<Page>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 SEPTEMBER 29, 2001 OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

                             COMMISSION FILE NUMBER:

                                    333-22155
                             -----------------------

                           THE WILLIAM CARTER COMPANY
               (Exact name of registrant as specified in charter)

                 MASSACHUSETTS                             04-1156680
       (State or other jurisdiction of         (IRS 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 [ ]

     Applicable only to corporate issuers:

     As of November 13, 2001, there were 1,000 shares of Common Stock
outstanding.

================================================================================
<Page>

                                              FORM 10-Q

                                       THE WILLIAM CARTER COMPANY
                          (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
                                                 INDEX

<Table>
<Caption>
                                                                                                                               PAGE
<S>                    <C>                                                                                                     <C>
PART I.                Financial Information

             Item 1.   Financial Statements

                       Condensed Consolidated Balance Sheets as of September 29, 2001 (Successor) (unaudited)
                       and December 30, 2000 (Predecessor)...................................................................    3

                       Unaudited Condensed Consolidated Statements of Operations for the periods August 15, 2001 through
                       September 29, 2001 (Successor) and July 1, 2001 through August 14, 2001 (Predecessor) and for the
                       three-month period ended September 30, 2000 (Predecessor).............................................    4

                       Unaudited Condensed Consolidated Statements of Operations for the periods August 15, 2001 through
                       September 29, 2001 (Successor) and December 31, 2000 through August 14, 2001 (Predecessor) and for
                       the nine-month period ended September 30, 2000 (Predecessor)..........................................    5

                       Unaudited Condensed Consolidated Statements of Cash Flows for the periods August 15, 2001 through
                       September 29, 2001 (Successor) and December 31, 2000 through August 14, 2001 (Predecessor) and for
                       the nine-month period ended September 30, 2000 (Predecessor)..........................................    6

                       Notes to Condensed Consolidated Financial Statements (unaudited)......................................    7

             Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.................    18

PART II.               Other Information.....................................................................................    23
</Table>


                                                                 2
<Page>



                                     THE WILLIAM CARTER COMPANY
                        (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
                                CONDENSED CONSOLIDATED BALANCE SHEETS
                            (dollars in thousands, except per share data)
                                             (unaudited)

<Table>
<Caption>

                                                                                  SUCCESSOR, AT  PREDECESSOR, AT
                                                                                  SEPTEMBER 29,  DECEMBER 30,
                                                                                      2001           2000
                                                                                    --------       --------
<S>                                                                                 <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents .....................................................   $  5,062       $  3,697
  Accounts receivable, net ......................................................     49,670         33,788
  Inventories, net ..............................................................    104,912         92,435
  Prepaid expenses and other current assets .....................................      5,709          4,971
  Assets held for sale ..........................................................        330            373
  Deferred income taxes .........................................................      9,815          9,184
                                                                                    --------       --------

    Total current assets ........................................................    175,498        144,448
Property, plant and equipment, net ..............................................     43,618         54,441
Assets held for sale ............................................................        600            950
Tradename, net ..................................................................    220,233         89,583
Cost in excess of fair value of net assets acquired, net ........................    147,512         26,606
Licensing agreements, net .......................................................     14,432           --
Deferred debt issuance costs, net ...............................................     13,243          4,167
Other assets ....................................................................      6,073          5,793
                                                                                    --------       --------

    Total assets ................................................................   $621,209       $325,988
                                                                                    ========       ========


LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Current maturities of long-term debt ..........................................   $  1,250       $  5,400
  Accounts payable ..............................................................     27,168         19,223
  Other current liabilities .....................................................     44,781         35,489
                                                                                    --------       --------

    Total current liabilities ...................................................     73,199         60,112
Long-term debt ..................................................................    302,043        136,000
Deferred income taxes ...........................................................     84,704         35,125
Other long-term liabilities .....................................................     10,293         10,238
                                                                                    --------       --------

    Total liabilities ...........................................................    470,239        241,475
                                                                                    --------       --------

Commitments and contingencies
Redeemable preferred stock, par value $.01 per share, $4,000 per share
  liquidation and redemption value, 5,000 shares authorized, issued and
  outstanding ...................................................................       --           19,116
                                                                                    --------       --------

Common stockholder's equity:
  Common stock, par value $.01 per share, 300,000 shares authorized, 1,000 shares
   issued and outstanding at September 29, 2001 (Successor) .....................       --             --
  Common stock, par value $.01 per share, 1,000 shares authorized, issued and
   outstanding at December 30, 2000 (Predecessor) ...............................       --             --
  Additional paid-in capital ....................................................    144,605         53,771
  Retained earnings .............................................................      6,365         11,626
                                                                                    --------       --------

    Total common stockholder's equity ...........................................    150,970         65,397
                                                                                    --------       --------

    Total liabilities and stockholder's equity ..................................   $621,209       $325,988
                                                                                    ========       ========
</Table>

         See accompanying notes to the unaudited condensed consolidated
                              financial statements


                                       3
<Page>

<Table>
<Caption>

                                                    THE WILLIAM CARTER COMPANY
                                       (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     (dollars in thousands)
                                                           (unaudited)

                                                                         SUCCESSOR                     PREDECESSOR
                                                                    -------------------  ----------------------------------------
                                                                    FOR THE PERIOD FROM  FOR THE PERIOD FROM  FOR THE THREE-MONTH
                                                                      AUGUST 15, 2001       JULY 1, 2001        PERIOD ENDED
                                                                          THROUGH             THROUGH           SEPTEMBER 30,
                                                                     SEPTEMBER 29, 2001   AUGUST 14, 2001           2000
                                                                     ------------------   ---------------       -------------
<S>                                                                       <C>                <C>                  <C>
Net sales .........................................................       $  91,047          $  66,708            $ 145,639
Cost of goods sold ................................................          55,668             41,868               89,162
                                                                          ---------          ---------            ---------

Gross profit ......................................................          35,379             24,840               56,477
Selling, general and administrative expenses ......................          21,988             21,597               39,906
Acquisition related non-recurring charges (Note 1) ................            --               11,289                 --
Royalty income ....................................................            (981)            (1,516)              (1,382)
                                                                          ---------          ---------            ---------

Operating income (loss) ...........................................          14,372             (6,530)              17,953
Interest expense, net .............................................           3,731              2,221                4,417
                                                                          ---------          ---------            ---------

Income (loss) before income taxes and extraordinary item ..........          10,641             (8,751)              13,536
Provision for (benefit from) income taxes .........................           4,276             (1,041)               5,418
                                                                          ---------          ---------            ---------

Income (loss) before extraordinary item ...........................           6,365             (7,710)               8,118
Extraordinary item, net of tax benefit of $4,115 ..................            --                6,173                 --
                                                                          ---------          ---------            ---------

Net income (loss) .................................................           6,365            (13,883)               8,118
Dividend requirements and accretion on redeemable preferred stock              --                 (345)                (663)
                                                                          ---------          ---------            ---------

Net income (loss) applicable to common stockholder ................       $   6,365          $ (14,228)           $   7,455
                                                                          =========          =========            =========
</Table>

         See accompanying notes to the unaudited condensed consolidated
                              financial statements


                                       4
<Page>

<Table>
<Caption>

                                                    THE WILLIAM CARTER COMPANY
                                       (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     (dollars in thousands)
                                                           (unaudited)

                                                                         SUCCESSOR                     PREDECESSOR
                                                                    -------------------  ---------------------------------------
                                                                    FOR THE PERIOD FROM  FOR THE PERIOD FROM  FOR THE NINE-MONTH
                                                                      AUGUST 15, 2001     DECEMBER 31, 2000     PERIOD ENDED
                                                                          THROUGH             THROUGH           SEPTEMBER 30,
                                                                     SEPTEMBER 29, 2001   AUGUST 14, 2001           2000
                                                                     ------------------   ---------------       -------------
<S>                                                                       <C>                <C>                  <C>
Net sales ..........................................................      $  91,047          $ 287,734            $ 339,313
Cost of goods sold .................................................         55,668            182,863              210,683
                                                                          ---------          ---------            ---------

Gross profit .......................................................         35,379            104,871              128,630
Selling, general and administrative expenses .......................         21,988             93,902              105,100
Acquisition related non-recurring charges (Note 1) .................           --               11,289                 --
Writedown of long-lived assets (Note 9) ............................           --                3,156                 --
Non-recurring charges-plant closure costs (Note 9) .................           --                1,116                 --
Royalty income .....................................................           (981)            (4,993)              (3,847)
                                                                          ---------          ---------            ---------

