the release of inventory reserves and a 53 week fiscal year. Accordingly, the Company’s strong first quarter fiscal 2021 performance may not be replicated in subsequent quarters in the balance of the year.
For fiscal 2021 (a 52 week fiscal year), the Company projects net sales will increase approximately 10% and adjusted diluted earnings per share will increase approximately 40% compared to adjusted diluted earnings per share of $4.16 in fiscal 2020. This forecast excludes: 1) approximately $7 million of expenses related to the COVID-19 pandemic, including costs associated with additional protective equipment and cleaning supplies, 2) approximately $1 million of restructuring costs, and 3) a benefit of approximately $1.5 million related to a gain on modifications of previously-impaired leases.
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For the second quarter of fiscal 2021, the Company projects net sales will increase approximately 35%, adjusted operating income will increase approximately 35% (compared to adjusted operating income of $41.1 million in the second quarter of fiscal 2020) and adjusted diluted earnings per share will increase approximately 25% (compared to adjusted diluted earnings per share of $0.54 in the second quarter of fiscal 2020). This forecast excludes approximately $2 million of expenses related to the COVID-19 pandemic, including costs associated with additional protective equipment and cleaning supplies.
Conference Call
The Company will hold a conference call with investors to discuss first quarter fiscal 2021 results and its business outlook on April 30, 2021 at 8:30 a.m. Eastern Daylight Time. To participate in the call, please dial 334-777-6978. To listen to a live broadcast via the internet and view the accompanying presentation materials, please visit ir.carters.com and select links for “News & Events” followed by “Webcasts & Presentations.” A replay of the call will be available shortly after the broadcast through May 30, 2021, at 888-203-1112 (U.S. / Canada) or +1 719-457-0820 (international), passcode 5767324. The replay will also be archived online on the “Webcasts & Presentations” page noted above.
About Carter’s, Inc.
Carter’s, Inc. is the largest branded marketer in North America of apparel exclusively for babies and young children. The Company owns the Carter’s and OshKosh B’gosh brands, two of the most recognized brands in the marketplace. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through over 1,000 Company-operated stores in the United States, Canada, and Mexico and online at www.carters.com, www.oshkosh.com, www.cartersoshkosh.ca, and www.carters.com.mx. The Company’s Child of Mine brand is available at Walmart, its Just One You brand is available at Target, and its Simple Joys brand is available on Amazon. The Company also owns Skip Hop, a global lifestyle brand for families with young children. Carter’s is headquartered in Atlanta, Georgia. Additional information may be found at www.carters.com.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws relating to our future performance, including statements with respect to the potential effects of the COVID-19 pandemic and the Company’s future outlook, earnings, liquidity, strategy, and investments. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or not materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated,
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estimated, or projected. Certain of the risks and uncertainties that could cause actual results and performance to differ materially are described in the Company’s most recently filed Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission from time to time under the headings “Risk Factors.” Included among those risks are those related to: the effects of the current coronavirus outbreak; financial difficulties for one or more of our major customers; an overall decrease in consumer spending; our products not being accepted in the marketplace; increased competition in the market place; diminished value of our brands; the failure to protect our intellectual property; the failure to comply with applicable quality standards or regulations; unseasonable or extreme weather conditions; pending and threatened lawsuits; a breach of our information technology systems and the loss of personal data; increased margin pressures, including increased cost of materials and labor; our foreign sourcing arrangements; disruptions in our supply chain; the management and expansion of our business domestically and internationally; the acquisition and integration of other brands and businesses; and changes in our tax obligations, including additional customs, duties or tariffs. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
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CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)


Fiscal Quarter Ended
April 3, 2021March 28, 2020
Net sales$787,361 $654,473 
Cost of goods sold401,731 403,373 
Adverse purchase commitments (inventory and raw materials), net(6,330)22,837 
Gross profit391,960 228,263 
Royalty income, net7,463 7,338 
Selling, general, and administrative expenses271,927 269,837 
Goodwill impairment— 17,742 
Intangible asset impairment— 26,500 
Operating income (loss) 127,496 (78,478)
Interest expense15,348 8,864 
Interest income(225)(464)
Other (income) expense, net(917)4,818 
Income (loss) before income taxes113,290 (91,696)
Income tax provision (benefit)27,094 (13,002)
Net income (loss) $86,196 $(78,694)
Basic net income (loss) per common share$1.96 $(1.82)
Diluted net income (loss) per common share$1.96 $(1.82)
Dividend declared and paid per common share$— $0.60 

