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EX-32 - EXHIBIT 32 - CARTERS INCex32.htm
EX-31.1 - EXHIBIT 31,1 - CARTERS INCex31_1.htm
EX-31.2 - EXHIBIT 31.2 - CARTERS INCex31_2.htm


 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q/A
(Amendment No. 1)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 4, 2009 OR
   
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____
TO ______

Commission file number:
 
001-31829
 

CARTER’S, INC.
(Exact name of Registrant as specified in its charter)

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

The Proscenium
1170 Peachtree Street NE, Suite 900
Atlanta, Georgia  30309
(Address of principal executive offices, including zip code)
(404) 745-2700
(Registrant's telephone number, including area code)


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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes [  ]     No [  ]

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

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

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

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

Common Stock
 
Outstanding Shares at July 30, 2009
Common stock, par value $0.01 per share
 
56,784,758
 
 
 
 

 
 
 

CARTER’S, INC.
FORM 10-Q/A
EXPLANATORY NOTE

We are filing this Amended Quarterly Report on Form 10-Q/A (the “Amended Filing” or "Form 10-Q/A") to our Quarterly Report on Form 10-Q for the three and six-month periods ended July 4, 2009 (the “Original Filing”) to amend and restate our unaudited condensed consolidated financial statements and related disclosures for the three and six-month periods ended July 4, 2009 and June 28, 2008, as discussed in Note 3 to the accompanying restated unaudited condensed consolidated financial statements.  The Original Filing was filed with the Securities and Exchange Commission (“SEC”) on July 31, 2009.

Background of the Restatement

On November 10, 2009, the Company announced that its Audit Committee, with the assistance of outside counsel, had commenced a review of customer margin support provided by the Company and an investigation into undisclosed margin support commitments and related matters.  As a result of this review, the Company announced that the previously issued consolidated financial statements for the fiscal years 2004 through 2008 included in the Company’s Forms 10-K, and for the fiscal quarters from September 29, 2007 through July 4, 2009 included in the Company's Forms 10-Q, should no longer be relied upon (collectively, the "Affected Periods"). 

Management initially began a review of margin support arrangements with respect to a single wholesale customer (the "Initial Customer") after becoming aware of a disputed amount of margin support with the Initial Customer.  In the normal course of business, the Company provides margin support and other allowances (collectively, “accommodations”) to its wholesale customers to assist them with the costs related to inventory clearance and sales promotions.  The Company’s policy is to reflect the amounts of accommodations as reductions to revenue or, in the case of certain co-op advertising expenses, as additions to selling, general, and administrative expenses.  As a result of its review, management identified issues with respect to the timing of recognizing customer accommodations with respect to the Initial Customer.  Following management’s review, the Audit Committee engaged outside counsel to undertake the review and investigation.

The Audit Committee has completed its review and investigation, which was conducted with the assistance of outside counsel and forensic accountants engaged by outside counsel, and has concluded that the Company reported various customer accommodations in incorrect fiscal periods.  The investigation uncovered irregularities involving members of the sales organization intentionally not disclosing accommodations arrangements with customers to the Company’s finance organization and intentionally providing inaccurate documentation and explanations regarding accommodations to the finance organization.  Consequently, such arrangements were not communicated to the Company’s independent registered public accounting firm.  These accommodations arrangements were made throughout the Affected Periods by certain members of the Company’s sales organization and involved the deferral of accommodations into later fiscal periods.  The deferrals resulted in the overstatement of net sales and net income in certain of the Affected Periods and the understatement of net sales and net income in certain of the Affected Periods.  The deferrals related primarily to the Initial Customer and, to a lesser extent, other wholesale customers.

The cumulative, after-tax impact of the adjustments required to fairly state the previously issued financial statements for the Affected Periods is a 3% reduction in retained earnings in the amount of $7.5 million as of July 4, 2009.  This amount reflects the sum of adjustments to net income for fiscal 2004 through the six-month period ended July 4, 2009, which total $4.4 million, and a 2003 cumulative adjustment to retained earnings in the amount of $3.1 million.  The adjustments do not impact the Company’s reported cash flow from operations for any of the Affected Periods.

The Company has self-reported information concerning this investigation to the SEC.  The Company has also been informed that the United States Attorney’s Office is conducting an inquiry into this matter.  The Company will continue to cooperate with these inquiries.


 
 

 

Restatement of Other Financial Statements

With the filing of this Form 10-Q/A, we are concurrently filing amendments to our Annual Report on Form 10-K for fiscal 2008 and our Quarterly Report on Form 10-Q for the quarterly period ended April 4, 2009.  The amendment to our Annual Report on Form 10-K/A is being filed to restate our consolidated financial statements for the fiscal years ended January 3, 2009, December 29, 2007, and December 30, 2006, and for the fiscal years ended December 31, 2005 and January 1, 2005, as included in Item 6 – “Selected Financial Data,” as well as our selected condensed consolidated financial data (excluding footnotes) for the quarterly periods in fiscal 2007 and fiscal 2008 included in Item 8 – “Financial Statements and Supplementary Data.”  The amendment to our Quarterly Report on Form 10-Q is being filed to restate our unaudited condensed consolidated financial statements and related financial information for the quarterly period ended April 4, 2009 and the comparative fiscal 2008 period for the effects of the restatement.  In addition, we are also concurrently filing our Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2009, in which we are restating our financial information for the three and nine-month periods ended September 27, 2008.

We do not intend to file any other amended Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q for periods affected by the restatement.  The consolidated financial statements and related financial information contained in any of the Company’s filings with the SEC during the restated periods should no longer be relied upon.

