cri-20230701

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023

☐ 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, Georgia 30326

(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. Yes x 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). Yes x 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 filer x 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 July 21, 2023, there were 37,258,307 shares of the registrant’s common stock outstanding.

CARTER’S, INC.

INDEX



Part I. Financial Information			Page

	Item 1	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of July 1, 2023, December 31, 2022 and July 2, 2022	1
		Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter and two fiscal quarters ended July 1, 2023 and July 2, 2022	2
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter and two fiscal quarters ended July 1, 2023 and July 2, 2022	3
		Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the fiscal quarters ended July 1, 2023, April 1, 2023, July 2, 2022 and April 2, 2022	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the two fiscal quarters ended July 1, 2023 and July 2, 2022	5
		Notes to the Unaudited Condensed Consolidated Financial Statements	6
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	27
	Item 4	Controls and Procedures	28

Part II. Other Information

	Item 1	Legal Proceedings	29
	Item 1A	Risk Factors	29
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3	Defaults upon Senior Securities	29
	Item 4	Mine Safety Disclosures	29
	Item 5	Other Information	29
	Item 6	Exhibits	30

Signatures			31

Certifications

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARTER’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


	July 1, 2023		December 31, 2022		July 2, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	174,503	$	211,748	$	231,339
Accounts receivable, net of allowance for credit losses of $3,849, $7,189, and $5,758, respectively	132,679		198,587		183,920
Finished goods inventories, net of inventory reserves of $17,847, $19,268, and $18,057, respectively	681,573		744,573		858,258
Prepaid expenses and other current assets(*)	56,616		33,812		68,245
Total current assets	1,045,371		1,188,720		1,341,762
Property, plant, and equipment, net of accumulated depreciation of $592,310, $569,528, and $548,013, respectively	178,100		189,822		186,778
Operating lease assets	499,689		492,335		449,350
Tradenames, net	298,274		298,393		307,518
Goodwill	210,517		209,333		211,247
Customer relationships, net	28,995		30,564		32,248
Other assets	27,525		30,548		31,747
Total assets	$	2,288,471	$	2,439,715	$	2,560,650

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	281,333	$	264,078	$	408,006
Current operating lease liabilities(*)	137,473		142,432		129,744
Other current liabilities	98,730		122,439		96,102
Total current liabilities	517,536		528,949		633,852
Long-term debt, net	496,984		616,624		616,275
Deferred income taxes	45,436		41,235		45,730
Long-term operating lease liabilities	420,805		421,741		400,046
Other long-term liabilities	32,701		34,757		43,881
Total liabilities	$	1,513,462	$	1,643,306	$	1,739,784

Commitments and contingencies - Note 12

Stockholders’ equity:
Preferred stock; par value $0.01 per share; 100,000 shares authorized; none issued or outstanding	$	—	$	—	$	—
Common stock, voting; par value $0.01 per share; 150,000,000 shares authorized; 37,354,464, 37,692,132, and 39,315,094 shares issued and outstanding, respectively	374		377		393
Additional paid-in capital	—		—		—
Accumulated other comprehensive loss	(24,963)		(34,338)		(32,203)
Retained earnings	799,598		830,370		852,676
Total stockholders’ equity	775,009		796,409		820,866
Total liabilities and stockholders’ equity	$	2,288,471	$	2,439,715	$	2,560,650

(*)Prepaid expenses and other current assets and Current operating lease liabilities as of July 2, 2022 were revised to reflect the presentation for payments of rent before payment due date of $13.2 million.

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)


	Fiscal quarter ended				Two fiscal quarters ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net sales	$	600,199	$	700,695	$	1,296,079	$	1,481,980
Cost of goods sold	308,303		369,456		694,716		795,699

Gross profit	291,896		331,239		601,363		686,281
Royalty income, net	4,341		5,602		10,860		13,076
Selling, general, and administrative expenses	258,676		261,423		518,308		521,315


Operating income	37,561		75,418		93,915		178,042
Interest expense	8,083		8,652		17,727		23,784
Interest income	(1,005)		(272)		(1,705)		(610)
Other (income) expense, net	(767)		17		(1,025)		(494)
Loss on extinguishment of debt	—		19,940		—		19,940
Income before income taxes	31,250		47,081		78,918		135,422
Income tax provision	7,383		10,111		19,055		30,519
Net income	$	23,867	$	36,970	$	59,863	$	104,903

Basic net income per common share	$	0.64	$	0.93	$	1.59	$	2.60
Diluted net income per common share	$	0.64	$	0.93	$	1.59	$	2.59
Dividend declared and paid per common share	$	0.75	$

SEC Form 10-Q filed by Carter's Inc.