• Q2 net income surged 64.3% to US$20.8m
  • Operating income increased 56.3% to $34.4m
  • Net sales were up 19.7% to $472.2m

US children's apparel specialist Carter's saw its second quarter net profit jump on the back of increased international sales. 

For the quarter ended 30 June, net income surged 64.3% to US$20.8m, while operating income increased 56.3% to $34.4m.

Net sales were up 19.7% to $472.2m, primarily due to a 23.5% jump in international sales, which reflected the company's first quarter of sales in Canada. During the quarter, Carter's opened four stores in Canada, taking its total number of stores in the country to 73.

For the first six months of the year, net income climbed 18.5%to $53.1m. Operating income increased 16.6% to $88.2m and net sales were up 18.6% to $1bn. 

"We are very pleased with our second quarter performance which reflects the strength of our product offerings and the success of our multi-channel growth strategies in the US and international markets," said Michael Casey, chairman and CEO.

"We are forecasting good growth in sales and earnings for the balance of the year supported by new product offerings and lower product costs."

Looking forward, the company expects adjusted diluted earnings per share, excluding expenses related to the Bonnie Togs acquisition, to increase around 25-30% compared to adjusted diluted earnings per share of $0.67 in the same period last year.

Show the press release

Carter's, Inc. Reports Second Quarter 2012 Results
  • Net Sales $472 Million, Up 20%
  • Earnings Per Share $0.35, Up 59%; Adjusted Earnings Per Share $0.37, Up 61%

ATLANTA--(BUSINESS WIRE)--Jul. 25, 2012-- Carter's, Inc. (NYSE:CRI), the largest branded marketer in the United States of apparel exclusively for babies and young children, today reported its second quarter 2012 results.

"We are very pleased with our second quarter performance which reflects the strength of our product offerings and the success of our multi-channel growth strategies in the United States and international markets," said Michael D. Casey, Chairman and Chief Executive Officer. "We are forecasting good growth in sales and earnings for the balance of the year supported by new product offerings and lower product costs."

Second Quarter of Fiscal 2012 compared to Second Quarter of Fiscal 2011

Consolidated net sales increased $77.7 million, or 19.7%, to $472.2 million. Net domestic sales of the Company's Carter'sbrands increased $48.2 million, or 15.3%, to $363.8 million. Net domestic sales of the Company's OshKosh B'gosh brand decreased $0.7 million, or 1.0%, to $71.1 million. Net international sales to customers outside the United States increased$30.2 million to $37.3 million, reflecting a full quarter of sales from the Company's Canadian operations in fiscal 2012.

Operating income in the second quarter of fiscal 2012 was $34.4 million, an increase of $12.4 million, or 56.3%, from $22.0 million in the second quarter of fiscal 2011. Second quarter fiscal 2012 pre-tax income includes expenses of approximately$1.8 million related to the previously-announced closure of the Company's Hogansville, Georgia distribution center in fiscal 2013 and the revaluation of contingent consideration associated with the June 2011 acquisition of Bonnie Togs, a retailer of children's apparel in Canada. Second quarter fiscal 2011 pre-tax income included approximately $1.2 million of expenses related to the Bonnie Togs acquisition. Excluding the facility closure-related costs and the acquisition-related expenses noted above and detailed at the end of this release, adjusted operating income in the second quarter of fiscal 2012 was $36.2 million, an increase of $13.0 million, or 56.2%, from the second quarter of fiscal 2011.

Net income increased $8.1 million, or 64.3%, to $20.8 million, or $0.35 per diluted share, compared to $12.7 million, or $0.22per diluted share, in the second quarter of fiscal 2011. Excluding the facility closure-related costs and the acquisition-related expenses noted above and detailed at the end of this release, adjusted net income in the second quarter of fiscal 2012 increased $9.0 million, or 66.8%, to $22.4 million, or $0.37 per diluted share. This compares to adjusted net income of $13.4 million, or $0.23 per diluted share, in the second quarter of fiscal 2011.

A reconciliation of income as reported under accounting principles generally accepted in the United States of America ("GAAP") to adjusted income is provided at the end of this release.