Internal Control Considerations

Through the investigation, management identified: (i) control deficiencies in its internal controls associated with customer accommodations processes that constitute material weaknesses, as discussed in Part I, Item 4 of this Amended Filing, and (ii) the need to restate prior period consolidated financial statements.  A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.  Management has also determined that the Company’s disclosure controls and procedures were ineffective as of July 4, 2009.  For a discussion of management’s consideration of the Company’s disclosure controls and procedures and material weaknesses identified, see Part I, Item 4 included in this Amended Filing.

If not remediated, these control deficiencies could result in future material misstatements to the Company’s consolidated financial statements.  Accordingly, management determined that these control deficiencies represented material weaknesses in internal control over financial reporting.

For the convenience of the reader, this Amended Filing sets forth the Original Filing in its entirety, as modified and superseded where necessary to reflect the restatement.  The following items have been amended principally as a result of, and to reflect, the restatement:

 
·  
Part I — Item 1. Financial Statements;
 
·  
Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations;
 
·  
Part I — Item 4. Controls and Procedures;

·  
Part II — Item 1A. Risk Factors; and

·  
Part II — Item 6. Exhibits.

In accordance with applicable SEC rules, this Amended Filing includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing.
 
The remaining Items contained within this Amended Filing consist of all other Items originally contained in the Form 10-Q and are included for the convenience of the reader.  The sections of the Form 10-Q which were not amended are unchanged and continue in full force and effect as originally filed.  This Amended Filing speaks as of the date of the Original Filing on the Form 10-Q and has not been updated to reflect events occurring subsequent to the original filing date other than those associated with the investigation and resulting restatement of the Company’s consolidated financial statements.

 
 

 
CARTER’S, INC.
INDEX

     
Page
 
     
         
     
         
      1  
           
      2  
           
      3  
           
      4  
           
      5  
           
    22  
           
    35  
           
    35  
           
       
           
    38  
           
    38  
           
    43  
           
    43  
           
    43  
           
    43  
           
    43  
           
    44  
         
Certifications
    45  






 
 

 



CARTER’S, INC.
(dollars in thousands, except for share data)
(unaudited)
   
July 4,
2009
(Restated)
   
January 3,
2009
(Restated)
 
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 173,812     $ 162,349  
Accounts receivable, net
    85,051       85,452  
Finished goods inventories, net
    256,151       203,486  
Prepaid expenses and other current assets
    13,538       13,214  
Deferred income taxes
    30,021       35,545  
                 
Total current assets
    558,573       500,046  
Property, plant, and equipment, net
    83,677       86,229  
Tradenames
    305,733       305,733  
Cost in excess of fair value of net assets acquired
    136,570       136,570  
Deferred debt issuance costs, net
    3,031       3,598  
Licensing agreements, net
    3,432       5,260  
Other assets
    293       576  
                 
       Total assets
  $ 1,091,309     $ 1,038,012  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Current maturities of long-term debt
  $ 3,503     $ 3,503  
Accounts payable
    109,944       79,011  
Other current liabilities
    42,509       57,613  
                 
Total current liabilities
    155,956       140,127  
Long-term debt
    332,772       334,523  
Deferred income taxes
    106,361       108,989  
Other long-term liabilities
    43,082       40,822  
                 
Total liabilities
    638,171       624,461  
                 
Commitments and contingencies
               
Stockholders’ equity:
               
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at July 4, 2009 and January 3, 2009
    --       --  
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 56,784,758 and 56,352,111 shares issued and outstanding at July 4, 2009 and January 3, 2009, respectively
    568       563  
Additional paid-in capital
    217,707       211,767  
Accumulated other comprehensive loss
    (6,914 )     (7,318 )
Retained earnings
    241,777       208,539  
                 
Total stockholders’ equity
    453,138       413,551  
                 
             Total liabilities and stockholders’ equity
  $ 1,091,309     $ 1,038,012  

See accompanying notes to the restated unaudited condensed consolidated financial statements


 
1

 

CARTER’S, INC.
(dollars in thousands, except per share data)
 (unaudited)

   
For the
three-month periods ended
   
For the
six-month periods ended
 
   
July 4,
2009
(Restated)
   
June 28,
2008
(Restated)
   
July 4,
2009
(Restated)
   
June 28,
2008
(Restated)
 
                         
Net sales
  $ 326,329     $ 303,636     $ 683,491     $ 637,521  
Cost of goods sold
    201,619       202,094       431,059       427,151  
                                 
Gross profit
    124,710       101,542       252,432       210,370  
Selling, general, and administrative expenses
    99,843       92,207       198,973       184,483  
Workforce reduction and facility write-down and closure costs (Note 11)
    2,980       --       11,400       --  
Executive retirement charges (Note 14)
    --       5,325       --       5,325  
Royalty income
    (7,472 )     (7,203 )     (16,234 )     (15,117 )
                                 
Operating income
    29,359       11,213       58,293       35,679  
Interest expense, net
    2,708       4,789       5,883       9,309  
                                 
Income before income taxes
    26,651       6,424       52,410       26,370  
Provision for income taxes
    10,017       2,404       19,172       8,319  
                                 
Net income
  $ 16,634     $ 4,020     $ 33,238     $ 18,051  
                                 
Basic net income per common share (Note 12)
  $ 0.29     $ 0.07     $ 0.59     $ 0.32  
Diluted net income per common share (Note 12)
  $ 0.28     $ 0.07     $ 0.57     $ 0.31  

See accompanying notes to the restated unaudited condensed consolidated financial statements



 
2

 

CARTER’S, INC.
(dollars in thousands)
(unaudited)
   
For the
six-month periods ended
 
   
July 4,
2009
(Restated)
   