Operating income ...................................................         14,372                401               27,377
Interest expense, net ..............................................          3,731             10,060               12,336
                                                                          ---------          ---------            ---------

Income (loss) before income taxes, extraordinary item and cumulative
   effect of change in accounting principle ........................         10,641             (9,659)              15,041
Provision for (benefit from) income taxes ..........................          4,276             (1,404)               6,025
                                                                          ---------          ---------            ---------

Income (loss) before extraordinary item and cumulative effect of
   change in accounting principle ..................................          6,365             (8,255)               9,016
Extraordinary item, net of tax benefit of $4,115 ...................           --                6,173                 --

Cumulative effect of change in accounting principle, net of
   tax benefit of $217 (Note 4) ....................................           --                 --                    354
                                                                          ---------          ---------            ---------
Net income (loss) ..................................................          6,365            (14,428)               8,662
Dividend requirements and accretion on redeemable preferred stock ..           --               (1,671)              (1,990)
                                                                          ---------          ---------            ---------

Net income (loss) applicable to common stockholder .................      $   6,365          $ (16,099)           $   6,672
                                                                          =========          =========            =========
</Table>

         See accompanying notes to the unaudited condensed consolidated
                              financial statements


                                       5
<Page>

<Table>
<Caption>

                                                    THE WILLIAM CARTER COMPANY
                                       (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
                                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (dollars in thousands)
                                                           (unaudited)

                                                                             SUCCESSOR                     PREDECESSOR
                                                                        -------------------  ---------------------------------------
                                                                        FOR THE PERIOD FROM  FOR THE PERIOD FROM  FOR THE NINE-MONTH
                                                                          AUGUST 15, 2001     DECEMBER 31, 2000     PERIOD ENDED
                                                                              THROUGH             THROUGH           SEPTEMBER 30,
                                                                         SEPTEMBER 29, 2001   AUGUST 14, 2001           2000
                                                                         ------------------   ---------------       -------------
<S>                                                                           <C>                <C>                  <C>
Cash flows from operating activities:
  Net income (loss) ......................................................    $   6,365          $ (14,428)           $   8,662
  Extraordinary loss, net of taxes .......................................         --                6,173                 --
  Adjustments to reconcile net income (loss) to net cash
    (used in) provided by operating activities:
   Depreciation and amortization .........................................        2,237             12,245               12,382
   Amortization of debt issuance costs ...................................          185                848                1,035
   (Payment of) provision for Acquisition related non-recurring charges ..      (11,289)            11,289                 --
   Writedown of long-lived assets ........................................         --                3,156                 --
   Non-recurring charges-plant closure costs .............................         --                1,116                 --
   Deferred tax benefit ..................................................       (5,635)              (352)              (1,198)
   Effect of changes in operating assets and liabilities:
   (Increase) decrease in assets:
    Accounts receivable ..................................................      (10,100)            (5,782)              (3,359)
    Inventories ..........................................................        5,307            (13,253)             (22,704)
    Prepaid expenses and other assets ....................................       (2,825)             1,807                 (305)
   Increase (decrease) in liabilities:
    Accounts payable and other liabilities ...............................       10,007             (1,444)              18,954
                                                                              ---------          ---------            ---------

    Net cash (used in) provided by operating activities ..................       (5,748)             1,375               13,467
                                                                              ---------          ---------            ---------

Cash flows from investing activities:
  Capital expenditures ...................................................       (2,715)            (9,480)              (6,178)
  Proceeds from sale of property, plant and equipment ....................         --                   10                   78
  Proceeds from assets held for sale .....................................         --                  204                  524
  Payment of buyer's Acquisition costs ...................................       (3,723)              --                   --
  Issuance of loan .......................................................         --                 --                 (4,336)
  Proceeds from loan .....................................................         --                 --                  1,500
                                                                              ---------          ---------            ---------


    Net cash used in investing activities ................................       (6,438)            (9,266)              (8,412)
                                                                              ---------          ---------            ---------

Cash flows from financing activities:
  Proceeds from Predecessor revolving line of credit .....................         --               53,500               62,900
  Payments of Predecessor revolving line of credit .......................      (12,900)           (40,600)             (62,900)
  Proceeds from Successor revolving line of credit .......................       30,450               --                   --
  Payments of Successor revolving line of credit .........................      (25,850)              --                   --
  Proceeds from Successor term loan ......................................      125,000               --                   --
  Payments of Predecessor term loan ......................................      (38,700)            (2,700)                (450)
  Proceeds from issuance of Successor 10 7/8% Senior Subordinated Notes ..      173,693               --                   --
  Payment of Predecessor 10 3/8% Senior Subordinated Notes ...............     (100,000)              --                   --
  Payments on capital lease obligation ...................................         (163)              (642)                (767)
  Acquisition related dividend to Holdings ...............................     (128,559)              --                   --
  Payment of other dividend to Holdings ..................................         --                  (60)                --
  Payments of preferred stock dividend ...................................         --               (1,207)              (1,213)
  Payment of Successor debt issuance costs ...............................      (13,428)              --                   --
  Other ..................................................................        7,181             (3,573)                 (15)
                                                                              ---------          ---------            ---------

    Net cash provided by (used in) financing activities ..................       16,724              4,718               (2,445)
                                                                              ---------          ---------            ---------

Net increase (decrease) in cash and cash equivalents .....................        4,538             (3,173)               2,610
Cash and cash equivalents, beginning of period ...........................          524              3,697                3,415
                                                                              ---------          ---------            ---------

Cash and cash equivalents, end of period..................................    $   5,062          $     524            $   6,025
                                                                              =========          =========            =========
</Table>

         See accompanying notes to the unaudited condensed consolidated
                              financial statements


                                       6
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

NOTE 1 -- CHANGE IN OWNERSHIP:

       The William Carter Company (the "Company") is a wholly-owned subsidiary
of Carter Holdings, Inc. ("Holdings"). Holdings has no significant assets or
investments other than the shares of stock of The William Carter Company. On
July 12, 2001, a special purpose entity formed by Berkshire Partners LLC and
affiliates ("Berkshire") entered into a stock purchase agreement with Holdings
and all of Holdings' stockholders to acquire substantially all of the stock of
Holdings except for some equity interests held by the Company's management (the
"Acquisition"). The Acquisition was consummated on August 15, 2001. Financing
for the Acquisition totaled $468.2 million and was provided by: $24.0 million in
new revolving credit facility borrowings; $125.0 million in new term loan
borrowings (both the revolver and term loan are part of a $185.0 million new
senior credit facility entered into by the Company); $173.7 million of
borrowings under a new senior subordinated loan facility (issued by the Company
in connection with an August 15, 2001 private placement); and $145.5 million of
capital invested by affiliates of Berkshire and other investors, which includes
rollover equity by the Company's management of $18.3 million.

       The proceeds of the Acquisition and financing were used to purchase
existing equity of Holdings ($252.5 million), pay for selling stockholders
transaction expenses ($19.1 million, including $0.8 million in debt prepayment
penalties recorded on Holdings), pay for buyers' transaction expenses ($4.0
million), pay debt issuance costs ($13.4 million) and to retire all outstanding
balances on the Company's and Holdings' previously outstanding long-term debt
including accrued interest thereon ($174.8 million). In addition, $4.4 million
of proceeds were held as cash for temporary working capital purposes. Also in
connection with the Acquisition, the redeemable preferred stock of the Company
held by Holdings was cancelled.

       For purposes of identification and description, the Company is referred
to as the "Predecessor" for the period prior to the Acquisition, the "Successor"
for the period subsequent to the Acquisition, and the "Company" for both
periods.

