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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1998 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number:
CARTER HOLDINGS, INC.
(Exact name of registrant as specified in charter)
Massachusetts 13-3912933
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1590 Adamson Parkway, Suite 400
Morrow, Georgia 30260
----------------------------------------------------------
(Address of principal executive offices, including zip code)
(770) 961-8722
--------------
(Registrant's telephone number, including area code)
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 |_|
Applicable only to corporate issuers:
As of November 17, 1998, there were 752,808 shares of Class A Common Stock,
218,655 Class C Common Stock and 5,000 shares of Class D Common Stock
outstanding.
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<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
INDEX
Part I. Financial Information Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
October 3, 1998 (unaudited) and January 3, 1998 3
Unaudited Condensed Consolidated Statements of
Income for the three-month periods ended
October 3, 1998 and September 27, 1997 4
Unaudited Condensed Consolidated Statements of
Income for the nine-month periods ended October
3, 1998 and September 27, 1997 5
Unaudited Condensed Consolidated Statements of
Cash Flows for the nine-month periods ended
October 3, 1998 and September 27, 1997 6
Notes to Condensed Consolidated Financial
Statements (unaudited) 7
Management's Discussion and Analysis of
Item 2. Financial Condition and Results of Operations 10
Part II. Other Information 14
2
<PAGE>
CARTER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,937 $ 4,259
Accounts receivable, net 39,954 30,134
Inventories 107,242 87,639
Prepaid expenses and other current assets 2,426 3,390
Deferred income taxes 12,353 13,630
--------- ---------
Total current assets 166,912 139,052
Property, plant and equipment, net 55,597 53,011
Tradename, net 95,208 97,083
Cost in excess of fair value of net assets acquired, net 30,724 31,445
Deferred debt issuance costs, net 8,800 9,926
Other assets 3,109 4,048
--------- ---------
Total assets $ 360,350 $ 334,565
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 900 $ 900
Accounts payable 18,637 14,582
Other current liabilities 42,332 35,196
--------- ---------
Total current liabilities 61,869 50,678
Long-term debt 189,950 176,200
Deferred income taxes 39,245 39,777
Other long-term liabilities 9,990 9,990
--------- ---------
Total liabilities 301,054 276,645
--------- ---------
Commitments and contingencies
Stockholders' equity:
Class A Stock, nonvoting; par value $.01 per share; 775,000
shares authorized; 752,808 shares issued and outstanding;
liquidation value of $.001 per share 45,168 45,168
Class C Stock, nonvoting; par value $.01 per share; 500,000
shares authorized; 242,192 shares issued; liquidation value of
$.001 per share 14,532 14,532
Class C Treasury Stock, 24,066 shares at cost at October 3,
1998, 19,709 shares at cost at January 3, 1998 (1,443) (1,183)
Class D Stock, voting; par value $.01 per share; 5,000 shares
authorized, issued and outstanding 300 300
Common Stock, voting; par value $.01 per share; 1,280,000 shares
authorized; none issued or outstanding -- --
Retained earnings 739 (897)
--------- ---------
Total stockholders' equity 59,296 57,920
--------- ---------
Total liabilities and stockholders' equity $ 360,350 $ 334,565
========= =========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
CARTER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(unaudited)
Three-month period ended
------------------------------
October 3, September 27,
1998 1997
----------- -------------
Net sales $127,243 $116,853
Cost of goods sold 78,840 74,098
-------- --------
Gross profit 48,403 42,755
Selling, general and administrative expenses 33,890 30,103
-------- --------
Operating income 14,513 12,652
Interest expense 5,523 5,265
-------- --------
Earnings before income taxes 8,990 7,387
Provision for income taxes 3,866 3,619
-------- --------
Net income $ 5,124 $ 3,768
======== ========
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
CARTER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
(unaudited)
Nine-month period ended
------------------------------
October 3, September 27,
1998 1997
----------- -------------
Net sales $300,171 $264,571
Cost of goods sold 189,701 166,420
-------- --------
Gross profit 110,470 98,151
Selling, general and administrative expenses 91,629 82,328
-------- --------
Operating income 18,841 15,823
Interest expense 15,971 14,945
-------- --------
Earnings before income taxes 2,870 878
Provision for income taxes 1,234 432
-------- --------
Net income $ 1,636 $ 446
======== ========
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE>
CARTER HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Nine-month period ended
------------------------------
October 3, September 27,
