SEC Filing | Carter’s, Inc.

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Q1 2014 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 MARCH 29, 2014 OR

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO ______

Commission file number:

001-31829

CARTER’S, INC.

(Exact name of Registrant as specified in its charter)



Delaware		13-3912933
(state or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

Phipps Tower

3438 Peachtree Road NE, Suite 1800

Atlanta, Georgia 30326

(Address of principal executive offices, including zip code)

(678) 791-1000

(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 ( )

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes (X) No ( )

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer, accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer (X) Accelerated Filer ( ) Non-Accelerated Filer ( ) Smaller Reporting Company ( )

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (X) No (X)

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Common Stock		Outstanding Shares at April 18, 2014
Common stock, par value $0.01 per share		53,692,806

CARTER’S, INC.

INDEX



			Page
Part I. Financial Information

	Item 1	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of March 29, 2014, December 28, 2013, and March 30, 2013	1
		Unaudited Condensed Consolidated Statements of Operations for the fiscal quarter ended March 29, 2014 and March 30, 2013	2
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the fiscal quarter ended March 29, 2014 and March 30, 2013	3
		Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the fiscal quarter ended March 29, 2014	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the fiscal quarter ended March 29, 2014 and March 30, 2013	5
		Notes to the Unaudited Condensed Consolidated Financial Statements	6
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	33
	Item 4	Controls and Procedures	33

Part II. Other Information

	Item 1	Legal Proceedings	34
	Item 1A	Risk Factors	34
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	44
	Item 3	Defaults upon Senior Securities	45
	Item 4	Mine Safety Disclosures	45
	Item 5	Other Information	45
	Item 6	Exhibits	45

Signatures			46

Certifications

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARTER’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except for share data)

(unaudited)



	March 29, 2014			December 28, 2013			March 30, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	277,236		$	286,546		$	397,563
Accounts receivable, net	205,166			193,611			178,360
Finished goods inventories, net	363,018			417,754			284,525
Prepaid expenses and other current assets	26,362			35,157			21,612
Deferred income taxes	37,343			37,313			31,708
Total current assets	909,125			970,381			913,768
Property, plant, and equipment, net	316,786			307,885			182,193
Tradenames and other intangibles, net	323,967			330,258			305,974
Goodwill	184,604			186,077			188,731
Deferred debt issuance costs, net	7,758			8,088			2,682
Other assets	10,109			9,795			4,333
Total assets	$	1,752,349		$	1,812,484		$	1,597,681

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	103,439		$	164,010		$	97,884
Other current liabilities	75,235			105,129			72,590
Total current liabilities	178,674			269,139			170,474
Long-term debt	586,000			586,000			186,000
Deferred income taxes	118,032			121,434			112,015
Other long-term liabilities	140,493			135,180			106,004
Total liabilities	$	1,023,199		$	1,111,753		$	574,493

Commitments and contingencies

Stockholders’ equity:
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at March 29, 2014, December 28, 2013, and March 30, 2013.	—			—			—
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 53,742,906, 54,541,879, and 59,358,011 shares issued and outstanding at March 29, 2014, December 28, 2013, and March 30, 2013, respectively	537			545			594
Additional paid-in capital	11,420			4,332			248,032
Accumulated other comprehensive loss	(12,842		)	(10,082		)	(12,670		)
Retained earnings	730,035			705,936			787,232
Total stockholders’ equity	729,150			700,731			1,023,188
Total liabilities and stockholders’ equity	$	1,752,349		$	1,812,484		$	1,597,681

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
	March 29, 2014			March 30, 2013

Net sales	$	651,643		$	591,009
Cost of goods sold	389,918			347,947
Gross profit	261,725			243,062
Selling, general, and administrative expenses	210,095			185,361
Royalty income	(9,901		)	(9,242		)
Operating income	61,531			66,943
Interest expense	6,897			1,294
Interest income	(132		)	(191		)
Other expense, net	596			573
Income before income taxes	54,170			65,267
Provision for income taxes	19,873			23,852
Net income	$	34,297		$	41,415

Basic net income per common share	$	0.64		$	0.70

Diluted net income per common share	$	0.63		$	0.69

Dividend declared and paid per common share	$	0.19		$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(unaudited)



	Fiscal quarter ended
	March 29, 2014			March 30, 2013

Net income	$	34,297		$	41,415
Other comprehensive income (loss):
Foreign currency translation adjustments	(2,760		)	(1,465		)
Comprehensive income	$	31,537		$	39,950

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(amounts in thousands, except share amounts)

(unaudited)



	Common stock - shares		Common stock - $			Additional paid-in capital			Accumulated other comprehensive (loss) income			Retained earnings			Total stockholders’ equity

Balance at December 28, 2013	54,541,879		$	545		$	4,332		$	(10,082	)	$	705,936		$	700,731
Income tax benefit from stock-based compensation	—		—			3,370			—			—			3,370
Exercise of stock options	183,667		1			5,545			—			—			5,546
Withholdings from vesting of restricted stock	(60,285	)	—			(4,079		)	—			—			(4,079		)
Restricted stock activity	131,950		1			(1		)	—			—			—
Stock-based compensation expense	—		—			4,535			—			—			4,535
Issuance of common stock	—		—			—			—			—			—
Repurchase of common stock	(1,054,305	)	(10		)	(2,282		)	—			—			(2,292		)
Cash dividends declared and paid	—		—			—			—			(10,198		)	(10,198		)
Comprehensive income	—		—			—			(2,760		)	34,297			31,537
Balance at March 29, 2014	53,742,906		$	537		$	11,420		$	(12,842	)	$	730,035		$	729,150

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)



	Fiscal quarter ended
	March 29, 2014			March 30, 2013
Cash flows from operating activities:
Net income	$	34,297		$	41,415
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	15,354			12,389
Amortization of H.W. Carter and Sons tradenames	6,271			—
Non-cash revaluation of contingent consideration	454			891
Amortization of debt issuance costs	375			196
Non-cash stock-based compensation expense	4,535			4,065
Income tax benefit from stock-based compensation	(3,370		)	(3,531		)
Loss on disposal of property, plant, and equipment	189			88
Deferred income taxes	(3,320		)	1,837
Effect of changes in operating assets and liabilities:
Accounts receivable	(11,725		)	(10,402		)
Inventories	53,309			64,592
Prepaid expenses and other assets	8,424			(221		)
Accounts payable and other liabilities	(74,233		)	(58,191		)
Net cash provided by operating activities	30,560			53,128

Cash flows from investing activities:
Capital expenditures	(32,083		)	(31,426		)
Net cash used in investing activities	(32,083		)	(31,426		)

Cash flows from financing activities:
Payment of debt issuance costs	(55		)	—
Repurchase of common stock	(2,292		)	(8,942		)
Dividends paid	(10,208		)	—
Income tax benefit from stock-based compensation	3,370			3,531
Withholdings from vesting of restricted stock	(4,079		)	(4,383		)
Proceeds from exercise of stock options	5,546			3,760

Net cash used in financing activities	(7,718		)	(6,034		)

Effect of exchange rate changes on cash	(69		)	(341		)
Net (decrease) increase in cash and cash equivalents	(9,310		)	15,327
Cash and cash equivalents, beginning of period	286,546			382,236

Cash and cash equivalents, end of period	$	277,236		$	397,563

See accompanying notes to the unaudited condensed consolidated financial statements.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – THE COMPANY

Carter’s, Inc. and its wholly owned subsidiaries (collectively, the “Company” and “its”) design, source, and market branded childrenswear under the Carter’s, Child of Mine, Just One You, Precious Firsts, OshKosh, and other brands. The Company's products are sourced through contractual arrangements with manufacturers worldwide for wholesale distribution to major domestic and international retailers and for the Company's own retail stores and websites that market its brand name merchandise and other licensed products manufactured by other companies. As of March 29, 2014, the Company operated 491 Carter’s stores in the United States, 186 OshKosh stores in the United States, and 103 stores in Canada.

NOTE 2 – BASIS OF PREPARATION

The accompanying unaudited condensed consolidated financial statements include the accounts of Carter's, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the Company’s accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair statement of its financial position and changes in stockholders' equity as of March 29, 2014 and the results of operations, comprehensive income, and cash flows for the fiscal quarters ended March 29, 2014 and March 30, 2013. Except as otherwise disclosed, all such adjustments consist only of those of a normal recurring nature. Operating results for the fiscal quarter ended March 29, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending January 3, 2015.

The accompanying condensed consolidated balance sheet as of December 28, 2013 is derived from the Company's audited consolidated financial statements included in its most recently filed Annual Report on Form 10-K. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and the instructions to Form 10-Q. The accounting policies the Company follows are set forth in the Annual Report on Form 10-K for the fiscal year ended December 28, 2013.

Certain prior year amounts have been reclassified to facilitate comparability with current year presentation.

The Company's fiscal year ends on the Saturday, in December or January, nearest the last day of December, resulting in an additional week of results every five or six years. As a result, fiscal 2014, ending on January 3, 2015 will be comprised of 53 weeks.

NOTE 3 – ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss consisted of the following:



(dollars in thousands)	March 29, 2014			December 28, 2013			March 30, 2013

Cumulative foreign currency translation adjustments	$	(10,312	)	$	(7,552	)	$	(3,531	)
Pension and post-retirement liability adjustment	(2,530		)	(2,530		)	(9,139		)
Total accumulated other comprehensive loss	$	(12,842	)	$	(10,082	)	$	(12,670	)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 4 – GOODWILL AND OTHER INTANGIBLE ASSETS

The Company’s goodwill and other intangible assets were as follows:



		March 29, 2014						December 28, 2013
(dollars in thousands)	Weighted-average useful life	Gross amount		Accumulated amortization		Net amount		Gross amount		Accumulated amortization		Net amount

Carter’s goodwill	Indefinite	$	136,570	$	—	$	136,570	$	136,570	$	—	$	136,570
Bonnie Togs goodwill	Indefinite	$	48,034	$	—	$	48,034	$	49,507	$	—	$	49,507
Total goodwill		$	184,604	$	—	$	184,604	$	186,077	$	—	$	186,077

Carter’s tradename	Indefinite	$	220,233	$	—	$	220,233	$	220,233	$	—	$	220,233
OshKosh tradename	Indefinite	$	85,500	$	—	$	85,500	$	85,500	$	—	$	85,500
Other tradenames	3 years	$	38,007	$	19,859	$	18,148	$	38,007	$	13,588	$	24,419
Bonnie Togs tradename	2 years	$	545	$	545	$	—	$	562	$	562	$	—
Total tradenames		$	344,285	$	20,404	$	323,881	$	344,302	$	14,150	$	330,152
Non-compete agreements	4 years	$	272	$	186	$	86	$	280	$	174	$	106
Total tradenames and other intangibles, net		$	344,557	$	20,590	$	323,967	$	344,582	$	14,324	$	330,258



		March 30, 2013
(dollars in thousands)	Weighted-average useful life	Gross amount		Accumulated amortization		Net amount

Carter’s goodwill	Indefinite	$	136,570	$	—	$	136,570
Bonnie Togs goodwill	Indefinite	$	52,161	$	—	$	52,161
Total goodwill		$	188,731	$	—	$	188,731

Carter’s tradename	Indefinite	$	220,233	$	—	$	220,233
OshKosh tradename	Indefinite	$	85,500	$	—	$	85,500
Bonnie Togs tradename	2 years	$	592	$	518	$	74
Total tradenames		$	306,325	$	518	$	305,807
Non-compete agreements	4 years	$	295	$	128	$	167
Total tradenames and other intangibles, net		$	306,620	$	646	$	305,974

The Company recorded approximately $6.3 million and $0.1 million in amortization expense during the fiscal quarter ended March 29, 2014 and March 30, 2013, respectively. The estimated future amortization expense for these assets is approximately $10.2 million for the remainder of fiscal 2014, $6.2 million for fiscal 2015, and $1.8 million for fiscal 2016.

NOTE 5 – COMMON STOCK:

Pursuant to the previously announced share repurchase authorizations by the Board of Directors, during the first quarter of fiscal 2014, the Company repurchased and retired 30,151 shares, or approximately $2.3 million of its common stock, at an average purchase price of $76.03 per share, in open market transactions. The total remaining capacity under the repurchase authorizations as of March 29, 2014, was approximately $264.9 million. The authorizations have no expiration date.

Accelerated Stock Repurchase Program

On August 29, 2013, the Company entered into two fixed dollar accelerated stock repurchase agreements, or the ASR agreements, which were settled during January 2014 with approximately one million additional shares received by the Company with a fair market value, at trade date, of approximately $70.3 million. Under the ASR agreements, the Company had received and retired a total of approximately 5.6 million shares.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 – LONG-TERM DEBT

Long-term debt consisted of the following:



(dollars in thousands)	March 29, 2014		December 28, 2013		March 30, 2013
Senior notes due 2021	$	400,000	$	400,000	$	—
Secured revolving credit facility	$	186,000	$	186,000	$	186,000
Total long-term debt	$	586,000	$	586,000	$	186,000

As of March 29, 2014, the Company had approximately $186.0 million in borrowings under its secured revolving credit facility, exclusive of $8.3 million of outstanding letters of credit. Amounts outstanding under the revolving credit facility currently accrue interest at a LIBOR rate plus 2.00%, which, as of March 29, 2014, was 2.15%. As of March 29, 2014, there was approximately $180.7 million available for future borrowing. As of March 29, 2014, The William Carter Company ("TWCC"), a 100% owned subsidiary of Carter's Inc. had outstanding $400 million principal amount of senior notes, bearing interest at a rate of 5.25% per annum, and maturing on August 15, 2021. The senior notes are unsecured and are fully and unconditionally guaranteed by Carter's Inc. and certain subsidiaries of TWCC.

As of March 29, 2014 the Company was in compliance with the financial debt covenants under the secured revolving credit facility.

NOTE 7 – STOCK-BASED COMPENSATION

The Company recorded stock-based compensation cost as follows:



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014		March 30, 2013
Stock options	$	1,370	$	1,274
Restricted stock:
Time-based awards	1,941		1,695
Performance-based awards	1,224		826
Stock awards	—		270
Total	$	4,535	$	4,065

All of the cost of stock-based compensation was reflected as a component of selling, general, and administrative expenses.

STOCK OPTIONS

The following table summarizes the Company's stock option activity for the fiscal quarter ended March 29, 2014:



	Number of shares		Weighted- average exercise price		Weighted-average remaining contractual terms (years)	Aggregate intrinsic value (in thousands)

Outstanding, December 28, 2013	1,677,741		$	35.37
Granted	221,300		68.49
Exercised	(183,667	)	30.19
Forfeited	(50,608	)	44.50
Expired	—		—
Outstanding, March 29, 2014	1,664,766		$	40.07	7.15	$	59,904
Vested and Expected to Vest, March 29, 2014	1,591,368		$	39.36	7.10	$	58,390
Exercisable, March 29, 2014	941,211		$	28.83	5.92	$	44,444

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The intrinsic value of stock options exercised during the fiscal quarter ended March 29, 2014 and March 30, 2013 was approximately $8.4 million and $6.9 million, respectively. At March 29, 2014, there was approximately $10.9 million of unrecognized compensation cost (net of estimated forfeitures) related to stock options which is expected to be recognized over a weighted-average period of approximately 2.9 years.

The table below presents the assumptions used to calculate the fair value of options granted:



	Fiscal quarter ended
	March 29, 2014			March 30, 2013

Expected volatility	30.87		%	33.17		%
Risk-free interest rate	1.82		%	1.13		%
Expected term (years)	6.0			6.0
Dividend yield	1.11		%	—
Weighted average fair value of options granted	$	19.80		$	20.09

RESTRICTED STOCK AWARDS

The following table summarizes activity related to all restricted stock awards during the fiscal quarter ended March 29, 2014:



	Restricted stock awards		Weighted-average grant-date fair value

Outstanding, December 28, 2013	786,189		$	44.87
Granted	171,550		68.49
Vested restricted stock	(151,500	)	39.65
Forfeited	(45,058	)	45.18
Outstanding, March 29, 2014	761,181		$	51.22

Time-based Restricted Stock Awards

At March 29, 2014, there was approximately $17.1 million of unrecognized compensation cost (net of estimated forfeitures) related to restricted stock which is expected to be recognized over a weighted-average period of approximately 3.0 years.

Performance-based Restricted Stock Awards

During the first fiscal quarter of 2014, the Company granted its executive officers 61,200 performance restricted shares at a fair market value of $68.49 per share. During the first fiscal quarter of 2013, the Company granted its executive officers an aggregate of 118,200 performance-based restricted shares at a fair market value of $59.27 per share.

Vesting of the performance restricted shares granted in the first quarter of fiscal 2014 and 2013 is contingent upon meeting specific performance targets through 2015 (in the case of the fiscal 2013 awards) and 2016 (in the case of the fiscal 2014 awards). Currently, the Company believes that the respective targets will be achieved and has recorded compensation expense based on the proration of the total ultimate expected value of the award.

At March 29, 2014, there was approximately $10.6 million of unrecognized compensation cost (net of estimated forfeitures) related to performance-based restricted stock awards which is expected to be recognized over a weighted-average period of approximately 2.2 years.

NOTE 8 – EMPLOYEE BENEFIT PLANS

OSHKOSH B'GOSH PENSION PLAN

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The net periodic pension cost included in the statement of operations was comprised of:



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014			March 30, 2013
Interest cost	$	622		$	584
Expected return on plan assets	(798		)	(764		)
Recognized actuarial loss	21			207
Net periodic pension (benefit) cost	$	(155	)	$	27

POST-RETIREMENT LIFE AND MEDICAL PLAN

The components of post-retirement benefit expense charged to the statement of operations are as follows:



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014			March 30, 2013

Service cost – benefits attributed to service during the period	$	28		$	40
Interest cost on accumulated post-retirement benefit obligation	57			58
Amortization net actuarial gain	(51		)	(34		)
Curtailment gain	(22		)	—
Total net periodic post-retirement benefit cost	$	12		$	64

NOTE 9 – INCOME TAXES

As of March 29, 2014, the Company had gross unrecognized tax benefits of approximately $11.6 million, of which $8.3 million, if ultimately recognized, will affect the Company’s effective tax rate in the period settled. The Company has recorded tax positions for which the ultimate deductibility is more likely than not, but for which there is uncertainty about the timing of such deductions. Because of deferred tax accounting, changes in the timing of these deductions would not affect the annual effective tax rate, but could accelerate the payment of cash to the taxing authorities.

Included in the reserves for unrecognized tax benefits are approximately $2.0 million of reserves for which the statute of limitations is expected to expire within the next fiscal year. If these tax benefits are ultimately recognized, such recognition, net of federal income taxes, may affect the annual effective tax rate for fiscal 2014 or fiscal 2015 and the effective tax rate in the quarter in which the benefits are recognized.

