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OshKosh B'Gosh, Inc.
(Exact name of registrant as specified in its charter)

(920) 231-8800
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   X     No       .

As of October 14, 2002, there were outstanding 10,048,259 shares of Class A Common Stock and 2,199,161 shares of Class B Common Stock.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)

OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The condensed consolidated financial statements included herein have been prepared by the Company without audit. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of Company management, necessary to present fairly the financial position as of September 28, 2002, and the results of operations and cash flows for the nine-month periods ended September 28, 2002 and September 29, 2001.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 2001 Annual Report.

A summary of inventories follows:

The replacement cost of inventory exceeds the above LIFO costs by $12,138 at September 28, 2002 and December 29, 2001, respectively.

The Company designs, sources, and markets apparel products using primarily the OshKosh B'Gosh brand. The apparel products are primarily marketed in two distinct distribution channels: domestic wholesale and through Company-owned retail stores. The Company designs and sources product to meet the needs of these distribution channels through a single procurement business unit.

Certain operations have been segregated into segments as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company manages its business operations by periodic analysis of business unit operating results. For this purpose, domestic wholesale, retail, and procurement are separately identified for management reporting and are considered segments as defined by SFAS No. 131.

Management evaluates the operating performance of each of its business units based on income from operations as well as return on net assets. For this purpose, product is transferred from procurement to the domestic wholesale and retail business units at cost. However, procurement receives a markup on product sold by the Company's wholesale and retail business units. Accounting policies used for segment reporting are consistent with the Company's overall accounting policies, except that inventories are valued on a FIFO basis. In addition, interest income, interest expense, certain corporate office expenses, and the effects of the LIFO inventory valuation method are not allocated to individual business units, and are included in the All Other/Corporate column below.

Segment assets include all assets used in the operation of each business unit, including accounts receivable, inventories, and property, plant and equipment. Certain other corporate assets that cannot be specifically identified with the operation of a business unit are not allocated. Financial information for the Company's reportable segments follows:

The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales.

Consolidated net sales for the three month period ended September 28, 2002 were $133.9 million, a $13.6 million decrease (9.2%) compared to 2001 third quarter net sales of $147.5 million. Consolidated net sales for the nine month period ended September 28, 2002 were $318.8 million, a $19.1 million decrease (5.7%) from net sales of $337.9 million for the first nine months of 2001. The Company's net sales for the three month and nine month periods ended September 28, 2002 and September 29, 2001 are summarized as follows:

The Company's domestic wholesale unit shipments for the three month period ended September 28, 2002 decreased approximately 7.8% as compared to the corresponding three month period of 2001. Wholesale net sales for the third quarter of 2002 of $57.9 million were approximately $11.7 million (16.8%) less than third quarter 2001 net wholesale sales of $69.6 million. These decreases resulted from a combination of lower booked orders for the Fall back-to-school season, overall price reductions in the Company's Fall back-to-school product offering (which averaged approximately 10%), and higher customer promotional support to our retail customers to assist in more effective flow of Company products through the retail channels. For the first nine months of 2002, wholesale unit shipments from continuing businesses (footwear and outerwear were licensed effective May 1, 2001) were approximately 7.4% less than the corresponding period in 2001. Net sales for the first three quarters of 2002 of $140.2 million were ap proximately $20.6 million (12.8%) less than 2001 net sales of approximately $160.8 million, exclusive of footwear and outerwear. Year-to-date decreases in unit shipments and net sales dollars are primarily the result of lower booked orders for the period, overall price reductions, and higher customer promotional support.

The Company's third quarter 2002 retail sales decrease resulted from a comparable store sales decrease of 9.4%, offset in part by sales volume from stores opened subsequent to September 29, 2001. The Company's increase in retail sales for the first nine months of 2002 resulted from sales volume from newly opened stores, offset in part by a comparable store sales decrease of 4.6% (as compared to a 1.0% increase in 2001). Third quarter and year to date comparable store sales were impacted by a deflationary pricing environment for apparel (the Company instituted pricing reductions for its Fall back-to-school line), lower customer store traffic in outlet malls, including the Company's outlet stores, and a generally sluggish economic environment, particularly in apparel retail sales.

At September 28, 2002 the Company operated 153 domestic OshKosh retail stores, including 146 outlet stores, two showcase stores, and five strip mall stores. During the third quarter of 2002, the Company opened two new outlet stores. At September 29, 2001 the Company operated a total of 137 domestic OshKosh retail stores.