Business Segment Results

As a result of the Bonnie Togs acquisition in June 2011, the Company realigned its reportable segments. Effective October 1, 2011, the Company's reportable segments include Carter's retail, Carter's wholesale, OshKosh retail, OshKosh wholesale, and international. Results for previous periods have been recast to conform to the realigned segment presentation.

Carter's Segments

Carter's retail segment sales increased $26.3 million, or 18.4%, to $169.3 million. The increase was driven by incremental sales of $16.9 million from new store openings and $9.5 million from eCommerce sales, and a comparable store sales increase of $1.3 million, or 1.0%. This growth was partially offset by a sales decrease of $1.5 million attributed to store closings. In the second quarter of fiscal 2012, the Company opened 16 Carter's retail stores and closed three. As of the end of the second quarter, the Company operated 385 Carter's retail stores in the United States.

Carter's wholesale segment sales grew $21.9 million or 12.7%, to $194.5 million reflecting strong demand for the Company'sCarter's, Child of Mine, and Just One You brands.

OshKosh B'gosh Segments

OshKosh retail segment sales increased $1.2 million, or 2.1%, to $58.3 million. The increase reflects incremental sales of $2.5 million from eCommerce sales, a comparable store sales increase of $0.5 million, or 1.0%, and incremental sales of $0.5 million for new store openings. The growth was partially offset by a sales decrease of $2.4 million attributed to store closings. In the second quarter of fiscal 2012, the Company opened one OshKosh retail store and closed three. As of the end of the second quarter, the Company operated 166 OshKosh retail stores in the United States.

OshKosh wholesale segment sales decreased $1.9 million, or 13.0%, to $12.8 million, principally due to lower sales to the off-price channel.

International Segment

International segment sales increased $30.2 million to $37.3 million, reflecting a full quarter of sales from the Company's Canadian operations in fiscal 2012. In the second quarter of fiscal 2012, the Company opened four retail stores in Canada. As of the end of the second quarter, the Company operated 73 retail stores in Canada.

First Half of Fiscal 2012 compared to First Half of Fiscal 2011

Consolidated net sales increased $160.3 million, or 18.6%, to $1.0 billion. Net domestic sales of the Company's Carter'sbrands increased $95.4 million, or 13.7%, to $790.5 million. Net domestic sales of the Company's OshKosh B'gosh brand increased $3.5 million, or 2.4%, to $149.4 million. Net international sales to customers outside the United States increased$61.4 million to $84.0 million.

Operating income in the first half of fiscal 2012 was $88.2 million, an increase of $12.6 million, or 16.6%, from $75.7 million in the first half of fiscal 2011. First half fiscal 2012 pre-tax income includes expenses of approximately $3.6 million related to the previously-announced closure of the Company's Hogansville, Georgia distribution center and the revaluation of contingent consideration associated with the acquisition of Bonnie Togs. First half fiscal 2011 pre-tax income included approximately $2.2 million of expenses related to the Bonnie Togs acquisition. Excluding the facility closure-related costs and the acquisition-related expenses noted above and detailed at the end of this release, adjusted operating income in the first half of fiscal 2012 was $91.8 million, an increase of $14.0 million, or 17.9%, from the first half of fiscal 2011.

Net income increased $8.3 million, or 18.5%, to $53.1 million, or $0.89 per diluted share, compared to $44.8 million, or $0.76per diluted share, in the first half of fiscal 2011. Excluding the facility closure-related costs and the acquisition-related expenses noted above and detailed at the end of this release, adjusted net income in the first half of fiscal 2012 increased $9.8 million, or 21.3%, to $56.0 million, or $0.94 per diluted share. This compares to adjusted net income of $46.2 million, or $0.79 per diluted share, in the first half of fiscal 2011.

A reconciliation of income as reported under accounting principles generally accepted in the United States of America ("GAAP") to adjusted income is provided at the end of this release.

Cash flow from operations in the first half of fiscal 2012 was $89.9 million compared to cash flow used in operations of $86.3 million in the first half of fiscal 2011. The increase was primarily due to favorable net changes in working capital and increased earnings.

Carter's Segments

Carter's retail segment sales increased $65.7 million, or 23.4%, to $346.5 million, driven by incremental sales of $34.8 milliongenerated by new store openings and $23.6 million from eCommerce sales, and a comparable store sales increase of $9.7 million, or 3.8%. This growth was partially offset by a sales decrease of $2.5 million attributed to store closings. In the first half of fiscal 2012, the Company opened 32 Carter's retail stores and closed six.