The Company recognizes interest related to unrecognized tax benefits as a component of interest expense and penalties related to unrecognized tax benefits as a component of income tax expense. During the fiscal quarter ended March 29, 2014 and March 30, 2013, interest expense recorded on uncertain tax positions was not significant. The Company had approximately $0.9 million, $0.8 million, and $0.8 million of interest accrued on uncertain tax positions as of March 29, 2014, December 28, 2013, and March 30, 2013, respectively.

NOTE 10 – FAIR VALUE MEASUREMENTS

INVESTMENTS

The Company invests in marketable securities, principally equity-based mutual funds, to mitigate the risk associated with the investment return on employee deferrals of compensation. The Company had approximately $5.5 million, $5.4 million, and $3.9 million of such Level 1 investments as of March 29, 2014, December 28, 2013, and March 30, 2013, respectively.

During the fiscal quarter ended March 29, 2014 and March 30, 2013, gains on the investments in marketable securities were not significant.

CONTINGENT CONSIDERATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the changes in the contingent consideration liability related to the Company's acquisition of Bonnie Togs on June 30, 2011:



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014			March 30, 2013

Balance at the beginning of period	$	16,348		$	29,704
Payments made	—			—
Accretion expense	454			887
Foreign currency translation adjustment	(487		)	(570		)
Balance at the end of period	$	16,315		$	30,021

The contingent consideration liability is a Level 3 fair value measurement. As of March 29, 2014, the Company determined the fair value of contingent consideration based upon a probability-weighted discounted cash flow analysis, reflecting a high probability that the earnings targets will be met and a discount rate of 18%.

BORROWINGS

As of March 29, 2014, the Level 2 fair value of the Company's $186 million in borrowings under its secured revolving credit facility approximated carrying value. The Level 2 fair value of the Company's $400 million in senior notes outstanding was approximately $412.0 million.

NOTE 11 – EARNINGS PER SHARE

The following is a reconciliation of basic common shares outstanding to diluted common and common equivalent shares outstanding:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



	Fiscal quarter ended
	March 29, 2014			March 30, 2013

Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding	53,172,459			58,467,804
Dilutive effect of equity awards	501,322			877,404
Diluted number of common and common equivalent shares outstanding	53,673,781			59,345,208

Basic net income per common share (in thousands, except per share data):
Net income	$	34,297		$	41,415
Income allocated to participating securities	(470		)	(602		)
Net income available to common shareholders	$	33,827		$	40,813

Basic net income per common share	$	0.64		$	0.70

Diluted net income per common share:
Net income	$	34,297		$	41,415
Income allocated to participating securities	(467		)	(595		)
Net income available to common shareholders	$	33,830		$	40,820

Diluted net income per common share	$	0.63		$	0.69

Anti-dilutive shares excluded from dilutive earnings per share computation	269,650			702,300

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 12 – OTHER CURRENT AND LONG-TERM LIABILITIES

Other current liabilities consisted of the following:



(dollars in thousands)	March 29, 2014		December 28, 2013		March 30, 2013
Accrued bonuses and incentive compensation	$	3,196	$	19,579	$	4,670
Contingent consideration	8,878		8,964		14,463
Income taxes payable	6,637		97		10,642
Accrued workers' compensation	7,392		7,236		5,351
Accrued sales and use taxes	7,307		8,486		6,078
Accrued salaries and wages	3,405		7,609		2,449
Accrued gift certificates	7,877		7,899		6,021
Accrued 401(k) contributions	893		8,775		906
Accrued closure costs	7,754		10,656		6,522
Other current liabilities	21,896		25,828		15,488
Total	$	75,235	$	105,129	$	72,590

Other long-term liabilities consisted of the following:



(dollars in thousands)	March 29, 2014		December 28, 2013		March 30, 2013
Deferred lease incentives	$	69,900	$	68,876	$	32,066
Accrued rent	34,446		31,821		21,777
Contingent consideration	7,437		7,384		15,558
OshKosh pension plan	3,613		3,768		13,584
Unrecognized tax benefits	12,505		11,947		11,447
Post-retirement medical plan	5,069		5,055		6,265
Deferred compensation	7,420		6,225		5,209
Other	103		104		98
Total	$	140,493	$	135,180	$	106,004

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 13 – SEGMENT INFORMATION

The table below presents certain segment information for the periods indicated:



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014			% of Total		March 30, 2013			% of Total
Net sales:
Carter’s Wholesale	$	271,628		41.7	%	$	248,178		42.0	%
Carter’s Retail (a)	230,328			35.3	%	208,429			35.3	%
Total Carter’s	501,956			77.0	%	456,607			77.3	%
OshKosh Retail (a)	63,558			9.8	%	55,345			9.4	%
OshKosh Wholesale	15,585			2.4	%	18,186			3.1	%
Total OshKosh	79,143			12.2	%	73,531			12.4	%
International (b)	70,544			10.8	%	60,871			10.3	%
Total net sales	$	651,643		100.0	%	$	591,009		100.0	%

Operating income:				% of segment net sales					% of segment net sales
Carter’s Wholesale	$	46,867		17.3	%	$	50,410		20.3	%
Carter’s Retail (a)	42,979			18.7	%	39,644			19.0	%
Total Carter’s	89,846			17.9	%	90,054			19.7	%
OshKosh Retail (a)	(4,489		)	(7.1	)%	(5,391		)	(9.7	)%
OshKosh Wholesale	2,025			13.0	%	2,908			16.0	%
Total OshKosh	(2,464		)	(3.1	)%	(2,483		)	(3.4	)%
International (b) (c)	4,036			5.7	%	4,598			7.6	%
Total segment operating income	91,418			14.0	%	92,169			15.6	%
Corporate expenses (d) (e)	(29,887		)	(4.6	)%	(25,226		)	(4.3	)%
Total operating income	$	61,531		9.4	%	$	66,943		11.3	%


(a)	Includes eCommerce results.


(b)	Net sales include international retail, eCommerce, and wholesale sales. Operating income includes international licensing income.

(c)

Includes charges associated with the revaluation of the Company’s contingent consideration of approximately $0.5 million and $0.9 million for the fiscal quarter ended March 29, 2014 and March 30, 2013, respectively. Also, includes a benefit of approximately $0.4 million for the quarter ended March 29, 2014, reflecting a favorable recovery on inventory related to the Company's exit from Japan retail operations. There were no such costs related to Japan for the quarter ended March 30, 2013.


(d)	Corporate expenses 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 the following charges:



	Fiscal quarter ended
(dollars in millions)	March 29, 2014		March 30, 2013
Closure of distribution facility in Hogansville, GA (1)	$	0.3	$	0.6
Office consolidation costs	$	2.0	$	8.0
Amortization of H.W. Carter and Sons tradenames	$	6.3	$	—

(1) Continuing operating costs associated with the closure of the Company's distribution facility in Hogansville, Georgia.

NOTE 14 – FACILITY CLOSURE

HOGANSVILLE DISTRIBUTION FACILITY

In connection with the plan to close the Hogansville distribution facility, the Company recorded the following charges in selling, general, and administrative expenses:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



	Fiscal quarter ended
(dollars in millions)	March 29, 2014		March 30, 2013

Severance	$	—	$	0.4
Accelerated depreciation	—		0.1
Other closure costs	—		0.1
Total	$	—	$	0.6

The following table summarizes restructuring reserves related to the closure of the Hogansville facility which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheet as of March 29, 2014:



(dollars in thousands)	Severance			Other closure costs			Total
Balance at December 28, 2013	$	1.2		$	0.1		$	1.3
Provision	—			—			—
Payments	(1.2		)	(0.1		)	(1.3		)
Balance at March 29, 2014	$	—		$	—		$	—

As of March 30, 2013, restructuring reserves were approximately $2.5 million.

OFFICE CONSOLIDATION

In connection with the Company's plan to consolidate into a new headquarters facility in Atlanta, Georgia, the Company recorded the following charges in selling, general, and administrative expenses:



	Fiscal quarter ended
(dollars in millions)	March 29, 2014		March 30, 2013
Severance and other benefits	$	0.6	$	1.8
Accelerated depreciation	—		1.3
Other Closure Costs	1.4		4.9
Total	$	2.0	$	8.0

The following table summarizes restructuring reserves related to the office consolidation which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheet as of March 29, 2014:



(dollars in thousands)	Severance			Other closure costs			Total
Balance at December 28, 2013	$	4.7		$	1.7		$	6.4
Provision	0.6			0.9			1.5
Payments	(1.7		)	(0.5		)	(2.2		)
Balance at March 29, 2014	$	3.6		$	2.1		$	5.7

As of March 30, 2013, restructuring reserves were approximately $4.0 million.

The Company has substantially completed its consolidation efforts as of December 28, 2013, and the severance accrual is expected to be substantially paid by the end of fiscal 2014. The Company expects to incur approximately $3.0 million in additional costs in fiscal 2014 in connection with the office consolidation.

JAPAN RETAIL OPERATIONS

In the fourth quarter of 2013, the Company made the decision to exit retail operations in Japan based on revised forecasts which do not meet the Company's investment objectives. As of March 29, 2014, the Company's retail operations in Japan generated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

sales of approximately $4.4 million and an operating loss of $1.1 million, including exit costs/benefits. In connection with the plan to exit these operations, the Company recorded approximately $0.6 million of accelerated depreciation in selling, general, and administrative expenses in the fiscal quarter ended March 29, 2014 and approximately $1.0 million in cost of goods sold related to a favorable recovery on inventory. There were no such exit costs related to Japan recorded in the fiscal quarter ended March 30, 2013.

The following table summarizes restructuring reserves related to the exit of retail operations in Japan, which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheet as of March 29, 2014:



(dollars in thousands)	Severance			Other closure costs			Total
Balance at December 28, 2013	$	0.9		$	2.0		$	2.9
Provision	0.7			(0.7		)	—
Payments	(0.4		)	(0.4		)	(0.8		)
Balance at March 29, 2014	$	1.2		$	0.9		$	2.1

The Company expects to incur approximately $1.2 million of additional costs in fiscal 2014 in connection with the exit of retail operations in Japan. Payments under the accruals as of March 29, 2014 are expected to be paid by the end of fiscal 2014.

NOTE 15 – GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The Company’s senior notes constitute debt obligations of TWCC (the “Issuer”), are unsecured and are fully and unconditionally guaranteed by Carter’s, Inc. (the “Parent”), and by each of the Company’s current domestic subsidiaries, and, subject to certain exceptions, future restricted subsidiaries that guarantee the Company’s senior secured revolving credit facility or certain other debt of the Company or the subsidiary guarantors.

The condensed consolidating financial information for the Parent, the Issuer and the guarantor and non-guarantor subsidiaries has been prepared from the books and records maintained by the Company. The accompanying condensed consolidating financial information has been prepared and presented pursuant to SEC Regulation S-X Rule 3-10. The financial information may not necessarily be indicative of the financial position, results of operations, comprehensive income, and cash flows, had the Parent, Issuer, guarantor or non-guarantor subsidiaries operated as independent entities.

Intercompany revenues and expenses included in the subsidiary records are eliminated in consolidation. As a result of this activity, an amount due to/due from affiliates will exist at any time. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The Company has accounted for investments in subsidiaries under the equity method. The guarantor subsidiaries are 100% owned directly or indirectly by the Parent and all guarantees are joint, several and unconditional.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CARTER’S, INC.

Condensed Consolidating Balance Sheets

As of March 29, 2014

(dollars in thousands)



	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	264,128	$	—	$	13,108	$	—		$	277,236
Accounts receivable, net	—		178,034		18,504		8,628		—			205,166
Intercompany receivable	—		54,911		80,281		12,078		(147,270		)	—
Intercompany loan receivable	—		10,000		—		—		(10,000		)	—
Finished goods inventories, net	—		177,816		180,133		35,933		(30,864		)	363,018
Prepaid expenses and other current assets	—		10,137		12,306		3,919		—			26,362
Deferred income taxes	—		24,252		12,155		936		—			37,343
Total current assets	—		719,278		303,379		74,602		(188,134		)	909,125
Property, plant, and equipment, net	—		154,045		137,170		25,571		—			316,786
Goodwill	—		136,570		—		48,034		—			184,604
Tradenames and other intangibles, net	—		238,382		85,500		85		—			323,967
Deferred debt issuance costs, net	—		7,758		—		—		—			7,758
Other assets	—		10,107		2		—		—			10,109
Intercompany long term receivable	—		—		261,259		—		(261,259		)	—
Intercompany long term note receivable	—		100,000		—		—		(100,000		)	—
Investment in subsidiaries	729,150		555,914		2,487		—		(1,287,551		)	—
Total assets	$	729,150	$	1,922,054	$	789,797	$	148,292	$	(1,836,944	)	$	1,752,349

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	68,708	$	28,654	$	6,077	$	—		$	103,439
Intercompany payables	—		78,020		62,719		6,531		(147,270		)	—
Intercompany loan payables	—		—		—		10,000		(10,000		)	—
Other current liabilities	—		29,124		33,638		12,473		—			75,235
Total current liabilities	—		175,852		125,011		35,081		(157,270		)	178,674
Long-term debt	—		586,000		—		—		—			586,000
Deferred income taxes	—		74,832		43,200		—		—			118,032
Intercompany long term liability	—		261,259		—		—		(261,259		)	—
Intercompany long term note payable	—		—		100,000		—		(100,000		)	—
Other long-term liabilities	—		64,097		57,852		18,544		—			140,493
Stockholders' equity (deficit)	729,150		760,014		463,734		94,667		(1,318,415		)	729,150
Total liabilities and stockholders’ equity	$	729,150	$	1,922,054	$	789,797	$	148,292	$	(1,836,944	)	$	1,752,349

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of December 28, 2013

(dollars in thousands)



	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	278,260	$	—	$	8,286	$	—		$	286,546
Accounts receivable, net	—		163,264		20,365		9,982		—			193,611
Intercompany receivable	—		62,802		104,123		12,385		(179,310		)	—
Finished goods inventories, net	—		221,462		181,889		46,217		(31,814		)	417,754
Prepaid expenses and other current assets	—		18,475		11,878		4,804		—			35,157
Deferred income taxes	—		20,594		15,893		826		—			37,313
Total current assets	—		764,857		334,148		82,500		(211,124		)	970,381
Property, plant, and equipment, net	—		148,671		133,846		25,368		—			307,885
Goodwill	—		136,570		—		49,507		—			186,077
Tradenames and other intangibles, net	—		244,653		85,500		105		—			330,258
Deferred debt issuance costs, net	—		8,088		—		—		—			8,088
Other assets	—		9,743		52		—		—			9,795
Intercompany long term receivable	—		—		263,183		—		(263,183		)	—
Intercompany long term note receivable	—		100,000		—		—		(100,000		)	—
Investment in subsidiaries	700,731		547,186		1,262		—		(1,249,179		)	—
Total assets	$	700,731	$	1,959,768	$	817,991	$	157,480	$	(1,823,486	)	$	1,812,484

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	108,851	$	40,825	$	14,334	$	—		$	164,010
Intercompany payables	—		100,804		70,857		7,649		(179,310		)	—
Other current liabilities	—		29,037		57,610		18,482					105,129
Total current liabilities	—		238,692		169,292		40,465		(179,310		)	269,139
Long-term debt	—		586,000		—		—		—			586,000
Deferred income taxes	—		77,798		43,636		—		—			121,434
Intercompany long term liability	—		263,183		—		—		(263,183		)	—
Intercompany long term note payable	—		—		100,000		—		(100,000		)	—
Other long-term liabilities	—		61,550		55,175		18,455		—			135,180
Stockholders' equity (deficit)	700,731		732,545		449,888		98,560		(1,280,993		)	700,731
Total liabilities and stockholders’ equity	$	700,731	$	1,959,768	$	817,991	$	157,480	$	(1,823,486	)	$	1,812,484

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 30, 2013

(dollars in thousands)



	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	369,131	$	6,379	$	22,053	$	—		$	397,563
Accounts receivable, net	—		152,461		21,072		4,827		—			178,360
Intercompany receivable	—		45,206		44,654		39		(89,899		)	—
Finished goods inventories, net	—		141,148		150,820		25,336		(32,779		)	284,525
Prepaid expenses and other current assets	—		2,201		15,979		3,432		—			21,612
Deferred income taxes	—		20,511		9,928		1,269		—			31,708
Total current assets	—		730,658		248,832		56,956		(122,678		)	913,768
Property, plant, and equipment, net	—		61,230		97,489		23,474		—			182,193
Goodwill	—		136,570		—		52,161		—			188,731
Tradenames and other intangibles, net	—		220,233		85,500		241		—			305,974
Deferred debt issuance costs, net	—		2,682		—		—		—			2,682
Other assets	—		4,261		72		—		—			4,333
Intercompany long term receivable	—		—		181,727		—		(181,727		)	—
Investment in subsidiaries	1,023,188		498,482		—		—		(1,521,670		)	—
Total assets	$	1,023,188	$	1,654,116	$	613,620	$	132,832	$	(1,826,075	)	$	1,597,681

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	—	$	64,844	$	25,572	$	7,468	$	—		$	97,884
Intercompany payables	—		32,802		43,935		13,162		(89,899		)	—
Other current liabilities	—		31,384		26,674		14,532		—			72,590
Total current liabilities	—		129,030		96,181		35,162		(89,899		)	170,474
Long-term debt	—		186,000		—		—		—			186,000
Deferred income taxes	—		76,519		35,496		—		—			112,015
Intercompany long term liabilities	—		181,727		—		—		(181,727		)	—
Other long-term liabilities	—		24,873		55,517		25,614		—			106,004
Stockholders' equity	1,023,188		1,055,967		426,426		72,056		(1,554,449		)	1,023,188
Total liabilities and stockholders’ equity	$	1,023,188	$	1,654,116	$	613,620	$	132,832	$	(1,826,075	)	$	1,597,681

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CARTER’S, INC.

