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Carter's, Inc.$84.28($.92)(1.08%)

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 Carter’s, Inc. Reports Third Quarter Fiscal 2016 Results
   Thursday, October 27, 2016 6:15:04 AM ET

--Diluted EPS $1.60, growth of 7%; adjusted diluted EPS $1.61, growth of 6%

--Returned $289 million to shareholders through share repurchases and dividends in the first three quarters of fiscal 2016

--Fiscal 2016 outlook: sales growth of 5% to 6%; adjusted diluted EPS growth of 9% to 10%

Carter’s, Inc. (CRI ), the largest branded marketer in the United States and Canada of apparel exclusively for babies and young children, today reported its third quarter fiscal 2016 results.

"In the third quarter, we achieved a record level of sales and earnings with sales growth in all channels of distribution," said Michael D. Casey, Chairman and Chief Executive Officer. "Our performance in the quarter reflects significant growth in online sales and higher demand from international customers. Given the current trends in our business, we expect to achieve our growth objectives this year and 28th consecutive year of sales growth."



Consolidated Results

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

Net sales increased $51.6 million, or 6.1%, to $901.4 million, reflecting growth in the Company’s U.S. Carter’s and OshKosh retail businesses, Carter’s wholesale business, and international segment. Changes in foreign currency exchange rates in the third quarter of fiscal 2016 compared to the third quarter of fiscal 2015 favorably affected consolidated net sales in the third quarter of fiscal 2016 by $0.3 million, or 0.1%. On a constant currency basis (a non-GAAP measure), consolidated net sales increased 6.0% in the third quarter of fiscal 2016.

Operating income in the third quarter of fiscal 2016 increased $0.7 million, or 0.5%, to $130.9 million, compared to $130.2 million in the third quarter of fiscal 2015. Operating margin decreased approximately 80 basis points to 14.5%, compared to 15.3% in the third quarter of fiscal 2015. Adjusted operating income (a non-GAAP measure) increased $0.2 million, or 0.2%, to $131.4 million, compared to $131.2 million in the third quarter of fiscal 2015. Adjusted operating margin (a non-GAAP measure) decreased approximately 80 basis points to 14.6%, compared to 15.4% in the third quarter of fiscal 2015, which reflected increased investments in store expansion and technology, partially offset by improved gross margin.

Net income in the third quarter of fiscal 2016 increased $1.5 million, or 1.9%, to $80.8 million, or $1.60 per diluted share, compared to $79.3 million, or $1.51 per diluted share, in the third quarter of fiscal 2015. Adjusted net income (a non-GAAP measure) increased $1.2 million, or 1.5%, to $81.1 million, compared to $79.9 million in the third quarter of fiscal 2015. Adjusted earnings per diluted share (a non-GAAP measure) in the third quarter of fiscal 2016 increased 6.2% to $1.61, compared to $1.52 in the third quarter of fiscal 2015.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

Net sales increased $117.6 million, or 5.5%, to $2.26 billion, reflecting growth in the Company’s U.S. Carter’s and OshKosh retail businesses, Carter’s wholesale business, and international segment. Changes in foreign currency exchange rates in the first three quarters of fiscal 2016 compared to the first three quarters of fiscal 2015 negatively affected consolidated net sales in the first three quarters of fiscal 2016 by $6.7 million, or 0.3%. On a constant currency basis (a non-GAAP measure), consolidated net sales increased 5.8% in the first three quarters of fiscal 2016.

Operating income in the first three quarters of fiscal 2016 increased $10.5 million, or 3.8%, to $287.1 million, compared to $276.7 million in the first three quarters of fiscal 2015. Operating margin decreased approximately 20 basis points to 12.7%, compared to 12.9% in the first three quarters of fiscal 2015. Adjusted operating income (a non-GAAP measure) increased $5.5 million, or 1.9%, to $289.4 million, compared to $283.9 million in the first three quarters of fiscal 2015. Adjusted operating margin (a non-GAAP measure) decreased approximately 40 basis points to 12.8%, compared to 13.2% in the first three quarters of fiscal 2015, which reflected increased investments in growth initiatives, partially offset by improved gross margin.

Net income in the first three quarters of fiscal 2016 increased $5.8 million, or 3.5%, to $171.0 million, or $3.34 per diluted share, compared to $165.2 million, or $3.12 per diluted share, in the first three quarters of fiscal 2015. Adjusted net income (a non-GAAP measure) increased $2.0 million, or 1.2%, to $172.4 million, compared to $170.4 million in the first three quarters of fiscal 2015. Adjusted earnings per diluted share (a non-GAAP measure) in the first three quarters of fiscal 2016 increased 4.7% to $3.37, compared to $3.22 in the first three quarters of fiscal 2015.

Cash flow from operations in the first three quarters of fiscal 2016 was $116.6 million compared to $146.0 million in the first three quarters of fiscal 2015. The decrease reflected unfavorable changes in net working capital, partially offset by an increase in net income.

See the "Reconciliation of GAAP to Adjusted Results" section of this release for additional disclosures and reconciliations regarding non-GAAP measures.

Business Segment Results

During the first three quarters of fiscal 2016, the Company believes that Carter’s and OshKosh retail comparable sales were negatively affected by lower demand from international consumers shopping in its U.S. stores and on its website, which the Company believes was influenced by the strength of the U.S. dollar relative to other currencies. However, the Company believes these effects were less pronounced in the third quarter of fiscal 2016 as its U.S. retail business experienced improvement in demand from international consumers.

Carter’s Retail Segment

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

Carter’s retail segment sales increased $19.8 million, or 6.7%, to $314.7 million. Carter’s retail comparable sales increased 2.1%, comprised of eCommerce comparable sales growth of 25.2%, partially offset by a stores comparable sales decrease of 4.1%.

In the third quarter of fiscal 2016, the Company opened 13 Carter’s stores and closed one store in the United States.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

Carter’s retail segment sales increased $61.2 million, or 7.7%, to $860.9 million. Carter’s retail comparable sales increased 2.1%, comprised of eCommerce comparable sales growth of 19.7%, partially offset by a stores comparable sales decline of 2.4%.

In the first three quarters of fiscal 2016, the Company opened 44 Carter’s stores and closed two stores in the United States. The Company operated 636 Carter’s stores in the United States as of October 1, 2016.

Carter’s Wholesale Segment

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

Carter’s wholesale segment net sales increased $12.7 million, or 3.7%, to $356.3 million, reflecting earlier customer demand and improved pricing due to favorable product mix.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

Carter’s wholesale segment net sales increased $17.5 million, or 2.1%, to $842.1 million, reflecting improved pricing due to favorable product mix.

OshKosh Retail Segment

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

OshKosh retail segment net sales increased $8.7 million, or 8.9%, to $107.0 million. OshKosh retail comparable sales increased 4.1%, comprised of eCommerce comparable sales growth of 34.8%, partially offset by a stores comparable sales decline of 3.0%.