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CARTER’S, INC.
BUSINESS SEGMENT RESULTS
(dollars in thousands)
(unaudited)

 Fiscal Quarter Ended
April 3, 2021% of
Total Net Sales
March 28, 2020% of
Total Net Sales
Net sales:     
U.S. Retail$407,067 51.7 %$320,717 49.0 %
U.S. Wholesale283,377 36.0 %252,130 38.5 %
International96,917 12.3 %81,626 12.5 %
Total net sales$787,361 100.0 %$654,473 100.0 %
Operating income (loss):% of
Segment
Net Sales
% of
Segment
Net Sales
U.S. Retail $76,521 18.8 %$(32,376)(10.1)%
U.S. Wholesale 70,058 24.7 %2,231 0.9 %
International9,734 10.0 %(27,705)(33.9)%
Corporate expenses(*)
(28,817)n/a(20,628)n/a
Total operating income (loss) $127,496 16.2 %$(78,478)(12.0)%

(*)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 fees, and audit fees.

Fiscal Quarter Ended April 3, 2021
(dollars in millions)U.S. RetailU.S. WholesaleInternational
Incremental costs associated with COVID-19 pandemic$1.1 $0.9 $0.1 
Retail store operating leases and other long-lived asset impairments, net of gain(1.5)— — 
 Total charges$(0.4)$0.9 $0.1 

(*)The first fiscal quarter ended April 3, 2021 also includes corporate charges related to organizational restructuring of $0.5 million.

Fiscal Quarter Ended March 28, 2020
(dollars in millions)U.S. RetailU.S. WholesaleInternational
Organizational restructuring(*)
$1.5 $0.6 $0.3 
Goodwill impairment— — 17.7 
Skip Hop tradename impairment charge
0.5 6.8 3.7 
OshKosh tradename impairment charge
13.6 1.6 0.3 
Incremental costs associated with COVID-19 pandemic2.2 0.3 0.3 
Retail store operating leases and other long-lived asset impairments, net of gain1.2 — — 
   Total charges$19.0 $9.3 $22.3 

(*)The first fiscal quarter ended March 28, 2020 also includes corporate charges related to organizational restructuring of $1.6 million.







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CARTER’S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
April 3, 2021January 2, 2021March 28, 2020
ASSETS
Current assets:
Cash and cash equivalents$1,053,690 $1,102,323 $759,100 
Accounts receivable, net of allowance for credit losses of $6,695, $5,940, and $10,620, respectively
240,212 186,512 221,884 
Finished goods inventories, net of inventory reserves of $15,581, $14,206, and $35,597, respectively
560,683 599,262 565,932 
Prepaid expenses and other current assets63,290 57,927 43,349 
Total current assets1,917,875 1,946,024 1,590,265 
Property, plant, and equipment, net of accumulated depreciation of $557,608, $583,980, and $542,158, respectively
248,799 262,345 303,919 
Operating lease assets559,391 593,008 673,301 
Tradenames, net307,830 307,893 308,080 
Goodwill212,271 211,776 207,720 
Customer relationships, net36,596 37,510 39,785 
Other assets27,711 34,024 30,435 
Total assets$3,310,473 $3,392,580 $3,153,505 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$334,831 $472,140 $187,199 
Current operating lease liabilities172,117 185,152 161,341 
Other current liabilities149,911 135,240 79,135 
Total current liabilities656,859 792,532 427,675 
Long-term debt, net989,980 989,530 1,238,822 
Deferred income taxes56,990 52,770 65,260 
Long-term operating lease liabilities517,875 554,497 647,334 
Other long-term liabilities59,160 65,218 58,412 
Total liabilities$2,280,864 $2,454,547 $2,437,503 
Commitments and contingencies
Stockholders' equity:
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at April 3, 2021, January 2, 2021, and March 28, 2020$— $— $— 
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 43,947,659, 43,780,075, and 43,610,725 shares issued and outstanding at April 3, 2021, January 2, 2021, and March 28, 2020, respectively
440 438 436 
Additional paid-in capital21,904 17,752 — 
Accumulated other comprehensive loss(31,534)(32,760)(48,626)
Retained earnings1,038,799 952,603 764,192 
Total stockholders' equity1,029,609 938,033 716,002 
Total liabilities and stockholders' equity$3,310,473 $3,392,580 $3,153,505 