       The Acquisition was accounted for as a purchase and has been reflected in
the Company's financial statements using pushdown accounting. Accordingly, the
purchase price for the Acquisition, including related fees and expenses, has
been allocated to the tangible and identifiable intangible assets and
liabilities of the Company based upon their preliminary estimated fair value
with the remainder allocated to goodwill. Subsequent to the Acquisition, the
Company's results of operations are expected to be significantly impacted by
changes in interest expense and amortization. (See below and Notes 11, 12
and 13)


                                       7
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 1 -- CHANGE IN OWNERSHIP: (CONTINUED)

A summary of the total financed purchase price is as follows ($000):

<Table>
<S>                                                                   <C>
Total financed purchase price ...............................         $ 468,193
   Less - amounts retained at Holdings ......................              (894)
                                                                      ---------
                                                                      $ 467,299
                                                                      =========
Allocated to:
   Cash and cash equivalents ................................         $   7,334
   Accounts receivable, net .................................            39,570
   Inventories, net .........................................           110,219
   Prepaid expenses and other current assets ................             3,525
   Property, plant and equipment ............................            42,569
   Assets held for sale .....................................               930
   Licensing agreements .....................................            15,000
   Tradename ................................................           220,233
   Cost in excess of fair value of net assets acquired ......           147,512
   Deferred debt issuance costs .............................            13,427
   Other assets .............................................             5,432
   Accounts payable .........................................           (20,639)
   Other current liabilities ................................           (25,936)
   Closure and exit liabilities .............................            (5,925)
   Other long-term liabilities ..............................           (10,850)
   Net deferred tax liabilities .............................           (75,102)
                                                                      ---------

                                                                      $ 467,299
                                                                      =========
</Table>

       The Acquisition related non-recurring charges in the Predecessor period
July 1, 2001 through August 14, 2001 reflect special compensation of $4.5
million paid to management at the closing of the Acquisition and $6.8 million
for sellers' transaction costs and fees.

       The extraordinary charge in the Predecessor period July 1, 2001 through
August 14, 2001, reflects the write off of deferred debt issuance costs of
approximately $1,991,000, net of a tax benefit of approximately $1,327,000,
and a debt prepayment penalty of approximately $4,182,000, net of a tax benefit
of approximately $2,788,000.

       The following unaudited pro forma operating data present the results
of operations for the nine-month periods ended September 29, 2001 and
September 30, 2000 as if the Acquisition had occurred on January 2, 2000,
with financing obtained as described above and assumes that there were no
other changes in the operations of the Predecessor. The pro forma results are
not necessarily indicative of the financial results that might have occurred
had the transaction actually taken place on January 2, 2000, or of future
results of operations ($000):


<TABLE>
<CAPTION>
                                                         For the nine-              For the nine-
                                                         month period                month period
                                                        ended September             ended September
                                                           29, 2001                     30, 2000
                                                        ---------------             ---------------
<S>                                                      <C>                        <C>
Net sales                                                   378,781                      339,313
Cost of goods sold                                          238,196                      210,286
                                                            -------                      -------
Gross profit                                                140,585                      129,027
Selling, general and administrative expense                 116,998                      106,399
Writedown of long lived assets                                3,156
Non-recurring plant closure costs                             1,116
Royalty Income                                               (5,974)                      (3,847)
                                                            -------                      -------
Operating income                                             25,289                       26,475
Interest expense, net                                        22,828                       22,956
                                                            -------                      -------
Income (loss) before income taxes
   and cumulative effect of accounting change                 2,461                        3,519

Provision for income taxes                                      470                        1,266
                                                            -------                      -------
Income (loss) before
   cumulative effect of accounting change                     1,991                        2,253
Cumulative effect of accounting change, net                                                  354
                                                            -------                      -------
Net income                                                    1,991                        1,899
                                                            =======                      =======

</TABLE>


                                       8
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 2 -- BASIS OF PREPARATION:

     In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of The William Carter Company contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Company as of September 29, 2001
(Successor); the results of its operations for the Successor period August 15,
2001 through September 29, 2001, and the Predecessor periods July 1, 2001
through August 14, 2001 and December 31, 2000 through August 14, 2001, and the
Predecessor three-month and nine-month periods ended September 30, 2000; and its
cash flows for the Successor period August 15, 2001 through September 29, 2001,
and the Predecessor period December 31, 2000 through August 14, 2001 and the
Predecessor nine-month period ended September 30, 2000. Operating results for
the periods ended August 14, 2001 and September 29, 2001 are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 29, 2001. The accompanying condensed consolidated balance sheet of the
Company as of December 30, 2000 has been derived from the audited consolidated
financial statements included in the Company's fiscal 2000 Annual Report on Form
10-K.

     Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC) and the
instructions to Form 10-Q. The accounting policies followed by the Company
are set forth in its Annual Report on Form 10-K in the Notes to the Company's
consolidated financial statements for the fiscal year ended December 30, 2000.

NOTE 3 -- THE COMPANY:

     The Company designs, sources, manufactures and markets premier branded
childrenswear under the CARTER'S, CARTER'S CLASSICS and TYKES labels. The
Company manufactures its products in plants located in the southern United
States, Costa Rica, the Dominican Republic and Mexico. The Company also sources
its products through contractual arrangements with various manufacturers
throughout the world. On October 23, 2001, the Company announced its plans to
close its sewing operations in the Dominican Republic and the remaining cutting
and embroidery operations in Georgia. Products are manufactured for wholesale
distribution to major domestic retailers and for the Company's 150 retail outlet
stores that market its brand name merchandise and certain products manufactured
by other companies. The Company's retail operations represented approximately
43% of its consolidated net sales in the third quarter of 2001 compared to
approximately 45% in the third quarter of 2000. Retail operations represented
approximately 44% and 45% of consolidated net sales in the first nine months of
2001 and 2000, respectively.


                                       9
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 4 -- REVENUE RECOGNITION:

     The SEC issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101") in December 1999. SAB 101 summarizes certain
SEC staff views in applying generally accepted accounting principles to revenue
recognition in financial statements. The Company adopted the provisions of SAB
101 in the fourth quarter of fiscal 2000 and revised its method of accounting
for revenue recognition retroactive to the beginning of fiscal 2000. As
previously disclosed in the Company's fiscal 2000 Annual Report on Form 10-K,
the Company has presented restated fiscal 2000 third quarter and first
nine-month results to reflect this retroactive application.

NOTE 5 -- INVENTORIES:

     Inventories consisted of the following ($000):

<Table>
<Caption>
                                                SUCCESSOR, AT    PREDECESSOR, AT
                                                SEPTEMBER 29,      DECEMBER 30,
                                                    2001              2000
                                                  --------          --------
<S>                                               <C>               <C>
Finished goods .......................            $ 79,852          $ 70,713
Work in process ......................              21,093            14,508
Raw materials and supplies ...........               3,967             7,214
                                                  --------          --------

Total ................................            $104,912          $ 92,435
                                                  ========          ========
</Table>

NOTE 6 -- PARENT COMPANY TRANSACTIONS:

     During the Predecessor period from December 31, 2000 through August 14,
2001, the Company paid a dividend on its Common Stock held by its parent, Carter
Holdings, Inc., in the amount of approximately $60,000, the proceeds of which
were used by Holdings to repurchase shares of Holdings' stock owned by a former
employee of the Company. In addition, during the Predecessor period from
December 31, 2000 through August 14, 2001, Holdings made a $60,000 capital
contribution to the Company in connection with the issuance of shares of
Holdings' stock to an employee of the Company; such transaction involved no cash
proceeds and the Company recognized $60,000 as compensation expense. There were
no such transactions between Holdings and the Company during the Successor
period from August 15, 2001 through September 29, 2001 or during the Predecessor
three and nine-month periods ended September 30, 2000.

     On May 1, 2001 and April 28, 2000, the Company paid semi-annual dividends
of 12% on $20.0 million of redeemable preferred stock, or approximately $1.2
million, to Holdings. All of the Company's redeemable preferred stock was
cancelled in connection with the Acquisition.

NOTE 7 -- ENVIRONMENTAL MATTERS:

     The Company is subject to various federal, state and local laws that govern
activities or operations that may have adverse environmental effects.
Noncompliance with these laws and regulations can result in significant
liabilities, penalties and costs. From time to time, operations of the Company
have resulted or may result in noncompliance with or a liability pursuant to
environmental laws. During 2001, the Company resolved certain environmental
matters associated with waste deposited at or near a landfill in Lamar County,
Georgia in the 1970's. The cost to the Company to resolve these matters was
$244,000, which had previously been fully accrued. Generally, compliance with
environmental laws has not had a material impact on the Company's operations,
but there can be no assurance that future noncompliance with such laws will not
have a material adverse effect on the Company or its operations.


                                       10
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 8 -- SEGMENT INFORMATION:

     The Company reports segment information in accordance with the provisions
of Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131"), which requires
segment information to be disclosed based on 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 the Company's
reportable segments. SFAS 131 also requires disclosure about products and
services, geographic areas and major customers. For purposes of complying with
SFAS 131, the Company has identified its two reportable segments as "Wholesale"
and "Retail". The Company generally sells the same products in each business
segment. Wholesale products are offered through the Company's wholesale
distribution channel while the Retail segment reflects the operations of the
Company's outlet stores.