June 28,
2008
(Restated)
 
Cash flows from operating activities:
           
Net income
  $ 33,238     $ 18,051  
Adjustments to reconcile net income to net cash provided by
operating activities:
               
Depreciation and amortization
    16,990       14,150  
Amortization of debt issuance costs
    567       567  
Non-cash stock-based compensation expense
    3,543       5,055  
Income tax benefit from exercised stock options
    (1,313 )     (60 )
Non-cash asset impairment and facility write-down charges
    3,662       --  
Deferred income taxes
    2,853       2,713  
Effect of changes in operating assets and liabilities:
               
     Accounts receivable
    401       5,340  
     Inventories
    (52,665 )     (25,323 )
     Prepaid expenses and other assets
    (767 )     (1,220 )
     Accounts payable and other liabilities
     20,492        4,786  
                 
     Net cash provided by operating activities
    27,001       24,059  
                 
Cash flows from investing activities:
               
Capital expenditures
    (15,835 )     (7,055 )
                 
     Net cash used in investing activities
    (15,835 )     (7,055 )
                 
Cash flows from financing activities:
               
  Payments on term loan
    (1,751 )     (875 )
Share repurchases
    --       (20,059 )
Income tax benefit from exercised stock options
    1,313       60  
Proceeds from exercise of stock options
    735       81  
                 
     Net cash provided by (used in) financing activities
    297       (20,793 )
                 
Net increase (decrease) in cash and cash equivalents
    11,463       (3,789 )
Cash and cash equivalents, beginning of period
    162,349       49,012  
                 
Cash and cash equivalents, end of period
  $ 173,812     $ 45,223  

See accompanying notes to the restated unaudited condensed consolidated financial statements

 
3

 

CARTER’S, INC.
(dollars in thousands, except for share data)
(unaudited)

   
Common
stock
   
Additional
paid-in
capital
   
Accumulated
other comprehensive
(loss)
income
   
Retained
earnings
   
Total
stockholders’
equity
 
                               
Restated balance at January 3, 2009
  $ 563     $ 211,767     $ (7,318 )   $ 208,539     $ 413,551  
Exercise of stock options (243,016 shares)
    2       733       --       --       735  
Income tax benefit from exercised stock options
    --       1,313       --       --       1,313  
Restricted stock activity     
    3       (3 )     --       --       --  
Stock-based compensation expense
    --       3,197       --       --       3,197  
Issuance of common stock (33,656 shares)
    --       700       --       --       700  
Comprehensive income (loss):
                                       
Restated net income     
    --       --       --       33,238       33,238  
Derivative hedging adjustment, net of tax of $214
    --       --       404       --       404  
Total comprehensive income
    --       --       404       33,238       33,642  
Restated balance at July 4, 2009
  $ 568     $ 217,707     $ (6,914 )   $ 241,777     $ 453,138  

See accompanying notes to the restated unaudited condensed consolidated financial statements

 
4

 

CARTER’S, INC.
(unaudited)

NOTE 1 – THE COMPANY:

Carter’s, Inc., and its wholly owned subsidiaries (collectively, the “Company,” “we,” “us,” “its,” and “our”) design, source, and market branded childrenswear under the Carter’s, Child of Mine, Just One Year, OshKosh, OshKosh B’Gosh, and related brands.  Our products are sourced through contractual arrangements with manufacturers worldwide for wholesale distribution to major domestic retailers, including the mass channel, and for our 271 Carter’s and 168 OshKosh retail stores that market our branded merchandise and other licensed products manufactured by other companies.

NOTE 2 – BASIS OF PREPARATION:

The accompanying unaudited condensed consolidated financial statements comprise the consolidated financial statements of Carter’s, Inc. and its subsidiaries.  All intercompany transactions and balances have been eliminated in consolidation.

In our opinion, the Company’s accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for a fair presentation of our financial position as of July 4, 2009, the results of our operations for the three and six-month periods ended July 4, 2009 and June 28, 2008, cash flows for the six-month periods ended July 4, 2009 and June 28, 2008 and changes in stockholders’ equity for the six-month period ended July 4, 2009.  Operating results for the three and six-month periods ended July 4, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending January 2, 2010.  Our accompanying condensed consolidated balance sheet as of January 3, 2009 is from our restated audited consolidated financial statements included in our most recently filed Annual Report on Form 10-K/A for the fiscal year ended January 3, 2009, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”).

Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and the instructions to Form 10-Q.  The accounting policies we follow are set forth in our most recently filed Annual Report on Form 10-K/A in the notes to our restated audited consolidated financial statements for the fiscal year ended January 3, 2009.

Our fiscal year ends on the Saturday, in December or January, nearest the last day of December.  The accompanying unaudited condensed consolidated financial statements for the second quarter and first half of fiscal 2009 are as of July 4, 2009.  The second quarter and first half of fiscal 2008 ended on June 28, 2008.

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

Subsequent events were evaluated through July 30, 2009, the date these financials were available to be issued.
 
NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:

Background of the Restatement

On November 10, 2009, the Company announced that its Audit Committee, with the assistance of outside counsel, had commenced a review of customer margin support provided by the Company and an investigation into undisclosed margin support commitments and related matters.  As a result of this review, the Company announced that the previously issued consolidated financial statements for the fiscal years 2004 through 2008 included in the Company’s Forms 10-K, and for the fiscal quarters from September 29, 2007 through July 4, 2009 included in the Company's Forms 10-Q, should no longer be relied upon (collectively, the "Affected Periods"). 