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CARTER’S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Fiscal Quarter Ended
April 3, 2021March 28, 2020
Cash flows from operating activities:
Net income (loss) $86,196 $(78,694)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation of property, plant, and equipment23,183 22,433 
Amortization of intangible assets932 935 
Provisions for excess and obsolete inventory, net1,364 26,596 
Goodwill impairment— 17,742 
Intangible asset impairments— 26,500 
Other asset impairments and (gain) loss on disposal of property, plant and equipment, net of recoveries(25)2,050 
Amortization of debt issuance costs738 353 
Stock-based compensation expense6,931 1,945 
Unrealized foreign currency exchange loss, net49 3,856 
Provisions for doubtful accounts receivable from customers766 4,270 
Deferred income tax (benefit)4,365 (10,053)
Effect of changes in operating assets and liabilities:
Accounts receivable(54,484)22,926 
Finished goods inventories37,812 (5,634)
Prepaid expenses and other assets(5,186)7,254 
Accounts payable and other liabilities(142,171)(56,781)
Net cash used in operating activities$(39,530)$(14,302)
Cash flows from investing activities:
Capital expenditures$(11,665)$(8,068)
Proceeds from sale of investments5,000 — 
Net cash used in investing activities$(6,665)$(8,068)
Cash flows from financing activities:
Borrowings under secured revolving credit facility$— $644,000 
Repurchases of common stock— (45,255)
Dividends paid— (26,260)
Withholdings from vesting of restricted stock(3,588)(4,712)
Proceeds from exercises of stock options811 1,840 
Net cash (used in) provided by financing activities$(2,777)$569,613 
Net effect of exchange rate changes on cash and cash equivalents339 (2,454)
Net (decrease) increase in cash and cash equivalents$(48,633)$544,789 
Cash and cash equivalents, beginning of period1,102,323 214,311 
Cash and cash equivalents, end of period$1,053,690 $759,100 
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CARTER’S, INC.
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
(dollars in millions, except earnings per share)
(unaudited)
Fiscal Quarter Ended April 3, 2021
Gross Profit% Net SalesSG&A% Net SalesOperating Income% Net SalesIncome TaxesNet IncomeDiluted EPS
As reported (GAAP)$392.0 49.8 %$271.9 34.5 %$127.5 16.2 %$27.1 $86.2 $1.96 
COVID-19 expenses (b)
— (2.1)2.1 0.5 1.6 0.04 
Restructuring costs (c)
— (0.5)0.5 0.1 0.4 0.01 
Retail store operating leases and other long-lived asset impairments, net of gain (d)
— 1.5 (1.5)(0.4)(1.2)(0.03)
As adjusted (a) (g)
$392.0 49.8 %$270.9 34.4 %$128.5 16.3 %$27.3 $87.0 $1.98 

Fiscal Quarter Ended March 28, 2020
Gross Profit% Net SalesSG&A% Net SalesOperating (Loss)% Net SalesIncome Taxes (Benefit)Net (Loss)Diluted EPS
As reported (GAAP)$228.3 34.9 %$269.8 41.2 %$(78.5)(12.0)%$(13.0)$(78.7)$(1.82)
Intangible asset impairment (e)
— — 26.5 6.3 20.2 0.46 
Goodwill impairment (f)
— — 17.7 — 17.7 0.40 
Restructuring costs (c)
— (3.9)3.9 0.9 3.0 0.07 
COVID-19 expenses (b)
— (2.8)2.8 0.7 2.1 0.05 
Retail store operating leases and other long-lived asset impairments, net of gain (d)
— (1.2)1.2 0.3 0.9 0.02 
As adjusted (a)
$228.3 34.9 %$261.9 40.0 %$(26.3)(4.0)%$(4.8)$(34.8)$(0.81)