Carter's wholesale segment sales increased $29.8 million, or 7.2%, to $444.0 million, reflecting growth in the Company's Child of Mine, Carter's, and Just One You brands, partially offset by lower off-price channel sales.

OshKosh B'gosh Segments

OshKosh retail segment sales increased $5.2 million, or 4.7%, to $116.3 million, driven by incremental sales of $6.0 milliongenerated by eCommerce sales, a comparable store sales increase of $2.8 million, or 2.8%, $1.0 million generated by new store openings, partially offset by a sales decrease of $4.7 million attributed to store closings. In the first half of fiscal 2012, the Company opened one OshKosh retail store and closed five.

OshKosh wholesale segment sales decreased $1.7 million, or 4.9%, to $33.1 million.

International Segment

International segment sales increased $61.4 million to $84.0 million, principally reflecting the contribution of the Company's business in Canada and higher wholesale sales in other countries. In the first half of fiscal 2012, the Company opened eight retail stores in Canada.

2012 Business Outlook

For the third quarter of fiscal 2012, the Company expects net sales to increase in the mid-single digit percentage range over the third quarter of fiscal 2011. The Company expects adjusted diluted earnings per share, excluding expenses totaling approximately $2 million related to the Bonnie Togs acquisition and the previously-announced distribution center closure, or other items the Company believes to be nonrepresentative of underlying business performance, to increase approximately 25% to 30%, compared to adjusted diluted earnings per share of $0.67 in the third quarter of fiscal 2011.

For fiscal 2012, the Company expects net sales will increase approximately 9% to 11% over fiscal 2011. The Company expects adjusted diluted earnings per share, excluding approximately $4 million to $5 million in expenses related to the Bonnie Togs acquisition, $3 million to $4 million in expenses related to the previously-announced distribution center closure, or other items the Company believes to be nonrepresentative of underlying business performance, to increase approximately 20% to 25% compared to adjusted diluted earnings per share of $2.09 in fiscal 2011.

Conference Call

The Company will hold a conference call with investors to discuss second quarter fiscal 2012 results and its business outlook on July 25, 2012 at 8:30 a.m. Eastern Time. To participate in the call, please dial 913-312-1383. To listen to a live broadcast of the call on the internet, please log on to http://www.carters.com and select the "Second Quarter 2012 Earnings Conference Call" link under the "Investor Relations" tab. Presentation materials for the call can be accessed at http://www.carters.com by selecting the "Conference Calls & Webcasts" link under the "Investor Relations" tab. A replay of the call will be available shortly after the broadcast through August 3, 2012, at 719-457-0820, passcode 5384169. The replay will also be archived on the Company's website.

About Carter's, Inc.

Carter's, Inc. is the largest branded marketer in the United States of apparel and related products exclusively for babies and young children. The Company owns the Carter's and OshKosh B'gosh brands, two of the most recognized brands in the marketplace. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through more than 600 Company-operated stores in the United States and Canada and on-line at http://www.carters.com and http://www.oshkoshbgosh.com. The Company's Just One YouPrecious Firsts, and Genuine Kids brands are available at Target, and its Child of Mine brand is available at Walmart. Carter's is headquartered in Atlanta, Georgia. Additional information may be found at http://www.carters.com.

           

CARTER'S, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except for share data)

(unaudited)

           
   

For the
three-month period ended

   

For the
six-month period ended

    June 30, 
2012
  July 2, 
2011
    June 30, 
2012
  July 2, 
2011
Net sales   $ 472,162     $ 394,488       $ 1,023,824     $ 863,488  
Cost of goods sold   288,919     259,445       645,842     570,360  
Gross profit   183,243     135,043       377,982     293,128  
Selling, general, and administrative expenses   156,290     121,290       305,995     235,070  
Royalty income   (7,474 )   (8,269 )     (16,240 )   (17,598 )
Operating income   34,427     22,022       88,227     75,656  
Interest expense, net   1,738     1,756       3,695     3,606  
Foreign currency (gain) loss   (207 )   (231 )     99     (231 )
Income before income taxes   32,896     20,497       84,433     72,281  
Provision for income taxes   12,091     7,838       31,353     27,499  
Net income   $ 20,805     $ 12,659       $ 53,080     $ 44,782  
Basic net income per common share   $ 0.35     $ 0.22       $ 0.90     $ 0.77  
Diluted net income per common share   $ 0.35     $ 0.22       $ 0.89     $ 0.76  
               
 

CARTER'S, INC.