     Effective December 30, 2000, each segment's results include the costs
directly related to the segment's revenue and all other costs are allocated
based on their relationship to consolidated net sales or units produced to
support each segment's revenue. Prior to December 30, 2000, the Company
determined the Retail segment's earnings before interest, taxes, depreciation
and amortization expenses ("EBITDA") on a direct contribution basis only and did
not include allocations of all costs incurred to support Retail operations. The
Wholesale segment, previously referred to as "Wholesale and Other", included all
other revenue and expenses of the Company not directly related to the Retail
segment. Management believes that its revised process for measurement provides a
more meaningful analysis of each segment's financial results. Prior year amounts
have been reclassified to conform to the current year presentation.

     Under the old method, EBITDA for the Wholesale and Other segment would have
been approximately $2,906, $(466) and $2,424 for the Successor period from
August 15, 2001 through September 29, 2001, the Predecessor period July 1, 2001
through August 14, 2001, and the Predecessor three-month period ended September
30, 2000, respectively, and $2,906, $(3,728) and $(6) for the Successor period
from August 15, 2001 through September 29, 2001, the Predecessor period December
31, 2000 through August 14, 2001 and the Predecessor nine-month period ended
September 30, 2000, respectively. Under the old method, EBITDA for the Retail
segment would have been approximately $13,703, $8,046 and $19,809 for the
Successor period from August 15, 2001 through September 29, 2001, the
Predecessor period July 1, 2001 through August 14, 2001, and the Predecessor
three-month period ended September 30, 2000, respectively, and $13,703, $31,935
and $39,765 for the Successor period from August 15, 2001 through September 29,
2001, the Predecessor period December 31, 2000 through August 14, 2001 and the
Predecessor nine-month period ended September 30, 2000, respectively.


                                       11
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 8 -- SEGMENT INFORMATION: (CONTINUED)

     The table below presents certain segment information for the periods
indicated ($000):

<Table>
<Caption>
                                                                    WHOLESALE     RETAIL      TOTAL
                                                                     --------    --------    --------
<S>                                                                  <C>         <C>         <C>
SUCCESSOR FOR THE PERIOD FROM AUGUST 15, 2001 THROUGH
   SEPTEMBER 29, 2001:
    Sales .......................................................    $ 52,501    $ 38,546    $ 91,047
    EBITDA ......................................................    $  6,563    $ 10,046    $ 16,609
PREDECESSOR FOR THE PERIOD FROM JULY 1, 2001 THROUGH
   AUGUST 14, 2001:
    Sales .......................................................    $ 36,990    $ 29,718    $ 66,708
    EBITDA ......................................................    $  3,402    $  4,178    $  7,580
 PREDECESSOR FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000:
    Sales .......................................................    $ 80,486    $ 65,153    $145,639
    EBITDA ......................................................    $  9,784    $ 12,449    $ 22,233

SUCCESSOR FOR THE PERIOD FROM AUGUST 15, 2001 THROUGH
   SEPTEMBER 29, 2001:
    Sales .......................................................    $ 52,501    $ 38,546    $ 91,047
    EBITDA ......................................................    $  6,563    $ 10,046    $ 16,609
PREDECESSOR FOR THE PERIOD FROM DECEMBER 31, 2000 THROUGH
   AUGUST 14, 2001:
    Sales .......................................................    $160,646    $127,088    $287,734
    EBITDA ......................................................    $ 12,853    $ 15,354    $ 28,207
PREDECESSOR FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000:
    Sales .......................................................    $185,786    $153,527    $339,313
    EBITDA ......................................................    $ 19,443    $ 20,316    $ 39,759
</Table>

     A reconciliation of total segment EBITDA to total consolidated income
(loss) before income taxes is presented below ($000):

<Table>
<Caption>
                               SUCCESSOR                PREDECESSOR                  SUCCESSOR                 PREDECESSOR
                            --------------    --------------------------------    ---------------   --------------------------------
                            FOR THE PERIOD    FOR THE PERIOD                      FOR THE PERIOD    FOR THE PERIOD
                                 FROM              FROM             FOR THE            FROM              FROM            FOR THE
                            AUGUST 15, 2001    JULY 1, 2001       THREE-MONTH     AUGUST 15, 2001    DECEMBER 31,       NINE-MONTH
                               THROUGH           THROUGH         PERIOD ENDED        THROUGH         2000 THROUGH      PERIOD ENDED
                             SEPTEMBER 29,      AUGUST 14,       SEPTEMBER 30,     SEPTEMBER 29,      AUGUST 14,       SEPTEMBER 30,
                                 2001              2001              2000              2001              2001              2000
                             -------------      ----------       -------------     -------------      ----------       -------------
<S>                            <C>               <C>               <C>               <C>               <C>               <C>
Total EBITDA for
   reportable segments ....    $ 16,609          $  7,580          $ 22,233          $ 16,609          $ 28,207          $ 39,759
Depreciation and
   amortization expense ...      (2,237)           (2,821)           (4,280)           (2,237)          (12,245)          (12,382)
Acquisition related
   non-recurring charges ..        --             (11,289)             --                --             (11,289)             --
Writedown of
   long-lived assets ......        --                --                --                --              (3,156)             --
Non-recurring charges-plant
   closure costs ..........        --                --                --                --              (1,116)             --
Interest expense, net .....      (3,731)           (2,221)           (4,417)           (3,731)          (10,060)          (12,336)
                               --------          --------          --------          --------          --------          --------
Consolidated income (loss)
   before income taxes ....    $ 10,641          $ (8,751)         $ 13,536          $ 10,641          $ (9,659)         $ 15,041
                               ========          ========          ========          ========          ========          ========
</Table>


                                       12
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 9 -- CLOSURE OF MANUFACTURING FACILITIES:

      In the first quarter of fiscal 2001, the Company announced its plans to
close its sewing facility located in Harlingen, Texas, which subsequently closed
and ceased operations on May 11, 2001. Approximately 460 employees, primarily
sew operators, were located at this facility. In the first quarter of 2001, the
Company recorded a non-recurring charge of approximately $582,000 for closure
costs and involuntary termination benefits. As of September 29, 2001,
approximately $144,000 of the costs provided for in the first quarter of 2001
for lease obligations and other closure costs have not yet been paid and are
included in other current liabilities in the accompanying balance sheet. The
components of the liability established for the costs associated with this plant
closure are as follows:

<Table>
<Caption>
                                              MARCH 31,            SEPTEMBER 29,
                                                2001     PAYMENTS      2001
                                              --------   --------    --------
<S>                                           <C>        <C>         <C>
Severance and other termination benefits....  $346,000   $339,000    $  7,000
Lease obligations...........................   167,000     60,000     107,000
Other closure costs.........................    69,000     39,000      30,000
                                              --------   --------    --------
    Total...................................  $582,000   $438,000    $144,000
                                              ========   ========    ========
</Table>

      In the second quarter of fiscal 2001, the Company announced its plans to
close its fabric printing operations located in Barnesville, Georgia, which
subsequently closed and ceased operations on June 29, 2001. Approximately 110
employees, primarily print operators, were located at this facility. In the
second quarter of 2001, the Company recorded a non-recurring charge of
approximately $534,000 for closure costs and involuntary termination benefits.
As of September 29, 2001, approximately $299,000 of the costs provided for in
the second quarter of 2001 for severance and other closure costs have not yet
been paid and are included in other current liabilities in the accompanying
balance sheet. The components of the liability established for the costs
associated with this plant closure are as follows:

<Table>
<Caption>
                                              JUNE 30,             SEPTEMBER 29,
                                                2001     PAYMENTS      2001
                                              --------   --------    --------
<S>                                           <C>        <C>         <C>
Severance and other termination benefits....  $328,000   $126,000    $202,000
Other closure costs.........................   206,000    109,000      97,000
                                              --------   --------    --------
    Total...................................  $534,000   $235,000    $299,000
                                              ========   ========    ========
</Table>

     Additionally, in accordance with the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the Company
recorded in the first quarter of 2001 a non-cash charge of approximately
$742,000 related to the writedown of the asset value of its Harlingen, Texas
facility to its estimated net realizable value. In the second quarter of 2001,
the Company recorded a non-cash charge of approximately $2,414,000 related to
the writedown of the asset value of its fabric printing operations in
Barnesville, Georgia to its estimated net realizable value. The assets from the
Barnesville facility are included in assets held for sale on the accompanying
balance sheet as of September 29, 2001.