Condensed Consolidating Statements of Operations

For the fiscal quarter ended March 29, 2014

(dollars in thousands)



	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	—		$	407,365		$	321,708		$	49,158		$	(126,588	)	$	651,643
Cost of goods sold	—			293,774			188,020			30,059			(121,935		)	389,918
Gross profit	—			113,591			133,688			19,099			(4,653		)	261,725
Selling, general, and administrative expenses	—			48,527			146,417			22,932			(7,781		)	210,095
Royalty income	—			(8,045		)	(4,027		)	—			2,171			(9,901		)
Operating income (loss)	—			73,109			(8,702		)	(3,833		)	957			61,531
Interest expense	—			6,897			1,313			24			(1,337		)	6,897
Interest income	—			(1,469		)	—			—			1,337			(132		)
(Income) loss in subsidiaries	(34,297		)	17,435			(586		)	—			17,448			—
Other (income) expense, net	—			(57		)	57			596			—			596
Income (loss) before income taxes	34,297			50,303			(9,486		)	(4,453		)	(16,491		)	54,170
Provision for income taxes	—			16,963			3,740			(830		)	—			19,873
Net income (loss)	$	34,297		$	33,340		$	(13,226	)	$	(3,623	)	$	(16,491	)	$	34,297

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the fiscal quarter ended March 30, 2013

(dollars in thousands)



	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	—		$	369,618		$	314,813		$	37,038		$	(130,460	)	$	591,009
Cost of goods sold	—			255,762			178,888			21,641			(108,344		)	347,947
Gross profit	—			113,856			135,925			15,397			(22,116		)	243,062
Selling, general, and administrative expenses	—			45,123			146,850			20,480			(27,092		)	185,361
Royalty income	—			(6,831		)	(4,024		)	—			1,613			(9,242		)
Operating income (loss)	—			75,564			(6,901		)	(5,083		)	3,363			66,943
Interest expense	—			1,294			—			—			—			1,294
Interest income	—			(130		)	(3		)	(58		)	—			(191		)
Other (income) expense, net	—			(75		)	75			573			—			573
(Income) loss in subsidiaries	(41,415		)	11,363			4,328			—			25,724			—
Income (loss) before income taxes	41,415			63,112			(11,301		)	(5,598		)	(22,361		)	65,267
Provision for income taxes	—			25,060			(972		)	(236		)	—			23,852
Net income (loss)	$	41,415		$	38,052		$	(10,329	)	$	(5,362	)	$	(22,361	)	$	41,415

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CARTER’S, INC.

Condensed Consolidating Statements of Comprehensive Income

For the fiscal quarter ended March 29, 2014

(dollars in thousands)



	Parent			Subsidiary Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	34,297		$	33,340	$	(13,226	)	$	(3,623	)	$	(16,491	)	$	34,297
Post-retirement benefit plans	—			—		—			—			—			—
Foreign currency translation adjustments	(2,760		)	—		—			(2,760		)	2,760			(2,760		)
Comprehensive income (loss)	$	31,537		$	33,340	$	(13,226	)	$	(6,383	)	$	(13,731	)	$	31,537

For the fiscal quarter ended March 30, 2013

(dollars in thousands)



	Parent			Subsidiary Issuer		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net income (loss)	$	41,415		$	38,052	$	(10,329	)	$	(5,362	)	$	(22,361	)	$	41,415
Post-retirement benefit plans	—			—		—			—			—			—
Foreign currency translation adjustments	(1,465		)	—		—			(1,465		)	1,465			(1,465		)
Comprehensive income (loss)	$	39,950		$	38,052	$	(10,329	)	$	(6,827	)	$	(20,896	)	$	39,950

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

CARTER’S, INC.

Condensed Consolidating Statements of Cash Flows

For the fiscal quarter ended March 29, 2014

(dollars in thousands)



	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Cash flows provided by (used in) operating activities:	$	—		$	44,470		$	(12,284	)	$	(1,626	)	$	—		$	30,560

Cash flows from investing activities:
Capital expenditures	—			(18,417		)	(10,994		)	(2,672		)	—			(32,083		)
Intercompany investing activity	11,033			3,772			(2,305		)	—			(12,500		)	—
Issuance of intercompany loan	—			(10,000		)	—			—			10,000			—
Net cash provided by (used in) investing activities	11,033			(24,645		)	(13,299		)	(2,672		)	(2,500		)	(32,083		)

Cash flows from financing activities:
Payments of debt issuance costs	—			(55		)	—			—			—			(55		)
Intercompany financing activity	—			(34,969		)	23,280			(811		)	12,500			—
Proceeds from intercompany loan	—			—			—			10,000			(10,000		)	—
Dividends paid	(10,208		)	—			—			—			—			(10,208		)
Repurchase of common stock	(2,292		)	—			—			—			—			(2,292		)
Income tax benefit from stock-based compensation	—			1,067			2,303			—			—			3,370
Withholdings from vesting of restricted stock	(4,079		)	—			—			—			—			(4,079		)
Proceeds from exercise of stock options	5,546			—			—			—			—			5,546
Net cash (used in) provided by financing activities	(11,033		)	(33,957		)	25,583			9,189			2,500			(7,718		)
Effect of exchange rate changes on cash	—			—			—			(69		)	—			(69		)
Net(decrease) increase in cash and cash equivalents	—			(14,132		)	—			4,822			—			(9,310		)
Cash and cash equivalents, beginning of period	—			278,260			—			8,286			—			286,546
Cash and cash equivalents, end of period	$	—		$	264,128		$	—		$	13,108		$	—		$	277,236

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the fiscal quarter ended March 30, 2013

(dollars in thousands)



	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Cash flows provided by (used in) operating activities:	$	—		$	62,524		$	(8,872	)	$	(524	)	$	—		$	53,128

Cash flows from investing activities:
Capital expenditures	—			(21,966		)	(5,070		)	(4,390		)	—			(31,426		)
Intercompany investing activity	9,565			(16,080		)	(4,956		)	—			11,471			—
Net cash provided by (used in) investing activities	9,565			(38,046		)	(10,026		)	(4,390		)	11,471			(31,426		)

Cash flows from financing activities:
Intercompany financing activity	—			(8,309		)	15,910			3,870			(11,471		)	—
Income tax benefit from stock-based compensation	—			1,104			2,427			—			—			3,531
Repurchase of common stock	(8,942		)	—			—			—			—			(8,942		)
Withholdings from vesting of restricted stock	(4,383		)	—			—			—			—			(4,383		)
Proceeds from exercise of stock options	3,760			—			—			—			—			3,760
Net cash (used in) provided by financing activities	(9,565		)	(7,205		)	18,337			3,870			(11,471		)	(6,034		)
Effect of exchange rate changes on cash	—			—			—			(341		)	—			(341		)
Net increase (decrease) in cash and cash equivalents	—			17,273			(561		)	(1,385		)	—			15,327
Cash and cash equivalents, beginning of period	—			351,858			6,940			23,438			—			382,236
Cash and cash equivalents, end of period	$	—		$	369,131		$	6,379		$	22,053		$	—		$	397,563

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following is a discussion of our results of operations and current financial condition. This should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes and our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.

Our Business

We are the largest branded marketer in the United States of apparel exclusively for babies and young children. We

own two of the most highly recognized and most trusted brand names in the children's apparel industry, Carter's and OshKosh

B'gosh ("OshKosh"). Established in 1865, our Carter's brand is recognized and trusted by consumers for high-quality apparel

for children sizes newborn to seven. Established in 1895, OshKosh is a well-known brand, trusted by consumers for its line of

apparel for children sizes newborn to 12, with a focus on playclothes for toddlers and young children. Given each brand's product category emphasis and brand aesthetic, we believe the brands provide a complementary product offering. We have extensive experience in the young children's apparel market and focus on delivering products that satisfy our consumers' needs. Our strategy is to market high-quality, essential core products at prices that deliver an attractive value proposition for consumers.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, (i) selected statement of operations data expressed as a percentage of net sales, and (ii) the number of retail stores open at the end of each period:



	Fiscal quarter ended
	March 29, 2014		March 30, 2013

Net sales
Carter’s Wholesale	41.7	%	42.0	%
Carter’s Retail	35.3	%	35.3	%
Total Carter’s	77.0	%	77.3	%

OshKosh Retail	9.8	%	9.4	%
OshKosh Wholesale	2.4	%	3.1	%
Total OshKosh	12.2	%	12.4	%

International	10.8	%	10.3	%

Consolidated net sales	100.0	%	100.0	%
Cost of goods sold	59.8	%	58.9	%

Gross profit	40.2	%	41.1	%
Selling, general, and administrative expenses	32.2	%	31.4	%
Royalty Income	(1.5	)%	(1.6	)%

Operating income	9.4	%	11.3	%
Interest expense	1.1	%	0.2	%
Interest income	—	%	—	%
Other expense (income), net	0.1	%	0.1	%

Income before income taxes	8.3	%	11.0	%
Provision for income taxes	3.0	%	4.0	%
Net income	5.3	%	7.0	%

Number of retail stores at end of period:
Carter’s - U.S.	491		423
OshKosh - U.S.	186		164
International	103		103

Total retail stores	780		690

Note: Results may not be additive due to rounding.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

FISCAL QUARTER ENDED MARCH 29, 2014 COMPARED WITH FISCAL QUARTER ENDED MARCH 30, 2013

CONSOLIDATED NET SALES

In the first fiscal quarter of 2014, consolidated net sales increased $60.6 million, or 10.3%, to $651.6 million. The increase reflects sales growth in our Carter's Wholesale, Carter's Retail, OshKosh Retail, and International segments. Changes in foreign currency exchange rates in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 negatively impacted International segment net sales in the first quarter of fiscal 2014 by approximately $4.0 million.



	Fiscal quarter ended
(dollars in thousands)	March 29, 2014		% of Total		March 30, 2013		% of Total

Net sales:
Carter’s Wholesale	$	271,628	41.7	%	$	248,178	42.0	%
Carter’s Retail	230,328		35.3	%	208,429		35.3	%
Total Carter’s	501,956		77.0	%	456,607		77.3	%

OshKosh Retail	$	63,558	9.8	%	$	55,345	9.4	%
OshKosh Wholesale	15,585		2.4	%	18,186		3.1	%
Total OshKosh	79,143		12.2	%	73,531		12.4	%
International	70,544		10.8	%	60,871		10.3	%
Total net sales	$	651,643	100.0	%	$	591,009	100.0	%

CARTER’S WHOLESALE SALES

Carter’s wholesale sales increased $23.5 million, or 9.4%, in the first fiscal quarter of 2014 to $271.6 million. This increase was primarily due to a 6.0% increase in units shipped and a 3.2% increase in average price per unit, as compared to the first fiscal quarter of 2013.

CARTER’S RETAIL SALES

Carter’s retail sales increased $21.9 million, or 10.5%, in the first fiscal quarter of 2014 to $230.3 million. The increase was driven by incremental sales of $19.9 million generated by new store openings and $10.2 million generated by eCommerce sales, partially offset by a comparable store sales decrease of $8.1 million primarily driven by a decrease in the number of transactions during fiscal 2014.

Carter's direct-to-consumer comparable sales, increased 1.0%, comprised of eCommerce comparable sales growth of 28.5% and a retail store comparable sales decline of 4.7%.

During the first fiscal quarter of 2014, we opened 16 Carter's retail stores and closed one store. There were a total of 491 Carter’s retail stores as of March 29, 2014. In total, we plan to open approximately 60 Carter's retail stores and close four stores during fiscal 2014.

OSHKOSH RETAIL SALES

OshKosh retail sales increased $8.2 million, or 14.8%, in the first fiscal quarter of 2014 to $63.6 million. The increase was driven by an incremental sales of $4.6 million from new store openings, an eCommerce sales increase of $2.9 million, and a comparable store sales increase of $1.4 million driven by an increase in average transaction value. This increase was partially offset by the impact of store closings of $0.6 million.

OshKosh direct-to-consumer comparable sales, increased 7.7%, comprised of eCommerce comparable sales growth of 31.8% and a retail store comparable sales increase of 3.0%.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

During the first fiscal quarter of 2014, we opened six OshKosh retail stores and closed one store. There were a total of 186 OshKosh retail stores as of March 29, 2014. In total, we plan to open approximately 24 and close four OshKosh retail stores during fiscal 2014.

OSHKOSH WHOLESALE SALES

OshKosh wholesale sales decreased $2.6 million, or 14.3%, in the first fiscal quarter of 2014 to $15.6 million. This decrease was the result of a decline in units shipped, as compared to the first fiscal quarter of 2013.

INTERNATIONAL SALES

International sales increased $9.7 million, or 15.9%, in the first fiscal quarter of 2014 to $70.5 million. Our international wholesale sales increased $9.0 million, or 33.3%, to $36.2 million, driven by incremental sales of $6.9 million in Canada through expansion of our wholesale product offerings to Canadian markets and $2.1 million in our other international locations. Our international retail sales increased by $0.6 million primarily driven by liquidation of inventory at our Japanese operations. Comparable store sales in Canada declined $2.8 million, or 10.2%.

During the first fiscal quarter of 2014, we opened two retail stores in Canada and closed one . There were a total of 103 retail stores in Canada as of March 29, 2014. In fiscal 2014, we plan to open a total of approximately 22 retail stores in Canada and close two.

GROSS PROFIT

Our gross profit increased $18.7 million, or 7.7%, to $261.7 million in the first fiscal quarter of 2014. Gross margin decreased from 41.1% in the first fiscal quarter of 2013 to 40.2% in the first fiscal quarter of 2014.

Gross margin in the first fiscal quarter of 2014 was unfavorably affected by higher product costs, partially offset by improved pricing.

We include distribution costs in selling, general, and administrative expenses. Accordingly, our gross profit may not be comparable to other companies that include such distribution costs in their cost of goods sold.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses in the first fiscal quarter of 2014 increased $24.7 million, or 13.3%, to $210.1 million. As a percentage of net sales, selling, general, and administrative expenses increased from 31.4% to 32.2% in the first fiscal quarter of 2014.

The increase in selling, general, and administrative expenses as a percentage of net sales reflects:


•	$8.7 million in higher domestic and Canada retail store expenses, as result of new store openings;


•	$6.3 million in amortization of the H.W. Carter tradename;


•	$4.4 million in incremental distribution and freight costs primarily related to the Braselton start-up and sales volume;


•	$3.4 million in incremental legal and consulting fees;


•	$3.0 million in incremental information technology costs;

Offsetting these increases were:


•	$6.0 million in lower costs associated with the office consolidation; and

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)


•	$1.3 million in lower provisions for performance-based compensation.

ROYALTY INCOME

We license the use of our Carter’s, Just One You, Child of Mine, OshKosh B’gosh, OshKosh, Genuine Kids from OshKosh, and Precious Firsts brand names. Royalty income from these brands in the first fiscal quarter of 2014 was approximately $9.9 million (including $1.4 million of international royalty income), an increase of 7.1%, as compared to the first fiscal quarter of 2013, reflecting strength in domestic royalties.

OPERATING INCOME

Operating income decreased $5.4 million, or 8.1%, to $61.5 million in the first fiscal quarter of 2014 as compared to the first fiscal quarter of 2013 due to the factors described above.

INTEREST EXPENSE

Interest expense in the first fiscal quarter of 2014 increased $5.6 million to $6.9 million, compared to the first fiscal quarter of 2013. Weighted-average borrowings for the first fiscal quarter of 2014 were $586 million at an effective interest rate of 4.64%, as compared to weighted-average borrowings for the first fiscal quarter of 2013 of $186.0 million at an effective interest rate of 2.58%. The effective interest rate in the first fiscal quarter of 2014 was higher than the comparable period of 2013 as a result of our senior notes issuance in the third fiscal quarter of 2013.

Effective interest rates include the effect of the amortization of debt issuance costs.

INCOME TAXES

Our effective tax rate for the first fiscal quarter of 2014 was 36.7% as compared to 36.5% for the first fiscal quarter of 2013. The increase in our effective rate for the first fiscal quarter of 2014, as compared to the prior year comparable period, is primarily attributable to the expiration of certain federal tax credits in 2014 combined with the effect of federal tax legislation enacted during the first fiscal quarter of 2013 that retroactively reinstated certain federal tax credits.

NET INCOME

Our net income for the first fiscal quarter of 2014 decreased $7.1 million, or 17.2%, to $34.3 million as compared to $41.4 million in the first fiscal quarter of 2013.

FINANCIAL CONDITION, CAPITAL RESOURCES, AND LIQUIDITY

Our primary cash needs are working capital and capital expenditures. We expect our primary source of liquidity will continue to be cash and cash equivalents on hand, cash flow from operations, and borrowings under our revolving credit facility, and we expect that these sources will fund our ongoing cash requirements for the foreseeable future, although no assurance can be given in this regard.

Net accounts receivable at March 29, 2014 were $205.2 million compared to $178.4 million at March 30, 2013 and $193.6 million at December 28, 2013. The increase of $26.8 million, or 15.0%, as compared to March 30, 2013 reflects growth in the business. Due to the seasonal nature of our operations, the net accounts receivable balance at March 29, 2014 is not comparable to the net accounts receivable balance at December 28, 2013.

Net inventories at March 29, 2014 were $363.0 million compared to $284.5 million at March 30, 2013 and $417.8 million at December 28, 2013. The increase of $78.5 million, or 27.6%, as compared to March 30, 2013, primarily reflects growth through planned sales and store openings, supply chain initiatives, and higher product costs as compared to the prior year. Due to the seasonal nature of our operations, the net inventories balance at March 29, 2014 is not comparable to the net inventories balance at December 28, 2013.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Net cash provided by operating activities for the first fiscal quarter of 2014 was $30.6 million compared to net cash provided by operating activities of $53.1 million in the first fiscal quarter of 2013. The decrease in operating cash flow primarily reflects unfavorable changes in net working capital and a decrease in earnings.

Our capital expenditures were $32.1 million in the first fiscal quarter of 2014 compared to $31.4 million in the first fiscal quarters of 2013, primarily reflecting expenditures of approximately $12.4 million for our U.S. and international retail store openings and remodelings, $6.8 million for the Braselton, Georgia distribution facility, $6.7 million for our new headquarters facility, and $5.8 million for information technology initiatives.

We plan to invest approximately $100 million in capital expenditures in fiscal 2014, primarily for U.S. and international retail store openings and remodelings, information technology, and further expansion of our distribution capacity at the Braselton, Georgia facility.

Secured Revolving Credit Facility

The aggregate principal amount of the secured revolving credit facility as of March 29, 2014, was $375 million, consisting of a $340 million U.S. dollar revolving credit facility and a $35 million multicurrency revolving credit facility. The sub-limit for U.S. dollar letters of credit is $175 million. The revolving credit facility expires August 31, 2017. Amounts outstanding under the revolving credit facility currently accrue interest at a LIBOR rate plus 2.00%, which, as of March 29, 2014, was 2.15%.

At March 29, 2014, we had $186.0 million in borrowings under the revolving credit facility, exclusive of $8.3 million of outstanding letters of credit, leaving approximately $180.7 million available for future borrowings.

As of March 29, 2014, we were in compliance with the financial debt covenants under our secured revolving credit facility.

Senior Notes

As of March 29, 2014, TWCC had $400 million principal amount of senior notes outstanding, bearing interest at a rate of 5.25% per annum, and maturing on August 15, 2021. TWCC received net proceeds from the offering of the senior notes of approximately $394.2 million, after deducting bank fees. The senior notes are unsecured and are fully and unconditionally guaranteed by Carter's, Inc. and certain subsidiaries of TWCC.

FACILITY CLOSURES

In conjunction with our plan to consolidate our Shelton, Connecticut and Atlanta, Georgia offices, as well as certain functions from our other offices, into a new headquarters facility in Atlanta, Georgia, we incurred approximately $2.0 million in closing-related costs for the fiscal quarter ended March 29, 2014. We expect approximately $3.0 million in additional costs in fiscal 2014 related to the office consolidation. The March 29, 2014 severance accrual of approximately $3.6 million is expected to be paid by the end of fiscal 2014.