1998 1997
----------- -------------
Cash flows from operating activities:
Net income $ 1,636 $ 446
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 12,539 11,475
Deferred tax provision 745 240
Effect of changes in assets and liabilities:
Increase in accounts receivable (9,820) (19,234)
Increase in inventories (19,603) (6,759)
Decrease in prepaid expenses and other
current assets 891 3,469
Increase in accounts payable and other
liabilities 8,969 14,882
-------- --------
Net cash (used in) provided by operating
activities (4,643) 4,519
-------- --------
Cash flows from investing activities:
Capital expenditures (10,414) (9,275)
Proceeds from sale of fixed assets 23 35
-------- --------
Net cash used in investing activities (10,391) (9,240)
-------- --------
Cash flows from financing activities:
Proceeds from revolving line of credit 94,350 77,500
Payments of revolving line of credit (80,150) (68,000)
Payment of other debt (450) (450)
Proceeds from sale of Class C Treasury
Stock 60
Repurchase of capital stock (320)
Payment of financing costs (650)
Other 2,222
-------- --------
Net cash provided by financing activities 15,712 8,400
-------- --------
Net increase in cash and cash equivalents 678 3,679
Cash and cash equivalents, beginning of period 4,259 1,961
-------- --------
Cash and cash equivalents, end of period $ 4,937 $ 5,640
======== ========
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
CARTER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PREPARATION:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Carter Holdings, Inc. and its subsidiaries
(the "Company") contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the Company
as of October 3, 1998, the results of its operations for the three-month and
nine-month periods ended October 3, 1998 and September 27, 1997, and its cash
flows for the nine-month periods ended October 3, 1998 and September 27, 1997.
Operating results for the three-month and nine-month periods ended October 3,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 2, 1999. The accompanying condensed consolidated
balance sheet of the Company as of January 3, 1998 has been derived from the
audited consolidated financial statements included in the Company's July 15,
1998 registration statement on Form S-4.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission and the instructions to Form 10-Q. The
accounting policies followed by the Company are set forth in its July 15, 1998
registration statement on Form S-4 in the Notes to the Company's consolidated
financial statements for the fiscal year ended January 3, 1998.
NOTE 2 - THE COMPANY:
Carter Holdings, Inc. is a holding company whose primary asset consists of
an investment in 100% of the outstanding capital stock of The William Carter
Company, Inc ("Carter's").
The Company is a manufacturer and marketer of premier branded
childrenswear under the CARTER'S, CARTER'S CLASSICS and BABY DIOR labels. The
Company manufactures its products in plants located in the southern United
States, Costa Rica, the Dominican Republic and Mexico. Products are manufactured
for wholesale distribution to major domestic retailers, and for the Company's
148 retail outlet stores that market its brand name merchandise and certain
products manufactured by other companies. The retail operations represented
approximately 40% of consolidated net sales in the third quarter and first nine
months of fiscal 1998 and approximately 36% in the third quarter and first nine
months of fiscal 1997.
7
<PAGE>
CARTER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 - INVENTORIES:
Inventories consisted of the following ($000):
October 3, January 3,
1998 1998
------------ -----------
Finished goods $ 64,812 $ 50,026
Work in process 29,855 24,069
Raw materials 12,575 13,544
-------- --------
Total $107,242 $ 87,639
======== ========
NOTE 4 - LONG TERM DEBT:
In June 1998, Carter's amended its Senior Credit Facility to benefit from
favorable changes in the interest rate environment and to support higher levels
of demand for the Company's products. The applicable interest margins for loans
which accrue interest at the Eurodollar Rate were adjusted from 2.50% to 2.25%
for the revolving credit facility and from 3.00% to 2.50% for the term loan. The
amendment provides for additional reductions in the interest margin based on the
achievement of certain leverage ratios. To support peak working capital
requirements in the second quarter, the revolving credit facility was increased
from $50.0 million to $65.0 million and the letter of credit sublimit increased
from $10.0 million to $15.0 million.
In April of 1998, the Company filed a registration statement on Form S-4
with the Securities and Exchange Commission related to an Exchange Offer for
$20.0 million of 12% Senior Subordinated Notes for a like amount of the 12%
Senior Subordinated Notes issued in the October 1996 private placement. This
registration statement became effective July 15, 1998.