Fiscal Quarter Ended June 27, 2020
Gross Profit% Net SalesSG&A% Net SalesOperating Income% Net SalesIncome Taxes (Benefit)Net IncomeDiluted EPS
As reported (GAAP)$235.5 45.7 %$218.1 42.4 %$21.0 4.1 %$(2.7)$8.2 $0.19 
COVID-19 expenses (b)
— (13.0)13.0 3.1 9.9 0.23 
Retail store operating leases and other long-lived asset impairments, net of gain (d)
— (3.7)3.7 0.9 2.8 0.06 
Restructuring costs (c)
— (3.5)3.5 0.8 2.7 0.06 
As adjusted (a)
$235.5 45.7 %$198.0 38.5 %$41.1 8.0 %$2.1 $23.6 $0.54 

Fiscal Year Ended January 2, 2021 (53 weeks)
Gross Profit% Net SalesSG&A% Net SalesOperating Income% Net SalesIncome Taxes Net IncomeDiluted EPS
As reported (GAAP)$1,313.4 43.4 %$1,105.6 36.6 %$189.9 6.3 %$25.3 $109.7 $2.50 
Intangible asset impairment (e)
— — 26.5 6.3 20.2 0.46 
Goodwill impairment (f)
— — 17.7 — 17.7 0.40 
COVID-19 expenses (b)
(21.4)21.4 5.2 16.2 0.37 
Restructuring costs (c)
— (16.6)16.6 3.8 12.9 0.29 
Retail store operating leases and other long-lived asset impairments, net of gain (d)
— (7.6)7.6 1.8 5.8 0.13 
As adjusted (a)
$1,313.4 43.4 %$1,059.9 35.0 %$279.8 9.3 %$42.3 $182.6 $4.16 


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(a)In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present gross profit, SG&A, operating income (loss), net income (loss), and net income (loss) on a diluted share basis excluding the adjustments discussed above.  The Company believes these adjustments provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company's core performance.  The adjusted, non-GAAP financial measurements included in this earnings release should not be considered as an alternative to net income (loss) or as any other measurement of performance derived in accordance with GAAP.  The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company’s future condition or results of operations.
(b)Net expenses incurred due to the COVID-19 pandemic, including incremental employee-related costs, costs associated with additional protective equipment and cleaning supplies, restructuring costs, and a payroll tax benefit.
(c)Certain lease exit, severance and related costs resulting from restructuring actions (not related to COVID-19).
(d)Impairments include an immaterial gain on the remeasurement of retail store operating leases.
(e)Intangible impairment charges related to the OshKosh and Skip Hop tradename assets.
(f)Goodwill impairment charge recorded in the International segment.
(g)Adjusted results exclude a customer bankruptcy recovery of $38,000.

Note: Results may not be additive due to rounding.


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CARTER’S, INC.
RECONCILIATION OF NET INCOME (LOSS) ALLOCABLE TO COMMON SHAREHOLDERS
(unaudited)
Fiscal Quarter Ended
April 3, 2021March 28, 2020
Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding43,370,744 43,355,635 
Dilutive effect of equity awards(*)
129,198 — 
Diluted number of common and common equivalent shares outstanding43,499,942 43,355,635 
As reported on a GAAP Basis:
(dollars in thousands, except per share data)
Basic net income (loss) per common share:
Net income (loss) $86,196 $(78,694)
Income allocated to participating securities(1,033)(254)
Net income (loss) available to common shareholders$85,163 $(78,948)
Basic net income (loss) per common share$1.96 $(1.82)
Diluted net income (loss) per common share:
Net income (loss)$86,196 $(78,694)
Income allocated to participating securities(1,030)(254)
Net income (loss) available to common shareholders$85,166 $(78,948)
Diluted net income (loss) per common share$1.96 $(1.82)
As adjusted (a):
Basic net income (loss) per common share:
Net income (loss)$86,987 $(34,762)
Income allocated to participating securities(1,043)(254)
Net income (loss) available to common shareholders$85,944 $(35,016)
Basic net income (loss) per common share$1.98 $(0.81)
Diluted net income (loss) per common share:
Net income (loss)$86,987 $(34,762)
Income allocated to participating securities(1,040)(254)
Net income (loss) available to common shareholders$85,947 $(35,016)
Diluted net income (loss) per common share$1.98 $(0.81)

(*)For the quarter ended March 28, 2020, there were 339,841 potentially dilutive equity awards that were excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive.