In the fourth quarter of 2013, we made the decision to exit retail operations in Japan based on revised forecasts which do not meet our investment objectives. As of March 29, 2014, the Company's retail operations in Japan generated sales of approximately $4.4 million and an operating loss of $1.1 million, including exit costs/benefits. In conjunction with the plan to exit these operations, the Company recorded a benefit of approximately $0.4 million for the quarter ended March 29, 2014, reflecting a favorable recovery on inventory. We expect to incur approximately $1.2 million of additional costs in fiscal 2014 in connection with the exit of retail operations in Japan. The March 29, 2014 accrual of approximately $2.1 million is expected to be paid by the end of fiscal 2014.

BONNIE TOGS ACQUISITION

As of March 29, 2014, a discounted contingent consideration liability of approximately $16.3 million remains. The liability is based upon the high probability that Bonnie Togs will attain its earnings targets. Approximately $8.9 million of the total liability is included in other current liabilities and the remainder is included in other long-term liabilities on the accompanying unaudited condensed consolidated balance sheet.

SHARE REPURCHASES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Pursuant to the previously announced share repurchase authorizations by the Board of Directors, during the first quarter of fiscal 2014, the Company repurchased and retired 30,151 shares in open market transactions, or approximately $2.3 million, at an average price of $76.03 per share. The total remaining capacity under the repurchase authorizations as of March 29, 2014, was approximately $264.9 million. The share repurchase authorizations have no expiration date.

Accelerated Stock Repurchase Program

The Company's previously announced ASR agreements were settled during the first fiscal quarter of 2014 and approximately one million additional shares were received in the first quarter with a fair market value, at trade date, of approximately $70.3 million. We received a total of approximately 5.6 million shares under the ASR program and all shares received were retired upon receipt.

DIVIDENDS

In the first fiscal quarter of 2014, the Company's Board of Directors authorized a quarterly cash dividend of $0.19 per share paid on March 20, 2014, for shareholders of record at the close of business on March 10, 2014. Future declarations of quarterly dividends and the establishment of future record and payment dates are at the discretion of the Company's Board of Directors based on a number of factors, including the Company's future financial performance and other investment priorities.

Provisions in the Company's secured revolving credit facility and indenture governing its senior notes could have the effect of restricting the Company’s ability to pay future cash dividends on or make future repurchases of its common stock.

EFFECTS OF INFLATION AND DEFLATION

In recent years, we have experienced increased costs of cotton, labor, fuel, and transportation, and have also had higher costs

for foreign sourced products as a result of the devaluation of the U.S. dollar relative to certain foreign currencies. While we

raised our selling prices on many of our products over the past two years, we have been unable to fully absorb the cost increases

and our profitability has been adversely impacted. We anticipate increased product costs in 2014 due to higher labor costs for our foreign manufacturers. If future product cost increases are more than anticipated, or if we are unable to offset such cost increases through selling price increases or otherwise, our profitability could be adversely affected. Future deflationary pressures on our selling prices could also adversely affect our profitability.

SEASONALITY

We experience seasonal fluctuations in our sales and profitability due to the timing of certain holidays and key retail shopping

periods, which generally has resulted in lower sales and gross profit in the first half of our fiscal year versus the second half of

the year. Accordingly, our results of operations during the first half of the year may not be indicative of the results we expect

for the full year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 to our audited consolidated financial statements for fiscal 2013, filed on Form 10-K. Our critical accounting policies and estimates, which are those policies that require management’s most difficult and subjective judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our critical accounting policies and estimates include: revenue recognition, inventory, goodwill and tradename, accrued expenses, loss contingencies, accounting for income taxes, foreign currency, employee benefit plans and stock-based compensation arrangements. There have been no significant changes in the application of these policies since December 28, 2013.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

FORWARD-LOOKING STATEMENTS

Statements contained herein that relate to our future performance, including, without limitation, statements with respect to our anticipated results of operations or level of business for fiscal 2014 or any other future period, are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Our risks are described herein under Item 1A of Part II.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CURRENCY AND INTEREST RATE RISKS

In the operation of our business, we have market risk exposures including those related to foreign currency risk and interest

rates. These risks and our strategies to manage our exposure to them are discussed below.

We contract for production with third parties primarily in Asia. While these contracts are stated in United States dollars, there

can be no assurance that the cost for the future production of our products will not be affected by exchange rate fluctuations

between the United States dollar and the local currencies of these contractors. Due to the number of currencies involved, we

cannot quantify the potential impact of future currency fluctuations on net income (loss) in future years. To date, such

exchange fluctuations have not had a material impact on our financial condition or results of operations.

The financial statements of our foreign subsidiaries, that are denominated in functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in Accumulated other comprehensive income (loss). Our Canadian subsidiary records Canadian denominated sales which are translated into U.S. dollars using weighted-average exchange rates. The changes in foreign currency exchange rates in the first quarter of fiscal 2014 as compared to the first quarter of fiscal 2013 negatively impacted International segment net sales in the first quarter of fiscal 2014 by approximately $4.0 million, primarily due to the devaluation of the Canadian dollar relative to the U.S. dollar.

Transactions by our Canadian subsidiary may be denominated in a currency other than the entity’s functional currency, which is

the Canadian dollar. Fluctuations in exchange rates, primarily between the United States dollar and the Canadian dollar, may

affect our results of operations, financial position, and cash flows. Transaction gains and losses are recorded in our Statement of Operations within Other expense, net. From time to time, we have employed foreign exchange contracts to hedge foreign currency exchange rate risk associated with the procurement of U.S. dollar denominated finished goods destined for the Canadian market. These foreign exchange contracts are marked to market at the end of each reporting period, which could result in earnings volatility. During the fiscal quarter ended March 29, 2014, we had no outstanding foreign exchange contracts. To date, such transaction gains and losses have not had a material impact on our financial condition or results of operations.

Our operating results are subject to risk from interest rate fluctuations on our secured revolving credit facility, which carries

variable interest rates. As of March 29, 2014, our outstanding variable rate debt aggregated approximately $186.0 million.

Weighted-average variable rate borrowings as of March 29, 2014 were $186.0 million. An increase or decrease of 1% in the effective interest rate on that amount would have increased or decreased our annual interest cost by approximately $1.9 million.

OTHER RISKS

We enter into various purchase order commitments with our suppliers. We can cancel these arrangements, although in some instances, we may be subject to a termination charge reflecting a percentage of work performed prior to cancellation.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective as of March 29, 2014.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal controls over financial reporting during the first fiscal quarter of 2014 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to various claims and pending or threatened lawsuits in the normal course of our business. The Company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its financial position, results of operations, or cash flows.

ITEM 1A. RISK FACTORS

You should carefully consider each of the following risk factors as well as the other information contained in this Quarterly Report on Form 10-Q and other filings with the SEC in evaluating our business. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impact our business operations. If any of the following risks actually occur, our operating results may be affected.

Risks Relating to Our Business

The loss of one or more of our major customers could result in a material loss of revenues; financial difficulties for our

major customers could have a significant impact on us.

We derived approximately 28% of our consolidated net sales from our top five customers for the quarter ended March

29, 2014. We do not enter into long-term sales contracts with our major customers, relying instead on product performance,

long-standing relationships, and on our position in the marketplace. As a result, we face the risk that one or more of these or

other customers may significantly decrease their business with us or terminate their relationship with us as a result of

competitive forces, financial difficulties, including bankruptcy or insolvency, or other reasons, which could result in significant levels of excess inventory, a material decrease in our sales, or material impact on our operating results. Further, a large percentage of our gross accounts receivables are typically from our largest wholesale customers. For example, approximately 75% of our gross accounts receivable at March 29, 2014 were from our ten largest wholesale customers, with three of these customers having individual receivable balances in excess of 10% of gross accounts receivable. Our reserves for doubtful accounts for estimated losses resulting from the inability of our customers to make payments may prove not to be sufficient if any of our major wholesale customers were unable to meet outstanding obligations to us or if their financial condition or credit position were to deteriorate, which could materially adversely affect our operating results.

The acceptance of our products in the marketplace is affected by consumers’ tastes and preferences, along with fashion

trends.

We believe that continued success depends on our ability to provide a compelling value proposition for our consumers in the

Company's distribution channels. There can be no assurance that the demand for our products will not decline, or that we will

be able to successfully and timely evaluate and adapt our products to changes in consumers' tastes and preferences or fashion

trends. If consumers' tastes and preferences are not aligned with our product offerings, demand for our products may decline,

promotional pricing may be required to move seasonal merchandise, and our gross margins and results of operations could be

adversely affected.

The value of our brand, and our sales, could be diminished if we are associated with negative publicity, including due to

actions by our vendors, independent manufacturers and licensees, over whom we have limited control.

Although we maintain policies with our vendors, independent manufacturers and licensees that promote ethical business

practices and our employees, agents, and third-party compliance auditors periodically visit and monitor the operations of our

vendors, independent manufacturers, and licensees, we do not control these vendors, independent manufacturers, licensees, or

their labor practices. A violation of our vendor policies, licensee agreements, labor laws, or other laws by these vendors,

independent manufacturers, or licensees could damage our brand image. As a result, negative publicity regarding our

Company, brands or products, including licensed products, could adversely affect our reputation and sales. Further, while the

Company takes steps to ensure the reputation of its brand is maintained through its license agreements, there can be no

guarantee that the Company's brand image will not be negatively impacted through its association with products or actions of

licensees. In addition, we are subject to certain rules as a public company, such as the conflict minerals rules promulgated

under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, that require disclosure of certain activities

notwithstanding their compliance with the substantive provisions of applicable law. If we are required to make such

disclosures, it is possible that our reputation could be harmed.

Our failure to protect our intellectual property rights could diminish the value of our brand, weaken our competitive

position, and adversely affect our results.

We currently rely on a combination of trademark, unfair competition, and copyright laws, as well as licensing arrangements, to

establish and protect our intellectual property rights. The steps taken by us or by our licensees to protect our proprietary rights

may not be adequate to prevent infringement of our trademarks or proprietary rights by others. In addition, intellectual property

protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect

our proprietary rights and where third parties may have rights to conflicting marks, and it may be more difficult for us to

successfully challenge the use of our proprietary rights by other parties in those countries. If we fail to protect and maintain our

intellectual property rights, the value of our brand could be diminished and our competitive position may suffer. Further, third

parties may assert intellectual property claims against us, particularly as we expand our business geographically, and any such

claim could be expensive and time consuming to defend, regardless of its merit. Successful infringement claims against us

could result in significant monetary liability or prevent us from selling some of our products, which could have an adverse

effect on our results.

We may incur substantial costs as a result of investigations or other proceedings related to previously disclosed

investigations.

As previously reported, beginning in the fourth quarter of fiscal 2009, the SEC and the United States Attorney's Office began

conducting investigations, with which the Company cooperated, related to customer margin support provided by the Company,

including undisclosed margin support commitments and related matters. In December 2010, the Company and the SEC entered

into a non-prosecution agreement pursuant to which the SEC agreed not to charge the Company with any violations of the

federal securities laws, commence any enforcement action against the Company, or require the Company to pay any financial

penalties in connection with the SEC's investigation of customer margin support provided by the Company, conditioned upon

the Company's continued cooperation with the SEC's investigation and with any related proceedings. The Company has

incurred and may continue to incur substantial expenses for legal services due to the SEC and United States Attorney's Office

investigations and any related proceedings. These matters may continue to divert management's time and attention away from

operations. The Company also expects to bear additional costs pursuant to its advancement and indemnification obligations to

directors and officers under our organizational documents in connection with proceedings related to these matters. Our

insurance may not provide coverage to offset such costs.

The Company's and its vendors' databases containing personal information and payment card data of our retail store and eCommerce customers, employees and other third parties, could be breached, which could subject us to adverse publicity, litigation, and expenses. In addition, if we are unable to comply with security standards created by the banks and payment card industry, our operations could be adversely affected.

We rely on the security of our networks, databases, systems and processes and, in certain circumstances, those of third parties,

such as vendors, to protect our proprietary information and information about our customers, employees, and vendors. If unauthorized parties gain access to these networks or databases, they may be able to steal, publish, delete, or modify our private and sensitive third-party information. In addition, employees may intentionally or inadvertently cause data or security breaches that result in unauthorized release of personal or confidential information. In such circumstances, we could be held liable to our customers, other parties, or employees, be subject to regulatory or other actions for breaching privacy law or failing to adequately protect such information. This could result in costly investigations and litigation, civil or criminal penalties, operational changes, and negative publicity that could adversely affect our financial condition, results of operations, and reputation. Further, if we are unable to comply with the security standards, established by banks and payment card industry, we may be subject to fines, restrictions, and expulsion from card acceptance programs, which could adversely affect our retail operations.

Increases in production costs and deflationary pressures on our selling prices may adversely affect our results.

The Company's product costs are subject to fluctuations in costs such as manufacturing, cotton, labor, fuel, and transportation.

Historically, the Company experienced deflationary pressure on its selling prices, in part driven by intense price competition in the young children's apparel industry. In recent years, we have experienced increased costs of cotton, labor, fuel, and transportation, and have also had higher costs for foreign sourced products as a result of the devaluation of the U.S. dollar relative to certain foreign currencies. We anticipate increased product costs in 2014 principally due to higher labor costs for our foreign manufacturers. While we raised our selling prices on many of our products over the past two years, we have been unable to fully absorb the cost increases and our profitability has been adversely impacted. If future product cost increases are more than anticipated, or if we are unable to offset such cost increases through selling price increases or otherwise, our profitability could be adversely affected. Future deflationary pressures on our selling prices could also adversely affect our profitability.

Our business is sensitive to overall levels of consumer spending, particularly in the young children's apparel segment.

Consumers' demand for young children's apparel, specifically brand name apparel products, is impacted by the overall level of

consumer spending. Discretionary consumer spending is impacted by employment levels, weather, gasoline and utility costs,

business conditions, availability of consumer credit, tax rates, interest rates, levels of consumer indebtedness, and overall levels

of consumer confidence. Recent and further reductions, or lower-than-expected growth, in the level of discretionary spending

may have a material adverse effect on the Company's sales and results of operations.

We source substantially all of our products through foreign production arrangements. Our dependence on foreign supply

sources could result in disruptions to our operations in the event of political instability, unfavorable economic conditions,

international events, or new foreign regulations, and such disruptions may increase our cost of goods sold and decrease

gross profit.

We source substantially all of our products through a network of vendors primarily in Asia, principally, coordinated by our

sourcing agents and directly through our Hong Kong sourcing office. The following could disrupt our foreign supply chain,

increase our cost of goods sold, decrease our gross profit, or impact our ability to get products to our customers:

• financial instability, including bankruptcy or insolvency, of one or more of our major vendors;

• political instability or other international events resulting in the disruption of trade in foreign countries from which we source our products;

• interruptions in the supply of raw materials, including cotton, fabric, and trim items;

• increases in the cost of labor in our sourcing locations;

• the imposition of new regulations relating to imports, duties, taxes, and other charges on imports;

• the occurrence of a natural disaster, unusual weather conditions, or an epidemic in foreign countries from which we source our products;

• changes in the United States customs procedures concerning the importation of apparel products;

• unforeseen delays in customs clearance of any goods;

• disruptions in the global transportation network such as a port strike, capacity withholding, world trade restrictions, or war;

• the application of foreign intellectual property laws;

• the ability of our vendors to secure sufficient credit to finance the manufacturing process including the acquisition of

raw materials;

• potential social compliance concerns resulting from our use of international vendors, independent manufacturers and licensees, over whom we have limited control;

• compliance with disclosure rules regarding the identification and reporting on the use of “conflict minerals” sourced from the Democratic Republic of the Congo in our products;

• exchange rate fluctuations between the Company's and/or its subsidiaries' functional currency and the currencies paid

to foreign contractors; and

• other events beyond our control that could interrupt our supply chain and delay receipt of our products into the United States.

A small number of vendors supply a significant amount of our products, and losing one or more of these vendors could have a material adverse effect on our business, results of operations, and financial condition.

In 2013, we sourced approximately 60% of our products from ten vendors and approximately 30% from three vendors. We expect that we will continue to source a significant portion of our products from these vendors. We do not have agreements with our major vendors that would provide us with assurances on a long-term basis as to adequate supply or pricing of our products. If any of our major vendors (i) decide to discontinue or significantly decrease the volume of products they manufacture for us, (ii) raise prices on products we purchase from them, or (iii) become unable to perform their responsibilities (e.g., experience financial difficulties, lack of capacity or significant labor disputes) our business, results of operations, and financial condition may be adversely affected.

We currently source most of our products through a single port. Labor disruptions at that port or otherwise along our supply

chain may adversely affect our relationships with customers, reputation with consumers, and results of operations.

Our business depends on our ability to source and distribute products in a timely manner. Labor disputes at independent

factories where our goods are produced, the shipping port we use, or our transportation carriers create significant risks for our

business, particularly if these disputes result in work slowdowns, lockouts, strikes, or other disruptions during our peak

manufacturing and importing times. The existing contract between the port through which we source most of our products and

International Longshore and Warehouse Union is scheduled to expire on July 1, 2014. This may result in slow-downs,

disruptions, or a strike if a new agreement is not reached by such date, or even before that date. While we have contingency

plans in place, in the event that slow-downs, disruptions or a strike occurs in connection with such contract expiration or

otherwise, it may have a material adverse effect on our relationships with our customers and our business, potentially resulting

in canceled orders by customers, unanticipated inventory accumulation, and reduced revenues and earnings.

We source substantially all of our products through a network of vendors. We have limited control over these vendors and

we may experience delays, product recalls, or loss of revenues if our products do not meet our quality standards.

Our vendors may not continue to provide products that are consistent with our standards. We have occasionally received, and

may in the future continue to receive, shipments of product that fail to conform to our quality control standards. A failure in our

quality control program may result in diminished product quality, which may result in increased order cancellations and returns,

decreased consumer demand for our products, or product recalls, any of which may have a material adverse effect on our results

of operations and financial condition. Because we do not control our vendors, products that fail to meet our standards, or other

unauthorized products, could end up in the marketplace without our knowledge. This could materially harm our brand and our

reputation in the marketplace.

We may experience delays, product recalls, or loss of revenues if our products do not meet regulatory requirements.

Our products are subject to regulation of and regulatory standards set by various governmental authorities around the world,

including the U.S. Consumer Product Safety Commission and Health Canada, with respect to quality and safety. These

regulations and standards may change from time to time. Our inability, or that of our vendors, to comply on a timely basis with

regulatory requirements could result in significant fines or penalties, which could adversely affect our reputation and sales.