NOTE 5 - TREASURY STOCK TRANSACTIONS:
The Company repurchased 2,289 shares and 5,357 shares of its Class C stock
owned by former employees of Carter's for cash payments totaling approximately
$136,000 and $320,000 in the three-month and the nine-month periods ended
October 3, 1998, respectively. The Company issued 1,000 shares of Class C stock
from shares repurchased for $60.00 per share to an employee of Carter's in the
nine-month period ended October 3, 1998.
8
<PAGE>
CARTER HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 6 - ENVIRONMENTAL MATTERS:
The Company has been named as a third-party defendant in an action
involving environmental claims relating to property located near its previously
owned facility in Needham, Massachusetts. This case is in the early stages of
discovery and management intends to aggressively defend its position that it has
no liability in this matter. In 1998, the Company commenced a review in Lamar
County, Georgia of a potential claim under Georgia's environmental laws. Based
on the information available at this time, the ultimate outcome of these matters
is uncertain and, therefore, the Company is unable to determine the amount of
its liability, if any, or assess whether the resolution of these matters will
have a material adverse effect on its results of operations or financial
condition. Accordingly, no provision for any liability has been made in the
accompanying financial statements.
9
<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.
RESULTS OF OPERATIONS
Three and nine-month periods ended October 3, 1998 compared with the three and
nine-month periods ended September 27, 1997
Consolidated net sales for the third quarter of 1998 were $127.2 million,
an increase of $10.3 million (8.9%) compared with the third quarter of 1997.
Consolidated net sales for the first nine months of 1998 were $300.2 million, an
increase of $35.6 million (13.5%) compared with the first nine months of 1997.
The Company's wholesale sales increased $3.0 million (4.0%) to
approximately $76.7 million in the third quarter of 1998 from $73.7 million in
the third quarter of 1997. Wholesale sales in the first nine months of 1998
increased $16.7 million (10.4%) to approximately $178.3 million from $161.6
million in the first nine months of 1997. The increase in wholesale sales was
due primarily to new product line introductions, which included Special
Delivery, Baby Basics, Dreamakers and Another Bundle of JOY (acronym for "Just
One Year").
The Company's retail outlet store sales in the third quarter of 1998 were
$50.6 million, an increase of $8.7 million (20.8%) compared with the third
quarter of 1997. Comparable store sales increased 12.4% in the third quarter of
1998 compared with the third quarter of 1997. The Company opened 7 stores and
closed 1 store in the third quarter of 1998. In the first nine months of 1998,
the Company opened 12 stores and closed 2 stores. There were 148 stores in
operation at October 3, 1998 compared with 139 stores at September 27, 1997.
Retail sales in the first nine months of 1998 were $121.9 million, an
increase of $23.4 million (23.7%) compared with the first nine months of 1997.
Comparable store sales increased 15.6% in the first nine months of 1998. These
increases are attributed to the successful implementation of a new marketing
strategy and the benefit from new product line introductions described above.
The new marketing strategy, which was fully implemented by February 1998, was
designed to clearly communicate the value of Carter's products sold through the
outlet stores relative to comparable values offered elsewhere. Improvements in
the merchandise planning and allocation process, a more impactful and
coordinated visual display of merchandise, and improvements in customer service,
also contributed to the increase in retail sales in the first nine months of
1998.
10
<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
The Company's gross profit increased $5.6 million (13.2%) to $48.4 million
in the third quarter of 1998 compared with the third quarter of 1997. In the
first nine months of 1998, gross profit increased $12.3 million (12.6%) to
$110.5 million compared with the first nine months of 1997. The improvement in
gross profit reflects the benefit derived from the growth in sales driven by new
product line introductions. In the third quarter of 1998, gross profit as a
percentage of net sales increased to 38.0% of net sales compared with 36.6% in
the third quarter of 1997. Gross profit as a percentage of net sales in the
first nine months of 1998 decreased to 36.8% compared to 37.1% in the first nine
months of 1997. The changes in gross margin as a percentage of net sales reflect
the impact of start-up costs incurred in the development of the Company's sewing
operations in Mexico in the first half of 1998. Such start-up costs are
comprised of manufacturing direct labor and facility costs not yet absorbed in
inventory due to the low level of production during the development stage.