In the third quarter of fiscal 2016, the Company opened seven OshKosh stores in the United States and closed two stores.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

OshKosh retail segment net sales increased $22.9 million, or 9.4%, to $267.7 million. OshKosh retail comparable sales increased 2.1%, comprised of eCommerce comparable sales growth of 24.9%, partially offset by a stores comparable sales decline of 3.5%.

In the first three quarters of fiscal 2016, the Company opened 30 OshKosh stores in the United States and closed four stores. The Company operated 267 OshKosh stores in the United States as of October 1, 2016.

OshKosh Wholesale Segment

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

OshKosh wholesale segment net sales decreased $1.3 million, or 7.0%, to $17.5 million due to a decrease in the number of units shipped, reflecting lower seasonal bookings, and a decrease in the average price per unit.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

OshKosh wholesale segment net sales decreased $10.4 million, or 21.1%, to $38.8 million due to a decrease in the number of units shipped, reflecting lower seasonal bookings, and a decrease in the average price per unit.

International Segment

Third Quarter of Fiscal 2016 compared to Third Quarter of Fiscal 2015

International segment net sales increased $11.8 million, or 12.5%, to $106.0 million, driven by growth in the Company’s retail businesses in Canada, increased wholesale demand in international markets, and eCommerce sales in China.

Changes in foreign currency exchange rates in the third quarter of fiscal 2016 compared to the third quarter of fiscal 2015 favorably affected international segment net sales in the third quarter of fiscal 2016 by $0.3 million, or 0.3%. On a constant currency basis (a non-GAAP measure), international segment net sales increased 12.2%.

For the third quarter of fiscal 2016, Canada retail comparable sales increased 1.6%, comprised of eCommerce comparable sales growth of 37.2%, partially offset by a stores comparable sales decline of 0.5%. In the third quarter of fiscal 2016, the Company opened six stores in Canada.

First Three Quarters of Fiscal 2016 compared to First Three Quarters of Fiscal 2015

International segment net sales increased $26.3 million, or 11.5%, to $255.5 million, principally driven by growth in the Company’s retail businesses in Canada, new eCommerce sales in China, and increased wholesale demand in international markets, partially offset by unfavorable foreign currency exchange rates.

Changes in foreign currency exchange rates in the first three quarters of fiscal 2016 compared to the first three quarters of fiscal 2015 negatively affected international segment net sales in the first three quarters of fiscal 2016 by $6.7 million, or 2.9%. On a constant currency basis (a non-GAAP measure), international segment net sales increased 14.4%.

For the first three quarters of fiscal 2016, Canada retail comparable sales increased 7.2%, comprised of stores comparable sales growth of 5.4% and eCommerce comparable sales growth of 37.3%. In the first three quarters of fiscal 2016, the Company opened nine stores in Canada. The Company operated 156 stores in Canada as of October 1, 2016.

Return of Capital

Since the beginning of fiscal 2013, the Company has returned a total of $1.05 billion to shareholders through share repurchases and cash dividends.

In the third quarter of fiscal 2016, the Company returned a total of $75.4 million to shareholders through share repurchases and cash dividends. In the first three quarters of fiscal 2016, the Company returned a total of $289.3 million to shareholders through share repurchases and cash dividends, as described below.

During the third quarter of fiscal 2016, the Company repurchased and retired 587,100 shares of its common stock for $58.9 million at an average price of $100.37 per share. In the first three quarters of fiscal 2016, the Company repurchased and retired 2,358,947 shares of its common stock for $239.1 million at an average price of $101.37 per share. Fiscal year-to-date through October 26, 2016, the Company repurchased and retired a total of 2,666,947 shares for $266.1 million at an average price of $99.76 per share. All shares were repurchased in open market transactions pursuant to applicable regulations for such transactions. As of October 26, 2016, the total remaining capacity under the Company’s previously announced repurchase authorizations was approximately $309 million.

During the third quarter of fiscal 2016, the Company paid a cash dividend of $0.33 per share totaling $16.5 million. In the first three quarters of fiscal 2016, the Company paid cash dividends of $0.99 per share totaling $50.1 million. Future declarations of quarterly dividends and the establishment of related record and payment dates will be 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 considerations.

2016 Business Outlook

For the fourth quarter of fiscal 2016, the Company projects net sales will increase approximately 5% to 6% compared to the fourth quarter of fiscal 2015 and adjusted diluted earnings per share in the range of $1.65 to $1.70 (growth of approximately 18% to 21%) compared to adjusted diluted earnings per share of $1.40 in the fourth quarter of fiscal 2015. This forecast for the fourth quarter of fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $0.3 million related to the Company’s direct sourcing initiative. The Company believes that these adjustments provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s core performance.

For fiscal 2016, the Company continues to project net sales growth of approximately 5% to 6% compared to fiscal 2015 and now projects adjusted diluted earnings per share will increase approximately 9% to 10% (previously projected growth of approximately 10%) compared to adjusted diluted earnings per share of $4.61 in fiscal 2015. This forecast for fiscal 2016 adjusted earnings per share excludes anticipated expenses of approximately $1.7 million related to the amortization of acquired tradenames and $0.8 million related to the Company’s direct sourcing initiative. The Company believes that these adjustments provide a meaningful comparison of the Company’s results and afford investors a view of what management considers to be the Company’s core performance.

Conference Call

The Company will hold a conference call with investors to discuss third quarter fiscal 2016 results and its business outlook on October 27, 2016 at 8:30 a.m. Eastern Daylight Time. To participate in the call, please dial 913-981-5519. To listen to a live broadcast via the internet, please visit www.carters.com and select the "Q3 2016 Earnings Conference Call" link under the "Investor Relations" tab. Presentation materials for the call can be accessed under the same tab by selecting the link for "News & Events" followed by "Webcasts & Presentations." A replay of the call will be available shortly after the broadcast through November 5, 2016, at 888-203-1112 (U.S. / Canada) or 719-457-0820 (international), passcode 5816538. The replay will also be archived on the Company’s website under the "Investor Relations" tab.

About Carter’s, Inc.

Carter’s, Inc. is the largest branded marketer in the United States and Canada of apparel and related products exclusively for babies and young children. The Company owns the Carter’s and OshKosh B’gosh brands, two of the most recognized brands in the marketplace. These brands are sold in leading department stores, national chains, and specialty retailers domestically and internationally. They are also sold through more than 1,000 Company-operated stores in the United States and Canada and on-line at www.carters.com, www.oshkoshbgosh.com, and www.cartersoshkosh.ca. The Company’s Just One You, Precious Firsts, and Genuine Kids brands are available at Target, and its Child of Mine brand is available at Walmart. Carter’s is headquartered in Atlanta, Georgia. Additional information may be found at www.carters.com.