BUSINESS SEGMENT RESULTS

(unaudited)

               
        For the three-month periods ended     For the six-month periods ended
  (dollars in thousands)     June 30, 
2012
  % of
Total
  July 2, 
2011
  % of
Total
    June 30, 
2012
  % of
Total
  July 2, 
2011
  % of
Total
 

Net sales:

                                   
  Carter's Wholesale     $ 194,523     41.2 %   $ 172,634     43.8 %     $ 444,008     43.4 %   $ 414,253     48.0 %
  Carter's Retail (a)     169,261     35.8 %   142,921     36.2 %     346,465     33.8 %   280,783     32.5 %
  Total Carter's     363,784     77.0 %   315,555     80.0 %     790,473     77.2 %   695,036     80.5 %
  OshKosh Retail (a)     58,301     12.3 %   57,112     14.5 %     116,289     11.4 %   111,106     12.9 %
  OshKosh Wholesale     12,789     2.7 %   14,700     3.7 %     33,063     3.2 %   34,776     4.0 %
  Total OshKosh     71,090     15.1 %   71,812     18.2 %     149,352     14.6 %   145,882     16.9 %
  International (b)     37,288     7.9 %   7,121     1.8 %     83,999     8.2 %   22,570     2.6 %
  Total net sales     $ 472,162     100.0 %   $ 394,488     100.0 %     $ 1,023,824     100.0 %   $ 863,488     100.0 %
                                       
 

Operating income (loss):

        % of
segment
net sales
      % of
segment
net sales
        % of
segment
net sales
      % of
segment
net sales
  Carter's Wholesale     $ 35,945     18.5 %   $ 20,438     11.8 %     $ 76,216     17.2 %   $ 57,581     13.9 %
  Carter's Retail (a)     19,951     11.8 %   19,392     13.6 %     50,485     14.6 %   46,055     16.4 %
  Total Carter's     55,896     15.4 %   39,830     12.6 %     126,701     16.0 %   103,636     14.9 %
  OshKosh Retail (a)     (9,319 )   (16.0 )%   (5,719 )   (10.0 )%     (16,778 )   (14.4 )%   (11,121 )   (10.0 )%
  OshKosh Wholesale     (574 )   (4.5 )%   (1,994 )   (13.6 )%     (454 )   (1.4 )%   (431 )   (1.2 )%
  Total OshKosh     (9,893 )   (13.9 )%   (7,713 )   (10.7 )%     (17,232 )   (11.5 )%   (11,552 )   (7.9 )%
  International (b)     6,257   (c) 16.8 %   3,607     50.7 %     13,724   (c) 16.3 %   8,586     38.0 %
  Segment operating income     52,260     11.1 %   35,724     9.1 %     123,193     12.0 %   100,670     11.7 %
  Corporate expenses (d)     (17,833 ) (e) (3.8 )%   (13,702 ) (f) (3.5 )%     (34,966 ) (e) (3.4 )%   (25,014 ) (f) (2.9 )%
  Total operating income     $ 34,427     7.3 %   $ 22,022     5.6 %     $ 88,227     8.6 %   $ 75,656     8.8 %
                                                               
   

(a)

Includes eCommerce results.

(b)

Net sales includes international retail, eCommerce, and wholesale sales. Operating income includes international licensing income.

(c)

Includes $1.1 million and $1.8 million charges associated with the revaluation of the Company's contingent consideration for the three and six-month periods ended June 30, 2012.

(d)

Corporate expenses generally include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance, building occupancy, information technology, certain legal fees, consulting, and audit fees.