Selling, general and administrative expenses for the third quarter of 1998
increased $3.8 million (12.6%) to $33.9 million compared with the third quarter
of 1997. As a percentage of net sales, such expenses increased to 26.6% in the
third quarter of 1998 compared to 25.8% in the third quarter of 1997. This
increase reflects marketing costs incurred to elevate the image of the Carter's
brand. For the first nine months of 1998 selling, general and administrative
expenses increased $9.3 million (11.3%) to $91.6 million compared with the first
nine months of 1997. These expenses as a percentage of net sales decreased to
30.5% in the first nine months of 1998 compared to 31.1% in the first nine
months of 1997. The improvement in selling, general and administrative expenses
as a percentage of net sales reflects the benefit from comparable store sales
increases achieved by the Company's retail outlet stores and lower retail store
expenses relative to sales resulting from cost controls implemented in store
operations.
Operating income for the third quarter of 1998 increased $1.9 million
(14.7%) to $14.5 million compared with the third quarter of 1997. Operating
income in the first nine months of 1998 increased $3.0 million (19.1%) to $18.8
million compared with the first nine months of 1997. This increase reflects the
changes in gross profit and selling, general and administration expenses
described above.
Interest expense for the third quarter of 1998 increased to $5.5 million
compared with $5.3 million in the third quarter of 1997. In the first nine
months of 1998, interest expense was $16.0 million compared with $14.9 million
in the first nine months of 1997. These increases reflect the cost of higher
average revolver borrowings for working capital requirements needed to support
an increased level of demand for Carter's products. Average revolver borrowings
during the first nine months of 1998 were $27.8 million compared to $11.5
million in the first nine months of 1997. At October 3, 1998, outstanding debt
aggregated $190.9 million compared to $174.1 million at September 27, 1997.
The Company recorded an income tax provision of $3.9 million in the third
quarter of 1998 compared with an income tax provision of $3.6 million in the
third quarter of 1997. In the first nine months of 1998 the tax provision was
$1.2 million compared with $.4 million in the first nine months of 1997. The
Company's effective tax rate was 43% during the three month and nine month
periods ended October 3, 1998 compared to an effective tax rate of 49% for the
three month and nine month periods ended September 27, 1997. The decrease in the
effective tax rate is attributable to a higher projected pre-tax income for
1998.
As a result of the factors described above, the Company reported net
income of approximately $5.1 million and $3.8 million in the third quarters of
1998 and 1997, respectively. The net income for the first nine months of 1998
was $1.6 million compared to net income of $.5 million in the first nine months
of 1997.
11
<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
The Company has financed its working capital, capital expenditures and
debt service requirements primarily through internally generated cash flow, in
addition to funds borrowed under the Company's revolving credit facility.
Net accounts receivable at October 3, 1998 were $40.0 million compared
with $38.5 million at September 27, 1997. This increase reflects the higher
levels of wholesale revenues in the third quarter of 1998 as compared to the
third quarter of 1997. Due to the seasonal nature of the Company's operations,
the net accounts receivable balance at October 3, 1998 is not comparable with
the net accounts receivable balance at January 3, 1998.
Inventories at October 3, 1998 were $107.2 million compared with $83.3
million at September 27, 1997. This increase reflects the growth in inventory
required to support higher levels of sales demand and additional inventory
required to support the Company's offshore sewing facilities, particularly the
development of two new facilities in Mexico. Inventory turnover in 1998 has
improved relative to 1997. Due to the seasonal nature of the Company's
operations, the inventory balance at October 3, 1998 is not comparable to the
net inventory balance at January 3, 1998.
Net cash flows used in operating activities was $4.6 million for the
nine-month period ended October 3, 1998 compared to the $4.5 million provided in
the nine-month period ended September 27, 1997. This change can be attributed to
the increase in inventory levels in fiscal 1998, financed primarily through
revolver borrowings under the Senior Credit Facility.
At October 3, 1998, the Company had $190.9 million of debt outstanding,
consisting of $100.0 million of 10 3/8% Series A Senior Subordinated Notes,
$20.0 million of 12% Senior Subordinated Notes, $43.7 million in term loan
borrowings and $27.2 million in revolver borrowings under the Senior Credit
Facility, exclusive of approximately $7.8 million of outstanding letters of
credit. At October 3, 1998, the Company had approximately $30.0 million of
financing available under the revolving credit portion of the Senior Credit
Facility.
The Company invested $10.4 million and $9.3 million in capital
expenditures during the first nine months of 1998 and 1997, respectively. The
Company plans to invest a total of approximately $20.0 million in capital
expenditures in 1998.