The Company's gross profit margin as a percent of net sales was 43.6% in the third quarter of 2002, compared to 43.2% in the third quarter of 2001. For the three month period ended September 28, 2002, the increase in gross margin percentage is primarily attributable to an increased proportion of sales from the Company's retail stores. For the nine month period ended September 28, 2002 gross profit margin as a percent of net sales was 43.5%, compared to 42.3% for the first nine months of 2001. The increase in gross margin percentage for the nine month period was due to favorable product sourcing and the increased proportion of sales from the Company's retail stores. As a result of reasonably effective execution of the Company's sourcing plan, the Company was able to maintain its gross margin percentage despite the price reductions in the Fall back-to-school line and the highly promotional retail environment.

SG&A expenses for the three month and nine month periods ended September 28, 2002 increased $1.0 million and $3.2 million over the three and nine month periods ended September 29, 2001, respectively. As a percentage of net sales, SG&A expenses were 29.2% and 35.3% for the three month and nine month periods ended September 28, 2002 as compared to 25.8% and 32.3% in the comparable periods of 2001. The increase in SG&A expenses in dollars relates primarily to continued expansion of the Company's retail operations. SG&A expenses, as a percentage of sales, increased over 2001 amounts due to the lower sales levels.

The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. Royalty income for the three month period ended September 28, 2002 was $3.1 million compared to $2.9 million in the third quarter of 2001. Royalty income for the nine month period ended September 28, 2002 was $8.0 million compared with $7.1 million in the comparable period of 2001. The increase is primarily attributable to increased business levels by the Company's Japanese licensees for the nine month period ending September 28, 2002, and royalty income from new licenses for outerwear and footwear.

As a result of the factors described above, the Company's operating income for the three month and nine month periods ended September 28, 2002 amounted to $22.4 million and $34.2 million as compared to $28.5 million and $40.8 million for the comparable periods in 2001.

The Company's third quarter 2002 net other income (expense) was a $.1 million expense compared to $.4 million in 2001. Interest expense was lower for the third quarter and nine month period ending September 28, 2002 compared to 2001 due to lower interest rates and prepayment of the Company's long-term debt during 2002.

The Company's effective tax rate for the nine month period ended September 28, 2002, was approximately 37.5% compared to 38.4% in 2001. The Company currently anticipates an effective income tax rate of approximately 37.5% for the remainder of 2002.

Net income for the three months ended September 28, 2002 of $14.0 was a $3.3 million decrease (19.1%) compared to net income for the three months ended September 29, 2001 of $17.3 million. Net income for the nine months ended September 28, 2002 of $21.0 million was a $3.3 million decrease (13.6%) compared with net income for the nine months ended September 29, 2001 of $24.3 million. Diluted earnings per share for the quarter ended September 28, 2002 was $1.11, a $.26 (19.0%) decrease over the comparable period in 2001.

The Company's business is seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 2002 quarterly sales and income.

At September 28, 2002, the Company's cash and cash equivalents were $24.8 million, compared to $29.3 million at the end of 2001 and $22.0 million at September 29, 2001. Net working capital at September 28, 2002 was $70.9 million compared to $75.4 million at December 29, 2001, and $72.5 million at September 29, 2001.

Cash provided by operations amounted to approximately $31.7 million in the first nine months of 2002, compared to $22.3 million in the first nine months of 2001. Accounts receivable at September 28, 2002 were $28.6 million compared to $25.7 million at December 29, 2001, and $33.7 million at September 29, 2001. Accounts receivable at September 28, 2002 are less than September 29, 2001 levels due to reduced wholesale sales and higher levels of promotional support. Inventories at September 28, 2002, were $58.2 million, compared to $55.4 million at December 29, 2001, and $63.7 million at September 29, 2001. The decrease in inventory levels compared to the same period in 2001 was the result of a combination of lower average unit costs, and a change in the Company's sourcing mix, which resulted in less raw materials and work in process. Management believes that September 28, 2002, inventory levels are generally appropriate for anticipated ongoing 2002 business activities.

Investing activities used $3.8 million of cash in the first nine months of 2002, compared to $3.5 million in 2001. Capital expenditures were $3.8 million in the first nine months of 2002, compared with $3.0 million in 2001. Capital expenditures in both years relate primarily to expansions and upgrades of the Company's retail stores.

Cash used in financing activities totaled $32.3 million in the first nine months of 2002, compared to $16.6 million in the first nine months of 2001. In 2002, cash generated by the Company was sufficient to finance its working capital needs, prepay $24.0 million of the Company's long-term debt, and repurchase Company stock.

The Company's Board of Directors has previously authorized a repurchase program for up to 2.5 million shares of its Class A common stock. During the third quarter of 2002, the Company repurchased 414,400 shares of its Class A common stock under this program for $12.6 million ($30.37 per share). The Company has 849,200 shares of its Class A common stock remaining under its current repurchase program.

The Company's unsecured credit agreement, as amended, with a number of banks provided a term loan for the repurchase of shares of its common stock, and includes a $75 million revolving credit facility available for general corporate purposes, including cash borrowings and issuances of letters of credit. The revolving credit facility expires November 3, 2002. The Company currently intends to extend this revolving credit facility before its expiration, and has been negotiating with existing members of the bank group to establish an extended credit facility. There are currently no borrowings under this credit agreement.