Cautionary Language

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 relating to the Company’s future performance, including, without limitation, statements with respect to the Company’s anticipated financial results for the fourth quarter of fiscal 2016 and fiscal year 2016, or any other future period, assessments of the Company’s performance and financial position, and drivers of the Company’s sales and earnings growth. Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize or not materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. Certain of the risks and uncertainties that could cause actual results and performance to differ materially are described in the Company’s most recently filed Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission from time to time under the headings "Risk Factors" and "Forward-Looking Statements." Included among the risks and uncertainties that may impact future results are the risks of: losing one or more major customers, vendors, or licensees, due to competition, inadequate quality of the Company’s products, or otherwise; financial difficulties for one or more of the Company’s major customers, vendors, or licensees, or an overall decrease in consumer spending; fluctuations in foreign currency exchange rates; our products not being accepted in the marketplace, due to quality concerns, changes in consumer preference and fashion trends, or otherwise; negative publicity, including as a result of product recalls or otherwise; failure to protect the Company’s intellectual property; various types of litigation, including class action litigation brought under various consumer protection, employment, and privacy and information security laws; a breach of the Company’s consumer databases, systems, or processes; the risk of slow-downs, disruptions, or strikes along the Company’s supply chain, including disruptions resulting from foreign supply sources, the Company’s distribution centers, or in-sourcing capabilities; unsuccessful expansion into international markets or failure to successfully manage legal, regulatory, political and economic risks of the Company’s existing international operations, including maintaining compliance with worldwide anti-bribery laws; and an inability to obtain additional financing on favorable terms. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

                                                                                                                                                                     
                                                                                                                                                               CARTER’S, INC.
                                                                                                                                                            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                                                                                                                             (dollars in thousands, except per share data)
                                                                                                                                                                              (unaudited)
                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                   
                                                                                                                                      Fiscal Quarter Ended                                                                                                                                     Three Fiscal Quarters Ended
                                                                                        ----------------------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------------------------------------------------------------
                                                                                                  October 1, 2016                        October 3, 2015                                                               October 1, 2016                           October 3, 2015
                                                                                        -----------------------------------                                          -----------------------------------                                          -------------------------------------                                          --------------------------------------
Net sales                                                                                   $ 901,425                                                                    $ 849,806                                                                    $ 2,264,981                                                                     $ 2,147,335
Cost of goods sold                                                                            525,879                                                   502,267                                                   1,296,324                                                    1,252,849  
                                                                                        ----------------------------------                                           ----------------------------------                                           ------------------------------------                                           -------------------------------------
Gross profit                                                                                  375,546                                                                      347,539                                                                        968,657                                                                         894,486
Selling, general, and administrative expenses                                                 255,322                                                                      230,017                                                                        712,782                                                                         650,496
Royalty income                                                                                (10,670 )                                                                    (12,699 )                                                                      (31,270 )                                                                       (32,688 )
                                                                                        ----------------------------------                                           ----------------------------------                                           ------------------------------------                                           -------------------------------------
Operating income                                                                              130,894                                                                      130,221                                                                        287,145                                                                         276,678
Interest expense                                                                                6,779                                                                        6,907                                                                         20,321                                                                          20,534
Interest income                                                                                   (68 )                                                                        (91 )                                                                         (453 )                                                                          (385 )
Other (income) expense, net                                                                       (36 )                                                                       (622 )                                                                        3,673                                                         (560 )
                                                                                        ----------------------------------                                           ----------------------------------                                           ------------------------------------                                           -------------------------------------
Income before income taxes                                                                    124,219                                                                      124,027                                                                        263,604                                                                         257,089
Provision for income taxes                                                                     43,408                                                    44,701                                                      92,615                                                       91,866  
                                                                                        ----------------------------------                                           ----------------------------------                                           ------------------------------------                                           -------------------------------------
Net income                                                                                  $  80,811                                                 $  79,326                                                 $   170,989                                                  $   165,223  
                                                                                        ===== ======= ====================                                           ===== ======= ====================                                           ===== ========= ====================                                           ====== ========= ====================
                                                                                                                                                                                                                                                                                                                                  