 
5

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
 
NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:  (Continued)
 
Management initially began a review of margin support arrangements with respect to a single wholesale customer (the "Initial Customer") after becoming aware of a disputed amount of margin support with the Initial Customer.  In the normal course of business, the Company provides margin support and other allowances (collectively, “accommodations”) to its wholesale customers to assist them with the costs related to inventory clearance and sales promotions.  The Company’s policy is to reflect the amounts of accommodations as reductions to revenue or, in the case of certain co-op advertising expenses, as additions to selling, general, and administrative expenses.  As a result of its review, management identified issues with respect to the timing of recognizing customer accommodations with respect to the Initial Customer.  Following management’s review, the Audit Committee engaged outside counsel to undertake the review and investigation.

The Audit Committee has completed its review and investigation, which was conducted with the assistance of outside counsel and forensic accountants engaged by outside counsel, and has concluded that the Company reported various customer accommodations in incorrect fiscal periods.  The investigation uncovered irregularities involving members of the sales organization intentionally not disclosing accommodations arrangements with customers to the Company’s finance organization and intentionally providing inaccurate documentation and explanations regarding accommodations to the finance organization.  Consequently, such arrangements were not communicated to the Company’s independent registered public accounting firm.  These accommodations arrangements were made throughout the Affected Periods by certain members of the Company’s sales organization and involved the deferral of accommodations into later fiscal periods.  The deferrals resulted in the overstatement of net sales and net income in certain of the Affected Periods and the understatement of net sales and net income in certain of the Affected Periods.  The deferrals related primarily to the Initial Customer and, to a lesser extent, other wholesale customers.

The Company has self-reported information concerning this investigation to the SEC.  The Company has also been informed that the United States Attorney’s Office is conducting an inquiry into this matter.  The Company will continue to cooperate with these inquiries.

Impact of the Restatement

The restatement adjustments detailed below to our previously filed consolidated financial statements reflect adjustments to margin support provided to wholesale customers which impact net income, net sales, and accounts receivable, net, along with the related deferred tax impact.

The effects of the restatement on the unaudited condensed consolidated balance sheets as of July 4, 2009 and January 3, 2009 are summarized in the following table:

   
As of July 4, 2009
   
As of January 3, 2009
 
(dollars in thousands)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously Reported
   
Adjustments
   
Restated
 
                                                 
Accounts receivable, net         
  $ 96,864     $ (11,813 )   $ 85,051     $ 106,060     $ (20,608 )   $ 85,452  
Deferred income taxes    
    25,712       4,309       30,021       27,982       7,563       35,545  
Total current assets   
    566,077       (7,504 )     558,573       513,091       (13,045 )     500,046  
Total assets        
    1,098,813       (7,504 )     1,091,309       1,051,057       (13,045 )     1,038,012  
Retained earnings  
    249,281       (7,504 )     241,777       221,584       (13,045 )     208,539  
Total stockholders’ equity      
    460,642       (7,504 )     453,138       426,596       (13,045 )     413,551  
Total liabilities and stockholders’ equity
    1,098,813       (7,504 )     1,091,309       1,051,057       (13,045 )     1,038,012  



 
6

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
 
NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:  (Continued)

The effects of the restatement on the unaudited condensed consolidated statements of operations for the three-month periods ended July 4, 2009 and June 28, 2008 are summarized in the following table:

   
For the three-month period ended
July 4, 2009
   
For the three-month period ended
June 28, 2008
 
(dollars in thousands, except per share data)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously
Reported
   
Adjustments
   
Restated
 
                                     
Net sales
  $ 317,909     $ 8,420     $ 326,329     $ 301,675     $ 1,961     $ 303,636  
Gross profit
    116,290       8,420       124,710       99,581       1,961       101,542  
Operating income
    20,939       8,420       29,359       9,252       1,961       11,213  
Income before income taxes
    18,231       8,420       26,651       4,463       1,961       6,424  
Provision for income taxes
    6,902       3,115       10,017       1,684       720       2,404  
Net income
    11,329       5,305       16,634       2,779       1,241       4,020  
Basic net income per common share
    0.20       0.09       0.29       0.05       0.02       0.07  
Diluted net income per common share
    0.19       0.09       0.28       0.05       0.02       0.07  

The effects of the restatement on the unaudited condensed consolidated statements of operations for the six-month periods ended July 4, 2009 and June 28, 2008 are summarized in the following table:

   
For the six-month period ended
July 4, 2009
   
For the six-month period ended
June 28, 2008
 
(dollars in thousands, except per share data)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously Reported
   
Adjustments
   
Restated
 
                                     
Net sales
  $ 674,696     $ 8,795     $ 683,491     $ 631,647     $ 5,874     $ 637,521  
Gross profit
    243,637       8,795       252,432       204,496       5,874       210,370  
Operating income
    49,498       8,795       58,293       29,805       5,874       35,679  
Income before income taxes
    43,615       8,795       52,410       20,496       5,874       26,370  
Provision for income taxes
    15,918       3,254       19,172       6,158       2,161       8,319  
Net income
    27,697       5,541       33,238       14,338       3,713       18,051  
Basic net income per common share
    0.49       0.10       0.59       0.25       0.07       0.32  
Diluted net income per common share
    0.47       0.10       0.57       0.24       0.07       0.31  



 
7

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)

 
NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:  (Continued)

The effects of the restatement on the unaudited condensed consolidated statements of cash flows for the six-month periods ended July 4, 2009 and June 28, 2008 are summarized in the following table:

   
For the six-month period ended
July 4, 2009
   
For the six-month period ended
June 28, 2008
 
(dollars in thousands)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously Reported
   
Adjustments
   
Restated
 
                                     
Cash flows from operating activities:
                                   