Issues with the compliance of merchandise we sell with these regulations and standards, regardless of our culpability, or

customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or

losses, merchandise recalls, and increased costs.

The loss of a sourcing agent could negatively impact our ability to timely deliver our inventory supply and disrupt our

business, which may adversely affect our operating results.

Currently, one sourcing agent manages approximately 70% of our inventory purchases. Although we believe that other buying

agents could be retained, or we could procure some of the inventory directly, the loss of this buying agent could delay our

ability to timely receive inventory supply and disrupt our business, which could result in a material adverse effect on our

operating results. In addition, we have recently increased the amount of our inventory that we source directly and plan to

continue to further increase such amounts. We have limited experience in directly sourcing inventory purchases from foreign

vendors and we may experience difficulty in the transition, which could disrupt our business, increase our costs, and have a

material adverse effect on our operating results.

We operate in a highly competitive market and the size and resources of some of our competitors may allow them to compete

more effectively than we can, resulting in a loss of market share and, as a result, a decrease in revenue and gross profit.

The baby and young children's apparel market is highly competitive. Both branded and private label manufacturers compete in

the baby and young children's apparel market. Our primary competitors in our wholesale businesses include private label

product offerings and Disney and Gerber. Our primary competitors in the retail store channel include, in alphabetical order,

Disney, Gap, Gymboree, Old Navy, and The Children's Place. Because of the fragmented nature of the industry, we also

compete with many other manufacturers and retailers. Some of our competitors have greater financial resources and larger

customer bases than we have. As a result, these competitors may be able to:

• adapt to changes in customer requirements more quickly;

• take advantage of acquisition and other opportunities more readily;

• devote greater resources to the marketing and sale of their products; and

• adopt more aggressive pricing strategies than we can.

The Company's retail success and future growth is dependent upon identifying locations and negotiating appropriate lease

terms for retail stores.

The Company's retail stores are located in leased retail locations across the United States and Canada. Successful operation of

a retail store depends, in part, on the overall ability of the retail location to attract a consumer base sufficient to make store sales

volume profitable. If the Company is unable to identify new retail locations with consumer traffic sufficient to support a

profitable sales level, retail growth may be limited. Further, if existing stores do not maintain a sufficient customer base that

provides a reasonable sales volume or the Company is unable to negotiate appropriate lease terms for the retail stores, there

could be a material adverse impact on the Company's sales, gross margin, and results of operations.

Profitability and our reputation and relationships could be negatively impacted if we do not adequately forecast the demand

for our products and, as a result, create significant levels of excess inventory or insufficient levels of inventory.

If the Company does not adequately forecast demand for its products and purchases inventory to support an inaccurate forecast,

the Company could experience increased costs and lower selling prices due to the need to dispose of excess inventory. In

addition, if we forecast demand for our products that is lower than actual demand, we may experience insufficient levels of

inventory, which could result in damage to our relationships with customers and our reputation with consumers.

We may not achieve sales growth plans, cost savings, and other assumptions that support the carrying value of our

intangible assets.

As of March 29, 2014, the Company had goodwill of $136.6 million for Carter's and goodwill of $48.0 million for Bonnie

Togs, and tradename assets of $220.2 million for the Carter's brand, and $85.5 million for the OshKosh brand on its

consolidated balance sheet. The carrying value of these assets is subject to annual impairment reviews as of the last day of each

fiscal year or more frequently, if deemed necessary, due to any significant events or changes in circumstances. Estimated future

cash flows used in these impairment reviews could be negatively impacted if we do not achieve our sales plans, planned cost

savings, and other assumptions that support the carrying value of these intangible assets, which could result in impairment of

the remaining asset values. Any impairment would adversely affect our results of operations.

We have substantial debt, which could adversely affect our financial health and our ability to obtain financing

in the future and to react to changes in our business.

As of March 29, 2014, we had approximately $586.0 million aggregate principal amount of debt outstanding (excluding

approximately $8.3 million of outstanding letters of credit), and approximately $180.7 million of undrawn availability under

our senior secured revolving credit facility after giving effect to $8.3 million of letters of credit issued under our senior secured revolving credit facility.

Our substantial debt could have important consequences. Because of our substantial debt:

• our ability to satisfy our obligations with respect to our debt may be adversely affected;

• we may be more vulnerable to adverse economic and general industry conditions, including interest rate fluctuations,

because a portion of our borrowings are at variable rates of interest;

• we may be unable to make strategic acquisitions or be required to make non-strategic divestitures;

• our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate or other purposes may be limited;

• a significant portion of our cash flow from operations may have to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use that cash flow to fund our operations, capital expenditures, and future business opportunities;

• it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on and acceleration of such debt;

• we may be at a competitive disadvantage compared to our competitors who have less debt or comparable debt at more favorable interest rates and who, as a result, may be better positioned to withstand economic downturns or to finance capital expenditures or acquisitions;

• our costs of borrowing may increase

• we may be unable to refinance our debt on terms as favorable as our existing debt or at all; and

• our flexibility to adjust to changing market conditions and our ability to withstand competitive pressures could be

limited, or we may be prevented from carrying out capital spending that is necessary or important to our growth

strategy and efforts to improve the operating margins of our businesses.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to

satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and

operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business,

legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating

activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our

indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations and other cash requirements, we

could be forced to reduce or delay investments and capital expenditures or to sell assets or operations, seek additional capital, or

restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on

commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled

debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems

and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our secured

revolving credit facility and the indenture governing the senior notes restrict our ability and the ability of our restricted

subsidiaries to dispose of assets and use the proceeds from any such dispositions and also restrict our and our restricted

subsidiaries’ ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be

able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then

due.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially

reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability

to satisfy our obligations.

If we cannot make scheduled payments on our debt, we will be in default and, as a result, holders of the secured revolving

credit facility could terminate their commitments to loan money and accelerate the maturity of borrowings thereunder, our secured lenders could foreclose against the assets securing such borrowings the holders of our senior notes could accelerate the maturity of our obligations thereunder, and we could be forced into bankruptcy or liquidation.

The terms of our secured revolving credit facility and the indenture governing the senior notes contain restrictions and

limitations that could significantly impact our management’s flexibility or our financial and operational flexibility to operate

our business.

Our secured revolving credit facility contains certain restrictive covenants that, among other things, restrict TWCC and certain

of its subsidiaries’ ability to:

• incur, assume or guarantee additional indebtedness;

• issue disqualified stock and preferred stock;

• pay dividends or make distributions or other restricted payments;

• redeem or repurchase capital stock;

• prepay, redeem or repurchase certain debt;

• make loans and investments (including joint ventures);

• incur liens;

• make dividends, loans or asset transfers from TWCC’s subsidiaries;

• sell or otherwise dispose of assets, including capital stock of subsidiaries;

• consolidate or merge with or into, or sell substantially all of TWCC’s assets to, another person;

• designate subsidiaries as unrestricted subsidiaries;

• enter into sale and leaseback transactions;

• enter into transactions with affiliates; and

• enter into new lines of business.

In addition, our secured revolving credit facility requires us to maintain specified financial ratios and satisfy other financial

condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot

assure you that it will meet them.

The indenture governing the senior notes contains certain restrictive covenants that, among other things, restricts TWCC and certain of its subsidiaries’ ability to:

• incur, assume or guarantee additional indebtedness;

• pay dividends or make distributions or other restricted payments;

• make loans and investments (including joint ventures);

• incur liens;

• sell or otherwise dispose of assets, including capital stock of subsidiaries;

• create restrictions on the payment of dividends or other amounts to TWCC or TWCC's subsidiaries that are guarantors of the senior notes from certain subsidiaries that are not guarantors of the senior notes;

• consolidate or merge with or into, or sell substantially all of TWCC’s assets to, another person;

• designate subsidiaries as unrestricted subsidiaries; and

• enter into transactions with affiliates.

The restrictions in the indenture that govern the senior notes or under our secured revolving credit facilities may limit our

ability to engage in acts that may be in our long-term best interests, and may make it difficult for us to execute our business

strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt

obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.

A breach of the covenants under the indenture that governs the senior notes or under the secured revolving credit facility could

result in an event of default under the applicable indebtedness. Such default may allow the holders to accelerate the related debt

and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition,

an event of default under the secured revolving credit facility would permit the lenders under the secured revolving credit

facility to terminate all commitments to extend further credit under that facility.

If our operating performance declines, we may need to seek waivers from the holders of our indebtedness to avoid being in

default under the instruments governing such indebtedness. If we breach our covenants under our indebtedness, we may not be

able to obtain a waiver from the holders of such indebtedness on terms acceptable to us or at all. If this occurs, we would be in

default under such indebtedness, the holders of such indebtedness and other lenders could exercise their rights as described

above, and we could be forced into bankruptcy or liquidation.

Furthermore, if we were unable to repay the amounts due and payable under our senior secured revolving credit facility, those

lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or holders of

senior notes accelerate the repayment of our borrowings, we cannot assure that we would have sufficient assets to repay such

indebtedness.

The Company's success is dependent upon retaining key individuals within the organization to execute the Company's

strategic plan.

The Company's ability to attract and retain qualified executive management, marketing, merchandising, design, sourcing,

operations, and support function staffing is key to the Company's success. If the Company were unable to attract and retain

qualified individuals in these areas, an adverse impact on the Company's growth and results of operations may result. Our

inability to retain personnel as a result of our recent office consolidation or otherwise could cause us to experience business

disruption due to a loss of historical knowledge and a lack of business continuity and may adversely affect our results of

operations, financial position, and cash flows.

Failure to implement new information technology systems or needed upgrades to our systems could adversely affect our business.

As our business grows in size, complexity, and geography, we expect our information technology infrastructure to be in regular

need of enhancement and upgrades. Failure to implement new systems or upgrade systems as needed or complications encountered in implementing new systems or upgrading existing systems could cause disruptions that may adversely affect our business results or operations. Further, additional investment needed to upgrade and expand our information technology infrastructure could require significant investment of additional resources and capital.

We may not effectively transition our distribution functions to our new Braselton, Georgia facility. If we encounter

problems with our distribution facilities, our ability to deliver our products to the market could be adversely affected and

expected efficiencies may not be realized.

If we are unsuccessful in timely or effectively transitioning our distribution functions to this facility, we may not achieve

planned efficiency improvements and may not have sufficient distribution capacity, which could cause sales to decline and costs

to increase and could have a material adverse effect on our results of operations. In addition, our new distribution facilities in

Braselton, Georgia are expected to be more complex to operate than our current facilities and we may face difficulty in hiring

and training needed personnel. Our ability to meet customer expectations, manage inventory, complete sales, and achieve

objectives for operating efficiencies depends on the proper operation of this facility. Disruptions could adversely affect our

results of operations.

We may be unsuccessful in expanding into international markets.

We do not have significant experience operating in markets outside of the United States and Canada. Consumer demand,

behavior, tastes, and purchasing trends may differ in international markets and, as a result, sales of our products may not be

successful or meet our expectations, or the margins on those sales may not be in line with those we currently anticipate. We

may encounter differences in business culture and the legal environment that may make working with commercial partners and

hiring and retaining an adequate employee base more challenging. We may also face difficulties integrating foreign business

operations with our current operations. Any of these challenges could hinder our success in new markets. Our entry into new

markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected

operational and financial performance and such costs may be greater than expected. We cannot be sure that we can successfully

complete any planned expansion or that new international business will be profitable or meet our expectations. If our

international expansion plans are unsuccessful, our results could be materially adversely affected.

Our results of operations, financial position, and cash flows, and our ability to conduct business in international markets may be affected by international legal, regulatory, political, economic, exchange rate risks.

Our ability to conduct business in new and existing international markets is subject to legal, regulatory, political, and economic

risks. These include:

• the burdens of complying with foreign laws and regulations, including trade and labor restrictions;

• compliance with U.S. and other country laws relating to foreign operations, including the Foreign Corrupt Practices Act, which prohibits U.S. companies from making improper payments to foreign officials for the purpose of obtaining or retaining business;

• unexpected changes in regulatory requirements; and

• new tariffs or other barriers in some international markets.

We are also subject to general political and economic risks in connection with our international operations, including:

• political instability and terrorist attacks;

• differences in business culture;

• different laws governing relationships with employees and business partners;

• changes in diplomatic and trade relationships;

•fluctuations in exchange rates, primarily between the United States dollar and the Canadian dollar and the currencies in other markets in which we conduct or may conduct business; and

• general economic fluctuations in specific countries or markets.

We cannot predict whether quotas, duties, taxes, or other similar restrictions will be imposed by the U.S. or foreign countries

upon the import or export of our products in the future, or what effect any of these actions would have, if any, on our business,

financial condition, or results of operations. Changes in regulatory, geopolitical, social or economic policies, and other factors

may have a material adverse effect on our business in the future or may require us to exit a particular market or significantly

modify our current business practices.

The Company's future success and growth through expansion of its international operations could be adversely affected by

violations of the United States Foreign Corrupt Practices Act and similar world-wide anti-bribery laws.

The United States Foreign Corrupt Practices Act, and similar world-wide anti-bribery laws prohibit companies and their

intermediaries from making improper payments to non-United States officials for the purpose of obtaining or retaining

business. The Company's policies mandate compliance with anti-bribery laws. The Company cannot provide assurance that

our internal control policies and procedures, or those of our vendors, will protect from reckless or criminal acts committed by

the Company's employees, agents, or vendors. Violations of these laws, or allegations of such violations, could disrupt the

business and result in a material adverse effect on the Company's financial condition, results of operations, and cash flows.

The Company is subject to various claims and pending or threatened lawsuits, and, as a result, may incur substantial costs

that adversely affect the Company's business, financial condition and results of operations.

The Company is subject to various claims and pending or threatened lawsuits in the course of its business. In the event we are

required or determine to pay amounts in connection with any such lawsuits, such amounts could be significant and could have a

material adverse impact on our business, financial condition and results of operations.

Failure to continue to pay quarterly cash dividends to our shareholders could cause the market price for our common stock

to decline.

The Company has initiated a quarterly cash dividend and has declared and paid cash dividends of $0.19 per share to holders of

record as of March 20, 2014. Provisions in our senior credit facility and the indenture governing our senior notes could have the effect of restricting our ability to pay future cash dividends on, or make future repurchases of, our common stock. Additionally, future declarations of quarterly cash dividends and the establishment of future record and payment dates are at the discretion of the Company's Board of Directors based on a number of factors, including the Company's future financial performance and other investment priorities. Any reduction or discontinuance by us of the payment of quarterly cash dividends could cause the market price of our common stock to decline.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

The following table provides information about share repurchases during the first fiscal quarter of 2014:



Period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (2)	Approximate dollar value of shares that may yet be purchased under the plans or programs

December 29, 2013 through January 25, 2014	1,024,154	$	69.89	1,024,154	$	267,175,911

January 26, 2014 through February 22, 2014	42,812	$	67.49	—	$	267,175,911

February 23, 2014 through March 28, 2014	47,624	$	73.08	30,151	$	264,883,643

Total	1,114,590			1,054,305


(1)	Includes shares of our common stock surrendered by our employees to satisfy required tax withholding upon the vesting of restricted stock awards. There were 60,285 shares surrendered between December 29, 2013 and March 29, 2014.


(2)	Amounts purchased during the first fiscal quarter of 2014 were made in accordance with the share repurchase authorizations described in Note 5 to our accompanying unaudited condensed consolidated financial statements.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

N/A

ITEM 4. MINE SAFETY DISCLOSURES

N/A

ITEM 5. OTHER INFORMATION

N/A

ITEM 6. EXHIBITS



Exhibit Number	Description of Exhibits



10.18	Separation Agreement between The William Carter Company and Lisa A. Fitzgerald, dated as of January 19, 2014.
10.19	Amended and Restated Severance Agreement between The William Carter Company and Michael D. Casey, dated as of March 5, 2014.
31.1	Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.
31.2	Rule 13a-15(e)/15d-15(e) and 13a-15(f)/15d-15(f) Certification.
32	Section 1350 Certification.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

CARTER’S, INC.



Date : April 28, 2014	/s/ MICHAEL D. CASEY
	Michael D. Casey
	Chief Executive Officer
	(Principal Executive Officer)



Date : April 28, 2014	/s/ RICHARD F. WESTENBERGER
	Richard F. Westenberger
	Executive Vice President and
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

10.18 Separation Agreement for Lisa A. Fitzgerald

Exhibit 10.18

SEPARATION AGREEMENT

THIS SEPARATION AGREEMENT (“Agreement”) is made by and between Lisa A. Fitzgerald (“Executive”), Carter’s, Inc. (“Carter’s”) and its subsidiary The William Carter Company (“TWCC” and, together with Carter’s, the “Company”).

WHEREAS the Executive has been employed as Executive Vice President and Brand Leader of OshKosh B’gosh pursuant to the Severance Agreement between the Executive and the Company dated as of March 2, 2011, by and between the Executive and TWCC (“Employment Agreement”).

WHEREAS the Executive has provided the Company valuable service during her employment;

WHEREAS the Executive and the Company, pursuant to Paragraph 3(c)(ii) of the Employment Agreement, have reached agreement on the timing and other terms and conditions of the Executive’s separation from employment with the Company, including without limitation the payments and benefits to be provided the Executive in connection therewith; and

WHEREAS the Company and the Executive wish to memorialize all of the aforementioned terms and conditions of their agreement;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms, provisions, and conditions set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.Separation from Service.

(a) Except as provided herein, each of the Executive and the Company hereby waives any notice that might otherwise be required from the other in connection with the Executive’s separation from the service of the Company, whether under the Employment Agreement or otherwise, and the parties hereby confirm that the Executive’s employment by the Company will terminate, effective as of March 1, 2014, or on an earlier agreed upon date (“Separation Date”). The Executive and the Company agree that the Executive’s last day in the Company’s offices shall be December 31, 2013, however, Executive will be permitted to work remotely until such date.

(b) The Executive and the Company also hereby confirm that, effective as of the Separation Date, the Executive shall resign, and the Company shall accept her resignation, from the Executive’s occupancy of any and all offices and directorships for any of the Company’s subsidiaries or other affiliates. The Executive shall execute such

additional confirmations of the foregoing resignations as the Company may reasonably request.

2. Compensation and Benefits. The Company shall pay to the Executive the following as full compensation for the services performed by the Executive through the Separation Date in full satisfaction of any rights the Executive may have under the Employment Agreement, subject to the other terms and conditions of this Agreement:

(a) On the Separation Date, the Company shall pay to the Executive her salary earned during the final payroll period of her employment, through the Separation Date, but not as yet paid, if any. The Company shall also pay Executive any accrued but unused vacation time. The Company shall reimburse any business expenses incurred by the Executive through the Separation Date that are eligible for reimbursement under Company policies but have not yet been reimbursed, provided that the Executive submits those expenses, with all required documentation and substantiation, within 30 days following the date such expenses were incurred. Appropriate reimbursement of the expenses shall be made promptly, but not later than the end of the calendar year following the calendar year in which the expense is incurred. Executive shall retain her right to all vested benefits in any pension, profit sharing, 401(k), or other retirement plan as of her Separation Date.