Basic net income per common share                                                           $    1.62                                                                    $    1.52                                                                    $      3.37                                                                     $      3.15
Diluted net income per common share                                                         $    1.60                                                                    $    1.51                                                                    $      3.34                                                                     $      3.12
Dividend declared and paid per common share                                                 $    0.33                                                                    $    0.22                                                                    $      0.99                                                                     $      0.66
                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                     CARTER’S, INC.
                                                                                                                                                                                                                                     BUSINESS SEGMENT RESULTS
                                                                                                                                                                                                                                     (dollars in thousands)
                                                                                                                                                                                                                                     (unaudited)
                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                              Fiscal Quarter Ended                                                                                                                                                                                                                                                                                             Three Fiscal Quarters Ended
                                                                                              ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                                               ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                         October 1,                           % of                          October 3,                           % of                                                                                       October 1,                            % of                             October 3,                          % of
                                                                                                            2016                                                                  Total Net                                                                2015                                                                  Total Net                                                                                       2016                                                                   Total Net                                                                   2015                                                                 Total Net
                                                                                                                                                                                    Sales                                                                                                                                          Sales                                                                                                                                                                  Sales                                                                                                                                            Sales
                                                                                              ------------------------------                                             -----------------------                                             ------------------------------                                             -----------------------                                                                  ---------------------------------                                             ------------------------                                             ---------------------------------                                             --------------------
Net sales:
---------------------------------------------------
Carter’s Wholesale                                                   $ 356,258                                                                                   39 .5%                                             $ 343,555                                                                                   40 .4%                                                                   $   842,136                                                                                   37 .2%                                               $   824,600                                                                                38.4%
Carter’s Retail (a)                                                    314,699                                                                34 .9%                                               294,928                                                                34 .7%                                                                       860,854                                                                38 .0%                                                   799,635                                                             37.2%
                                                                                              --------------------------------                                           -------------------------                                           --------------------------------                                           -------------------------                                                                -----------------------------------                                           --------------------------                                           -----------------------------------                                           ----------------------
   Total Carter’s (U.S.)                                               670,957                                                                74 .4%                                               638,483                                                                75 .1%                                                                     1,702,990                                                                75 .2%                                                 1,624,235                                                             75.6%
                                                                                              --------------------------------                                           -------------------------                                           --------------------------------                                           -------------------------                                                                -----------------------------------                                           --------------------------                                           -----------------------------------                                           ----------------------
OshKosh Retail (a)                                                                                106,999                                                                                   11 .9%                                                98,292                                                                                   11 .6%                                                                       267,715                                                                                   11 .8%                                                   244,787                                                                                11.4%
OshKosh Wholesale                                                                                  17,474                                                                 1 .9%                                                18,794                                                                 2 .2%                                                                        38,772                                                                 1 .7%                                                    49,151                                                              2.3%
                                                                                              --------------------------------                                           -------------------------                                           --------------------------------                                           -------------------------                                                                -----------------------------------                                           --------------------------                                           -----------------------------------                                           ----------------------
   Total OshKosh (U.S.)                                                                           124,473                                                                13 .8%                                               117,086                                                                13 .8%                                                                       306,487                                                                13 .5%                                                   293,938                                                             13.7%
                                                                                              --------------------------------                                           -------------------------                                           --------------------------------                                           -------------------------                                                                -----------------------------------                                           --------------------------                                           -----------------------------------                                           ----------------------
International (b)                                                                                 105,995                                                                11 .8%                                                94,237                                                                11 .1%                                                                       255,504                                                                11 .3%                                                   229,162                                                             10.7%
                                                                                              --------------------------------                                           -------------------------                                           --------------------------------                                           -------------------------                                                                -----------------------------------                                           --------------------------                                           -----------------------------------                                           ----------------------
      Total net sales                                                                           $ 901,425                                                               100 .0%                                             $ 849,806                                                               100 .0%                                                                   $ 2,264,981                                                               100 .0%                                               $ 2,147,335                                                            100.0%
                                                                                              === ======= ====================                                           =========================                                           === ======= ====================                                           =========================                                                                ==== ========= ====================                                           ==========================                                           ==== ========= ====================                                           ======================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
Operating income (loss):                                                                                                                                                            % of                                                                                                                                           % of                                                                                                                                                                   % of                                                                                                                                             % of
                                                                                                                                                                                   Segment                                                                                                                                        Segment                                                                                                                                                                Segment                                                                                                                                          Segment
                                                                                                                                                                                  Net Sales                                                                                                                                      Net Sales                                                                                                                                                              Net Sales                                                                                                                                        Net Sales
---------------------------------------------------                                                                                                                      -----------------------                                                                                                                        -----------------------                                                                                                                                                ------------------------                                                                                                                           --------------------
Carter’s Wholesale                                                   $  81,551                                                                                   22 .9%                                             $  74,347                                                                                   21 .6%                                                                   $   187,655                                                                                   22 .3%                                               $   172,485                                                                                20.9%
Carter’s Retail (a)                                                     48,051                                                                15 .3%                                                51,733                                                                17 .5%                                                                       127,738                                                                14 .8%                                                   134,557                                                             16.8%
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
   Total Carter’s (U.S.)                                               129,602                                                                19 .3%                                               126,080                                                                19 .7%                                                                       315,393                                                                18 .5%                                                   307,042                                                             18.9%
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
OshKosh Retail (a)                                                                                  2,652                                                                                    2 .5%                                                 6,171                                                                                    6 .3%                                                                          (614 )                                                                                 (0 .2)%                                                    3,396                                                                                 1.4%
OshKosh Wholesale (U.S.)                                                                            4,450                                                                25 .5%                                                 4,487                                                                23 .9%                                                                         8,266                                                                21 .3%                                                     9,715                                                             19.8%
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
   Total OshKosh                                                                                    7,102                                                                 5 .7%                                                10,658                                                                 9 .1%                                                                         7,652                                                                 2 .5%                                                    13,111                                                              4.5%
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
International (b) (c)                                                                              19,645                                                                18 .5%                                                18,220                                                                19 .3%                                                                        37,191                                                                14 .6%                                                    30,967                                                             13.5%
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
Corporate expenses (d) (e) (f)                                                                    (25,455 )                                                                                                                                      (24,737 )                                                                                                                                                              (73,091 )                                                                                                                                          (74,442 )
                                                                                              --------------------------------                                                                                                               --------------------------------                                                                                                                                    -----------------------------------                                                                                                                -----------------------------------
      Total operating income                                                                    $ 130,894                                                                14 .5%                                             $ 130,221                                                                15 .3%                                                                   $   287,145                                                                12 .7%                                               $   276,678                                                             12.9%
                                                                                              === ======= ====================                                                                                                               === ======= ====================                                                                                                                                    ==== ========= ====================                                                                                                                ==== ========= ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
     
   (a)  Includes eCommerce results.
   (b)  Net sales includes 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 related to the Company’s 2011 acquisition
        of Bonnie Togs of approximately $1.9 million for the first three
        fiscal quarters ended October 3, 2015.
   (d)  Corporate expenses include expenses related to incentive
        compensation, stock-based compensation, executive management,
        severance and relocation, finance, building occupancy, information
        technology, legal, consulting, and audit fees.
   (e)  Includes charges related to the amortization of the H.W. Carter and
        Sons tradenames of approximately $1.7 million for the three fiscal
        quarters ended October 1, 2016, and approximately $1.0 million and
        $5.3 million for the fiscal quarter and three fiscal quarters ended
        October 3, 2015, respectively. This amortization expense for the
        third fiscal quarter ended October 1, 2016 was not material.
   (f)  Includes charges related to the Company’s direct sourcing initiative
        of $0.5 million for the fiscal quarter and for the three fiscal
        quarters ended October 1, 2016.
                                                                                                                                                              
                                                                                                                                        CARTER’S, INC.
                                                                                                                                          CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                                                                                      (dollars in thousands, except per share data)
                                                                                                                                                       (unaudited)
                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                  
                                                                                                                           October 1, 2016                                                                  January 2, 2016                                                                  October 3, 2015
                                                                                                               ---------------------------------------                                          ---------------------------------------                                          ---------------------------------------
ASSETS
Current assets:
   Cash and cash equivalents                                                                                         $   140,626                                                                      $   381,209                                                                      $   288,260
   Accounts receivable, net                                                                                              271,207                                                                          207,570                                                                          246,565
   Finished goods inventories                                                                                            552,726                                                                          469,934                                                                          511,520
   Prepaid expenses and other current assets                                                                              43,155                                                                           37,815                                                                           36,414
   Deferred income taxes                                                                                                  37,600                                                        34,080                                                        34,895  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
      Total current assets                                                                                             1,045,314                                                                        1,130,608                                                                        1,117,654
Property, plant, and equipment, net of accumulated depreciation of                                                       388,440                                                                          371,704                                                                          361,305
$333,660, $290,636, and $276,230, respectively
Tradenames, net                                                                                                          308,973                                                                          310,848                                                                          311,842
Goodwill                                                                                                                 176,956                                                                          174,874                                                                          176,633
Other assets                                                                                                              18,022                                                        15,620                                                        14,940  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
       Total assets                                                                                                  $ 1,937,705                                                   $ 2,003,654                                                   $ 1,982,374  
                                                                                                               ======= ========= ====================                                           ======= ========= ====================                                           ======= ========= ====================
                                                                                                                                                                                                                                                                                  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
   Accounts payable                                                                                                  $   155,223                                                                      $   157,648                                                                      $   173,594
   Other current liabilities                                                                                             126,922                                                       105,070                                                       105,199  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
      Total current liabilities                                                                                          282,145                                                                          262,718                                                                          278,793
                                                                                                                                                                                                                                                                                  