Net income
  $ 27,697     $ 5,541     $ 33,238     $ 14,338     $ 3,713     $ 18,051  
Deferred income taxes
    (401 )     3,254       2,853       552       2,161       2,713  
    Decrease (increase) in accounts receivable
    9,196       (8,795 )     401       17,114       (11,774 )     5,340  
   (Increase) decrease in prepaid expenses and other assets
    ( 767)       --       (767)       (7,120 )     5,900       (1,220 )
    Net cash provided by operating activities
    27,001       --       27,001       24,059       --       24,059  

The effects of the restatement on the Company’s segment information (see Note 10) for the three-month periods ended July 4, 2009 and June 28, 2008 are summarized in the following table:

   
For the three-month period ended
July 4, 2009
   
For the three-month period ended
June 28, 2008
 
(dollars in thousands)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously Reported
   
Adjustments
   
Restated
 
                                     
Carter’s wholesale net sales     
  $ 100,088     $ 7,973     $ 108,061     $ 94,322     $ (139 )   $ 94,183  
Carter’s wholesale operating income
    12,352       7,973       20,325       12,663       (139 )     12,524  
Carter’s mass channel net sales       
    44,216       67       44,283       51,054       (19 )     51,035  
Carter’s mass channel operating income
    8,639       67       8,706       7,123       (19 )     7,104  
Carter’s total segment net sales     
    254,431       8,040       262,471       238,032       (158 )     237,874  
Carter’s total segment operating income
    37,566       8,040       45,606       30,144       (158 )     29,986  
OshKosh wholesale net sales       
    11,318       380       11,698       13,760       2,119       15,879  
OshKosh wholesale operating (loss) income
    (2,318 )     380       (1,938 )     (4,312 )     2,119       (2,193 )
OshKosh total segment net sales       
    63,478       380       63,858       63,643       2,119       65,762  
OshKosh total segment operating (loss) income
    (1,094 )     380       (714 )     (6,330 )     2,119       (4,211 )
Total net sales     
    317,909       8,420       326,329       301,675       1,961       303,636  
Total operating income     
    20,939       8,420       29,359       9,252       1,961       11,213  



 
8

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
 
NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:  (Continued)
 
The effects of the restatement on the Company’s segment information (see Note 10) for the six-month periods ended July 4, 2009 and June 28, 2008 are summarized in the following table:

   
For the six-month period ended
July 4, 2009
   
For the six-month period ended
June 28, 2008
 
(dollars in thousands)
 
Previously Reported
   
Adjustments
   
Restated
   
Previously Reported
   
Adjustments
   
Restated
 
                                     
Carter’s wholesales net sales   
  $ 222,985     $ 6,893     $ 229,878     $ 212,154     $ 251     $ 212,405  
Carter’s wholesale operating income
    36,531       6,893       43,424       34,222       251       34,473  
Carter’s mass channel net sales            
    102,961       145       103,106       113,978       106       114,084  
Carter’s mass channel operating income
    16,674       145       16,819       13,865       106       13,971  
Carter’s total net sales     
    538,003       7,038       545,041       505,190       357       505,547  
Carter’s total operating income 
    86,368       7,038       93,406       69,887       357       70,244  
OshKosh wholesale net sales     
    32,705       1,757       34,462       32,209       5,517       37,726  
OshKosh wholesale operating (loss) income
    (2,274 )     1,757       (517 )     (6,836 )     5,517       (1,319 )
OshKosh total net sales      
    136,693       1,757       138,450       126,457       5,517       131,974  
OshKosh total operating (loss) income
    (675 )     1,757       1,082       (15,056 )     5,517       (9,539 )
Total net sales                                                     
    674,696       8,795       683,491       631,647       5,874       637,521  
Total operating income        
    49,498       8,795       58,293       29,805       5,874       35,679  


NOTE 4 – COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER
                   INTANGIBLE ASSETS:

Cost in excess of fair value of net assets acquired as of July 4, 2009, represents the excess of the cost of the acquisition of Carter’s, Inc. by Berkshire Partners LLC which was consummated on August 15, 2001 over the fair value of the net assets acquired.  The Carter’s cost in excess of fair value of net assets acquired is not deductible for tax purposes.

The Carter’s cost in excess of fair value of net assets acquired and Carter’s and OshKosh tradenames are deemed to have indefinite lives and are not being amortized.

The Company’s intangible assets were as follows:

     
July 4, 2009
   
January 3, 2009
 
(dollars in thousands)
Weighted-average useful life
 
Gross amount
   
Accumulated amortization
   
Net amount
   
Gross amount
   
Accumulated amortization
   
Net amount
 
                                       
Carter’s cost in excess of fair value of net assets acquired
Indefinite
  $ 136,570     $   --     $ 136,570     $ 136,570     $   --     $ 136,570  
Carter’s tradename 
Indefinite
  $ 220,233     $   --     $ 220,233     $ 220,233     $   --     $ 220,233  
OshKosh tradename 
Indefinite
  $ 85,500     $   --     $ 85,500     $ 85,500     $   --     $ 85,500  
OshKosh licensing agreements
4.7 years
  $ 19,100     $ 15,668     $ 3,432     $ 19,100     $ 13,840     $ 5,260  
Leasehold interests
4.1 years
  $ 1,833     $ 1,815     $ 18     $ 1,833     $ 1,599     $ 234  


 
9

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)
 
NOTE 4 – COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS:   (Continued)
 
Amortization expense for intangible assets was approximately $1.0 million for the three-month periods ended July 4, 2009 and June 28, 2008.  Amortization expense for intangible assets was approximately $2.0 million and $2.1 million for the six-month periods ended July 4, 2009 and June 28, 2008.  Amortization expense for the remainder of fiscal 2009 and fiscal 2010 for the OshKosh licensing agreements and leasehold interests is expected to be as follows:

(dollars in thousands)
     
Fiscal Year
 
Estimated
amortization
expense
 
       
2009 (period from July 5 through January 2, 2010)
  $ 1,673  
2010                                                                          
    1,777  
         
              Total                                                                          
  $ 3,450  

NOTE 5 – INCOME TAXES:

The Company and its subsidiaries file income tax returns in the United States and in various states and local jurisdictions.  During the first quarter of fiscal 2009, the Internal Revenue Service completed an income tax audit for fiscal 2006, and began an audit of fiscal 2007.  In most cases, the Company is no longer subject to state and local tax authority examinations for years prior to fiscal 2005.