(e)

Includes $0.7 million and $1.8 million in facility closure-related costs related to closure of a distribution facility located in Hogansville, Georgia for the three and six-month periods ended June 30, 2012, respectively. For the second quarter of 2012, the total closure-related costs consisted of severance of $0.3 million, accelerated depreciation (included in selling, general and administrative expenses) of $0.4 million, and other closure costs of $0.1 million. For the first half of 2012, the total closure-related costs consisted of severance of $1.4 million, accelerated depreciation (included in selling, general and administrative expenses) of $0.4 million and other closure costs of $0.1 million.

(f)

Includes $1.2 million and $2.2 million of professional service fees associated with the acquisition of Bonnie Togs for the three and six-month periods ended July 2, 2011, respectively.

             

CARTER'S, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except for share data)

(unaudited)

             
    June 30, 
2012
  December 31, 
2011
  July 2, 
2011
ASSETS            
Current assets:            
Cash and cash equivalents   $ 237,629     $ 233,494     $ 86,725  
Accounts receivable, net   131,888     157,754     124,667  
Finished goods inventories, net   377,857     347,215     458,114  
Prepaid expenses and other current assets   16,858     18,519     16,689  
Deferred income taxes   23,838     25,165     23,687  
Total current assets   788,070     782,147     709,882  
Property, plant, and equipment, net   139,592     122,346     101,796  
Tradenames   306,028     306,176     306,356  
Goodwill   188,621     188,679     191,050  
Deferred debt issuance costs, net   2,270     2,624     2,978  
Other intangible assets, net   221     258     311  
Other assets   436     479     445  
Total assets   $ 1,425,238     $ 1,402,709     $ 1,312,818  
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities:            
Current maturities of long-term debt   $ -     $ -     $ -  
Accounts payable   120,922     102,804     119,428  
Other current liabilities   34,012     49,949     37,226  
Total current liabilities   154,934     152,753     156,654  
Long-term debt   186,000     236,000     236,000  
Deferred income taxes   113,355     114,421     112,261  
Other long-term liabilities   103,612     93,826     75,021  
Total liabilities   557,901     597,000     579,936  
Commitments and contingencies            
Stockholders' equity:            
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at June 30, 2012, December 31, 2011, and July 2, 2011   -     -     -  
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 58,989,420, 58,595,421, and 58,087,327 shares issued and outstanding at June 30, 2012, December 31, 2011, and July 2, 2011, respectively   590     586     581  
Additional paid-in capital   240,427     231,738     218,857  
Accumulated other comprehensive loss   (11,427 )   (11,282 )   (1,989 )
Retained earnings   637,747     584,667     515,433  
Total stockholders' equity   867,337     805,709     732,882  
Total liabilities and stockholders' equity   $ 1,425,238     $ 1,402,709     $ 1,312,818  
     

CARTER'S, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

(unaudited)

     
   

For the six-month periods
ended

    June 30, 
2012
  July 2, 
2011
Cash flows from operating activities:        
Net income   $ 53,080     $ 44,782  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:        
Depreciation and amortization   17,606     16,367  
Non-cash revaluation of contingent consideration   1,779     -  
Amortization of Bonnie Togs tradename and non-compete agreements   187     -  
Amortization of debt issuance costs   354     354  
Non-cash stock-based compensation expense   6,351     4,883  
Income tax benefit from stock-based compensation   (1,834 )   (2,840 )
Loss on disposal/sale of property, plant, and equipment   517     140  
Deferred income taxes   554     4,844  
Effect of changes in operating assets and liabilities:        
Accounts receivable   25,887     (234 )
Inventories   (30,705 )   (123,324 )
Prepaid expenses and other assets   1,706     1,291  
Accounts payable and other liabilities   14,457     (32,565 )
         
Net cash provided by (used in) operating activities   89,939     (86,302 )
         
Cash flows from investing activities:        
Capital expenditures   (37,711 )   (16,086 )
Acquisition of Bonnie Togs   -     (61,199 )
Proceeds from sale of property, plant, and equipment   6     -  
         
Net cash used in investing activities   (37,705 )   (77,285 )
         
Cash flows from financing activities:        
Borrowings under revolving credit facility   2,500     -  
Payments on revolving credit facility   (52,500 )   -  
Income tax benefit from stock-based compensation   1,834     2,840  
Withholdings from vesting of restricted stock   (2,408 )   (1,602 )
Proceeds from exercise of stock options   2,481     1,692  
         
Net cash (used in) provided by financing activities   (48,093 )   2,930  
         
Effect of exchange rate changes on cash   (6 )   -  
Net increase (decrease) in cash and cash equivalents   4,135     (160,657 )
Cash and cash equivalents, beginning of period   233,494     247,382  
         
Cash and cash equivalents, end of period   $ 237,629     $ 86,725  
       
 

CARTER'S, INC.