Long-term debt, net                                                                                                      580,613                                                                          578,972                                                                          579,612
Deferred income taxes                                                                                                    129,278                                                                          128,838                                                                          119,499
Other long-term liabilities                                                                                              169,535                                                       158,075                                                       161,527  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
        Total liabilities                                                                                              1,161,571                                                                        1,128,603                                                                        1,139,431
                                                                                                                                                                                                                                                                                  
Commitments and contingencies
                                                                                                                                                                                                                                                                                  
Stockholders’ equity:
Preferred stock; par value $.01 per share; 100,000 shares                                                         --                                                                   --                                                                   --
authorized; none issued or outstanding at October 1, 2016, January
2, 2016, and October 3, 2015
Common stock, voting; par value $.01 per share; 150,000,000 shares                                                           496                                                                              518                                                                              521
authorized; 49,625,609, 51,764,309, and 52,076,784 shares issued and
outstanding at October 1, 2016, January 2, 2016 and October 3, 2015,
respectively
Additional paid-in capital                                                                                        --                                                                   --                                                                   --
Accumulated other comprehensive loss                                                                                     (31,889 )                                                                        (36,367 )                                                                        (33,480 )
Retained earnings                                                                                                        807,527                                                       910,900                                                       875,902  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
Total stockholders’ equity                                                                                               776,134                                                       875,051                                                       842,943  
                                                                                                               --------------------------------------                                           --------------------------------------                                           --------------------------------------
        Total liabilities and stockholders’ equity                                                                   $ 1,937,705                                                   $ 2,003,654                                                   $ 1,982,374  
                                                                                                               ======= ========= ====================                                           ======= ========= ====================                                           ======= ========= ====================
                                                                                                                                                                                                                                                                                                    
                                                                
                                                                                         CARTER’S, INC.
                                                                                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                                  (dollars in thousands)
                                                                                                        (unaudited)
                                                                                                        
                                                                                                        
                                                                                                                                                   Three Fiscal Quarters Ended
                                                                                                       -------------------------------------------------------------------------------------------------------------------
                                                                                                                  October 1, 2016                          October 3, 2015
                                                                                                       -------------------------------------                                          ------------------------------------
Cash flows from operating activities:
Net income                                                                                                   $ 170,989                                                                     $ 165,223
Adjustments to reconcile net income to net cash provided by
operating activities:
   Depreciation and amortization                                                                                52,384                                                                        44,187
   Amortization of tradenames                                                                                    1,875                                                                         5,422
   Accretion of contingent consideration                                                                --                                                                           809
   Amortization of debt issuance costs                                                                           1,092                                                                         1,246
   Non-cash stock-based compensation expense                                                                    13,026                                                                        13,304
   Unrealized foreign currency loss, net                                                                         2,361                                                                           221
   Income tax benefit from stock-based compensation                                                             (4,067 )                                                                      (7,963 )
   Loss on disposal of property, plant, and equipment                                                              821                                                                            80
   Deferred income taxes                                                                                        (2,333 )                                                                      (1,801 )
Effect of changes in operating assets and liabilities:
   Accounts receivable, net                                                                                    (63,436 )                                                                     (61,108 )
   Finished goods inventories                                                                                  (81,011 )                                                                     (73,724 )
   Prepaid expenses and other assets                                                                           (10,138 )                                                                      (3,144 )
   Accounts payable and other liabilities                                                                       35,011                                                     63,282  
                                                                                                       ------------------------------------                                           -----------------------------------
      Net cash provided by operating activities                                                                116,574                                                    146,034  
                                                                                                       ------------------------------------                                           -----------------------------------
                                                                                                                                                                                       
Cash flows from investing activities:
Capital expenditures                                                                                           (71,190 )                                                                     (76,987 )
Proceeds from sale of property, plant, and equipment                                                               216                                                         66  
                                                                                                       ------------------------------------                                           -----------------------------------
      Net cash used in investing activities                                                                    (70,974 )                                                                     (76,921 )
                                                                                                       ------------------------------------                                           -----------------------------------
                                                                                                                                                                                       
Cash flows from financing activities:
Payments of debt issuance costs                                                                         --                                                                        (1,495 )
Borrowings under secured revolving credit facility                                                      --                                                                       205,586
Payments on secured revolving credit facility                                                           --                                                                      (205,237 )
Repurchase of common stock                                                                                    (239,138 )                                                                     (78,339 )
Payment of contingent consideration                                                                     --                                                                        (7,572 )
Dividends paid                                                                                                 (50,131 )                                                                     (34,617 )
Income tax benefit from stock-based compensation                                                                 4,067                                                                         7,963
Withholdings from vesting of restricted stock                                                                   (8,594 )                                                                     (12,575 )
Proceeds from exercise of stock options                                                                          6,386                                                      5,743  
                                                                                                       ------------------------------------                                           -----------------------------------
      Net cash used in financing activities                                                                   (287,410 )                                                                    (120,543 )
                                                                                                       ------------------------------------                                           -----------------------------------
                                                                                                                                                                                       
Effect of exchange rate changes on cash and cash equivalents                                                     1,227                                                       (948 )
                                                                                                       ------------------------------------                                           -----------------------------------
Net decrease in cash and cash equivalents                                                                     (240,583 )                                                                     (52,378 )
Cash and cash equivalents, beginning of period                                                                 381,209                                                    340,638  
                                                                                                       ------------------------------------                                           -----------------------------------
Cash and cash equivalents, end of period                                                                     $ 140,626                                                  $ 288,260  
                                                                                                       ======= ======= ====================                                           ====== ======= ====================
                                                                                                                                                                                                      
                                               
                                                                                                                                                                                                                                     CARTER’S, INC.
                                                                                                                                                                                                                                     RECONCILIATION OF GAAP TO ADJUSTED RESULTS
                                                                                                                                                                                                                                     (dollars in millions, except earnings per share)
                                                                                                                                                                                                                                     (unaudited)
                                                                                       
                                                                                       
                                                                                                                                                                                                                                                                                                                           Fiscal Quarter Ended October 1, 2016
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                       % Net Sales                      SG&A                       % Net Sales                 Operating Income                   % Net Sales                   Net Income                Diluted EPS
                                                                                      ----------------------------------                                             --------------------                                            ---------------------------                                             --------------------                                            ------------------------------                                             --------------------                                            ----------------------------                                             ----------
As reported (GAAP)                                                                          $   375.5                                                                                41.7%                                            $ 255.3                                                                                28.3%                                               $ 130.9                                                                                14.5%                                             $  80.8                                                                    $  1.60
Direct sourcing initiative (c) (d)                                                     --                                                                                                                 (0.5 )                                                                                                                                      0.5                                                                                                                   0.3                                                    0.01
                                                                                      ------------------------------------                                                                                                           -----------------------------                                                                                                           --------------------------------                                                                                                           ------------------------------                                           ------------
As adjusted (a)                                                                             $   375.5                                                             41.7%                                            $ 254.8                                                             28.3%                                               $ 131.4                                                             14.6%                                             $  81.1                                                 $  1.61
                                                                                      ======= ======= ====================                                                                                                           == ===== ====================                                                                                                           ===== ===== ====================                                                                                                           === ===== ====================                                           ===== =====
                                                                                       