During the first half of fiscal 2009, we recognized approximately $1.0 million in tax benefits due to the completion of the Internal Revenue Service audit for fiscal 2006.  During the first half of fiscal 2008, we recognized approximately $1.6 million in tax benefits due to the completion of an Internal Revenue Service audit for fiscal 2004 and 2005.  

As of July 4, 2009, the Company had gross unrecognized tax benefits of approximately $7.1 million.  Substantially all of the Company’s reserve for unrecognized tax benefits as of July 4, 2009, if ultimately recognized, will impact the Company’s effective tax rate in the period settled.  The Company has recorded tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductions.  Because of deferred tax accounting, changes in the timing of these deductions would not impact the annual effective tax rate, but would accelerate the payment of cash to the taxing authorities.

Included in the reserves for unrecognized tax benefits are approximately $0.5 million of reserves for which the statute of limitations is expected to expire in the third quarter of fiscal 2009.  If these tax benefits are ultimately recognized, such recognition may impact our annual effective tax rate for fiscal 2009 and the effective tax rate in the quarter in which the benefits are recognized.  While the Internal Revenue Service has begun its audit of the Company’s income tax return for fiscal 2007, the audit has not proceeded to a point where the Company can reasonably determine the outcome or completion date.

We recognize interest related to unrecognized tax benefits as a component of interest expense and penalties related to unrecognized tax benefits as a component of income tax expense.  The Company had approximately $0.6 million of interest accrued as of July 4, 2009.


 
10

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)

NOTE 6 – FINANCIAL INSTRUMENTS:

Effective December 30, 2007 (the first day of our 2008 fiscal year), the Company adopted Statement of Financial Accounting Standards (“SFAS”) SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The fair value hierarchy for disclosure of fair value measurements under SFAS 157 is as follows:

Level 1
-  Quoted prices in active markets for identical assets or liabilities
   
Level 2
-  Quoted prices for similar assets and liabilities in active markets or inputs that are observable
   
Level 3
-  Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The following table summarizes assets and liabilities measured at fair value on a recurring basis at July 4, 2009, as required by SFAS 157:

(dollars in millions)
 
Level 1
   
Level 2
   
Level 3
 
                   
Assets
                 
Investments
  $ --     $ 130.0     $ --  
Assets held for sale
  $ --     $ 2.8     $ --  
                         
Liabilities
                       
Interest rate hedge agreements
  $ --     $ 2.0     $ --  

At July 4, 2009, we had approximately $130.0 million invested in two Dreyfus Cash Management Funds, which are included in cash and cash equivalents on the accompanying unaudited condensed consolidated balance sheet.  These funds consisted of the Dreyfus Treasury Prime Cash Management fund ($87.9 million), which invests only in U.S. Treasury Bills or U.S. Treasury Notes, and the Dreyfus Tax Exempt Cash Management fund ($42.1 million), which invests in short-term, high quality municipal obligations that provide income exempt from federal taxes.  

At July 4, 2009, the carrying value of the Company’s White House, Tennessee distribution facility held for sale was estimated to be $2.8 million.  As discussed in more detail in Note 11, during the second quarter of fiscal 2009, the Company wrote down the carrying value of this property by approximately $0.7 million to reflect the decrease in the fair market value as evidenced by recent negotiations to sell the property.

Our senior credit facility requires us to hedge at least 25% of our variable rate debt under this facility.  As of July 4, 2009, approximately $147.1 million of our $336.3 million of outstanding debt was hedged under interest rate swap agreements.

On September 22, 2005, we entered into an interest rate swap agreement to receive floating interest and pay fixed interest.  This interest rate swap agreement is designated as a cash flow hedge of the variable interest payments on a portion of our term loan debt.  The interest rate swap agreement matures on July 30, 2010.  As of July 4, 2009, approximately $47.1 million of our outstanding term loan debt was hedged under this interest rate swap agreement.

On May 25, 2006, we entered into an interest rate collar agreement (the “collar”) with a floor of 4.3% and a ceiling of 5.5%.  The collar covered $100 million of our variable rate term loan debt and was designated as a cash flow hedge of the variable interest payments on such debt.  The collar matured on January 31, 2009.


 
11

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(unaudited)

NOTE 6 – FINANCIAL INSTRUMENTS:   (Continued)

On January 30, 2009, we entered into two interest rate swap agreements in order to limit our exposure to higher interest rates.  Each interest rate swap agreement covers $50.0 million of our variable rate term loan debt, to receive floating interest and pay fixed interest.  We continue to be in compliance with the 25% hedging requirement under our senior credit facility.  These interest rate swap agreements are designated as cash flow hedges of the variable interest payments on a portion of our variable rate term loan debt and each mature in January 2010.

Our interest rate swap agreements are traded in the over-the-counter market.  Fair values are based on quoted market prices for similar assets or liabilities or determined using inputs that use as their basis readily observable market data that are actively quoted and can be validated through external sources, including third-party pricing services, brokers, and market transactions.