The Company believes that cash generated from operations, together with
availability under the revolving portion of the Senior Credit Facility, will be
adequate to meet its debt service requirements, capital expenditures and working
capital needs for the foreseeable future, although no assurance can be given in
this regard.
12
<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
EFFECTS OF INFLATION
The Company is affected by inflation primarily through the purchase of raw
material, increased operating costs and expenses, and higher interest rates. The
effects of inflation on the Company's operations have not been material in
recent years.
SEASONALITY
The Company experiences seasonal fluctuations in its sales and
profitability, with generally lower sales and gross profit in the first and
second quarters of its fiscal year. The Company believes that seasonality of
sales and profitability is a factor that affects the baby and children's apparel
industry generally and is primarily due to retailers' emphasis on Fall and
Holiday sales, including back to school promotions, which results in higher
sales and profitability in the third and fourth quarters. Accordingly, the
results of operations for the three-month and nine-month periods ended October
3, 1998 are not indicative of the results to be expected for the full year.
YEAR 2000
The potential for software processing errors arising from calculations
using the Year 2000 date are a known risk. Efforts to address the Year 2000
issue commenced in 1997 when the Company began identifying, updating and
replacing hardware and software that were not Year 2000 ready. The Company has
replaced a significant portion of its at-risk legacy hardware with systems that
are Year 2000 compliant. In the software applications area, the Company is
nearing completion of the detection phase of its plan which consists of planning
and awareness, a complete inventory of software, prioritization and a detailed
assessment. The correction phase is also underway as remediation and testing of
major computer applications are being completed and made ready for the
deployment phase.
The Company has completed an inventory of equipment and software
throughout its manufacturing plants, performed risk analyses and developed
action plans for any systems posing possible concerns. The Company is also
taking steps to examine Year 2000 implications of relationships with its
suppliers, vendors and service providers to understand their commitment to Year
2000 readiness as well as working with its electronic data interchange ("EDI")
customers to ensure Year 2000 readiness.
As of October 3, 1998, the Company estimates the investment required to be
Year 2000 ready to be $4.0 million. Such investment will be made in the fourth
quarter of 1998 and in 1999. This level of investment was previously
contemplated in the Company's plans to upgrade its information technology
systems. The Company expects to be Year 2000 ready by June 1999.
13
<PAGE>
FORM 10-Q
CARTER HOLDINGS, INC.
PART II - OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings arising out of the
ordinary course of its business. Management believes that none of these actions,
individually or in the aggregate, will have a material adverse effect on the
results of operations or financial condition of the Company.
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- - ------ -----------------------
*27 Financial Data Schedule
- - ----------
* Filed herewith
(b) Reports on Form 8K
No report was filed by the Registrant during the quarter ended October 3, 1998
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARTER HOLDINGS, INC.
Date: November 17, 1998 /s/ FREDERICK J. ROWAN, II
-------------------------------------
Frederick J. Rowan, II
Chairman of the Board of Directors,
President and Chief Executive Officer
Date: November 17, 1998 /s/ MICHAEL D. CASEY
-------------------------------------
Michael D. Casey
Senior Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JAN-02-1999 JAN-02-1999
<PERIOD-START> JAN-04-1998 JUL-05-1998
<PERIOD-END> OCT-03-1998 OCT-03-1998
<CASH> 4,937 0
<SECURITIES> 0 0
<RECEIVABLES> 42,669 0
<ALLOWANCES> 2,715 0
<INVENTORY> 107,242 0
<CURRENT-ASSETS> 166,912 0
<PP&E> 73,994 0
<DEPRECIATION> 18,397 0
<TOTAL-ASSETS> 360,350 0
<CURRENT-LIABILITIES> 61,869 0
<BONDS> 189,950 0
0 0
58,557 0
<COMMON> 0 0
<OTHER-SE> 739 0
<TOTAL-LIABILITY-AND-EQUITY> 360,350 0
<SALES> 300,171 127,243
<TOTAL-REVENUES> 300,171 127,243
<CGS> 189,701 78,840
<TOTAL-COSTS> 189,701 78,840
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 15,971 5,523
<INCOME-PRETAX> 2,870 8,990
<INCOME-TAX> 1,234 3,866
<INCOME-CONTINUING> 1,636 5,124
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,636 5,124
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