                                                                                       
                                                                                                                                                                                                                                                                                                                           Three Fiscal Quarters Ended October 1, 2016
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                                                             % Net Sales                                                            SG&A                                                             % Net Sales                                                       Operating Income                                                         % Net Sales                                                         Net Income                                                      Diluted EPS
                                                                                      -------------------------------------                                          ----------------------                                          ------------------------------                                          ----------------------                                          ---------------------------------                                          ----------------------                                          -------------------------------                                          ------------
As reported (GAAP)                                                                          $   968.7                                                                                42.8%                                            $ 712.8                                                                                31.5%                                               $ 287.1                                                                                12.7%                                             $ 171.0                                                                    $  3.34
Amortization of tradenames (d)                                                         --                                                                                                                                    (1.7 )                                                                                                                                      1.7                                                                                                                                      1.1                                                                       0.02
Direct sourcing initiative (c) (d)                                                     --                                                                                                                 (0.5 )                                                                                                                                      0.5                                                                                                                   0.3                                                    0.01
                                                                                      ------------------------------------                                                                                                           -----------------------------                                                                                                           --------------------------------                                                                                                           ------------------------------                                           ------------
As adjusted (a)                                                                             $   968.7                                                             42.8%                                            $ 710.5                                                             31.4%                                               $ 289.4                                                             12.8%                                             $ 172.4                                                 $  3.37
                                                                                      ======= ======= ====================                                                                                                           == ===== ====================                                                                                                           ===== ===== ====================                                                                                                           === ===== ====================                                           ===== =====
                                                                                       
                                                                                       
                                                                                                                                                                                                                                                                                                                           Fiscal Quarter Ended October 3, 2015
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                                                             % Net Sales                                                            SG&A                                                             % Net Sales                                                       Operating Income                                                         % Net Sales                                                         Net Income                                                      Diluted EPS
                                                                                      -------------------------------------                                          ----------------------                                          ------------------------------                                          ----------------------                                          ---------------------------------                                          ----------------------                                          -------------------------------                                          ------------
As reported (GAAP)                                                                          $   347.5                                                                                40.9%                                            $ 230.0                                                                                27.1%                                               $ 130.2                                                                                15.3%                                             $  79.3                                                                    $  1.51
Amortization of tradenames (d)                                                         --                                                                                                                                    (1.0 )                                                                                                                                      1.0                                                                                                                                      0.6                                                                       0.01
As adjusted (a)                                                                             $   347.5                                                             40.9%                                            $ 229.0                                                             27.0%                                               $ 131.2                                                             15.4%                                             $  79.9                                                 $  1.52
                                                                                      ======= ======= ====================                                                                                                           == ===== ====================                                                                                                           ===== ===== ====================                                                                                                           === ===== ====================                                           ===== =====
                                                                                       
                                                                                       
                                                                                                                                                                                                                                                                                                                           Three Fiscal Quarters Ended October 3, 2015
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                                                             % Net Sales                                                            SG&A                                                             % Net Sales                                                       Operating Income                                                         % Net Sales                                                         Net Income                                                      Diluted EPS
                                                                                      -------------------------------------                                          ----------------------                                          ------------------------------                                          ----------------------                                          ---------------------------------                                          ----------------------                                          -------------------------------                                          ------------
As reported (GAAP)                                                                          $   894.5                                                                                41.7%                                            $ 650.5                                                                                30.3%                                               $ 276.7                                                                                12.9%                                             $ 165.2                                                                    $  3.12
Amortization of tradenames (d)                                                         --                                                                                                                                    (5.3 )                                                                                                                                      5.3                                                                                                                                      3.3                                                                       0.06
Revaluation of contingent consideration (b)                                            --                                                                                                                 (1.9 )                                                                                                                                      1.9                                                                                                                   1.9                                                    0.04
                                                                                      ------------------------------------                                                                                                           -----------------------------                                                                                                           --------------------------------                                                                                                           ------------------------------                                           ------------
As adjusted (a)                                                                             $   894.5                                                             41.7%                                            $ 643.3                                                             30.0%                                               $ 283.9                                                             13.2%                                             $ 170.4                                                 $  3.22
                                                                                      ======= ======= ====================                                                                                                           == ===== ====================                                                                                                           ===== ===== ====================                                                                                                           === ===== ====================                                           ===== =====
                                                                                                                                                                                                                                                                                                                                                                                                                   
                
     (a)                                                In addition to the results provided in this earnings release in
                                                        accordance with GAAP, the Company has provided adjusted, non-GAAP
                                                        financial measurements that present SG&A, operating income, net
                                                        income, and net income on a diluted share basis excluding the
                                                        adjustments discussed above. The Company believes these adjustments
                                                        provide a meaningful comparison of the Company’s results and affords
                                                        investors a view of what management considers to be the Company’s
                                                        core performance. The adjusted, non-GAAP financial measurements
                                                        included in this earnings release should not be considered as an
                                                        alternative to net income or as any other measurement of performance
                                                        derived in accordance with GAAP. The adjusted, non-GAAP financial
                                                        measurements are presented for informational purposes only and are
                                                        not necessarily indicative of the Company’s future condition or
                                                        results of operations.
     (b)                                                Revaluation of the contingent consideration liability associated
                                                        with the Company’s acquisition of Bonnie Togs in 2011.
     (c)                                                Costs associated with the Company’s direct sourcing initiative,
                                                        which includes severance and relocation.
     (d)                                                The difference between the impacts on Operating Income and Net
                                                        Income represents the income taxes related to the adjustment item
                                                        and it was calculated by using the applicable tax rate of the
                                                        underlying jurisdiction.
Note: Results may not be additive due to rounding.
                                                        
                                               
                                                                                                                                                                                          CARTER’S, INC.
                                                                                                                                                                                         RECONCILIATION OF GAAP TO ADJUSTED RESULTS
                                                                                                                                                                                      (dollars in millions, except earnings per share)
                                                                                                                                                                                                         (unaudited)
                                                                                       
                                                                                       
                                                                                                                                                                                                                                       Fiscal Quarter Ended January 2, 2016
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                              SG&A                         Operating Income                       Net Income                       Diluted EPS
                                                                                      -------------------------------------                                          ------------------------------                                          ---------------------------------                                          -------------------------------                                          ---------------------------
As reported (GAAP)                                                                          $   363.5                                                                 $ 258.7                                                                    $ 116.2                                                                  $  72.6                                                                    $                 1.39
Amortization of tradenames (c)                                                         --                                                 (1.0 )                                                                      1.0                                                   0.6                                                                   0.01
                                                                                      ------------------------------------                                           -----------------------------                                           --------------------------------                                           ------------------------------                                           ---------------------------
As adjusted (a)                                                                             $   363.5                                              $ 257.8                                                 $ 117.1                                               $  73.2                                                 $                 1.40
                                                                                      ======= ======= ====================                                           == ===== ====================                                           ===== ===== ====================                                           === ===== ====================                                           ===== ====================
                                                                                       