     In connection with the Acquisition, the Company reevaluated the
requirements for certain manufacturing operations which it had previously
planned to maintain to support its long-term revenue growth plans. After a
thorough assessment of alternative sourcing opportunities, the Company decided
to exit certain manufacturing operations. Accordingly, on October 23, 2001, the
Company announced its plans to close its cutting and fabric warehouse operations
located in Griffin, Georgia, its embroidery operation located in Milner,
Georgia, its bed and bath sewing and finishing operation located in Barnesville,
Georgia, and its sewing facility located in San Pedro, Dominican Republic before
the end of fiscal 2001. At Acquisition, the Company established a liability for
these plant closures. The number of employees affected by these closures is as
follows:


                                       13
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 9 -- CLOSURE OF MANUFACTURING FACILITIES: (CONTINUED)

<Table>
<Caption>
                                                                       NUMBER OF
                     FACILITY                                          EMPLOYEES
-------------------------------------------------------------------    ---------
<S>                                                                       <C>
San Pedro, Dominican Republic (sewing operators)....................      468
Griffin, Georgia (cutting and warehouse operators) .................      170
Milner, Georgia (embroidery operators)..............................       90
Barnesville, Georgia (sewing operators).............................       60
</Table>

     The components of the liability established for the costs associated with
these plant closures are as follows:

<Table>
<Caption>
                                            AUGUST 15,               SEPTEMBER 29,
                                               2001       PAYMENTS       2001
                                            ----------    --------    ----------
<S>                                         <C>           <C>         <C>
Severance and other termination benefits    $1,277,000    $   --      $1,277,000
Lease obligations ......................       947,000        --         947,000
Other closure costs ....................       128,000        --         128,000
                                            ----------    --------    ----------
     Total .............................    $2,352,000    $   --      $2,352,000
                                            ==========    ========    ==========
</Table>

NOTE 10 -- OTHER EXIT COSTS:

     In connection with the Acquisition, the Company announced its decision to
terminate an initiative being evaluated to open full price retail stores.
Accordingly, the Company has recorded liabilities in its Acquisition purchase
price allocation to terminate three employees, exit a consulting contract and
provide for related lease obligations for space in its corporate office
devoted to this initiative. The components of the liability established to
terminate this initiative are as follows:

<Table>
<Caption>
                                             AUGUST 15,              SEPTEMBER 29,
                                               2001       PAYMENTS       2001
                                            ----------    --------    ----------
<S>                                         <C>           <C>         <C>
Severance and other termination benefits    $  490,000    $   --      $  490,000
Professional fees ......................       670,000        --         670,000
Lease obligations ......................     2,413,000        --       2,413,000
                                            ----------    --------    ----------
     Total .............................    $3,573,000    $   --      $3,573,000
                                            ==========    ========    ==========
</Table>

NOTE 11 -- RECENT ACCOUNTING PRONOUNCEMENTS:

     In 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 - An Amendment of FASB
Statement No. 133". Provisions of SFAS 133 are effective as of the beginning of
fiscal 2001. SFAS 133 establishes accounting and reporting standards requiring
that all derivative instruments, including certain derivative instruments
embedded in other contracts, be recorded in the balance sheet as either assets
or liabilities measured at fair value. SFAS 133 requires that changes in the
derivative instrument's fair value be recognized currently in earnings, unless
specific hedge accounting criteria are met. SFAS 133 did not have an impact on
the financial position or results of operations of the Company at the required
adoption date or as of September 29, 2001 and the periods then ended.


                                       14
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 11 -- RECENT ACCOUNTING PRONOUNCEMENTS: (CONTINUED)

      In July 2001, the FASB issued SFAS 141 and 142, "Business Combinations"
("SFAS 141") and "Goodwill and Other Intangible Assets" ("SFAS 142"),
respectively. SFAS 141 supercedes Accounting Principles Board Opinion No. 16
(APB 16), "Business Combinations". The most significant changes made by SFAS 141
are: (1) requiring that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001, (2) establishing specific
criteria for the recognition of intangible assets separately from goodwill, and
(3) requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain (instead of being deferred and amortized).

      SFAS 142 supercedes APB 17, "Intangible Assets". SFAS 142 primarily
addresses the accounting for goodwill and intangible assets subsequent to their
acquisition (i.e., the post-acquisition accounting). The most significant
changes made by SFAS 142 are: (1) goodwill and indefinite lived intangible
assets will no longer be amortized, (2) goodwill will be tested for impairment
at least annually at the reporting unit level, (3) intangible assets deemed to
have an indefinite life will be tested for impairment at least annually and (4)
the amortization period of intangible assets with finite lives will no longer be
limited to forty years. The provisions of SFAS 142 will be effective for fiscal
years beginning after December 15, 2001 and must be adopted at the beginning of
a fiscal year. However, goodwill and intangible assets acquired after June 30,
2001 will be subject immediately to the non-amortization and amortization
provisions of this statement. Prior to the provisions of SFAS 142 going into
effect, amortization of goodwill and tradename amounted to approximately
$800,000 per quarter.

      In connection with the Acquisition, the Company has adopted the provisions
of SFAS 141 and SFAS 142. Accordingly, the Company's tradename and goodwill have
been deemed to have indefinite lives and will no longer be amortized. The
Company's licensing agreements, however, have been recognized in the allocation
of the Acquisition purchase price and will be amortized over the average three
year life of such agreements as it has been determined that these agreements
have finite lives.

      The Company is currently evaluating the impact of Emerging Issues Task
Force (the "Task Force") Issue 00-25, "Accounting for Consideration from a
Vendor to a Retailer in Connection with the Purchase or Promotion of the
Vendor's Products" ("EITF 00-25"), which addresses when consideration from a
vendor to a retailer (a) in connection with the retailer's purchase of the
vendor's products or (b) to promote sales of the vendor's products by the
retailer should be classified in the vendor's income statement as a reduction of
revenue. In April 2001, the Task Force reached a consensus that consideration
from a vendor to a retailer of a vendor's products is presumed to be a reduction
to the selling prices of the vendor's products and should be characterized as a
reduction of revenue when recognized in the vendor's income statement. However,
the consideration should be characterized as a cost incurred to the extent that
a benefit is received from the recipient of the consideration. Provisions of
EITF 00-25 are effective as of the beginning of fiscal 2002.

NOTE 12 -- SENIOR CREDIT FACILITY:

      In connection with the Acquisition, the Company entered into a new senior
credit facility with Goldman, Sachs & Co., as the lead arranger, Fleet National
Bank, as the administrative agent, and other lenders. The senior credit facility
provides for aggregate borrowings by the Company of up to $185.0 million,
including a $125.0 million term loan and a $60.0 million revolving credit
facility. As of September 29, 2001, there was outstanding $125.0 million in term
loan borrowings and $4.6 million in revolving credit borrowings (excluding
approximately $11.1 million in outstanding letters of credit) and approximately
$44.3 million of unused commitment under the senior credit facility for working
capital and other corporate purposes.


                                       15
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 12 -- SENIOR CREDIT FACILITY: (CONTINUED)

      Amounts outstanding under the senior credit facility accrue interest, at
the Company's option, at a rate per annum equal to either: (1) the base rate, as
defined in the senior credit facility, or (2) an adjusted Eurodollar rate, as
defined in the senior credit facility, in each case plus an applicable interest
margin. The applicable interest margin for the term loan is initially 3.50% for
Eurodollar rate loans and 2.50% for base rate loans. The applicable interest
margin for the revolving credit facility is initially 3.00% for Eurodollar rate
loans and 2.00% for base rate loans. After March 31, 2002, the applicable
interest margins for the term loan and the revolving credit facility will be
subject to quarterly reduction based on the Company's achievement of certain
performance targets. The interest rate otherwise payable under the senior credit
facility will increase by 2.00% per annum during the continuance of a payment
default.

      Principal borrowings under the term loan are due and payable in quarterly
installments of approximately $.313 million beginning December 31, 2001 through
September 30, 2007 and approximately $29.4 million from December 31, 2007
through September 30, 2008. Interest is payable at interest rate reset dates,
not to exceed six months. The outstanding balance of the revolving credit
facility is payable in full on August 15, 2006 and interest is payable
quarterly.