(a)In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present per share data excluding the adjustments discussed above. The Company has excluded $0.8 million and $43.9 million in after-tax expenses from these results for the fiscal quarters ended April 3, 2021 and March 28, 2020, respectively.


Note: Results may not be additive due to rounding.
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RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
(dollars in millions)
(unaudited)

The following table provides a reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the periods indicated:
Fiscal Quarter EndedFour Fiscal Quarters Ended
April 3, 2021March 28, 2020April 3, 2021
Net income (loss) $86.2 $(78.7)$274.6 
Interest expense15.3 8.9 62.5 
Interest income(0.2)(0.5)(1.3)
Income tax provision (benefit) 27.1 (13.0)65.4 
Depreciation and amortization24.1 23.4 94.7 
EBITDA$152.5 $(59.9)$496.0 
Adjustments to EBITDA
Intangible asset impairment (a)
$— $26.5 $— 
Goodwill impairment (b)
— 17.7 — 
COVID-19 expenses (c)
2.1 2.8 20.8 
Restructuring costs (d)
(0.1)3.9 12.2 
Retail store operating leases and other long-lived asset impairments, net of gain (e)
(1.5)1.2 4.9 
  Total adjustments0.5 52.1 37.8 
Adjusted EBITDA (f)
$153.0 $(7.8)$533.8 

(a)Related to the write-down of the OshKosh and Skip Hop tradename assets.
(b)Goodwill impairment charge recorded in the International segment.
(c)Expenses incurred due to the COVID-19 pandemic.
(d)Certain lease exit, severance and related costs resulting from restructuring actions (not related to COVID-19). Amounts for fiscal quarter and four fiscal quarters ended April 3, 2021 exclude $0.5 million and $1.0 million of depreciation expense included in the corresponding depreciation and amortization line item, respectively.
(e)Impairments include gain on the remeasurement of retail store operating leases.
(f)Adjusted EBITDA for fiscal quarter and four fiscal quarters ended April 3, 2021 excludes a customer bankruptcy recovery of $38,000.


Note: Results may not be additive due to rounding.

EBITDA and Adjusted EBITDA are supplemental financial measures that are not defined or prepared in accordance with GAAP. We define EBITDA as net income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for the items described in footnotes (a) - (f) to the table above.

We present EBITDA and Adjusted EBITDA because we consider them important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. These measures also afford investors a view of what management considers to be the Company's core performance.

The use of EBITDA and Adjusted EBITDA instead of net income or cash flows from operations has limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. EBITDA and Adjusted EBITDA do not represent net income or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA, Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. EBITDA and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us for working capital, debt service and other purposes.
14


RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
(dollars in millions)
(unaudited)

The table below reflects the calculation of constant currency net sales on a consolidated and International segment basis for the fiscal quarter ended April 3, 2021:
Fiscal Quarter Ended
Reported Net Sales
April 3, 2021
Impact of Foreign Currency TranslationConstant-Currency Net Sales
April 3, 2021
Reported Net Sales
March 28, 2020
Reported Net Sales % ChangeConstant-Currency Net Sales % Change
Consolidated net sales$787.4 $3.1 $784.2 $654.5 20.3 %19.8 %
International segment net sales$96.9 $3.1 $93.8 $81.6 18.7 %14.9 %

The Company evaluates its net sales on both an “as reported” and a “constant currency” basis.  The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates that occurred between the comparative periods.  Constant currency net sales results are calculated by translating current period net sales in local currency to the U.S. dollar amount by using the currency conversion rate for the prior comparative period.  The Company consistently applies this approach to net sales for all countries where the functional currency is not the U.S. dollar.  The Company believes that the presentation of net sales on a constant currency basis provides useful supplemental information regarding changes in our net sales that were not due to fluctuations in currency exchange rates and such information is consistent with how the Company assesses changes in its net sales between comparative periods.
Note: Results may not be additive due to rounding.



15

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Ticker: CRI
CIK: 1060822
Form Type: 8-K Corporate News
Accession Number: 0001060822-21-000009
Submitted to the SEC: Fri Apr 30 2021 6:12:42 AM EST
Accepted by the SEC: Fri Apr 30 2021
Period: Friday, April 30, 2021
Industry: Apparel And Other Finishd Prods Of Fabrics And Similar Matl
Events:
  1. Earnings Release
  2. Financial Exhibit

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