The Company believes that these credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures and business development needs.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, and revenues and expenses during the period. Significant accounting policies employed by the Company, including the use of estimates, are presented in the Notes to Consolidated Financial Statements of the Company's Annual Report.

Critical accounting policies are those that are most important to the presentation of the Company's financial condition and the results of operations, and require management's most difficult, subjective and complex judgments, and involve uncertainties. The Company's most critical accounting policies, discussed below, pertain to revenue recognition, accounts receivable, net, inventories, and accrued expenses. Management must use informed judgments and best estimates to properly apply these critical accounting policies. Because of the uncertainty in these estimates, actual results could differ from estimates used in applying the critical accounting policies. The Company is not aware of any reasonably likely events or circumstances which would result in different amounts being reported that would materially affect its financial condition or results of operations.

Retail store revenue is recognized at the time of sale, and is net of returns.

Revenue within the Company's wholesale business is recognized at the time merchandise is shipped from the Company's distribution centers. In the normal course of this business, the Company provides promotional support and co-op advertising support, and is presented with operational chargebacks from its wholesale customers. In addition, the Company periodically authorizes return of its product.

Wholesale revenue is net of returns, promotional support, the portion of co-op advertising program support that is not correlated with a specific acquisition of advertising material, and other allowances. A provision for promotional support, co-op advertising claims recorded as a reduction of revenue and other allowances is recognized when the related shipment of product is recognized. Reduction of sales for returns is recognized at the time the return is authorized by the Company.

The Company records wholesale revenue net of returns, promotional support, and co-op advertising, as described below.

Returns The Company periodically estimates potential returns of unsaleable products, and reduces sales for the full amount of the credit that is anticipated will be issued or has been issued to its wholesale customers.

Promotional Support In accordance with long-standing programs with many of the Company's wholesale customers, the Company provides allowances to retail customers to effectively flow products through the retail channels. The Company periodically performs a review of its outstanding customer support obligations for all product shipped through the date of the financial statements. These amounts are evaluated on a customer by customer basis, and consider any unauthorized deductions taken by the customer. Settlements of promotional support payments are periodically compared to the Company's original estimates to enhance the Company's ability to predict the support level in subsequent seasons. Promotional support arrangements are recorded as a reduction of sales.

Co-op Advertising In accordance with the Financial Accounting Standard Board's Emerging Issues Task Force issue number 01-09 (EITF 01-09, accounting for consideration given by a vendor to a customer) the Company carefully evaluates the substance of any co-op advertising support. To the extent that the co-op advertising support relates to the acquisition of advertising material which the Company could obtain independently, these costs are considered advertising expense. To the extent that they relate to promotional support for the Company's customers' advertising activities, they are considered reductions of revenue, in accordance with the EITF 01-09. The Company evaluates co-op advertising commitments on a customer by customer basis considering actions taken throughout the course of the year, and the Company's prior history in dealing with client co-op advertising issues.

In the normal course of business, the Company extends credit to customers. Accounts receivable, as shown on the Condensed Consolidated Balance Sheets, is net of allowances for doubtful accounts and other allowances.

An allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the date of the financial statements, assessments of collectibility based on historic trends and an evaluation of the impact of economic conditions.

The Company regularly receives unauthorized charge backs from its customers for a variety of operational reasons. The Company periodically evaluates the adequacy of its reserve for such amounts by reviewing the historical collection of operational charge backs. The Company also considers likely charge backs that are anticipated to be taken in the foreseeable future based on historical charge back rates to properly match subsequent charge back activity with the revenue reflected in the Company's financial statements.

Allowances for returns of unsaleable products and promotional support which reduce net sales, are also reflected as a reduction to accounts receivable, net as they are generally settled upon payment of customer invoices.

Inventories are stated at lower of cost (using the last-in, first-out method) or market. The Company continually evaluates the composition of its inventories assessing slow-turning, ongoing product as well as prior season fashion product. Market value of aged inventory is determined based on historical sales trends for this category of inventory, the impact of market trends and economic conditions, and current sales negotiations for this type of inventory.

Accrued expenses for employee health insurance, worker's compensation, profit sharing, contracted advertising, professional fees, and other outstanding Company obligations are assessed based on statistical trends, and estimates based on projections and current expectations, and are updated periodically as additional information becomes available.

The retail climate, particularly in many of the channels in which the Company's products are sold, remains challenging. Further clouding prospects for the remainder of 2002 is our previously announced decision to lower price points on a significant portion of our Fall and Holiday 2002 product offerings as well as implications of the recent Pacific Coast labor dispute. More specifically, we currently plan the remainder of 2002 as follows: