Edgar Filing: CARTERS INC

form10_q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 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 [ ] No [X]

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 January 15, 2010
Common stock, par value $0.01 per share		58,077,002

CARTER’S, INC.

FORM 10-Q

EXPLANATORY NOTE

As part of this Quarterly Report on Form 10-Q, the Company is hereby amending its results for the three and nine-month periods ended September 27, 2008, which were originally filed with the Securities and Exchange Commission (“SEC”) on Form 10-Q on October 30, 2008 (“Original Filing”).

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, we are concurrently filing amendments to our Annual Report on Form 10-K for fiscal 2008 and our Quarterly Reports on Form 10-Q for each of the quarterly periods ended April 4, 2009 and July 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 amendments to our Quarterly Reports on Form 10-Q are being filed to restate our unaudited condensed consolidated financial statements and related financial information for the quarterly periods ended April 4, 2009 and July 4, 2009 and the comparative fiscal 2008 periods for the effects of the restatement.

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 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 October 3, 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 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.

The Company is amending and restating its financial information for the three and nine-month periods ended September 27, 2008, as modified and superseded where necessary to reflect the restatement in the following items:

·	Part I — Item 1. Financial Statements

o	Unaudited Condensed Consolidated Balance Sheet as of January 3, 2009

o	Unaudited Condensed Consolidated Statements of Operations for the three and nine-month periods ended September 27, 2008

o	Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month period ended September 27, 2008

o	Notes to Unaudited Condensed Consolidated Financial Statements — the impacts are more fully discussed in Note 3 — Restatement of Consolidated Financial Statements

·	Part I — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine-month periods ended September 27, 2008

In accordance with applicable SEC rules, this filing includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing.

CARTER’S, INC.

INDEX

		Page
Part I. Financial Information

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of October 3, 2009 and January 3, 2009 (Restated)		1

	Unaudited Condensed Consolidated Statements of Operations for the three and nine-month periods ended October 3, 2009 and September 27, 2008 (Restated)		2

	Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month periods ended October 3, 2009 and September 27, 2008 (Restated)		3

	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the nine-month eriod ended October 3, 2009		4

	Notes to the Unaudited Condensed Consolidated Financial Statements		5

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		33

Item 4.	Controls and Procedures		33

Part II. Other Information

Item 1.	Legal Proceedings		36

Item 1A.	Risk Factors		37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 3.	Defaults upon Senior Securities		43

Item 4.	Submission of Matters to a Vote of Security Holders		43

Item 5.	Other Information		43

Item 6.	Exhibits		43

Signatures			44

Certifications			45

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CARTER’S, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except for share data)

(unaudited)

	October 3, 2009			January 3, 2009 (Restated)

ASSETS
Current assets:
Cash and cash equivalents	$	214,339		$	162,349
Accounts receivable, net		127,879			85,452
Finished goods inventories, net		223,510			203,486
Prepaid expenses and other current assets		11,845			13,214
Deferred income taxes		32,005			35,545

Total current assets		609,578			500,046
Property, plant, and equipment, net		84,430			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		2,750			3,598
Licensing agreements, net		2,597			5,260
Other assets		405			576

Total assets	$	1,142,063		$	1,038,012

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	3,503		$	3,503
Accounts payable		68,009			79,011
Other current liabilities		69,808			57,613

Total current liabilities		141,320			140,127
Long-term debt		331,896			334,523
Deferred income taxes		106,646			108,989
Other long-term liabilities		43,628			40,822

Total liabilities		623,490			624,461

Commitments and contingencies
Stockholders’ equity:
Preferred stock; par value $.01 per share; 100,000 shares authorized; none issued or outstanding at October 3, 2009 and January 3, 2009		--			--
Common stock, voting; par value $.01 per share; 150,000,000 shares authorized; 58,037,018 and 56,352,111 shares issued and outstanding at October 3, 2009 and January 3, 2009, respectively		580			563
Additional paid-in capital		233,565			211,767
Accumulated other comprehensive loss		(6,755	)		(7,318	)
Retained earnings		291,183			208,539

Total stockholders’ equity		518,573			413,551

Total liabilities and stockholders’ equity	$	1,142,063		$	1,038,012

See accompanying notes to the unaudited condensed consolidated financial statements

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(unaudited)

	For the three-month periods ended						For the nine-month periods ended
	October 3, 2009			September 27, 2008 (Restated)			October 3, 2009			September 27, 2008 (Restated)

Net sales	$	481,506		$	434,882		$	1,164,997		$	1,072,403
Cost of goods sold		295,942			281,752			727,001			708,903

Gross profit		185,564			153,130			437,996			363,500
Selling, general, and administrative expenses		115,225			104,536			314,198			289,019
Workforce reduction and facility write-down and closure costs (Note 12)		--			2,609			11,400			2,609
Executive retirement charges (Note 15)		--			--			--			5,325
Royalty income		(10,637	)		(9,576	)		(26,871	)		(24,693	)

Operating income		80,976			55,561			139,269			91,240
Interest expense, net		2,688			4,048			8,571			13,357

Income before income taxes		78,288			51,513			130,698			77,883
Provision for income taxes		28,882			19,111			48,054			27,430

Net income	$	49,406		$	32,402		$	82,644		$	50,453

Basic net income per common share (Note 13)	$	0.86		$	0.57		$	1.45		$	0.89
Diluted net income per common share (Note 13)	$	0.84		$	0.55		$	1.41		$	0.86

See accompanying notes to the unaudited condensed consolidated financial statements

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	For the nine-month periods ended
	October 3, 2009			September 27, 2008 (Restated)
Cash flows from operating activities:
Net income	$	82,644		$	50,453
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		24,396			20,576
Amortization of debt issuance costs		848			851
Non-cash stock-based compensation expense		5,200			6,756
Income tax benefit from exercised stock options		(11,374	)		(3,457	)
Non-cash asset impairment and facility write-down charges		3,662			2,609
Loss on sale or disposal of property, plant, and equipment		96			383
Deferred income taxes		1,310			198
Effect of changes in operating assets and liabilities:
Accounts receivable		(42,427	)		(47,109	)
Inventories		(20,024	)		11,135
Prepaid expenses and other assets		(1,876	)		(2,337	)
Accounts payable and other liabilities		16,134			17,295

Net cash provided by operating activities		58,589			57,353

Cash flows from investing activities:
Capital expenditures		(23,238	)		(19,197	)
Proceeds from the sale of fixed assets		2,805			--

Net cash used in investing activities		(20,433	)		(19,197	)

Cash flows from financing activities:
Payments on term loan		(2,627	)		(1,751	)
Share repurchases		--			(29,774	)
Income tax benefit from exercised stock options		11,374			3,457
Proceeds from exercise of stock options		5,087			560

Net cash provided by (used in) financing activities		13,834			(27,508	)

Net increase in cash and cash equivalents		51,990			10,648
Cash and cash equivalents, beginning of period		162,349			49,012

Cash and cash equivalents, end of period	$	214,339		$	59,660

See accompanying notes to the unaudited condensed consolidated financial statements

CARTER’S, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(dollars in thousands, except for share data)

(unaudited)

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

Balance at January 3, 2009 (Restated)	$	563	$	211,767		$	(7,318	)	$	208,539	$	413,551
Exercise of stock options (1,484,276 shares)		14		5,073			--			--		5,087
Income tax benefit from exercised stock options		--		11,374			--			--		11,374
Restricted stock activity		3		(3	)		--			--		--
Stock-based compensation expense		--		4,654			--			--		4,654
Issuance of common stock (33,656 shares)		--		700			--			--		700
Comprehensive income:
Net income		--		--			--			82,644		82,644
Derivative hedging adjustment, net of tax of $307		--		--			563			--		563
Total comprehensive income		--		--			563			82,644		83,207
Balance at October 3, 2009	$	580	$	233,565		$	(6,755	)	$	291,183	$	518,573

See accompanying notes to the unaudited condensed consolidated financial statements

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – THE COMPANY:

Carter’s, Inc., and its wholly owned subsidiaries (collectively, the “Company,” “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 273 Carter’s and 169 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 October 3, 2009, the results of our operations for the three and nine-month periods ended October 3, 2009 and September 27, 2008, cash flows for the nine-month periods ended October 3, 2009 and September 27, 2008 and changes in stockholders’ equity for the nine-month period ended October 3, 2009. Operating results for the three and nine-month periods ended October 3, 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 audited restated 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 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 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 third quarter and first nine months of fiscal 2009 are as of October 3, 2009. The third quarter and first nine months of fiscal 2008 ended on September 27, 2008.

As part of this Quarterly Report on Form 10-Q, the Company is hereby amending its results for the three and nine-month periods ended September 27, 2008, which were originally filed with the Securities and Exchange Commission on Form 10-Q on October 30, 2008 (“Original Filing”).

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

Subsequent events were evaluated through January 15, 2010, the date these financials were available to be issued, see Note 16, “Subsequent Events.”

NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS:

Background of the Restatement

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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

The Company has self-reported information concerning this investigation to the Securities and Exchange Commission. 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 sheet as of January 3, 2009 are summarized in the following table:

	As of January 3, 2009
(dollars in thousands)	Previously Reported		Adjustments			Restated
							,
Accounts receivable, net	$	106,060	$	(20,608	)	$	85,452
Deferred income taxes		27,982		7,563			35,545
Total current assets		513,091		(13,045	)		500,046
Total assets		1,051,057		(13,045	)		1,038,012
Retained earnings		221,584		(13,045	)		208,539
Total stockholders’ equity		426,596		(13,045	)		413,551
Total liabilities and stockholders’ equity		1,051,057		(13,045	)		1,038,012

CARTER’S, INC.

NOTES TO 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 and nine-month periods ended September 27, 2008 are summarized in the following table:

	For the three-month period ended September 27, 2008							For the nine-month period ended September 27, 2008
(dollars in thousands, except per share data)	Previously Reported		Adjustments			Restated		Previously Reported		Adjustments		Restated

Net sales	$	436,419	$	(1,537	)	$	434,882	$	1,068,066	$	4,337	$	1,072,403
Gross profit		154,667		(1,537	)		153,130		359,163		4,337		363,500
Operating income		57,098		(1,537	)		55,561		86,903		4,337		91,240
Income before income taxes		53,050		(1,537	)		51,513		73,546		4,337		77,883
Provision for income taxes		19,675		(564	)		19,111		25,833		1,597		27,430
Net income		33,375		(973	)		32,402		47,713		2,740		50,453
Basic net income per common share (a)		0.59		(0.02	)		0.57		0.84		0.05		0.89
Diluted net income per common share (a)		0.57		(0.02	)		0.55		0.81		0.05		0.86

(a)

Previously reported basic and diluted net income per share have been adjusted to reflect the adoption of new accounting guidance which requires earnings per share to be calculated pursuant to the two-class method for unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

The effects of the restatement on the unaudited condensed consolidated statements of cash flows for the nine-month period ended September 27, 2008 are summarized in the following table:

	For the nine-month period ended September 27, 2008
(dollars in thousands)	Previously Reported			Adjustments			Restated

Cash flows from operating activities:
Net income	$	47,713		$	2,740		$	50,453
Deferred income taxes		(1,399	)		1,597			198
Increase in accounts receivable		(40,387	)		(6,722	)		(47,109	)
(Increase) decrease in prepaid expenses and other assets		(4,722	)		2,385			(2,337	)
Net cash provided by operating activities		57,353			--			57,353

CARTER’S, INC.

NOTES TO 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 11) for the three and nine-month periods ended September 27, 2008 are summarized in the following table:

	For the three-month period ended September 27, 2008							For the nine-month period ended September 27, 2008
(dollars in thousands)	Previously Reported		Adjustments			Restated		Previously Reported			Adjustments			Restated

Carter’s wholesale net sales	$	151,848	$	(1,798	)	$	150,050	$	364,002		$	(1,547	)	$	362,455
Carter’s wholesale operating income (a)		29,520		(1,798	)		27,722		63,742			(1,547	)		62,195
Carter’s mass channel net sales		76,694		114			76,808		190,672			220			190,892
Carter’s mass channel operating income (a)		10,055		114			10,169		23,920			220			24,140
Carter’s total net sales		341,050		(1,684	)		339,366		846,240			(1,327	)		844,913
Carter’s total operating income		59,942		(1,684	)		58,258		129,829			(1,327	)		128,502
OshKosh wholesale net sales		22,801		147			22,948		55,010			5,664			60,674
OshKosh wholesale operating income (loss)		1,546		147			1,693		(5,290	)		5,664			374
OshKosh total net sales		95,369		147			95,516		221,826			5,664			227,490
OshKosh total operating income (loss)		12,120		147			12,267		(2,936	)		5,664			2,728
Total net sales		436,419		(1,537	)		434,882		1,068,066			4,337			1,072,403
Total operating income		57,098		(1,537	)		55,561		86,903			4,337			91,240

(a) Previously reported operating income for the nine-month period ended September 27, 2008 reflects a $656,000 reclassification from Carter’s mass channel to Carter’s wholesale

to further refine allocations of inventory-related charges for comparative purposes.

NOTE 4 – COMPREHENSIVE INCOME (LOSS):

Comprehensive income (loss) is summarized as follows:

	For the three-month periods ended				For the nine-month periods ended
(dollars in thousands)	October 3, 2009		September 27, 2008 (Restated)		October 3, 2009		September 27, 2008 (Restated)

Net income	$	49,406	$	32,402	$	82,644	$	50,453
Unrealized gain (loss) on interest rate collar, net of taxes of $110, $216, and $(199)		--		188		407		(375	)
Unrealized gain on interest rate swap agreements, net of taxes of $93, $203, $91, and $28		159		345		156		28
Total comprehensive income	$	49,565	$	32,935	$	83,207	$	50,106

NOTE 5 – COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS:

The Carter’s cost in excess of fair value of net assets acquired 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.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 5 – COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS: (Continued)

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 are comprised of the following:

		October 3, 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 (1)	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	$	16,503	$	2,597	$	19,100	$	13,840	$	5,260
Leasehold interests	4.1 years	$	1,833	$	1,833	$	--	$	1,833	$	1,599	$	234

(1) $51.8 million of which relates to Carter’s wholesale segment, $82.0 of which relates to Carter’s retail segment, and $2.7 million of which relates to Carter’s mass channel segment.

Amortization expense for intangible assets was approximately $0.9 million for the three-month period ended October 3, 2009 and $1.0 million for the three-month period ended September 27, 2008. Amortization expense for intangible assets was approximately $2.9 million and $3.1 million for the nine-month periods ended October 3, 2009 and September 27, 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 October 4 through January 2, 2010)	$	820
2010		1,777

Total	$	2,597

NOTE 6 – 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 2006.

During the first nine months of fiscal 2009, we recognized approximately $1.4 million in tax benefits consisting of $1.0 million due to the completion of the Internal Revenue Service audit for fiscal 2006 and approximately $0.4 million due to various statute closures. During the first nine months of fiscal 2008, we recognized approximately $1.9 million in tax benefits consisting of $1.6 million due to the completion of an Internal Revenue Service audit for fiscal 2004 and 2005 and approximately $0.3 million due to various statute closures, primary state and local jurisdictions.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 6 – INCOME TAXES: (Continued)

As of October 3, 2009, the Company had gross unrecognized tax benefits of approximately $7.5 million. Substantially all of the Company’s reserve for unrecognized tax benefits as of October 3, 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.

The Company settled its ongoing Internal Revenue Service audit of the Company’s income tax return for fiscal 2007 in the fourth quarter of fiscal 2009. The Company is not anticipating a material payment or material impact on its effective tax rate as a result of the expected settlement.

Included in the reserves for unrecognized tax benefits are approximately $0.6 million of reserves for which the statute of limitations is expected to expire in the third quarter of fiscal 2010. If these tax benefits are ultimately recognized, such recognition may impact our annual effective tax rate for fiscal 2010 and the effective tax rate in the quarter in which the benefits are recognized.

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 $0.5 million of interest accrued as of October 3, 2009.

NOTE 7 – FINANCIAL INSTRUMENTS:

The guidance on fair value measurements 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 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 October 3, 2009:

(dollars in millions)	Level 1		Level 2		Level 3

Assets
Investments	$	--	$	190.0	$	--
Interest rate hedge agreements	$	--	$	0.1	$	--

Liabilities
Interest rate hedge agreements	$	--	$	1.9	$	--

At October 3, 2009, we had approximately $190.0 million invested in two Dreyfus Cash Management Funds and U.S. Treasury Bills, which are included in cash and cash equivalents on the accompanying unaudited condensed consolidated balance sheet. The 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. We also invested $60.0 million in U.S. Treasury Bills that mature in the fourth quarter of fiscal 2009.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 7 – FINANCIAL INSTRUMENTS: (Continued)

Our senior credit facility requires us to hedge at least 25% of our variable rate debt under this facility. The Company enters into interest rate swap agreements in order to hedge the risk of interest rate fluctuations. 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. 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.

As of October 3, 2009, approximately $243.0 million of our $335.4 million of outstanding debt was hedged under interest rate swap agreements. These interest rate swap agreements mature at various times through January 2011. We continue to be in compliance with the 25% hedging requirement under our senior credit facility.

The fair value of our derivative instruments in our accompanying unaudited condensed consolidated balance sheet as of October 3, 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	$	0.1	Other current liabilities	$	1.9

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 October 3, 2009					For the nine-month period ended October 3, 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	$	159	$	(720	)	$	156	$	(2,134	)

(1) Amount recognized in accumulated other comprehensive (loss) income, net of tax of $93,000 and $91,000 for the three and nine-month periods ended October 3, 2009, respectively.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 8 – 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 audited restated 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 nine-month periods ended
(dollars in thousands)	October 3, 2009			September 27, 2008		October 3, 2009			September 27, 2008

Service cost – benefits attributed to service during the period	$	23		$	26	$	69		$	79
Interest cost on accumulated post-retirement benefit obligation		113			132		339			395
Amortization net actuarial gain		(7	)		--		(21	)		--
Total net periodic post-retirement benefit cost	$	129		$	158	$	387		$	474

We have an obligation under a defined benefit plan covering certain former officers and their spouses. The component of pension expense charged to operations is as follows:

	For the three-month periods ended				For the nine-month periods ended
(dollars in thousands)	October 3, 2009		September 27, 2008		October 3, 2009		September 27, 2008

Interest cost on accumulated pension benefit obligation	$	12	$	13	$	38	$	39

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 nine-month periods ended
(dollars in thousands)	October 3, 2009			September 27, 2008			October 3, 2009			September 27, 2008

Interest cost on accumulated pension benefit obligation	$	567		$	562		$	1,702		$	1,686
Expected return on assets		(651	)		(943	)		(1,951	)		(2,830	)
Amortization of actuarial loss (gain)		103			(19	)		308			(57	)
Total net periodic pension expense (benefit)	$	19		$	(400	)	$	59		$	(1,201	)

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 9 – 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 nine months of fiscal 2009, the Company did not repurchase any shares of its common stock. During the third quarter and first nine months of fiscal 2008, the Company repurchased and retired approximately 578,098 and 1,898,183 shares of its common stock at an average price of $16.81 and $15.69 per share, respectively. Since inception of the program and through October 3, 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 first nine months 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 first nine months of fiscal 2008, the Company issued 43,386 shares of common stock at a fair market value of $14.52 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 10 – STOCK-BASED COMPENSATION:

Under our Amended and Restated 2003 Equity Incentive Plan, the compensation committee of our Board of Directors may award incentive stock options (ISOs and non-ISOs), stock appreciation rights (SARs), restricted stock, unrestricted stock, stock deliverable on a deferred basis, performance-based stock awards, and cash payments intended to help defray the cost of awards. 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 nine-month period ended October 3, 2009.

	Assumptions

Volatility		35.75	%
Risk-free interest rate		2.54	%
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.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 10 – STOCK-BASED COMPENSATION: (Continued)

The following table summarizes our stock option and restricted stock activity during the nine-month period ended October 3, 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		470,000			--			--			219,500
Exercised		(1,370,762	)		--			(113,514	)		--
Vested restricted stock		--			--			--			(134,381	)
Forfeited		(85,600	)		(20,000	)		--			(52,525	)
Expired		(42,000	)		--			--			--

Outstanding, October 3, 2009		3,704,718			200,000			--			477,183

Exercisable, October 3, 2009		2,595,048			--			--			--

During the three-month period ended October 3, 2009, we granted 22,000 time-based stock options with a weighted-average Black-Scholes fair value of $11.32 and a weighted-average exercise price of $26.49. In connection with these grants, we recognized approximately $9,400 in stock-based compensation expense.

During the nine-month period ended October 3, 2009, we granted 470,000 time-based stock options with a weighted-average Black-Scholes fair value of $7.78 and a weighted-average exercise price of $18.48. In connection with these grants, we recognized approximately $451,000 in stock-based compensation expense.

During the three-month period ended October 3, 2009, we granted 11,000 shares of restricted stock to employees with a weighted-average fair value on the date of grant of $26.49. In connection with these grants, we recognized approximately $11,000 in stock-based compensation expense.

During the nine-month period ended October 3, 2009, we granted 219,500 shares of restricted stock to employees with a weighted-average fair value on the date of grant of $18.50. In connection with these grants, we recognized approximately $496,000 in stock-based compensation expense.

As a result of the retirement of an executive officer during the first nine months 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 15, “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 October 4 through January 2, 2010)	$	720	$	717	$	1,437
2010		2,550		2,522		5,072
2011		1,987		2,059		4,046
2012		1,111		1,242		2,353
Total	$	6,368	$	6,540	$	12,908

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 11 – SEGMENT INFORMATION:

We report segment information in accordance with accounting guidance on segment reporting 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 nine-month periods ended
(dollars in thousands)	Oct. 3, 2009			% of Total			Sept. 27, 2008 (Restated)			% of Total			Oct. 3, 2009			% of Total			Sept. 27, 2008 (Restated)			% of Total
Net sales:

Carter’s:
Wholesale	$	165,672			34.4	%	$	150,050			34.5	%	$	395,550			34.0	%	$	362,455			33.8	%
Retail		137,708			28.6	%		112,508			25.9	%		349,765			30.0	%		291,566			27.2	%
Mass Channel		78,584			16.3	%		76,808			17.6	%		181,690			15.6	%		190,892			17.8	%
Carter’s net sales		381,964			79.3	%		339,366			78.0	%		927,005			79.6	%		844,913			78.8	%

OshKosh:
Retail		74,103			15.4	%		72,568			16.7	%		178,091			15.3	%		166,816			15.5	%
Wholesale		25,439			5.3	%		22,948			5.3	%		59,901			5.1	%		60,674			5.7	%
OshKosh net sales		99,542			20.7	%		95,516			22.0	%		237,992			20.4	%		227,490			21.2	%

Total net sales	$	481,506			100.0	%	$	434,882			100.0	%	$	1,164,997			100.0	%	$	1,072,403			100.0	%

Operating income (loss):				% of segment net sales						% of segment net sales						% of segment net sales						% of segment net sales

Carter’s:
Wholesale	$	36,954			22.3	%	$	27,722			18.5	%	$	80,378			20.3	%	$	62,195			17.2	%
Retail		31,381			22.8	%		20,367			18.1	%		64,544			18.5	%		42,167			14.5	%
Mass Channel		14,482			18.4	%		10,169			13.2	%		31,301			17.2	%		24,140			12.6	%

Carter’s operating income		82,817			21.7	%		58,258			17.2	%		176,223			19.0	%		128,502			15.2	%

OshKosh:
Retail		10,765			14.5	%		9,810			13.5	%		11,220			6.3	%		431			0.3	%
Wholesale		4,124			16.2	%		1,693			7.4	%		3,607			6.0	%		374			0.6	%
Mass Channel (a)		709			--			764			--			1,853			--			1,923			--

OshKosh operating income		15,598			15.7	%		12,267			12.8	%		16,680			7.0	%		2,728			1.2	%

Segment operating income		98,415			20.4	%		70,525			16.2	%		192,903			16.6	%		131,230			12.2	%

Corporate expenses (b)		(17,439	)		(3.6	%)		(12,355	)		(2.8	%)		(41,269	)		(3.5	%)		(32,056	)		(3.0	%)
Workforce reduction and facility write-down and closure costs (c)		--			--			(2,609	)		(0.6	%)		(12,365	)		(1.1	%)		(2,609	)		(0.2	%)
Executive retirement charges (d)		--			--			--			--			--			--			(5,325	)		(0.5	%)

Net corporate expenses		(17,439	)		(3.6	%)		(14,964	)		(3.4	%)		(53,634	)		(4.6	%)		(39,990	)		(3.7	%)

Total operating income	$	80,976			16.8	%	$	55,561			12.8	%	$	139,269			12.0	%	$	91,240			8.5	%

(a) OshKosh mass channel consists of a licensing agreement with Target Stores. Operating income consists of royalty income, net of related expenses.

(b) Corporate expenses generally include expenses related to incentive compensation, stock-based compensation, executive management, severance and relocation, finance,

building occupancy, information technology, certain legal fees, consulting, audit fees, and investments in e-commerce.

(c) Includes closure costs associated with our Barnesville, Georgia distribution facility including severance, asset impairment charges, other closure costs, and accelerated

depreciation, asset impairment charges related to our Oshkosh, Wisconsin facility, write-down of our White House, Tennessee facility, and severance and other

benefits related to the corporate workforce reduction (see Note 12).

(d) Charges associated with an executive officer’s retirement (see Note 15).

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 12 – WORKFORCE REDUCTION AND FACILITY WRITE-DOWN AND CLOSURE COSTS:

Corporate Workforce Reduction

On April 21, 2009, the Company announced to affected employees a plan to reduce its corporate workforce (defined as excluding retail district managers, hourly retail store employees, and distribution center employees). Approximately 150 employees were affected under the plan. The plan includes consolidating the majority of our operations performed in our Oshkosh, Wisconsin office into other Company locations. This consolidation will result in the addition of resources in our other locations.

As a result of this corporate workforce reduction, during the first nine months of fiscal 2009, we recorded charges of $7.3 million consisting of $5.5 million in severance charges and other benefits ($3.3 million which related to corporate office positions in connection with our existing plan and $2.2 million of special one-time benefits provided to affected employees), and approximately $1.8 million in asset impairment charges related to the closure of our Oshkosh, Wisconsin office. The majority of the severance payments will be paid through the end of fiscal 2010.