RECONCILIATION OF GAAP TO ADJUSTED RESULTS

       
      Three-month period ended June 30, 2012
  (dollars in millions, except earnings per share)   SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 156.3     $ 34.4     $ 20.8     $ 0.35
  Revaluation of contingent consideration (a)   (1.1 )   1.1     1.1     0.01
  Facility closure-related costs (b)   (0.7 )   0.7     0.5     0.01
  As adjusted (d)   $ 154.5     $ 36.2     $ 22.4     $ 0.37
                                 
      Six-month period ended June 30, 2012
  (dollars in millions, except earnings per share)   SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 306.0     $ 88.2     $ 53.1     $ 0.89
  Revaluation of contingent consideration (a)   (1.8 )   1.8     1.8     0.03
  Facility closure-related costs (b)   (1.8 )   1.8     1.2     0.02
  As adjusted (d)   $ 302.4     $ 91.8     $ 56.0     $ 0.94
                                 
      Three-month period ended July 2, 2011
  (dollars in millions, except earnings per share)   SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 121.3     $ 22.0     $ 12.7     $ 0.22
  Professional fees / other expenses (c)   (1.2 )   1.2     0.7     0.01
  As adjusted (d)   $ 120.1     $ 23.2     $ 13.4     $ 0.23
                                 
      Six-month period ended July 2, 2011
  (dollars in millions, except earnings per share)   SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 235.1     $ 75.7     $ 44.8     $ 0.76
  Professional fees / other expenses (c)   (2.2 )   2.2     1.4     0.03
  As adjusted (d)   $ 232.9     $ 77.9     $ 46.2     $ 0.79
   

(a)

Revaluation of the contingent consideration liability associated with the Company's June 2011 acquisition of Bonnie Togs.

(b)

Costs related to the closure of a distribution facility located in Hogansville, Georgia, including severance and related benefits of $0.3 million and $1.4 million for the three and six-month periods ended June 30, 2012, respectively, $0.4 million in accelerated depreciation for the three and six-months period ended June 30, 2012, respectively and $0.1 million in other closure costs for the three and six-month periods ended June 30, 2012, respectively.

(c)

Professional service fees associated with the acquisition of Bonnie Togs.

(d)

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 SG&A, operating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison of the Company's results. The adjusted, non-GAAP financial measurements included in this earnings release should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company's future condition or results of operations.

   
 

Note: Results may not be additive due to rounding.

       
 

CARTER'S, INC.

RECONCILIATION OF GAAP TO ADJUSTED RESULTS

       
      Three-month period ended October 1, 2011
  (dollars in millions, except earnings per share)  

Gross
Margin

  SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 192.1     $ 145.8     $ 56.8     $ 34.4     $ 0.58
  Amortization of fair value step-up of inventory (a)   5.9     -     5.9     4.3     0.07
  Revaluation of contingent consideration (b)   -     (1.0 )   1.0     1.0     0.02
  Professional fees / other expenses (c)   -     (0.1 )   0.1     -     -
  As adjusted (d)   $ 198.1     $ 144.8     $ 63.8     $ 39.7     $ 0.67
                                         
                                         
      Twelve-month period ended December 31, 2011
  (dollars in millions, except earnings per share)  

Gross
Margin

  SG&A  

Operating
Income

  Net Income   Diluted EPS
  As reported (GAAP)   $ 692.3     $ 542.1     $ 187.5     $ 114.0     $ 1.94
 

Acquisition-related expenses:

                   
  Amortization of fair value step-up of inventory (a)   6.7     -     6.7     4.8     0.08
  Revaluation of contingent consideration (b)   -     (2.5 )   2.5     2.5     0.04
  Professional fees / other expenses (c)   -     (3.0 )   3.0     1.9     0.03
  Total acquisition-related expenses   6.7     (5.5 )   12.2     9.2     0.15
  As adjusted (d)   $ 698.9     $ 536.6     $ 199.7     $ 123.2     $ 2.09
   

(a)

Expense related to the amortization of the fair value step-up for Bonnie Togs inventory acquired.