(b) Following the Separation Date, the Company will pay the Executive a total of 12 months of pay (“Severance Pay Period”). This severance pay amounts to five hundred thirty thousand dollars ($530,000), which will be paid in equal installments of $20,384.62 on a bi-weekly basis and coincide with the Company’s regular pay periods commencing on May 9, 2014. Executive’s first severance payment on May, 9, 2014, will be a lump sum payment of $101, 923.10, which represents the first five installments of severance pay in compliance with Paragraph 4(b)(i) of the Employment Agreement. The Company and the Executive acknowledge and agree that the Executive will not be eligible to receive any severance or other benefit under the Company’s Severance Plan, or any other severance plan or arrangement of the Company, except as provided in this Agreement. The severance shall be subject to withholding for state and federal taxes and lawful authorized deductions for any benefit plans in which Executive continues to participate during the Severance Pay Period. The foregoing severance payments will not be treated as compensation under any pension, profit sharing, 401(k), or other benefit plan that bases benefits in whole or part on compensation received from the Company.

(c) After the Separation Date, if the Executive elects to continue to participate in the Company’s group medical and dental insurance plans under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the Company shall provide the Executive with continued employer contributions toward the premium cost of her group medical and dental insurance, in the same rate as if the Executive remained an active employee of the Company, during the twelve (12) month period following the Separation Date (“COBRA Period”) (subject to such continuation coverage not having terminated).

Such employer contributions will be made on a monthly basis on the same schedule as employer contributions are made for active employees of the Company. If Executive has not otherwise obtained separate coverage under another employer’s plan by December 15, 2014, the Company will issue the Executive a check for the employer contributions covering the remaining time of the COBRA Period, which will be subject to withholdings for federal and state taxes.

(d) For 12 months following the Separation Date, the Company shall provide the Executive with continued monthly employer contributions toward the premium cost of her basic life insurance coverage, in the same percentage and amount as if the Executive remained employed (subject to such insurance coverage not having terminated), such employer contributions to be made on a monthly basis on the same schedule as employer contributions are made for active employees of the Company. Thereafter, the Executive shall be solely responsible for the costs associated with basic life insurance coverage and the Company shall have no continuing obligation or liability with respect thereto. For the avoidance of doubt, as of the Separation Date, the Executive shall be solely responsible for any costs associated with supplemental life insurance coverage and the Company shall have no continuing obligation or liability with respect thereto.

(e) On the date when other bonuses, if any, are paid for fiscal 2013 to participants in the Company’s Amended and Restated Annual Incentive Plan (“Bonus Plan”), but not later than March 15, 2014, the Company shall pay to the Executive her full bonus for 2013, subject to approval by the Compensation Committee, in accordance with the Bonus Plan. Executive’s fiscal 2013 bonus will be based on her 2013 salary. Executive understands and agrees that she will not receive a merit increase for 2014 nor will she be eligible for a bonus for fiscal 2014.

(f) The parties hereto acknowledge that the Executive currently holds restricted shares of, and options to acquire common stock of, Carter’s that have been granted to the Executive under the Carter’s, Inc. Amended and Restated Equity Incentive Plan or predecessor plans (“Equity Plan”). The parties agree that vesting of the Executive’s shares and options will continue as normal through the Separation Date. The parties hereto agree that, upon the Separation Date, any unvested shares of restricted stock and any unvested stock options shall be terminated and shall be of no further force or effect. Any vested options shall continue to be exercisable until the expiration of sixty (60) days following the Separation Date and will then, to the extent not previously exercised, immediately expire; provided, that nothing in this Agreement shall affect the future applicability of any corporate merger, acquisition or similar provision of the plans or programs under which the vested options were granted that might result in an earlier termination or conversion of the options so referenced. Except for the restricted stock and stock options referenced in this subsection (f), the Executive has no equity or equity-based awards from the Company. Executive understands and agrees that she will not receive any equity grants in 2014.

3. Section 409A Compliance. The Executive will be deemed to have an “involuntary separation from service," as defined in Treasury Regulation § 1.409A-1(n), on her Separation Date. Furthermore, each installment payment or benefit provided for in this Agreement is a separate payment within the meaning of Treasury Regulation section 1.409A-2(b)(2)(i). Accordingly, the payments made under this Agreement are intended to fall within the short-term deferral exemption and/or the separation pay exemption as provided under Treasury Regulation § 1.409A-1(b)(4) and -1(b)(9), respectively (“Exemptions”). If the payments under this Agreement are determined to not fall under one of the Exemptions and if the Executive is a “specified employee,” as defined in section 409A of the Internal Revenue Code of 1986, as amended, the Company will delay payments provided for in this Agreement in accordance with Treasury Regulation § 1.409A-3(i)(2). To the extent that the payments under this Agreement fall within one or both of the Exemptions, the Company in its sole discretion may choose to accelerate the payments in Section 2(b).

4. Withholding. All payments made and benefits provided directly or indirectly by the Company under this Agreement shall be reduced by any tax or other amounts required to be withheld under applicable law, and all such withheld amounts shall be deemed to have been paid to the Executive hereunder. The Company may withhold, or cause to be withheld, from any source of payments owed to the Executive; or, if the cash portion of amounts paid contemporaneously with the withholding obligation are not sufficient, the Company may require the Executive to pay (and the Executive upon notice thereof shall promptly pay) by separate check, all amounts required to be withheld in respect of any such payments or benefits.

5. Acknowledgement of Full Payment. The Executive hereby acknowledges and agrees that the payments to be provided under Section 2(a) of this Agreement are in complete satisfaction of any and all compensation due to the Executive from the Company, whether for services provided to the Company or otherwise, through the Separation Date, and that, except as expressly provided in Sections 2(b) through 2(f) hereof, no further compensation of any kind is owed or will be paid to the Executive.

6. Status of Employee Benefits. The Executive’s participation in all employee benefit plans of the Company will cease in accordance with the terms of those plans, except as expressly provided herein.

7. Cooperation. The Executive shall cooperate with the Company in order to facilitate a smooth transition of the Executive’s responsibilities. The Executive also agrees to cooperate with the Company and its subsidiaries or other affiliates with respect to all matters arising during or related to the Executive’s employment, including but not limited to all matters in connection brand strategy which may have arisen during the Executive’s employment or which may arise following the signing of this Agreement, and Executive understands that she will not receive any additional compensation for such cooperation.

8. Surviving Obligations. Paragraphs 8, 9, and 10 of the Employment Agreement, and such other provisions of the Employment Agreement as are necessary or desirable for the enforcement by the Company of its rights under those enumerated paragraphs shall survive execution of this Agreement and the termination of the Executive’s employment and of the Employment Agreement in accordance with the terms of the aforesaid paragraphs.

9. Release of Claims.

(a) In exchange for those payments and benefits to be provided the Executive under Sections 2(b) through 2(f) hereof in accordance with this Agreement, and for other good and valuable consideration, to which the Executive would not otherwise be entitled, the Executive agrees completely and irrevocably to release all claims, obligations, causes of action and demands which she has or ever had, from the beginning of time to the Separation date, against the Company, its parents, subsidiaries, divisions, joint ventures, partnerships and/or affiliated entities, their predecessors, successors and assigns, and all of their present and/or former officers, directors, managers, supervisors, employees, shareholders, agents, representatives, and employee benefit or pension plans or funds (and the trustees, administrators, fiduciaries and insurers of such programs) (collectively, the “Released Parties”). The Executive agrees that any person acting by, through or under her, such as her heirs, executors, administrators, representatives and assigns, are also bound by her release of claims.

(b) The Executive understands that the claims her release includes but is not limited to: (i) any claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Equal Pay Act, the National Labor Relations Act, the Pregnancy Discrimination Act, the Genetic Information and Discrimination Act of 2008, the Employee Retirement Income Security Act of 1974, Sections 503 and 504 of the Rehabilitation Act of 1973, the Worker Adjustment Retraining and Notification Act, and the Sarbanes Oxley Act of 2002, all as amended; (ii) any claims under any state or local labor law and/or discrimination law, and all other federal, state and local discrimination, labor or employment laws or regulations; (iii) any other claims relating to or arising out of her employment, the terms and conditions of her employment and/or the termination of her employment, in law or in equity, including, without limitation, claims for discrimination, retaliation, or harassment (on the basis of age, race, color, religion, national origin, gender, sexual orientation, marital status, citizenship status, genetic predisposition, veteran status or any other basis protected by law), whistle-blowing, breach of contract (oral or written, express or implied) or of policy or practice, constructive discharge, wrongful discharge, detrimental reliance, negligence, emotional distress, pain and suffering, compensatory and punitive damages and all other torts, including any intentional torts, such as defamation; (iv) any claims subject to federal, state and local occupational safety and health laws and regulations; (v) claims under any other federal, state or local Constitution, statute, regulation, or agreement or duty; and (vi)

any claims for attorneys’ fees, costs, disbursements and/or the like, or for equitable relief and reinstatement.

(c) The Executive understands that she is releasing all claims, whether or not they are known to her at the time she signs this Agreement.

(d) The Executive understands this Agreement does not apply to any claims or rights (i) that may arise after the date that the Executive signs this Agreement, (ii) for the consideration for or breach of this Agreement, (iii) for reimbursement of business expenses incurred on behalf of the Company under the Company’s expense reimbursement policies, (iv) for vested rights under any Company ERISA-covered employee benefit plans as applicable on the date Executive signs this Agreement, (v) for any claims that controlling law clearly states may not be released by settlement, such as, but not limited to, claims for Worker’s Compensation benefits for job-related illness or injury, (vi) for any right of indemnification that the Executive has pursuant to the Articles of Incorporation or By-Laws of the Company, or (vii) to challenge the validity of this Agreement under the Older Workers Benefit Protection Act (“OWBPA”).

(e) The Executive further understands that nothing in this Agreement prevents her from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the Equal Employment Opportunity Commission (“EEOC”), National Labor Relations Board (“NLRB”), or any other federal, state or local agency charged with the enforcement of any employment laws, although by signing this Agreement, the Executive is waiving her right to individual relief based on claims asserted in such a charge or complaint, regardless of whether she or another party has filed it.

(f) This Agreement, including the release of claims set forth above, creates legally binding obligations, and the Company therefore advises the Executive to consult an attorney before signing this Agreement. By signing this Agreement, the Executive gives the Company assurance that the Executive has signed it voluntarily and with a full understanding of its terms; that the Executive has had sufficient opportunity, before signing this Agreement, to consider its terms and to consult with an attorney, if the Executive wished to do so, or to consult with any other person of her choosing; and that, in signing this Agreement, the Executive has not relied on any promises or representations, express or implied, that are not set forth expressly in this Agreement.

10. Conditions for Receiving Severance. The Executive agrees and acknowledges that she has maintained, and shall maintain, complete compliance with all of the following representations, warranties, and conditions in order to be eligible to receive the severance pay and benefits described in Sections 2(b) through 2(f). In the event the Executive fails to fulfill any of the following representations, warranties, or conditions, as determined by the Company in its discretion, the Company shall cease payment of all severance pay and benefits hereunder, and shall likewise be entitled to the immediate forfeiture and recapture of all severance pay and benefits paid to the Executive prior to its discovery of the same. The Executive represents and warrants that:

(a) At all times during the pendency of his employment, the Executive complied with all state and federal laws, and conducted herself with the highest degree of fidelity to the Company, committing no acts of theft, embezzlement, misappropriation, insider trading, or other forms of substantial misconduct contrary to the interests of the Company.

(b) At all times during the pendency of her employment, the Executive complied with each of her obligations under Paragraphs 8, 9 and10 of the Employment Agreement with respect to Confidential Information, Work Product, and Non-Competition and Non-Solicitation, respectively.

(c) The Executive’s obligations herein and pursuant to Paragraphs 8, 9 and 10 of the Employment Agreement shall continue in full force and effect from the date hereof, and that the Executive’s full compliance with such obligations shall be a condition to the Executive’s eligibility to accept this Agreement and to receive or retain its benefits (excluding only those payments to be provided in accordance with Section 2(a) herein) and to the performance of the Company hereunder. Additionally, the Executive agrees that her obligations under Paragraph 10 of the Employment Agreement shall continue for the Severance Pay Period covered in Section 2(b) of this Agreement.

(d) Except as otherwise provided in Section 2(f) herein, the Executive shall return to the Company all Confidential Information (as defined below), work product, and all other Company property, on or before the Separation Date, including, but not limited to, keys, credit cards, documents, records, identification cards, office equipment, portable computers, mobile telephones, pagers, hand held electronic devices, and parking cards.

11. Confidentiality.

(a) Executive, pursuant to Paragraph 8 of the Employment Agreement, has not and shall not disclose any information of the Company or its subsidiaries that is not generally known by others, including but not limited to: (1) the development, research, testing, manufacturing, marketing and financial activities of the Company or any of its affiliate entities, (2) the products and services offered by the Company or any of its affiliate

entities, (3) the costs, sources of supply, financial performance, and strategic plans of the Company or any affiliate entities, (4) the identity and special needs of the customers of the Company and its affiliated entities, (5) the people and organizations with whom the Company and its affiliate entities have business relationship and the nature and substance of those relationships, and (6) trade secrets and other proprietary information (collectively, “Confidential Information”). Executive acknowledges and agrees that the Confidential Information is the sole and exclusive property of the Company and that she has not and shall not use any Confidential Information for her own benefit. Executive agrees that the aforementioned restrictions shall remain applicable for a period of three years after her Separation Date.

(b) Executive agrees to keep the existence and terms of this Agreement confidential, except for disclosures necessary to enforce this Agreement, or disclosures made to her attorney, tax advisor, or members of her immediate family, provided that all persons to whom permissible disclosures are made agree not to disclose the same to others.

12. Non-Disparagement. Executive, pursuant to Paragraph 10 of the Employment Agreement, will not make, directly or indirectly, to any person or entity including, but not limited to, present or former employees of the Company and/or the press, any disparaging oral or written statements about the Released Parties, their employees and customers, or her employment with or separation from employment with the Company, or intentionally do anything which damages the Released Parties and/or their services, reputation, financial status, or business relationships. No Company executive will make any disparaging oral or written statements about Executive. This Section shall not prevent either party from testifying truthfully under oath pursuant to a valid and enforceable subpoena, court order and/or similar process from a judicial, arbitral, administrative or regulatory body of competent jurisdiction, or from participating in a government investigation as stated above in Section 9.

13. Voluntary Agreement. The Executive acknowledges that:

(a) The Executive has read this entire document, and she fully understands it. The Executive understands its legal and binding effect. The Executive is acting voluntarily and of her own free will in executing this Agreement.

(b) The benefits the Company is providing the Executive in return for signing this Agreement are in addition to anything of value to which she is already entitled. Specifically, the Executive acknowledges that she is not otherwise entitled to any severance pay from the Company.

(c) The Executive has had the opportunity to seek, and the Executive was advised in writing to seek, legal counsel prior to signing this Agreement.

(d) The severance pay set forth in Sections 2(b) through 2(f) of this Agreement provides valid and sufficient consideration for her undertakings in this Agreement, including the release of claims in Section 9, and her obligations under Paragraphs 8,9, and 10 of the Employment Agreement with respect to Confidential Information, Work Product, and Non-competition and Non-Solicitation.

(e) This Agreement will be void if the Executive does not sign it within the 53 days she has been given to consider it, or if she revokes it as provided below.

(f) The Executive has been given at least 53 days to consider the terms of this Agreement before signing it. If the Executive signs this Agreement before the full 53-day consideration period expires, she is knowingly and voluntarily waiving the remainder of the 53-day consideration period. The Executive has not been asked by the Company to shorten her time to consider whether to sign this Agreement. The Company has not threatened to withdraw or alter the benefits due the Executive prior to the expiration of the 53-day consideration period. The Company has not promised or provided different terms to the Executive for signing this Agreement prior to the expiration of the 53-day consideration period.

(g) The Executive agrees with the Company that changes to this Agreement, whether material or immaterial, do not restart the running of the 53-day consideration period.

(h) The Executive has (a) received all compensation due her as a result of services performed for the Company; (b) reported to the Company any and all work-related injuries incurred by her during her employment with the Company; (c) been properly provided any leave of absence because of her or a family member’s health condition and has not been subjected to any improper treatment, conduct, or actions due to a request for or taking such leave, and (d) disclosed any potential violations of the Company’s Code of Ethics.

14. Revocation.

(a) The Executive understands that if she signs this Agreement, she can change her mind and revoke it within seven (7) days after signing it by returning it with a written revocation notice to Jill Wilson, Senior Vice President of Human Resources and Talent Development, 1170 Peachtree Street, Suite 900, Atlanta, Georgia 30309, Phone: (404) 745-2701. The Executive understands that this Agreement will not be effective until after this seven-day period has expired (“Revocation Period”), and she will receive no benefits before the eighth day after she signs this Agreement. The Executive understands and agrees that she will begin receiving severance as indicated above in Section 2.

(b) If Executive decides to revoke, her written revocation notice should clearly state that “I hereby revoke my agreement to the Agreement that I signed on [fill in

date].” The Executive should type or print her name so the Company knows who she is, and the Executive must sign her name to the notice. The Executive understands that, to revoke this Agreement, she must deliver the signed revocation notice to Jill Wilson. To be effective, the notice of revocation must be sent to Jill Wilson no later than the seventh day after the Executive has signed the Agreement.

15. Binding Agreement.

(a) The Executive understands that following the seven-day Revocation Period, this Agreement will be final and binding. The Executive promises that she will not pursue any claim that she has settled by this Agreement. If the Executive breaks this promise, the Executive agrees to pay all of the Company’s costs and expenses (including reasonable attorneys’ fees) related to the defense of any claims. This paragraph does not apply to claims that the Executive may have under the OWBPA and the Age Discrimination in Employment Act of 1967 (“ADEA”). Such claims are covered by the next paragraph.

(b) Although the Executive is releasing claims that she may have under the OWBPA and the ADEA, the Executive understands that she may challenge the knowing and voluntary nature of this Agreement under the OWBPA and the ADEA before a court, the EEOC, the NLRB, or any other federal, state or local agency charged with the enforcement of any employment laws. The Executive understands, however, that if she pursues a claim against the Company under the OWBPA and/or the ADEA, a court has the discretion to determine whether the Company is entitled to restitution, recoupment, or set off (hereinafter “Reduction”) against a monetary award obtained by the Executive in the court proceeding. A reduction never can exceed the amount the Executive recovers, or the severance she received for signing this Agreement, whichever is less. The Executive also recognizes that the Company may be entitled to recover costs and attorneys’ fees incurred by the Company as specifically authorized under applicable law.