The following table summarizes restructuring reserves related to the corporate workforce reduction which are included in other current liabilities on the accompanying unaudited condensed consolidated balance sheet:

(dollars in thousands)	Severance and other one-time benefits

Balance at April 4, 2009	$	3,300
Provision		2,200
Payments		(900	)
Balance at July 4, 2009		4,600
Provision		--
Payments		(1,300	)
Balance at October 3, 2009	$	3,300

Barnesville Distribution Facility Closure

On April 2, 2009, the Company announced to affected employees a plan to close its Barnesville, Georgia distribution center. Approximately 210 employees were affected by this closure. Operations at the Barnesville facility ceased on June 1, 2009.

In accordance with accounting guidance on accounting for the impairment or disposal of long-lived assets, under a held and used model, it was determined that the distribution facility assets became impaired during March 2009, when it became “more likely than not” that the expected life of the Barnesville, Georgia distribution facility would be significantly shortened. Accordingly, we wrote down the assets to their estimated recoverable fair value in March 2009. The adjusted asset values were subject to accelerated depreciation over their remaining estimated useful life.

In conjunction with the plan to close the Barnesville, Georgia distribution center, the Company recorded approximately $4.3 million during the first nine months of fiscal 2009, consisting of severance of $1.7 million, asset impairment charges of $1.1 million related to the write-down of the related land, building, and equipment, $1.0 million of accelerated depreciation (included in selling, general, and administrative expenses), and $0.5 million of other closure costs.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 12 – WORKFORCE REDUCTION AND FACILITY WRITE-DOWN AND CLOSURE COSTS: (continued)

The following table summarizes restructuring reserves related to the closure of the Barnesville, Georgia distribution center which are included in other current liabilities on the accompanying unaudited condensed consolidated balance sheet:

(dollars in thousands)	Severance			Other closure costs		Total

Balance at April 4, 2009	$	1,700		$	500	$	2,200
Provision		--			--		--
Payments		(700	)		--		(700	)
Balance at July 4, 2009		1,000			500		1,500
Provision		--			--		--
Payments		(500	)		--		(500	)
Adjustments		(400	)		--		(400	)
Balance at October 3, 2009	$	100		$	500	$	600

White House Distribution Facility

During the first nine months of fiscal 2009, the Company wrote down the carrying value of its White House, Tennessee distribution facility by approximately $0.7 million to $2.8 million to reflect the decrease in the fair market value as evidenced by recent negotiations to sell the facility. During the third quarter of fiscal 2009, the Company sold the facility for net proceeds of approximately $2.8 million.

In the third quarter of fiscal 2008, the Company wrote down the carrying value of the White House, Tennessee distribution facility by approximately $2.6 million to $3.5 million to reflect the anticipated selling price of the property at that time.

CARTER’S, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

NOTE 13 – EARNINGS PER SHARE:

Basic net income per share is calculated by dividing net income for the period by the weighted-average common shares outstanding for the period. Diluted net income per share includes the effect of dilutive instruments, such as stock options and restricted stock, and uses the average share price for the period in determining the number of shares that are to be added to the weighted-average number of shares outstanding. The table below summarizes the shares from these potentially dilutive securities, calculated using the treasury stock method.

The Company calculates basic and diluted net income per common share in accordance with new accounting guidance which requires earnings per share to be calculated pursuant to the two-class method for unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid).

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

	For the three-month periods ended				For the nine-month periods ended
	October 3, 2009		September 27, 2008 (Restated)		October 3, 2009		September 27, 2008 (Restated)

Weighted-average number of common and common equivalent shares outstanding:
Basic number of common shares outstanding		56,825,229		56,015,725		56,334,860		56,462,515
Dilutive effect of unvested restricted stock		112,370		84,593		116,483		84,119
Dilutive effect of stock options		1,622,531		1,863,623		1,684,897		1,943,772
Diluted number of common and common equivalent shares outstanding		58,560,130		57,963,941		58,136,240