(b)

Revaluation of the contingent consideration liability associated with the Company's June 2011 acquisition of Bonnie Togs.

(c)

Professional service fees associated with the acquisition of Bonnie Togs.

(d)

In addition to the results provided in this earnings release in accordance with GAAP, the Company has provided adjusted, non-GAAP financial measurements that present gross margin, SG&A, operating income, net income, and net income on a diluted share basis excluding the adjustments discussed above. The Company believes these adjustments provide a meaningful comparison to the Company's results. The adjusted, non-GAAP financial measurements included in this earnings release should not be considered as an alternative to net income or as any other measurement of performance derived in accordance with GAAP. The adjusted, non-GAAP financial measurements are presented for informational purposes only and are not necessarily indicative of the Company's future condition or results of operations.

   
 

Note: Results may not be additive due to rounding.

             
 

CARTER'S, INC.

RECONCILIATION OF NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS

             
      For the

three-month periods ended

   

For the
six-month periods ended

      June 30, 
2012
  July 2, 
2011
    June 30, 
2012
  July 2, 
2011
  Weighted-average number of common and common equivalent outstanding:                  
  Basic number of common shares outstanding   58,200,702     57,320,717       58,128,989     57,185,008  
  Dilutive effect of unvested restricted stock   170,495     96,845       174,134     101,921  
  Dilutive effect of stock options   676,321     635,425       645,174     665,797  
  Diluted number of common and common equivalent shares outstanding   59,047,518     58,052,987       58,948,297     57,952,726  
                     
 

As reported on a GAAP Basis:

                 
  Basic net income per common share:                  
  Net income   $ 20,805,000     $ 12,659,000       $ 53,080,000     $ 44,782,000  
  Income allocated to participating securities   (281,253 )   (140,083 )     (718,436 )   (496,715 )
  Net income available to common shareholders   $ 20,523,747     $ 12,518,917       $ 52,361,564     $ 44,285,285  
                     
  Basic net income per common share   $ 0.35     $ 0.22       $ 0.90     $ 0.77  
                     
  Diluted net income per common share                  
  Net income   $ 20,805,000     $ 12,659,000       $ 53,080,000     $ 44,782,000  
  Income allocated to participating securities   (278,065 )   (138,564 )     (710,655 )   (491,061 )
  Net income available to common shareholders   $ 20,526,935     $ 12,520,436       $ 52,369,345     $ 44,290,939  
                     
  Diluted net income per common share   0.35     0.22       0.89     0.76  
                     
 

As adjusted (a):

                 
  Basic net income per common share:                  
  Net income   $ 22,353,000     $ 13,402,000       $ 56,021,000     $ 46,176,000  
  Income allocated to participating securities   (302,179 )   (148,305 )     (758,242 )   (512,177 )
  Net income available to common shareholders   $ 22,050,821     $ 13,253,695       $ 55,262,758     $ 45,663,823  
                     
  Basic net income per common share   $ 0.38     $ 0.23       $ 0.95     $ 0.80  
                     
  Diluted net income per common share                  
  Net income   $ 22,353,000     $ 13,402,000       $ 56,021,000     $ 46,176,000  
  Income allocated to participating securities   (298,755 )   (146,697 )     (750,030 )   (506,347 )
  Net income available to common shareholders   $ 22,054,245     $ 13,255,303       $ 55,270,970     $ 45,669,653  
                     
  Diluted net income per common share   $ 0.37     $ 0.23       $ 0.94     $ 0.79  
                                     

(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 $1.6 million and $2.9 million in after-tax expenses from these results for the three and six-month periods ended June 30, 2012, respectively. The Company has excluded $0.7 million and $1.4 million in after-tax expenses from these results for the three and six-month periods ended July 2, 2011, respectively.

Source: Carter's, Inc.

Original source: http://ir.carters.com/phoenix.zhtml?c=135392&p=irol-newsArticle&ID=1718076&highlight=