      The Company is required to prepay borrowings under the senior credit
facility in specified amounts and under specified circumstances such as certain
asset sales, cash insurance proceeds, cash proceeds from the Company's issuance
of equity and excess cash flows, all as defined in the senior credit facility
agreement. Subject to certain conditions, the Company may make optional
prepayments of loans without premium or penalty.

      The senior credit facility is collateralized by substantially all of the
Company's personal property and some of the Company's real property and a pledge
of all the issued and outstanding stock of the Company and the Company's
domestic subsidiaries, as well as 65% of the issued and outstanding stock of the
Company's foreign subsidiaries. All of the Company's obligations under the
senior credit facility are guaranteed by Holdings and all of the Company's
present and future domestic subsidiaries.

      The senior credit facility contains certain covenants, which among other
things, limit the incurrence of additional indebtedness, mergers, acquisitions
and sales of assets; the incurrence of liens or other encumbrances, guarantees
or pledges; the payment of dividends and repurchases of common stock;
prepayments of equity and subordinated debt instruments, including the
10 7/8% senior subordinated notes; investments; and certain transactions with
affiliates. The senior credit facility requires the Company to meet financial
tests, including, without limitation: maximum leverage; minimum interest
coverage; maximum capital expenditures; and minimum fixed charge coverage.

      The senior credit facility contains customary events of default including,
among other things payment defaults; breaches of representations and warranties;
covenant defaults; cross-defaults to certain other debt, including the 10 7/8%
senior subordinated notes; events of bankruptcy and insolvency; judgment
defaults; invalidity of any guarantee or impairment of any collateral interests
supporting the senior credit facility; and a change in the Company control, as
defined in the senior credit facility.

      The Company is also required to pay a periodic administrative agent's fee,
a letter of credit fee equal to the applicable interest margin for Eurodollar
rate loans under the revolving credit facility, and letter of credit fronting
fees.


                                       16
<Page>

                           THE WILLIAM CARTER COMPANY
              (A WHOLLY-OWNED SUBSIDIARY OF CARTER HOLDINGS, INC.)
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)

NOTE 13 -- SENIOR SUBORDINATED NOTES:

      In connection with the Acquisition, the Company also issued $175.0 million
of 10 7/8% senior subordinated notes, less a discount of $1.3 million (the
"Notes"). Interest on the Notes accrues at the rate of 10.875% per annum and is
payable semi-annually in arrears on February 15 and August 15, commencing on
February 15, 2002. Unless redeemed earlier, principal on the Notes is due in
full on August 15, 2011. At any time prior to August 15, 2004, the Company may
on any one or more occasions redeem up to 35% of the aggregate principal amount
of the Notes at a redemption price of 110.875% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the redemption date, with the net
cash proceeds of one or more equity offerings; provided that:

      (1)   at least 65% of the aggregate principal amount of the Notes remains
            outstanding immediately after the occurrence of such redemption
            (excluding the Notes held by the Company and its Subsidiaries); and

      (2)   the redemption occurs within 90 days of the date of the closing of
            such equity offering.

      Except pursuant to the preceding paragraph, the Notes will not be
redeemable at the Company's option prior to August 15, 2006.

      After August 15, 2006, the Company may redeem all or part of the Notes
upon not less than 30 nor more than 60 days notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest, if any, on the Notes redeemed, to the applicable redemption
date, if redeemed during the twelve-month period beginning on August 15 of the
years indicated below:

<Table>
<Caption>
               YEAR                                       PERCENTAGE
               ----                                       ----------
<S>                                                       <C>
               2006.....................................  105.438%
               2007.....................................  103.625%
               2008.....................................  101.813%
               2009 and thereafter......................  100.000%
</Table>

      The Notes contain provisions and covenants including limitations on other
indebtedness, restricted payments and distributions, sales of assets, subsidiary
stock, liens and certain other transactions.

      On November 5, 2001, the Company filed a registration statement on Form
S-4 with the Securities and Exchange Commission ("SEC") related to an Exchange
Offer of $175.0 million of 10 7/8% Series B senior subordinated notes for a like
amount of the 10 7/8% senior subordinated notes issued in the August 15, 2001
private placement. Terms of the exchange notes will be the same as Notes issued
on August 15, 2001.


                                       17
<Page>

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

      THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS.

RESULTS OF OPERATIONS

     THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 29, 2001 COMPARED TO THREE AND
     NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000

     The 2001 results discussed below represent the mathematical addition of the
historical results for the period from December 31, 2000 through August 14, 2001
(the "Predecessor" period) and the period from August 15, 2001 through September
29, 2001 (the "Successor" period) for purpose of the discussion below only.

     While this approach is not consistent with generally accepted accounting
principles, due to the new basis of accounting established at the Acquisition
date, management believes it is the most practical way to comment on the
results of operations.

     As a result of the Acquisition, the Company's assets and liabilities were
adjusted to their estimated fair values as of August 15, 2001. In addition, the
Company entered into new financing arrangements and had a change in its capital
structure. The one and one-half month period prior to the Acquisition reflects
non-recurring charges, principally Company and sellers' expenses, such as
management bonuses and professional fees, and an extraordinary charge for debt
prepayment penalties and the write off of deferred debt issuance costs on debt
retired as a result of the Acquisition and refinancing. All Predecessor periods
included amortization expense on the Company's tradename and goodwill. The
period subsequent to the Acquisition reflects increased interest expense, the
amortization of licensing agreements and cessation of amortization on the
Company's tradename and goodwill due to the adoption of SFAS 141 and 142.
Accordingly, the results of operations for the Predecessor and Successor periods
are not comparable.

    In the third quarter of fiscal 2001, consolidated net sales increased $12.1
million (8.3%) to $157.8 million from $145.6 million in the third quarter of
fiscal 2000. Consolidated net sales for the first nine months of 2001 were
$378.8 million, an increase of $39.5 million (11.6%) compared to $339.3 million
in the first nine months of 2000.

    The Company's total wholesale sales increased $9.0 million (11.2%) to $89.5
million in the third quarter of 2001 from $80.5 million in the third quarter of
2000. Excluding discount channel and off-price sales, wholesale revenue
increased $4.9 million (6.4%) in the third quarter of 2001 to $80.4 million from
$75.5 million in the third quarter of 2000. The increase in wholesale sales
during the third quarter of 2001 was driven primarily by strong performance in
the sleepwear and playwear product categories.

    Total wholesale sales increased $27.4 million (14.7%) to $213.1 million in
the first nine months of 2001 from $185.8 million in the first nine months of
2000. In the first nine months of 2001, wholesale sales, excluding discount
channel and off-price sales, increased $13.5 million (7.8%) to $187.9 million
from $174.4 million in the first nine months of 2000. The increase in wholesale
sales during the first nine months of 2001 reflects strong performance in all
product categories. Strong product performance reflects improvements in fabrics,
garment construction, embroideries and prints made possible through the
Company's global sourcing capabilities.

    Over the past two years, the Company began its transition from a domestic,
vertically-integrated manufacturing company to a global sourcing company. In
addition to operating leased sewing facilities in Central America, the Caribbean
and Mexico, the Company has built full-package sourcing capabilities, which has
enabled the Company to source better products at lower costs than the Company
believes are available domestically.


                                       18
<Page>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS: (CONTINUED)

      The Company launched the TYKES brand in the discount channel in the fourth
quarter of 2000, the revenues from which were $5.5 million and $15.0 million for
the three and nine-month periods ended September 29, 2001, respectively. This
contributed to the overall increase in total wholesale sales for these periods.

      Off-price sales (merchandise sold at more than 25% off regular wholesale
prices) decreased $1.3 million to $3.6 million in the third quarter of 2001 from
$5.0 million in the third quarter of 2000. Off-price sales were 2.3% of total
sales in the third quarter of 2001 compared to 3.4% in the third quarter of
2000. Off-price sales for the first nine months of 2001 decreased $1.1 million
to $10.3 million from $11.4 million in the first nine months of 2000. Off-price
sales were 2.7% of total sales in the first nine months of 2001 compared to 3.4%
in the first nine months of 2000.