The fair value of our derivative instruments in our accompanying unaudited condensed consolidated balance sheet as of July 4, 2009 was as follows:

 
Asset Derivatives
 
Liability Derivatives
 
                 
(dollars in millions)
Balance sheet
location
 
Fair value
 
Balance sheet
location
 
Fair value
 
                 
Interest rate hedge agreements
Prepaid expenses and other current assets
    --  
Other current liabilities
  $ 2.0  

 
The effect of derivative instruments designated as cash flow hedges on our accompanying unaudited condensed consolidated financial statements were as follows:

   
For the three-month period ended
July 4, 2009
   
For the six-month period ended
July 4, 2009
(dollars in thousands)
 
Amount of gain (loss)
recognized in accumulated
other comprehensive
income (loss) on effective hedges (1)
   
Amount of gain (loss)
reclassified from accumulated
other comprehensive
income (loss) into interest expense
   
Amount of gain (loss)
recognized in accumulated
other comprehensive
income (loss) on
effective hedges (1)
   
Amount of gain (loss)
reclassified from
accumulated
other comprehensive
income (loss) into interest expense
                       
Interest rate hedge agreements
  $ 144     $ (541 )   $ (3 )   $ (1,414 )
                                   
(1) Amount recognized in accumulated other comprehensive (loss) income, net of tax of $85,000 and net of tax benefit of $2,000 for the three and six-month periods ended July 4, 2009, respectively.
   


 
12

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

NOTE 7 – EMPLOYEE BENEFIT PLANS:

Under a defined benefit plan frozen in 1991, we offer a comprehensive post-retirement medical plan to current and certain future retirees and their spouses until they become eligible for Medicare or a Medicare Supplement Plan.  We also offer life insurance to current and certain future retirees.  Employee contributions are required as a condition of participation for both medical benefits and life insurance and our liabilities are net of these expected employee contributions.  See Note 8 “Employee Benefit Plans” to our restated audited consolidated financial statements in our most recently filed Annual Report on Form 10-K/A for further information.

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

   
For the
three-month periods ended
   
For the
six-month periods ended
 
(dollars in thousands)
 
July 4,
2009
   
June 28,
2008
   
July 4,
2009
   
June 28,
2008
 
                         
Service cost – benefits attributed to service during the period
  $ 23     $ 26     $ 46     $ 53  
Interest cost on accumulated post-retirement benefit obligation
    113       132       226       263  
Amortization net actuarial gain
    (7 )      --       (14 )     --  
    Total net periodic post-retirement benefit cost
  $ 129     $ 158     $ 258     $ 316  

The component of pension expense charged to operations is as follows:

   
For the
three-month periods ended
   
For the
six-month periods ended
 
(dollars in thousands)
 
July 4,
2009
   
June 28,
2008
   
July 4,
2009
   
June 28,
2008
 
                         
Interest cost on accumulated pension benefit obligation
  $ 13     $ 13     $ 26     $ 26  

Under a defined benefit pension plan frozen as of December 31, 2005, certain current and former employees of OshKosh are eligible to receive benefits.  The net periodic pension benefit associated with this pension plan and included in the statement of operations was comprised of:

   
For the
three-month periods ended
   
For the
six-month periods ended
 
(dollars in thousands)
 
July 4,
2009
   
June 28,
2008
   
July 4,
2009
   
June 28,
2008
 
                         
Interest cost on accumulated pension benefit obligation
  $ 568     $ 562     $ 1,135     $ 1,124  
Expected return on assets
    (650 )     (944 )     (1,300 )     (1,887 )
Amortization of actuarial loss (gain)
    102       (19 )     205       (38 )
    Total net periodic pension expense (benefit)
  $ 20     $ (401 )   $ 40     $ (801 )



 
13

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

NOTE 8 – COMMON STOCK:

On February 16, 2007, the Company’s Board of Directors approved a stock repurchase program, pursuant to which the Company is authorized to purchase up to $100 million of its outstanding common shares.  Such repurchases may occur from time to time in the open market, in negotiated transactions, or otherwise.  This program has no time limit.  The timing and amount of any repurchases will be determined by the Company’s management, based on its evaluation of market conditions, share price, and other factors.

During the first half of fiscal 2009, the Company did not repurchase any shares of its common stock.  During the second quarter and first half of fiscal 2008, the Company repurchased and retired approximately 645,727 and 1,320,085 shares of its common stock at an average price of $15.55 and $15.20 per share, respectively.  Since inception of the program and through July 4, 2009, the Company repurchased and retired approximately 4,599,580 shares, or approximately $91.1 million, of its common stock at an average price of $19.81 per share, leaving approximately $8.9 million available for repurchase under the plan.  We have reduced common stock by the par value of such shares repurchased and have deducted the remaining excess repurchase price over par value from additional paid-in capital.

During the second quarter and first half of fiscal 2009, the Company issued 33,656 shares of common stock at a fair market value of $20.80 to its non-management board members.  In connection with this issuance, we recognized approximately $700,000 in stock-based compensation expense.  During the second quarter and first half of fiscal 2008, the Company issued 43,386 shares of common stock at a fair market value of $14.48 to its non-management board members.  In connection with this issuance, we recognized approximately $630,000 in stock-based compensation expense.  We received no proceeds from the issuance of these shares.

NOTE 9 – STOCK-BASED COMPENSATION:

We account for stock-based compensation expense in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment.”  The fair value of time-based or performance-based stock option grants are estimated on the date of grant using the Black-Scholes option pricing method with the following weighted-average assumptions used for grants issued during the six-month period ended July 4, 2009.