                                                                                       
                                                                                                                                                                                                                                         Fiscal Year Ended January 2, 2016
                                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                  Gross Margin                                                                    SG&A                                                               Operating Income                                                             Net Income                                                             Diluted EPS
                                                                                      ----------------------------------                                             ---------------------------                                             ------------------------------                                             ----------------------------                                             -------------------------
As reported (GAAP)                                                                          $ 1,258.0                                                                 $ 909.2                                                                    $ 392.9                                                                  $ 237.8                                                                    $                 4.50
Amortization of tradenames (c)                                                         --                                                                    (6.2 )                                                                      6.2                                                                      3.9                                                                                      0.08
Revaluation of contingent consideration (b)                                            --                                                 (1.9 )                                                                      1.9                                                   1.9                                                                   0.04
                                                                                      ------------------------------------                                           -----------------------------                                           --------------------------------                                           ------------------------------                                           ---------------------------
As adjusted (a)                                                                             $ 1,258.0                                              $ 901.1                                                 $ 401.0                                               $ 243.6                                                 $                 4.61
                                                                                      ======= ======= ====================                                           == ===== ====================                                           ===== ===== ====================                                           === ===== ====================                                           ===== ====================
                                                                                                                                                                                                                                                                                                                                                                                                        
                  
   (a)                                 In addition to the results provided in this earnings release in
                                       accordance with GAAP, the Company has provided adjusted, non-GAAP
                                       financial measurements that present SG&A, operating income, net
                                       income, and net income on a diluted share basis excluding the
                                       adjustments discussed above. The Company believes these adjustments
                                       provide a meaningful comparison of the Company’s results and affords
                                       investors a view of what management considers to be the Company’s
                                       core performance. The adjusted, non-GAAP financial measurements
                                       included in this earnings release should not be considered as an
                                       alternative to net income or as any other measurement of performance
                                       derived in accordance with GAAP. The adjusted, non-GAAP financial
                                       measurements are presented for informational purposes only and are
                                       not necessarily indicative of the Company’s future condition or
                                       results of operations.
   (b)                                 Revaluation of the contingent consideration liability associated
                                       with the Company’s acquisition of Bonnie Togs in 2011.
   (c)                                 The difference between the impacts on Operating Income and Net
                                       Income represents the income taxes related to the adjustment item
                                       and it was calculated by using the applicable tax rate of the
                                       underlying jurisdiction.
Note: Results may not be additive due to rounding.
 
                                                                                                                                                                                          
                                                                                                                                                                       CARTER’S, INC.
                                                                                                                                                             RECONCILIATION OF NET INCOME ALLOCABLE TO COMMON SHAREHOLDERS
                                                                                                                                                                                      (unaudited)
                                                                                                                                                                                                                                                                        
                                                                                                                                                                                                                                                                        
                                                                                                                                                            Fiscal Quarter Ended                                                                                                                                  Three Fiscal Quarters Ended
                                                                                                               --------------------------------------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------------------------------------
                                                                                                                           October 1,                            October 3,                                                                  October 1,                             October 3,
                                                                                                                              2016                                                                        2015                                                                        2016                                                                         2015
                                                                                                               -------------------------------                                             -------------------------------                                             --------------------------------                                             --------------------------------
Weighted-average number of common and common equivalent shares
outstanding:
   Basic number of common shares outstanding                                                                     49,526,480                                                                  51,740,523                                                                   50,282,345                                                                   51,960,041
   Dilutive effect of equity awards                                                                                 460,271                                                  507,815                                                   470,050                                                   512,861  
                                                                                                               ---------------------------------                                           ---------------------------------                                           ----------------------------------                                           ----------------------------------
   Diluted number of common and common equivalent shares outstanding                                             49,986,751                                               52,248,338          50,752,395                                                52,472,902  
                                                                                                               =================================                                           ================================= -------------------- -------------------- ==================================                                           ==================================
As reported on a GAAP Basis:
--------------------------------------------------------------------
(dollars in thousands, except per share data)
Basic net income per common share:
   Net income                                                                                                      $ 80,811                                                                    $ 79,326                                                                    $ 170,989                                                                    $ 165,223
   Income allocated to participating securities                                                                        (632 )                                                                      (675 )                                                                     (1,359 )                                                                     (1,557 )
                                                                                                               ---------------------------------                                           ---------------------------------                                           ----------------------------------                                           ----------------------------------
   Net income available to common shareholders                                                                     $ 80,179                                                 $ 78,651                                                 $ 169,630                                                 $ 163,666  
                                                                                                               ===== ====== ====================                                           ===== ====== ====================                                           ===== ======= ====================                                           ===== ======= ====================
   Basic net income per common share                                                                               $   1.62                                                                    $   1.52                                                                    $    3.37                                                                    $    3.15
Diluted net income per common share:
   Net income                                                                                                      $ 80,811                                                                    $ 79,326                                                                    $ 170,989                                                                    $ 165,223
   Income allocated to participating securities                                                                        (627 )                                                                      (669 )                                                                     (1,350 )                                                                     (1,545 )
                                                                                                               ---------------------------------                                           ---------------------------------                                           ----------------------------------                                           ----------------------------------
   Net income available to common shareholders                                                                     $ 80,184                                                 $ 78,657                                                 $ 169,639                                                 $ 163,678  
                                                                                                               ===== ====== ====================                                           ===== ====== ====================                                           ===== ======= ====================                                           ===== ======= ====================
   Diluted net income per common share                                                                             $   1.60                                                                    $   1.51                                                                    $    3.34                                                                    $    3.12
As adjusted (a):
--------------------------------------------------------------------
Basic net income per common share:
   Net income                                                                                                      $ 81,135                                                                    $ 79,925                                                                    $ 172,411                                                                    $ 170,443
   Income allocated to participating securities                                                                        (634 )                                                                      (681 )                                                                     (1,371 )                                                                     (1,607 )
                                                                                                               ---------------------------------                                           ---------------------------------                                           ----------------------------------                                           ----------------------------------
   Net income available to common shareholders                                                                     $ 80,501                                                 $ 79,244                                                 $ 171,040                                                 $ 168,836  
                                                                                                               ===== ====== ====================                                           ===== ====== ====================                                           ===== ======= ====================                                           ===== ======= ====================
   Basic net income per common share                                                                               $   1.63                                                                    $   1.53                                                                    $    3.40                                                                    $    3.25
Diluted net income per common share:
   Net income                                                                                                      $ 81,135                                                                    $ 79,925                                                                    $ 172,411                                                                    $ 170,443
   Income allocated to participating securities                                                                        (629 )                                                                      (675 )                                                                     (1,362 )                                                                     (1,595 )
                                                                                                               ---------------------------------                                           ---------------------------------                                           ----------------------------------                                           ----------------------------------
   Net income available to common shareholders                                                                     $ 80,506                                                 $ 79,250                                                 $ 171,049                                                 $ 168,848  
                                                                                                               ===== ====== ====================                                           ===== ====== ====================                                           ===== ======= ====================                                           ===== ======= ====================
   Diluted net income per common share                                                                             $   1.61                                                                    $   1.52                                                                    $    3.37                                                                    $    3.22
                                                                                                                                                                                                                                                                                                                                                                   
(a)   In addition to the results provided in this earnings release in
                         accordance with GAAP, the Company has provided adjusted, non-GAAP
                         financial measurements that present per share data excluding the
                         adjustments discussed above. The Company has excluded $0.3 million
                         and $1.4 million in after-tax expenses from these results for the
                         fiscal quarter and three fiscal quarters ended October 1, 2016,
                         respectively. The Company has excluded $0.6 million and $5.2 million
                         in after-tax expenses from these results for the fiscal quarter and
                         three fiscal quarters ended October 3, 2015, respectively.
                          
                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                              RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
                                                                                                                                                                                                                                   (unaudited)
                                                                                                                                                                                                                               
                                                                                                                                                                                                         The following table provides a reconciliation of net income to
                                                                                                                                                                                                              EBITDA and Adjusted EBITDA for the periods indicated:
                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                                                                                                                                                                                                                                                                                                                    
                                                                                                                                            Fiscal Quarter Ended                                                                                                                                               Three Fiscal Quarters Ended                                                                                                  Four Fiscal Quarters Ended
                                                                                      ------------------------------------------------------------------------------------------------------------------------                                                  -----------------------------------------------------------------------------------------------------------------                                                  ------------------------------------------
                                                                                                    October 1, 2016                                October 3, 2015                                                                      October 1, 2016                            October 3, 2015                                                                    October 1, 2016
                                                                                      ---------------------------------------                                             -----------------------------------------                                             ---------------------------------------                                             ----------------------------------                                             ------------------------------------------
(dollars in millions)
Net income                                                                                $           80.8                                                                      $           79.3                                                                    $          171.0                                                                      $   165.2                                                                       $          243.6
Interest expense                                                                                       6.8                                                                                   6.9                                                                                20.3                                                                           20.5                                                                                   26.8
Interest income                                                                                       (0.1 )                                                                                (0.1 )                                                                              (0.5 )                                                                         (0.4 )                                                                                 (0.6 )
Income tax expense                                                                                    43.4                                                                                  44.7                                                                                92.6                                                                           91.9                                                                                  131.1
Depreciation and amortization (a)                                                                     17.5                                                               14.8                                                             54.3                                                        49.6                                                                73.1  
                                                                                      -----------------------------------------                                           -------------------------------------------                                           -----------------------------------------                                           ------------------------------------                                           --------------------------------------------
EBITDA                                                                                    $          148.4                                                   $          145.6                                                 $          337.7                                                   $   326.8                                                    $          474.0  
                                                                                      ===== ============== ====================                                           ======= ============== ====================                                           ===== ============== ====================                                           ======= ======= ====================                                           ======== ============== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                    
Adjustments to EBITDA
Revaluation of contingent consideration (b)                                               $ --                                                                      $ --                                                                    $ --                                                                      $     1.9                                                                       $ --
Direct sourcing initiative (c)                                                                         0.5                                                     --                                                              0.5                                              --                                                                 0.5  
                                                                                      -----------------------------------------                                           -------------------------------------------                                           -----------------------------------------                                           ------------------------------------                                           --------------------------------------------
Adjusted EBITDA                                                                           $          148.9                                                   $          145.6                                                 $          338.2                                                   $   328.7                                                    $          474.5  
                                                                                      ===== ============== ====================                                           ======= ============== ====================                                           ===== ============== ====================                                           ======= ======= ====================                                           ======== ============== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                            
   (a)              Includes amortization of acquired tradenames.
   (b)                                 Revaluation of the contingent consideration liability associated
                                       with the Company’s acquisition of Bonnie Togs in 2011.
   (c)                                 Pre-tax costs associated with the Company’s direct sourcing
                                       initiative, which includes severance and relocation. Approximately
                                       $0.2 million of income tax benefit is associated with this
                                       adjustment and it was calculated by using the applicable tax rate of
                                       the underlying jurisdiction.
                                       
Note: Results may not be additive due to rounding.
 

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

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

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

                                   
                                                                                                                                                                                                                                 RECONCILIATION OF U.S. GAAP AND NON-GAAP INFORMATION
                                                                                                                                                                                                                                     (dollars in millions)
                                                                                                                                                                                                                                     (unaudited)
                                                                                                                                                                                                                                      
 
The tables below reflect the calculation of constant currency for
total net sales of the International segment and consolidated net
sales for the fiscal quarter and three fiscal quarters ended
October 1, 2016:
                                                                           
                                                                                                                                                                                                                                                                                      Fiscal Quarter Ended
                                                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Reported Net Sales October 1, 2016     Impact of Foreign Currency Translation      Constant-Currency Net Sales October 1, 2016    Reported Net Sales October 3, 2015      Reported Net Sales % Change    Constant-Currency Net Sales % Change
                                                                          --------------------------------                                             ------------------------------------                                             -----------------------------------------                                             --------------------------------                                             --------------------------                                            -----------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
Consolidated net sales                                                              $       901.4                                                                 $         (0.3 )                                                                   $          901.1                                                                   $       849.8                                                                             6.1%                                                                           6.0%
International segment net sales                                                     $       106.0                                                                 $         (0.3 )                                                                   $          105.7                                                                   $        94.2                                                                            12.5%                                                                          12.2%
                                                                           
                                                                                                                                                                                                                                                                                First Three Fiscal Quarters Ended
                                                                          ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Reported Net Sales October 1, 2016                                           Impact of Foreign Currency Translation                                            Constant-Currency Net Sales October 1, 2016                                          Reported Net Sales October 3, 2015                                            Reported Net Sales % Change                                          Constant-Currency Net Sales % Change
                                                                          --------------------------------                                             ------------------------------------                                             -----------------------------------------                                             --------------------------------                                             --------------------------                                            -----------------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
Consolidated net sales                                                              $     2,265.0                                                                 $          6.7                                                                     $        2,271.7                                                                   $     2,147.3                                                                             5.5%                                                                           5.8%
International segment net sales                                                     $       255.5                                                                 $          6.7                                                                     $          262.2                                                                   $       229.1                                                                            11.5%                                                                          14.4%
                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20161027005754r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20161027005754/en/

SOURCE: Carter’s, Inc.

Carter’s, Inc. 
Sean McHugh, 678-791-7615 
Vice President & Treasurer


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