      The Company's retail outlet store sales were $68.3 million in the third
quarter of 2001, which represented an increase of $3.1 million (4.8%) compared
to the third quarter of 2000. Comparable store sales increased 2.9% in the third
quarter of 2001. Retail outlet store sales increased $12.1 million (7.9%) in the
first nine months of 2001 to $165.6 million from $153.5 million in the first
nine months of 2000. Comparable store sales increased 5.4% in the first nine
months of 2001. Sales in each of the Company's major product categories, baby,
sleepwear and playwear, increased during the third quarter and first nine months
of 2001 compared to similar periods of 2000. During the third quarter of 2001,
the Company opened one store. During the first nine months of 2001, five stores
were opened and two stores were closed. There were 150 outlet stores operating
as of September 29, 2001 compared to 148 as of September 30, 2000. The Company
plans to open six stores and close three stores in the last quarter of 2001.

      The Company's gross profit increased $3.7 million (6.6%) to $60.2
million in the third quarter of 2001 from $56.5 million in the third quarter
of 2000. Gross profit as a percentage of net sales in the third quarter of
2001 decreased to 38.2% from 38.8% in the third quarter of 2000. The decrease
in gross profit as a percentage of net sales in the third quarter of 2001
reflects a higher mix of discount channel revenues and a $1.7 million
amortization charge related to the step-up in the inventory valuation at
Acquisition but are offset by the Company's continuing transition from
domestic manufacturing towards full package and partial package sourcing
capabilities. Excluding the $1.7 million Acquisition adjustment, gross profit
as a percentage of net sales would have been 39.2% of net sales in the third
quarter of 2001. In the first nine months of 2001, gross profit increased
$11.6 million (9.0%) to $140.3 million compared to $128.6 million in the
first nine months of 2000. Gross profit as a percentage of net sales in the
first nine months of 2001 decreased to 37.0% compared to 37.9% in the first
nine months of 2000. The decrease in gross profit as a percentage of net
sales in the first nine months of 2001 reflects the benefit from the change
in product sourcing strategies mentioned above offset by a higher mix of
discount channel revenues, certain costs attendant to the Harlingen, Texas
and Barnesville, Georgia plant closures in the first half of 2001 and a $1.7
million charge related to the amortization of the step-up in the inventory
valuation at Acquisition. Excluding this Acquisition adjustment, gross profit
as a percentage of net sales would have been 37.5% in the first nine months
of 2001. The Company currently estimates that gross profit as a percentage of
net sales for fiscal 2001 will be comparable to fiscal 2000.

      Selling, general and administrative expenses for the third quarter of 2001
increased $3.7 million (9.2%) to $43.6 million from $39.9 million in the third
quarter of 2000. Selling, general and administrative expenses as a percentage of
net sales increased to 27.6% in the third quarter of 2001 from 27.4% in the
third quarter of 2000. The increase in selling, general and administrative
expenses as a percentage of net sales is attributed to additional investments in
brand marketing partially offset by the benefit from continued increases in
comparable retail outlet store growth. In the first nine months of 2001,
selling, general and administrative expenses increased $10.8 million (10.3%) to
$115.9 million from $105.1 million in the first nine months of 2000. As a
percentage of net sales, selling, general and administrative expenses decreased
to 30.6% in the first nine months of 2001 from 31.0% in the first nine months of
2000. The decrease in selling, general and administrative expenses as a
percentage of net sales is attributed to the benefit from continued increases in
comparable retail outlet store growth and lower distribution costs relative to
net sales, partially offset by investments in brand marketing. Included in
selling, general and administrative expenses are $0.3 million and $1.1 million
of costs incurred in connection with activity leading up to the


                                       19
<Page>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS: (CONTINUED)

Acquisition discussed in Note 1 to the accompanying financial statements for the
three and nine-month periods ended September 29, 2001, respectively.

     Royalty income was $2.5 million and $1.4 million in the third quarter of
2001 and 2000, respectively, and $6.0 million and $3.8 million in the first nine
months of 2001 and 2000, respectively. The increases in royalty income for the
third quarter and the first nine months of 2001 are attributed to the extension
of the Company's brands through new licensing arrangements and an increase in
average royalty rates.

     As described in Note 9 to the accompanying financial statements, the
Company closed two of its manufacturing facilities during the first nine months
of fiscal 2001. In the first quarter of fiscal 2001, the Company closed its
Harlingen, Texas sewing facility and recognized a non-recurring charge of
approximately $582,000 related to certain closure costs and involuntary
termination benefits. Additionally, the Company recorded a non-cash charge of
approximately $742,000 related to the writedown of the asset value to its
estimated net realizable value. In the second quarter of fiscal 2001, the
Company closed its fabric printing operations located in Barnesville, Georgia
and recognized a non-recurring charge of approximately $534,000 related to
certain closure costs and involuntary termination benefits. Additionally, the
Company recorded a non-cash charge of approximately $2,414,000 related to the
writedown of the asset value to the printing facility's estimated net realizable
value.

     As described in Note 1 to the accompanying financial statements, the
Company incurred Acquisition related non-recurring charges in connection with
the sale of the Company including $4.5 million in management bonuses and $6.8
million in seller expenses, during the one and one-half month period ended
August 14, 2001.

     Operating income for the third quarter of 2001 decreased $10.1 million to
$7.8 million compared to $18.0 million in the third quarter of 2000. Operating
income in the first nine months of 2001 decreased $12.6 million to $14.8 million
compared to $27.4 million in the first nine months of 2000. The decreases
primarily reflect the effects of the non-recurring Acquisition related and plant
closure costs. Excluding such charges, operating income for the third quarter
and first nine months of 2001 would have increased $1.5 million and $4.1
million, respectively, compared to the comparable periods in 2000.

     Net interest expense in the third quarter of 2001 increased $1.5 million to
$6.0 million from $4.4 million in the third quarter of 2000. Net interest
expense for the first nine months of 2001 increased $1.5 million to $13.8
million from $12.3 million in the first nine months of 2000. Average revolver
borrowings during the first nine months of 2001 were $7.6 million compared to
$6.7 million in the first nine months of 2000. These increases are attributed
primarily to significant additional borrowings resulting from the Acquisition
and refinancing. Prior to the Acquisition, interest expense for the seven and
one-half month period ended August 14, 2001 was approximately $10.1 million, an
amount comparable to similar periods in 2000. At September 29, 2001, outstanding
debt aggregated $303.3 million compared to $141.9 million at September 30, 2000.

     The Company's effective tax rate was 40% for the one and one-half month
period ended September 29, 2001; 14.5% for the seven and one-half month period
ended August 14, 2001; and 40% for the nine-month period ended September 30,
2000. The 14.5% benefit against the Company's pretax loss for the seven and
one-half month period ended August 14, 2001 is primarily a result of goodwill
amortization and certain seller's expenses incurred in connection with the
Acquisition that are not deductible for tax purposes.

     As described in Note 1 to the accompanying financial statements, the
Company incurred an extraordinary loss during the one and one-half month period
ended August 14, 2001 in connection with the Acquisition and refinancing due to
the write off of deferred debt issuance costs and debt prepayment penalties.


                                       20
<Page>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS: (CONTINUED)

     As a result of the factors described above, the Company reported a net loss
of approximately $7.5 million in the third quarter of 2001 compared to net
income of approximately $8.1 million in the third quarter of 2000. Loss
before cumulative effect of change in accounting principle in the first nine
months of 2001 was $8.1 million compared to income before cumulative effect of
change in accounting principle of $9.0 million in the first nine months of 2000.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

     The Company has historically financed its working capital, capital
expenditures and debt service requirements primarily through internally
generated cash flow and funds borrowed under the Company's revolving credit
facilities.

     Net accounts receivable at September 29, 2001 were $49.7 million compared
to $37.8 million at September 30, 2000. Such increases reflect a higher level of
wholesale shipments in the latter part of the third quarter ended September 29,
2001 compared to the comparable period in 2000. Due to the seasonal nature of
the Company's operations, the net accounts receivable balance at September 29,
2001 is not comparable to the net accounts receivable balance at December 30,
2000.

     Inventories at September 29, 2001 were $104.9 million, an increase of 2.5%
compared to $102.3 million at September 30, 2000. Included in the September 29,
2001 inventory balance is $2.9 million associated with an inventory fair market
valuation in connection with the Acquisition discussed in Note 1 to the
accompanying financial statements. Due to the seasonal nature of the Company's
operations, inventories at September 29, 2001 are not comparable to inventories
at December 30, 2000.

     The Company invested $12.2 million and $6.2 million in capital expenditures
during the first nine months of 2001 and 2000, respectively. The Company plans
to invest approximately $20.5 million in capital expenditures in 2001. Major
investments include retail outlet store openings and remodeling, fixturing
programs for wholesale customers and the relocation of Carter's corporate
headquarters to Atlanta, Georgia.