   
Assumptions
 
       
Volatility
    35.83 %
Risk-free interest rate
    2.50 %
Expected term (years)
    7  
Dividend yield
    --  

The fair value of restricted stock is determined based on the quoted closing price of our common stock on the date of grant.



 
14

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

NOTE 9 – STOCK-BASED COMPENSATION:  (Continued)

The following table summarizes our stock option and restricted stock activity during the six-month period ended July 4, 2009:
 
   
Time-based
stock options
   
Performance-based
stock
options
   
Retained
stock options
   
Restricted
stock
 
                         
Outstanding, January 3, 2009
    4,733,080       220,000       113,514       444,589  
                                 
Granted
    448,000       --       --       208,500  
Exercised
    (129,502 )     --       (113,514 )     --  
Vested restricted stock
    --       --       --       (132,256 )
Forfeited
    (85,600 )     (20,000 )     --       (52,525 )
Expired
    (36,000 )     --       --       --  
                                 
Outstanding, July 4, 2009
    4,929,978       200,000       --       468,308  
                                 
Exercisable, July 4, 2009
    3,796,558       --       --       --  

During the six-month period ended July 4, 2009, we granted 448,000 time-based stock options with a weighted-average Black-Scholes fair value of $7.61 and a weighted-average exercise price of $18.08.  In connection with these grants, we recognized approximately $250,000 in stock-based compensation expense.

During the six-month period ended July 4, 2009, we granted 208,500 shares of restricted stock to employees with a weighted-average fair value on the date of grant of $18.08.  In connection with these grants, we recognized approximately $275,000 in stock-based compensation expense.

As a result of the retirement of an executive officer during the second quarter of fiscal 2008, the Company recognized approximately $2.2 million of stock-based compensation expense as a result of the accelerated vesting of 400,000 performance-based stock options (see Note 14, “Executive Retirement Charges”).

Unrecognized stock-based compensation expense related to outstanding unvested stock options and unvested restricted stock awards is expected to be recorded as follows:

(dollars in thousands)
 
Time-based
stock
options
   
Restricted
stock
   
Total
 
                   
2009 (period from July 5 through January 2, 2010)
  $ 1,438     $ 1,407     $ 2,845  
2010        
    2,502       2,466       4,968  
2011         
    1,938       2,002       3,940  
2012                     
    1,059       1,180       2,239  
       Total                                                                   
  $ 6,937     $ 7,055     $ 13,992  


 
15

 

CARTER’S, INC.
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(unaudited)

NOTE 10 – SEGMENT INFORMATION (RESTATED):

 
We report segment information in accordance with the provisions of SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” which requires segment information to be disclosed based upon a “management approach.”  The management approach refers to the internal reporting that is used by management for making operating decisions and assessing the performance of our reportable segments.  We report our corporate expenses, workforce reduction, and facility write-down and closure costs separately as they are not included in the internal measures of segment operating performance used by the Company in order to measure the underlying performance of our reportable segments.

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


   
For the three-month periods ended
   
For the six-month periods ended
 
(dollars in thousands)
 
July 4,
2009
(Restated)
   
% of
Total
   
June 28,
2008
(Restated)
   
% of
Total
   
July 4,
2009
(Restated)
   
% of
Total
   
June 28,
2008
(Restated)
   
% of
Total
 
Net sales:
                                               
                                                 
Carter’s:
                                               
 Wholesale
  $ 108,061       33.1 %   $ 94,183       31.0 %   $ 229,878       33.6 %   $ 212,405       33.3 %
 Retail
    110,127       33.7 %     92,656       30.5 %     212,057       31.0 %     179,058       28.1 %
 Mass Channel
    44,283       13.6 %     51,035       16.8 %     103,106       15.1 %     114,084       17.9 %
         Carter’s net sales
    262,471       80.4 %     237,874       78.3 %     545,041       79.7 %     505,547       79.3 %
                                                                 
OshKosh:
                                                               
 Retail
    52,160       16.0 %     49,883       16.4 %     103,988       15.2 %     94,248       14.8 %
 Wholesale
    11,698       3.6 %     15,879       5.3 %     34,462       5.1 %     37,726       5.9 %
         OshKosh net sales
    63,858       19.6 %     65,762       21.7 %     138,450       20.3 %     131,974       20.7 %
                                                                 
               Total net sales
  $ 326,329       100.0 %   $ 303,636       100.0 %   $ 683,491       100.0 %   $ 637,521       100.0 %
                                                                 
Operating income (loss):
         
% of
segment
net sales
           
% of
segment
net sales
           
% of
segment
net sales
           
% of
segment
net sales
 
                                                                 
Carter’s:
                                                               
 Wholesale
  $ 20,325       18.8 %   $ 12,524       13.3 %   $ 43,424       18.9 %   $ 34,473       16.2 %
 Retail
    16,575       15.1 %     10,358       11.2 %     33,163       15.6 %     21,800       12.2 %
 Mass Channel
    8,706       19.7 %     7,104       13.9 %     16,819       16.3 %     13,971       12.2 %
                                                                 
         Carter’s operating income
    45,606       17.4 %     29,986       12.6 %     93,406       17.1 %     70,244       13.9 %
                                                                 
OshKosh:
                                                               
 Retail
    786       1.5 %     (2,646 )     (5.3 %)     455       0.4 %     (9,379 )     (10.0 %)
 Wholesale
    (1,938 )     (16.6 %)     (2,193 )     (13.8 %)     (517 )     (1.5 %)     (1,319 )     (3.5 %)
 Mass Channel (a)
    438       --       628       --       1,144       --       1,159       --  
                                                    <