(c) Executive further understands that nothing in this Agreement generally prevents her from filing a charge or complaint with or from participating in an investigation or proceeding conducted by the EEOC, NLRB, or any other federal, state or local agency charged with the enforcement of any employment laws, although by signing this Agreement the Executive is waiving her right to individual relief based on claims asserted in such a charge or complaint.

16. No Admission of Liability. This Agreement is not an admission by the Released Parties of any liability or wrongdoing or a violation of any statute, regulation, duty, law, contract, right, or order. The Released Parties disclaim any liability the Executive or any other person for any alleged violation of any statute, regulation, duty, law, contract or order.

17. Entire Agreement. This Agreement constitutes the complete and total agreement between the Company and the Executive with respect to issues addressed in this

Agreement. However, the Executive agrees this Agreement will not in any way affect, modify, or nullify any agreement(s) she may have entered into with the Company that obligate her to refrain from competitive activity, to protect the Company’s confidential information, and/or refrain from soliciting the Company’s employees after her employment is terminated, and that any such obligations contained in those agreement(s) remain in full force and effect. Specifically, those paragraphs of the Employment Agreement that survive have been incorporated by reference.

18. No Reliance. The Executive represents that in signing this Agreement, she is not relying on any other agreements or representations not fully expressed in this document.

19. Modification. This Agreement shall not be modified, altered, or discharged except by written agreement signed by an authorized Company representative and the Executive.

20. Headings. The headings in this document are for reference only, and shall not in any way affect the meaning of this Agreement.

21. Use of this Agreement in Subsequent Proceedings. The Executive further agrees that this Agreement may be used as evidence in a subsequent proceeding in which the Company or the Executive alleges a breach of this Agreement or as a complete defense to any lawsuit or claim. Other than this exception, or disclosure to the EEOC or NLRB or any other federal, state, or local agency charged with the enforcement of any employment laws, as provided in Section 9 above, the Executive agrees she will not offer or introduce this Agreement as evidence in any administrative proceeding, arbitration, or lawsuit.

22. Enforcement. The failure of either party to insist upon strict adherence to any term of this Agreement shall not be considered a waiver of that term or of any other term of this Agreement, and shall not deprive that party of the right to later insist upon strict adherence to that term or any other term of the Agreement.

23. Severability. The Executive agrees that should any part of this Agreement be found to be void or unenforceable by a court of competent jurisdiction, that determination will not affect the remainder of this Agreement.

24. Governing Law/Venue. This Agreement shall be governed and construed in accordance with the laws of the State of Georgia and any applicable federal laws. All disputes relating to this Agreement shall be resolved exclusively in the state or federal courts of Georgia, to whose jurisdiction the parties hereto expressly consent.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

THE UNDERSIGNED HEREBY AFFIRM THAT SHE HAS CAREFULLY READ THE FOREGOING SEPARATION AGREEMENT, KNOWS THE CONTENTS THEREOF, AND SIGNS THE SAME OF HIS OWN FREE ACT.

This Agreement may be executed in one or more counterparts.

Carter’s, Inc. and The William Carter Company

By: /s/ Jill Wilson

Name: Jill Wilson

Title: SVP Human Resources & Talent Development

Date: 1/22/2014

I, Lisa A. Fitzgerald, hereby accept the severance pay and benefits upon the terms and conditions set forth in this Agreement.

By: /s/ Lisa A. Fitzgerald

Name: Lisa A. Fitzgerald

Date: 1/19/2014

10.19 Amended Severance Agreement for Michael D. Casey

Exhibit 10.19

AMENDED AND RESTATED SEVERANCE AGREEMENT

This Amended and Restated Severance Agreement (“Agreement”) is made as of March 5, 2014 (the “Effective Date”), by and between The William Carter Company (the “Company”) and Michael D. Casey (the “Executive”). Except as otherwise provided in Section 14(b) hereof, this Agreement shall replace in its entirety the Amended and Restated Employment Agreement between Executive and the Company dated as of August 15, 2001, as it had been further amended from time to time (the “Prior Agreement”), the Severance Agreement between the Executive and the Company dated as of August 25, 2010 (the “Severance Agreement”), and the Amended and Restated Severance Agreement between the Executive and the Company dated as of March 2, 2011 (the “Amended Severance Agreement”).

WHEREAS, the Company has determined that given the key nature of the Executive’s position, the interests of the Company will be best served by entering into an amended and restated agreement with respect to certain aspects of the Executive’s continued employment relationship with the Company and by providing the Executive the assurance of severance pay and benefits in the event that the Executive’s employment is terminated in specified circumstances.

WHEREAS, the Company has determined that the interests of the Company will be best served by extending the Restricted Period (as defined herein) to 24 months and the Executive has agreed to such extension of the Restricted Period.

WHEREAS, in consideration for the Executive’s agreement to extend the Restricted Period, the Company shall grant the Executive an award of stock options and restricted stock.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the parties agree as follows:

1.Position and Duties. During employment, the Executive shall continue to serve as the Chief Executive Officer of the Company and shall have the normal duties, responsibilities and authority of such position, subject to any limitations imposed by the bylaws of the Company and subject to the power of the Board of Directors to expand or limit such duties, responsibilities and authority and to override actions of Executive. Executive shall devote Executive’s best efforts and Executive’s full business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company. Executive shall perform Executive’s duties and responsibilities to the best of Executive’s abilities in a diligent, trustworthy, businesslike and efficient manner.

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2. Base Salary and Bonus Opportunity. During the term of Executive’s employment hereunder, Executive’s base salary shall be at an annual rate no less than the annual rate of base salary that was paid to the Executive during 2013. The Company’s Board of Directors may, in its discretion, increase Executive’s base salary at such times and in such amounts as it determines, but at no time shall Executive’s base salary, in effect from time to time, be decreased. Base salary shall be payable by the Company in regular installments in accordance with the Company’s general payroll practices. During the term of Executive’s employment hereunder, Executive shall participate in the Company’s Amended and Restated Annual Incentive Compensation Plan (the “Bonus Plan”), as in effect from time to time, in accordance with the terms of such Bonus Plan. Executive’s target bonus shall be no less than 100 percent of base salary.

3. Term and Termination. The Executive’s employment hereunder shall continue until terminated in accordance with this Section 3.

(a) The Executive’s employment shall terminate automatically in the event of the Executive’s death.

(b) The Company may terminate the Executive’s employment hereunder, upon notice to the Executive, in the event that the Executive becomes disabled during the Executive’s employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform substantially all of the Executive’s duties and responsibilities hereunder (notwithstanding the provision of any reasonable accommodation) for one hundred eighty (180) days during any period of three hundred and sixty-five (365) consecutive calendar days. The Board may designate another employee to act in the Executive’s place during any period of the Executive’s disability (and such designation shall not constitute Good Reason, as such term is defined in Section 12). If any question shall arise as to whether during any period the Executive is disabled, the Executive may, and at the request of the Company shall, submit to a medical examination by a physician selected by the Company to determine whether the Executive is so disabled and such determination shall, for the purposes of this Agreement, be conclusive. If such question shall arise and the Executive shall fail to submit to such medical examination, the Company’s determination of the issue shall be binding on the Executive.

(c) The Company may terminate the Executive’s employment hereunder (i) for Cause (as defined in Section 12) at any time upon notice to the Executive, setting forth in reasonable detail the nature of such Cause, or (ii) at any time, without Cause, upon notice to the Executive.

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(d) The Executive may terminate employment hereunder (i) for Good Reason (as defined and in accordance with the timing and procedural requirements set forth in Section 12) or (ii) without Good Reason at any time upon sixty (60) days’ prior written notice, which notice period (or any portion thereof) may be waived by the Company without any further payment to the Executive.

4. Payments and Benefits Upon Termination.

(a) In the event of termination of employment, however so caused, the Company will pay the Executive (i) any base salary earned but not paid during the final payroll period of Executive’s employment through the date of termination of employment (the “Separation Date”); (ii) pay for any vacation time earned but not used through the Separation Date, as reflected in Company records; and (iii) any business expenses incurred by the Executive but unreimbursed on the Separation Date, provided that such expenses and any required substantiation are submitted consistent with the terms of Company policy and that such expenses are reimbursable under Company policy (clauses (i), (ii) and (iii) together, “Final Compensation”). Other than business expenses described in Section 4(a)(iii) (which shall be paid in accordance with Company policy), Final Compensation shall be paid to the Executive (or the Executive’s designated beneficiary or estate) within thirty (30) days following the Separation Date. The Company shall not have any further obligations to the Executive, except as set forth in Section 4(b) below.

(b) In the event that the Company terminates the Executive’s employment other than for Cause (as defined in Section 12), or the Executive terminates employment for Good Reason (as defined in Section 12), in addition to Final Compensation, the Company will provide the Executive the following (clauses (i) through (iv), in the aggregate, the “Severance Benefits”), provided that the Executive meets all eligibility requirements for such Severance Benefits as set forth in this Agreement:

(i) the Company will continue to pay the Executive’s base salary, at the same rate as was in effect on the Separation Date, for the period of twenty-four (24) months following the Separation Date. Subject to Sections 5 and 6 below, such payments shall be in the form of salary continuation, payable in accordance with the normal payroll practices of the Company for its executives, with the first payment, which shall be retroactive to the day immediately following the Separation Date, being due and payable on the Company’s next regular payday for executives that follows the expiration of sixty (60) calendar days from the date the Executive’s employment terminates.

(ii) the Company will pay the Executive a pro-rata bonus for the fiscal year in which the Separation Date occurs, determined following the end of the fiscal year

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in which the Separation Date occurs. The amount of any such bonus shall be determined by multiplying the amount of the bonus that would have been paid to the Executive pursuant to the Company’s Bonus Plan had the Executive remained employed for the full fiscal year (which determination shall disregard any individual performance goals which may have been set for Executive pursuant to the Company’s Bonus Plan, and shall be based solely on the extent to which Company performance goals have been met) by a fraction, the numerator of which is the number of days the Executive was employed during the fiscal year in which the Separation Date occurs and the denominator of which is 365 (the “Pro-Rata Bonus”). The Pro -Rata Bonus will be payable at the time provided for, and in accordance with the provisions of, the Bonus Plan, but in no event earlier than January 1st or later than December 31st of the year following the year in which the Separation Date occurs.

(iii) provided that the Executive and the Executive’s dependents are eligible to continue participation in the Company’s group health and dental plans following the date the Executive’s employment terminates under the federal law commonly known as “COBRA” and elect to do so in a timely manner, then, until the earlier of (A) eighteen (18) months following the Separation Date, (B) the date the Executive becomes eligible for coverage under the health and/or dental plans of another employer, or (C) the date the Executive otherwise ceases to be eligible to continue participation in the Company’s health and dental plans under COBRA, the Company will pay to the Executive each month within the period set forth above, within ten (10) days after the first day of each such month, an amount equal to the full monthly COBRA premium for such month minus the monthly cost for such health and dental plan coverage that is paid by active executives, provided, however, that to the extent that it would not violate applicable law, result in any penalty, fine or tax to the Company, or result in the Company failing to comply with Section 105(h), any similar provision of the Internal Revenue Code of 1986, as amended (the “Code”), or Section 409A of the Code, then, subject to the Executive meeting the eligibility requirements set forth above, the Company, rather than paying the monthly premiums described above to the Executive, may in its discretion, instead contribute the same amount directly to its group health and dental plans at the same time it otherwise would have paid the monthly premiums to the Executive. To the extent that the payment of the monthly premiums described above would result in the imposition of any additional tax on the Executive, the Company will pay to the Executive each such month, within ten (10) days after the first day of such month an additional amount, as determined by the Company, equal to the federal, state and local income taxes that the Executive is reasonably expected to be obligated to pay as a result of the payments of the monthly premiums described above (the “Additional Amount”). No additional amount shall be paid to the Executive pursuant to the preceding

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sentence in the event that the amount of the federal, state and local income taxes that the Executive ultimately owes to the relevant taxing authority is greater than the amount paid to the Executive pursuant to the preceding sentence. In the event that, following the expiration of such eighteen (18) month period, the Executive has not yet become eligible for coverage under the health and/or dental plans of another employer, then for the six (6) month period thereafter (or, if earlier, until the date the Executive becomes eligible for coverage under the health and/or dental plans of another employer), the Company will pay to the Executive each month within such period, within ten (10) days after the first day of such month, an amount equal to the full monthly COBRA premium minus the monthly cost for such health and dental plan coverage that is paid by active executives, as calculated at the end of the eighteen (18) month period, together with any Additional Amount that may be due to the Executive. In the event that the Executive becomes eligible for coverage under the health and/or dental plans of another employer, the Executive shall inform the Company within ten (10) days of such occurrence.

(iv) for the twenty-four (24) month period following the Separation Date, subject to applicable plan terms and applicable law, the Company shall provide the Executive with continued monthly employer contributions toward the premium cost of the Executive’s basic life insurance coverage, in the same percentage and amount as if the Executive remained employed (subject to such insurance coverage not having terminated), such employer contributions to be made on a monthly basis at the same time and on the same schedule as employer contributions are made for active employees of the Company. For the avoidance of doubt, as of the Separation Date, the Executive shall be solely responsible for any costs associated with supplemental life insurance coverage and the Company shall have no continuing obligation or liability with respect thereto.

(c) In the event that within two (2) years following a Change of Control (as defined in Section 12), the Company terminates the Executive’s employment other than for Cause (as defined in Section 12), or the Executive terminates employment for Good Reason (as defined in Section 12) (such termination, a “Qualifying Termination”) in addition to Final Compensation and the Severance Benefits provided pursuant to Section 4(b) of this Agreement, the Company will provide the Executive the following benefits (“Additional Severance Benefits”), provided that the Executive meets all eligibility requirements for such Additional Severance Benefits as set forth in this Agreement:

(i) the Company will continue to pay the Executive’s base salary, at the same rate as was in effect on the Separation Date, for an additional period of twelve (12) months, following the completion of the salary continuation payments provided for in Section 4(b)(i) above. Subject to Sections 5 and 6 below, such payments shall be in

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the form of salary continuation, payable in accordance with the normal payroll practices of the Company for its executives;

(ii) subject to the conditions set forth in Section 4(b)(iii) above having initially been satisfied, in the event that, following the expiration of the twenty-fourth (24th ) month anniversary of such Qualifying Termination, the Executive has not yet become eligible for coverage under the health and/or dental plans of another employer, then for the twelve (12) month period thereafter (or, if earlier, until the date the Executive becomes eligible for coverage under the health and/or dental plans of another employer), the Company will pay to the Executive each month within such period, within ten (10) days after the first day of such month, an amount equal to the full monthly COBRA premium minus the monthly cost for such health and dental plan coverage that is paid by active executives, as calculated at the end of the eighteen (18) month period, together with any Additional Amount that may be due to the Executive with respect to such payments. In the event that the Executive becomes eligible for coverage under the health and/or dental plans of another employer, the Executive shall inform the Company within ten (10) days of such occurrence; and

(iii) following a Qualifying Termination, the Company shall, in addition to providing for life insurance premium contributions pursuant to Section 4(b)(iv) for twenty-four (24) months, shall provide for such payment for an additional period of twelve (12) months, which payments shall be made in accordance with the terms set forth in Section 4(b)(iv) and subject to the conditions set forth in such Section.

5. Conditions to Eligibility, Exclusivity of Benefits, Offset.

(a) Any obligation of the Company to provide the Executive the Severance Benefits or the Additional Severance Benefits, in each case, is conditioned on (i) the Executive signing and returning to the Company (without revoking) a timely and effective release of claims in the form provided by the Company by the deadline specified therein, which in all events shall be no later than the fifty-third (53rd) calendar day following the date of termination (any such release submitted by such deadline, the “Release of Claims”), (ii) the Executive maintaining complete compliance with the Executive’s obligations to the Company and its Company Affiliates during employment, including without limitation under Sections 8, 9, 10 and 11 of this Agreement, and (iii) the Executive’s continued compliance with Executive’s obligations to the Company and its Company Affiliates that survive termination of Executive’s employment, including without limitation under Sections 8, 9, 10 and 11 of this Agreement. The Release of Claims required for Separation Benefits creates legally binding obligations on the part of the Executive and the Company therefore advises the Executive to seek the advice of an attorney before signing the Release of Claims. It is expressly agreed and understood that no Severance

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Benefits or Additional Severance Benefits shall be required to be paid or provided unless and until the foregoing Release of Claims requirement is satisfied.

(b) In the event the Company determines, in its discretion, that Executive has failed to fulfill any of Executive’s obligations, either during Executive’s employment or after termination of employment (howsoever caused), the Company may cease payment of all Severance Benefits and Additional Severance Benefits and shall likewise be entitled to the immediate forfeiture and recapture of all Severance Benefits and Additional Severance Benefits paid to the Executive prior to its discovery of the same. For the avoidance of doubt, if the Executive fails to satisfy the conditions for the receipt of the Severance Benefits, the Executive shall not be entitled to any Additional Severance Benefits hereunder.

(c) The Executive agrees that the Severance Benefits and the Additional Severance Benefits to be provided in accordance with the terms and conditions of this Agreement are exclusive and the Executive acknowledges and agrees that the Executive will not be eligible to participate in or receive benefits under any other plan, program, or policy of the Company or any of its Company Affiliates providing for severance or termination pay or benefits, including but not limited to the Company’s Severance Pay Plan. The Executive also agrees that the Severance Benefits and the Additional Severance Benefits shall be reduced by any other payments or benefits to which the Executive is entitled under applicable law as a result of termination of employment, including without limitation any federal, state or local law with respect to plant closing, mass layoffs or group benefits plan continuation following termination or the like.

6. 409A Compliance.

(a) Separation from Service. For purposes of this Agreement, references to termination of employment, Separation Date (as defined in Section 4(a) of this Agreement), retirement, separation from service and similar or correlative terms mean a “separation from service” (as defined at Section 1.409A-1(h) of the Treasury Regulations) from the Company and from all other corporations and trades or businesses, if any, that would be treated as a single “service recipient” with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations. A termination of employment for Good Reason or by the Company Without Cause under this Agreement is intended to satisfy the meaning of “involuntary separation from service” (as defined in Section 1.409A-1(n) of the Treasury Regulations).

(b) Section 409A Exemption. Without limiting the generality of the foregoing, so much of the Executive’s Severance Benefits and Additional Severance Benefits as does not exceed the “exempt amount” as hereinafter defined shall in no event be paid later than by December 31 of the second calendar year following the calendar year in which the

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involuntary separation from service occurs. For purposes of the immediately preceding sentence, the Executive’s “exempt amount” means the lesser of (i) the Executive’s total separation pay, if any, or (ii) the lesser of (A) two times the applicable limit under Section 401(a)(17) of the Code for the year in which the involuntary separation from service occurs, or (B) two times the Executive’s annualized compensation determined under applicable Treasury Regulations by reference to the Executive’s annual rate of pay for the calendar year preceding the calendar year in which the separation from service occurs. For purposes of the Treasury Regulations under Section 409A of the Code, each payment described in this Section shall be treated as a separate payment. Any amounts that exceed the exempt amount will be paid in accordance with the provisions of Section 6(c) of this Agreement.

(c) Specified Employee. If at the time of separation from service the Executive is a specified employee as hereinafter defined, any and all amounts payable in connection with such separation from service that constitute deferred compensation subject to Section 409A of the Code, as determined by the Company in its sole discretion, and that would (but for this sentence) be payable within six months following such separation from service, shall instead be paid on the date that follows the date of such separation from service by six (6) months and one day. For purposes of the preceding sentence, the term “specified employee” means an individual who is determined by the Company to be a specified employee as defined in subsection (a)(2)(B)(i) of Section 409A of the Code. The Company may, but need not, elect in writing, subject to the applicable limitations under Section 409A of the Code, any of the special elective rules prescribed in Section 1.409A-1(i) of the Treasury Regulations for purposes of determining “specified employee” status. Any such written election shall be deemed part of this Agreement.

(a) 409A Compliance. Notwithstanding any other provision hereunder, this Agreement and all compensation payments hereunder are intended to comply with the requirements of Section 409A of the Code, including the regulations, notices and exemptive provisions thereunder, and shall be construed and administered accordingly. In no event shall the Company have any liability relating to any payment or benefit under this Agreement failing to comply with, or be exempt from, the requirements of Section 409A of the Code.

7. Effect of Termination.

(a) Except as otherwise expressly provided in Sections 4(b)(iii) and 4(b)(iv) above or as may be required by applicable law, the Executive’s participation in all employee benefit plans of the Company will terminate, in accordance with the terms of those plans, based on the Separation Date.

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(b) Other than the Severance Benefits and the Additional Severance Benefits, the Executive shall have no further rights to any other compensation or benefits on or after the termination of employment.

(c) Provisions of this Agreement shall survive any termination of the Executive’s employment if so provided herein or if necessary or desirable to fully accomplish the purposes of other surviving provisions, including without limitation the Executive’s obligations under Sections 8, 9, 10, and 11 hereof.

8. Confidential Information.

(a) Executive acknowledges that the Company and its Company Affiliates continually develop trade secrets and Confidential Information (as defined in Section 12 below), that the Executive may have in the past and may in the future develop trade secrets and/or Confidential Information for the Company or its Company Affiliates, and that the Executive may learn of trade secrets and Confidential Information during the course of employment. Executive acknowledges that the information obtained or created by him while employed by the Company or any Company Affiliate concerning the business or affairs of the Company or any Company Affiliate of the Company is the exclusive property of the Company or such Company Affiliate. The Executive shall comply with the policies and procedures of the Company and its Company Affiliates for protecting trade secrets and Confidential Information. For purposes of this Agreement, the term “Confidential Information” does not include information that Executive can demonstrate (a) was in Executive’s possession prior to Executive’s initial employment with the Company or any Company Affiliate, provided that such information is not subject to another confidentiality agreement with, or other obligation of confidentiality to, the Company or any other party, (b) is generally known by the public and became generally known by the public other than as a result of any act by the Executive, or (c) became available to Executive on a non-confidential basis from a third party, provided that such third party is not known by Executive to be bound by a confidentiality agreement with, or other obligation of secrecy to, the Company or another party or is not otherwise prohibited from providing such information to Executive by a contractual, legal or fiduciary obligation. Executive agrees that Executive will not disclose trade secrets or Confidential Information to any person (other than employees of the Company or any of its Company Affiliates or any other person expressly authorized by an appropriate officer of the Company to receive trade secrets or Confidential Information). Executive shall not use for Executive’s own account trade secrets or any Confidential Information, other than for a legitimate business purpose for the Company or its Company Affiliates. The Executive acknowledges and agrees that the Executive’s obligations under this Agreement with respect to trade secrets shall remain in effect for as long as such information shall remain a trade secret under applicable law, and that the Executive’s obligations with regard to Confidential

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Information shall remain in effect while employed by the Company and for three years after the Separation Date, regardless of the reason for termination of employment.

(b) Executive shall deliver to the Company on the Separation Date, or at any other time the Company’s Board of Directors may request in writing, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof, including electronic copies), whether or not containing trade secrets or Confidential Information or Work Product, which Executive may then possess or have under Executive’s control.

9. Work Product. Executive agrees that all inventions, innovations, improvements, developments, methods, designs, analyses, reports and all similar or related information which relate to the Company’s or any of its Company Affiliates’ actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed with the Company (“Work Product”) belong to the Company or such Company Affiliate. Executive hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) the Executive’s full right, title and interest in and to all Work Product. Executive will promptly disclose such Work Product to the Company’s Board of Directors and perform all actions reasonably requested by the Company’s Board of Directors (whether during or after the Employment Period) to assign the Work Product to the Company and to otherwise establish and confirm such ownership.

10. Non-Competition, Non-Solicitation, Non-Disparagement, Compliance.

(a) Executive acknowledges that in the course of Executive’s employment with the Company or its Company Affiliates Executive has become and will become in the future familiar with the trade secrets and other Confidential Information of the Company and its Company Affiliates and that Executive’s services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that, during Executive’s employment and for a period of 24 months following the Separation Date, regardless of the basis or timing of termination (the “Restricted Period”), Executive shall not, directly or indirectly, provide services in a Restricted Capacity (as defined below) in the Restricted Territory (as defined below) to any person or entity with respect to any product or service of such person or entity which competes with any aspect of the Business of the Company or any of its Company Affiliates with respect to which Executive has had access to Confidential Information or customer goodwill as a result of Executive’s employment or other association with the Company. Nothing herein shall prohibit Executive from being a passive owner of not more than one percent (1%) of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation.

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(b) For purposes of this Agreement,

(i) the “Business of the Company or any of its Company Affiliates” shall include the wholesale and retail sale (including, without limitation, electronic commerce) of children’s apparel and related accessories;

(ii) “Restricted Territory” means each state in the United States;

(iii) “Restricted Capacity” means the provision of services to a competitor of the Company which is the same or comparable to the services the Executive provided to the Company or any of its Company Affiliates or in which the Confidential Information, trade secrets or customer goodwill which the Executive created or to which the Executive had access during the Executive’s employment with the Company or any of its Company Affiliates would give that competitor an unfair competitive advantage.

(c) During the Restricted Period, Executive shall not, directly or indirectly through another entity, (i) induce or attempt to induce any employee of the Company or any of its Company Affiliates to leave the employ of such person, (ii) solicit or encourage any independent contractor providing services to the Company or any of its Company Affiliates to terminate or diminish its relationship with them; or (iii) induce or attempt to induce any customer, supplier, licensee or other person having a business relationship with the Company or any of its Company Affiliates (the “Service Recipients”) to cease doing business with the Company or such Company Affiliate or seek to persuade any such Service Recipient to conduct with any other person or entity any business or activity which is conducted or could be conducted with the Company; provided, however, that the restrictions in clause (iii) shall apply (A) only with respect to those Service Recipients who have been such at any time within the immediately preceding two year period or whose business has been solicited on behalf of the Company or any of its Company Affiliates within said two year period, other than by form letter, blanket mailing or published advertisement, and (B) only if the Executive had a business relationship with such Service Recipient as a result of the Executive’s employment, or otherwise had access to Confidential Information as a result of the Executive’s employment which would assist in the solicitation of such Service Recipient; and provided further that the restrictions in clauses (i) and (ii) shall apply only to employees and independent contractors who have provided services to the Company or any of its Company Affiliates within the two years preceding the Separation Date.

(d) Notification. Until 45 days after the conclusion of the Restricted Period, the Executive shall give notice to the Company of each new business activity the Executive plans to undertake, at least fourteen days prior to beginning such an activity. The Executive shall

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provide the Company with such pertinent information concerning such business activity as the Company may reasonably request in order to determine the Executive’s continued compliance with obligations under Sections 8, 9, 10 and 11 hereof.

(e) Non-Disparagement. The Executive agrees that the Executive will not disparage the Company or any of its Company Affiliates, or any of their respective management, products or services and will not do or say anything that could reasonably be expected to disrupt the good morale of the employees of the Company or otherwise harm the business interests or reputation of the Company; provided, however, that nothing in this Agreement shall preclude the Executive from providing truthful testimony in any court or regulatory action or proceeding or otherwise making good faith statements in connection with legal investigations or other proceedings. The Executive understands and agrees that this restriction shall continue to apply after the termination of the Executive’s employment, howsoever caused.

(f) Compliance. The Executive agrees at all times during the pendency of the Executive’s employment to comply with all state and federal laws, and conduct himself with the highest degree of fidelity to the Company, committing no acts of theft, embezzlement, misappropriation, insider trading or other forms of misconduct contrary to the interests of the Company.

11. Enforcement of Covenants. The Executive acknowledges that the Executive has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed upon him pursuant to Sections 8, 9, 10 and 11 hereof. The Executive agrees without reservation that each of the restraints contained herein is necessary for the reasonable and proper protection of the goodwill, Confidential Information, trade secrets, and other legitimate interests of the Company and its Company Affiliates; that each and every one of those restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent him from obtaining other suitable employment during the period in which the Executive is bound by these restraints. The Executive further agrees that the Executive will never assert, or permit to be asserted on the Executive’s behalf, in any forum, any position contrary to the foregoing. The Executive further acknowledges that, were the Executive to breach any of the covenants contained in Sections 8, 9, 10 or 11 hereof, the damage to the Company would be irreparable. The Executive therefore agrees that in the event of the breach or a threatened breach by Executive of any of the provisions of Sections 8, 9, 10 or 11 hereof, the Company, in addition and supplementary to other rights and remedies existing in its favor (including pursuant to Section 3(c) hereof), may apply to any court of law or equity of competent jurisdiction for specific performance or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security), and will additionally be entitled to an award of attorney’s fees incurred in connection with securing any relief hereunder. The parties further

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agree that if, at the time of enforcement of Sections 8, 9, 10 or 11, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. The Executive agrees that the Restricted Period shall be tolled, and shall not run, during any period of time in which the Executive is in violation of the terms thereof, in order that the Company and its Company Affiliates shall have all of the agreed-upon temporal protection recited herein. No breach of any provision of this Agreement by the Company, or any other claimed breach of contract or violation of law, or change in the nature or scope of the Executive’s employment relationship with the Company, shall operate to extinguish the Executive’s obligation to comply with Sections 8, 9, 10 and 11 hereof.

12. Definitions. As used in this Agreement, the following terms shall have the meaning set forth below:

(a) “Affiliate” means , with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise).

(b) “Carter’s” means Carter’s, Inc., a Delaware corporation.

(c) “Cause” means (a) conviction of Executive for a felony, or the entry by Executive of a plea of guilty or nolo contendere to a felony, (b) a material breach by Executive of Sections 8, 9, 10 or 11 of this Agreement, (c) the commission of an act of fraud or other act involving dishonesty which such act of dishonesty is materially injurious to the Company or any Company Affiliate, (d) the willful and continued refusal by Executive to substantially perform Executive’s duties for the Company or any of its Company Affiliates (other than any such refusal resulting from Executive’s incapacity due to mental illness or physical illness or injury) or gross negligence in the performance of such duties, after a demand for substantial performance is delivered to Executive by the Company’s Board of Directors, or (e) the willful engaging by Executive in gross misconduct injurious to the Company or any of its Company Affiliates.

(d) “Change of Control” means (i) any transaction or series of related transactions in which any Person who is not a Company Affiliate, or any two or more such Persons acting as a Group, and all Affiliates of such Person or Persons, who prior to such time

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did not own shares of the Common Stock of Carter’s representing fifty percent (50%) or more of the voting power at elections for the Board of Directors of Carter’s, shall (A) acquire, whether by purchase, exchange, tender offer, merger, consolidation, recapitalization or otherwise, or (B) otherwise be the owner of (as a result of a redemption of shares of the Common Stock of Carter’s or otherwise) shares of the Common Stock of Carter’s or its subsidiaries (or shares in a successor corporation by merger, consolidation or otherwise) such that following such transaction or transactions, such Person or Group and their respective Affiliates beneficially own fifty percent (50%) or more of the voting power at elections for the Board of Directors of Carter’s or the Company or any successor corporation, or (ii) the sale or transfer of all or substantially all the assets of either the Company or Carter’s.

(e) “Common Stock” means the common stock of the Carter’s, Inc., a Delaware corporation, par value $.01 per share.

(f) “Company Affiliate” means Carter’s, Inc. and its subsidiaries.

(g) “Confidential Information” means any and all information of the Company and its Company Affiliates, other than trade secrets, that is not generally known by others with whom they compete or do business, or with whom they plan to compete or do business and any and all information, publicly known in whole or in part or not, which, if disclosed by the Company or any of its Company Affiliates would assist in competition against them. Confidential Information includes without limitation such information relating to (i) the development, research, testing, manufacturing, marketing and financial activities of the Company and its Company Affiliates, (ii) the products and services offered by the Company or any of its Company Affiliates, (iii) the costs, sources of supply, financial performance and strategic plans of the Company and its Company Affiliates, (iv) the identity and special needs of the customers of the Company and its Company Affiliates and (v) the people and organizations with whom the Company and its Company Affiliates have business relationships and the nature and substance of those relationships. Confidential Information also includes information that the Company or any of its Company Affiliates has received, or may receive hereafter, belonging to others or which was received by the Company or any of its Company Affiliates with any understanding, express or implied, that it would not be disclosed.

(h) “Good Reason” means, unless Executive shall have consented in writing thereto, any of the following: (i) a material reduction in Executive’s title, duties, or responsibilities, as compared to such title, duties, or responsibilities on the Effective Date; (ii) a material change in the geographic location at which the Executive must perform services (provided, that for the avoidance of doubt, any change in location within the greater Atlanta metropolitan area shall not be a material change); or (iii) any material breach of this Agreement by the Company; provided, however, that Executive shall not have the right to terminate

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Executive’s employment for “Good Reason” unless Executive shall have given thirty (30) days prior written notice to the Board of Directors of the Company within thirty (30) days following the first occurrence (for the Executive) of such condition in which Executive sets forth in reasonable detail the circumstances that Executive believes constitute “Good Reason” pursuant to the preceding clauses (i) through (iii) and the Company shall not have remedied the matter within said thirty (30) day period; it shall not constitute “Good Reason” unless the Executive separates from service not later than ninety (90) days following the end of the Company’s thirty (30) day cure period; and provided, further, however that the fact that the Company does or does not so remedy said matter shall not be deemed an admission by the Company that such circumstances constitute “Good Reason.”

(i) “Group” means any two or more Persons who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring or holding securities of Carter’s or its Company Affiliates.

(j) “Person” means any individual, partnership, corporation, association, limited liability company, trust, joint venture, unincorporated organization or entity, or any government, governmental department or agency or political subdivision thereof.

13. Withholding . Payments by the Company under this Agreement shall be reduced by all taxes and other amounts which the Company is required to withhold under applicable law.

14. Miscellaneous.

(a) This Agreement is not a contract of employment for a definite term and does not otherwise restrict the Executive’s right, or that of the Company, to terminate the Executive’s employment, with or without notice or Cause.

(b) This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior communications, agreements and understandings, written or oral, with respect thereto, including but not limited to the Prior Agreement, the Severance Agreement and the Amended Severance Agreement; provided, however, that this Agreement shall not supersede or otherwise terminate any effective assignment the Executive has made of any invention or other intellectual property to the Company or any of its Company Affiliates on or before the date of execution of this Agreement; nor shall this Agreement supersede or otherwise terminate any rights or remedies of the Company or any of its Company Affiliates arising from the Executive’s obligations pursuant to any agreement with respect to confidentiality, non-competition, non-solicitation or the like in effect prior to the date of execution of this Agreement or under applicable law, all of which assignments and rights shall remain in full force and effect.

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(c) No modification or amendment of this Agreement shall be valid unless in writing and signed by the Executive and a duly authorized representative of the Company. The headings and captions in this Agreement are for convenience only and in no way define or describe the scope or content of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

(d) Neither the Company nor the Executive may make any assignment of this Agreement or any interest in it, by operation of law or otherwise, without the prior written consent of the other; provided, however, that in the event that the Company shall hereafter affect a reorganization, consolidate with, or merge into any entity or transfer all or substantially all of its properties or assets to any entity, the Company may assign its rights and obligations under this Agreement to such entity. This Agreement shall inure to the benefit of and be binding upon the Executive and the Company, and each of their respective successors, executors, administrators, heirs and permitted assigns.

15. Choice of Law. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction) that would cause the application of the laws of any other jurisdiction. By executing this Agreement, the parties hereby irrevocably submit to the jurisdiction of the state and federal courts located in the Commonwealth of Massachusetts for the purpose of any action or dispute between the parties to this Agreement arising in whole or in part under or in connection with this Agreement or the subject matter of this Agreement (other than an action brought to enforce a judgment by any such court), hereby waive and agree not to assert any defense that venue in such courts is improper, invalid or inconvenient (or any similar defense) and agree not to commence any action or dispute arising in whole or in part under or in connection with this Agreement in any court other than the above -named Massachusetts courts.

[The remainder of this page has been left blank intentionally.]

-16-

Exhibit 10.19

WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company, by a duly authorized representative, and by the Executive, as of the Effective Date.



THE EXECUTIVE:		THE COMPANY:
By: /s/ Michael Casey _____________________________		By: /s/ Jill Wilson _____________________________
Michael D. Casey		Name: Jill Wilson
		Title: Senior Vice President of Human Resources and Talent Development

-17-

CRI-2014.3.29 Exh 31.1

Exhibit 31.1

CERTIFICATION

I, Michael D. Casey, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Carter’s, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date : April 28, 2014	/s/ MICHAEL D. CASEY
	Michael D. Casey
	Chief Executive Officer

CRI-2014.3.29 Exh 31.2

Exhibit 31.2

CERTIFICATION

I, Richard F. Westenberger, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Carter’s, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date : April 28, 2014	/s/ RICHARD F. WESTENBERGER
	Richard F. Westenberger
	Chief Financial Officer

CRI-2014.3.29 Exh 32

Exhibit 32

CERTIFICATION

Each of the undersigned in the capacity indicated hereby certifies that, to his knowledge, this Report on Form 10-Q for the fiscal quarter ended March 29, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of Carter’s, Inc.



Date : April 28, 2014	/s/ MICHAEL D. CASEY
	Michael D. Casey
	Chief Executive Officer



Date : April 28, 2014	/s/ RICHARD F. WESTENBERGER
	Richard F. Westenberger
	Chief Financial Officer

The foregoing certifications are being furnished solely pursuant to 18 U.S.C. § 1350 and are not being filed as part of the Report on Form 10-Q or as a separate disclosure document.