     The Company increased its level of indebtedness in connection with the
Acquisition. At September 29, 2001, the Company had $303.3 million of debt
outstanding, consisting of $173.7 million of 10 7/8% senior subordinated notes,
$125.0 million in term loan borrowings and $4.6 million in revolver borrowings
under the new senior credit facility at September 29, 2001, exclusive of
approximately $11.1 million of outstanding letters of credit. At September 29,
2001, the Company had approximately $44.3 million of financing available under
the revolving credit portion of the new senior credit facility. Principal
borrowings under the term loan are due and payable in quarterly installments of
approximately $.313 million beginning December 31, 2001 through September 30,
2007 and approximately $29.4 million from December 31, 2007 through September
30, 2008. Interest is payable at interest rate reset dates, not to exceed six
months. The outstanding balance of the revolving credit facility is payable
in full on August 15, 2006 and interest is payable quarterly.

     The Company believes that cash generated from operations, together with
availability under the revolving credit portion of the new senior credit
facility, will be adequate to meet its debt service requirements, capital
expenditures and working capital needs for the foreseeable future, although no
assurance can be given in this regard.

     On May 1, 2001 and April 28, 2000, the Company paid semi-annual dividends
of 12% on $20.0 million of redeemable preferred stock, or approximately $1.2
million, to Holdings. All of the Company's redeemable preferred stock was
cancelled in connection with the Acquisition.

IMPACT OF THE TRANSACTIONS

     As a result of the Acquisition, the Company's assets and liabilities have
been adjusted to their fair value as of the closing. The Company has also
increased its aggregate borrowings in connection with the new financing
arrangements entered into in connection with the Acquisition. Accordingly,
depreciation expense will be lower and amortization and interest expenses
will be higher in periods following the

                                       21
<Page>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS: (CONTINUED)

transactions. A significant portion of the purchase price has been allocated
to the Company's tradename. As an asset with an indefinite life, this asset
will not be amortized, unless and until determined it has a definite life,
but it will be subject to periodic impairment review. The excess of the total
purchase price over the value of assets at closing has been allocated to
goodwill, and will be subject to periodic impairment review. In connection
with the Acquisition, the Company reevaluated the requirements for certain
manufacturing operations which it had previously planned to maintain to
support its long-term revenue growth plans. After a thorough assessment of
alternative sourcing opportunities, the Company decided to exit certain
manufacturing operations. This decision was made in consultation with the new
owners in advance of the Acquisition. Accordingly, the Company has identified
one foreign and two domestic manufacturing facilities for closure by the end
of fiscal 2001. In addition to lowering inventory levels, the Company expects
our sourcing strategy to further streamline operations by taking advantage of
sources of supply nearer to our current offshore locations, as well as to
expand the use of lower cost third-party full packaging suppliers. Also in
connection with the Acquisition, the Company has determined to abandon an
initiative to open a new line of retail stores. This has led to the dismissal
of three employees, to terminate a consulting contract and to seek to sublet
related office space in corporate office. The allocation of the purchase
price includes approximately $5.9 million in exit costs associated with the
above decisions.

EFFECTS OF INFLATION

     The Company is affected by inflation primarily through the purchase of raw
material, increased operating costs and expenses and higher interest rates. The
effects of inflation on the Company's operations have not been material in
recent years.

SEASONALITY

     The Company experiences seasonal fluctuations in its sales and
profitability, with generally lower sales and gross profit in the first and
second quarters of its fiscal year. Accordingly, the results of operations for
the three and nine-month periods ended September 29, 2001 are not indicative of
the results to be expected for the full year.

MARKET RISKS

     In the operation of its business, the Company has market risk exposures to
sourcing products internationally, raw material prices and interest rates. Each
of these risks and the Company's strategies to manage the exposure are discussed
below.

     The Company currently sources substantially all of its production through
its offshore facilities and third-party manufacturers located in foreign
countries. As a result, the Company may be adversely affected by political
instability resulting in the disruption of trade from foreign countries, the
imposition of additional regulations relating to imports, duties, taxes and
other charges on imports and any significant decreases in the value of the
dollar against foreign currencies and restrictions on the transfer of funds.
These and other factors could result in the interruption of production in
offshore facilities or a delay in the receipt of the products by the Company in
the United States. The Company's future performance may be subject to such
factors, which are beyond the Company's control, and there can be no assurance
that such factors would not have a material adverse effect on the Company's
financial condition and results of operations.

     The principal raw materials used by the Company are finished fabrics and
trim materials. These materials are available from a number of suppliers. Prices
for these materials are affected by changes in market demand and there can be no
assurance that prices for these and other raw materials will not increase in the
near future.

     The Company's operating results are subject to risk from interest rate
fluctuations on debt which carries variable interest rates. At September 29,
2001, outstanding debt aggregated $303.3 million, of which $129.6 million bore
interest at a variable rate, so that an increase of 1% in the applicable rate
would increase the Company's annual interest expense by $1,296,000.


                                       22
<Page>

                           PART II--OTHER INFORMATION:

ITEM 1. LEGAL PROCEEDINGS:

       In January 2001, The Little Tikes Company filed a lawsuit against the
Company in federal court in Illinois alleging that the Company abandoned its
rights to use the TYKES trademarks and that the Company's use of the TYKES and
BABY TYKES trademarks infringe The Little Tikes Company's rights in its Little
Tikes trademarks. The lawsuit sought an order canceling the Company's trademark
registrations for Tykes and preventing the Company from using them and its Baby
Tykes trademarks to sell its products. In addition, Little Tikes seeks other
relief that the court might deem appropriate. The Company has defended its right
to use these trademarks. In May 2001, the court dismissed the lawsuit, but it
allowed The Little Tikes Company to reinstate its claim before July 31, 2001 if
the Company did not reach a settlement before that date. A settlement was not
reached, and The Little Tikes Company reinstated its claim in order to preserve
its rights. The parties recently have reached an agreement in principle to
settle the case and are in the process of finalizing a written settlement
agreement. In October 2001, the court again dismissed the lawsuit, but it will
allow The Little Tikes Company to reinstate its claim if the settlement
agreement is not finalized. The Company believes that if the usage of these
trademarks was ever prevented, the Company would be able to develop alternative
trademarks for its products without having a material adverse effect on
operating results.

       From time to time, the Company has been involved in various legal
proceedings. Management believes that all such litigation is routine in nature
and incidental to the conduct of its business, and that none of such litigation,
if resolved adversely to the Company, would have a material adverse effect on
the financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES:

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

       On August 15, 2001, the holder of all 1,000 shares of common stock of the
Company, voted by unanimous written consent to accept the resignation of two
previous directors and to elect the following directors: Frederick J. Rowan, II,
Joseph Pacifico, David A. Brown, Bradley M. Bloom and Ross M. Jones. No other
directors continued in office after the vote.

       On August 15, 2001 the holder of all 1,000 shares of common stock of the
Company, voted by unanimous written consent to amend and restate the articles of
organization of the Company.

ITEM 5. OTHER INFORMATION:

None


                                       23
<Page>

                     PART II--OTHER INFORMATION: (CONTINUED)

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: None

     (b) Reports on Form 8-K

       The Company filed a Current Report on Form 8-K with the Commission on
July 16, 2001. Under Item 5 of the report, the Company announced that its
parent, Carter Holdings, Inc. ("Holdings"), the Holdings stockholders and CH
Acquisitions LLC, a Delaware limited liability company ("CH Acquisitions"), had
entered into a Stock Purchase Agreement, dated as of July 12, 2001, pursuant to
which CH Acquisitions would acquire substantially all of the outstanding capital
stock of Holdings.

       The Company also filed a Current Report on Form 8-K with the Commission
on July 27, 2001. Under Item 5 of the report, the Company announced that it
would raise $175.0 million in gross proceeds through an offering of Senior
Subordinated Notes due 2011.


                                       24
<Page>

                                   SIGNATURES

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


                           THE WILLIAM CARTER COMPANY


Date: November 13, 2001    /s/ FREDERICK J. ROWAN, II
                           --------------------------
                             Frederick J. Rowan, II
                                  CHAIRMAN,
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER


Date: November 13, 2001       /s/ MICHAEL D. CASEY
                           --------------------------
                                Michael D. Casey
                            SENIOR VICE PRESIDENT AND
                             CHIEF FINANCIAL OFFICER


                                       25