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                            SECURITIES AND EXCHANGE
                                  COMMISSION
                             Washington, DC 20549

                                  FORM 10-QA

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1997 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)

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                     <S>                                      <C>
                MASSACHUSETTS                             04-1156680
(STATE OR OTHER JURISDICTION OF INCORPORATION      (IRS EMPLOYER IDENTIFICATION
                 OR ORGANIZATION)                              NO.)
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             1590 ADAMSON PARKWAY, SUITE 400, MORROW, GEORGIA 30260
             ------------------------------------------------------
           (Address of principal executive offices, including zip code)

                                (770) 961-8722
                                --------------
               (Registrant's telephone number, including area code)


                  ------------------------------------------
                   (Former name, former address and former 
                    fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. 

Yes       No      X

Applicable only to corporate issuers:

As of May 20, 1997, there were 1,000 shares of Common Stock outstanding. 

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                                   FORM 10-QA

                          THE WILLIAM CARTER COMPANY

                                                                           PAGE
PART I.          

Item 2.          Management's Discussion and Analysis of Financial
                 Condition and Results of Operations.                        3

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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 publically 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 Months Ended March 29, 1997 Compared to Three Months Ended
March 30, 1996.

    In the first quarter of 1997, consolidated net sales increased $4.9 
million (7.0%) to $75.2 million from $70.3 million in the first quarter of 
1996. The Company's wholesale sales increased $0.7 
million (1.5%) to approximately $46.2 million in the first quarter of 1997 
from $45.4 million in the first quarter of 1996. Regular priced wholesale 
sales were $41.3 million or $0.1 million lower than the first quarter of 1996 
due to a higher level of demand for early Spring shipments in the fourth 
quarter of 1996. The increase in wholesale sales in the first quarter of 1997 
was attributed to off-price sales (sales at 25% or more off regular wholesale 
sales prices) which were $4.9 million, or $0.8 million higher than off-price 
sales in the first quarter of 1996. Off-price sales for fiscal year 1997 are 
expected to be lower than fiscal year 1996.
 
    The Company's retail store sales were approximately $27.1 million for the 
first quarter of 1997, which represented an increase of $2.3 million (9.1%) 
compared to the first quarter of 1996. Comparable store sales decreased 1.6% 
in the first quarter of 1997 compared to the first quarter of 1996. This 
decrease was due primarily to a less aggressive markdown plan in the first 
quarter of 1997, and the reduction of certain higher-priced, but lower margin,
product lines including outerwear and certain playwear categories. During the 
first quarter of 1997, the Company opened one retail outlet store which brought
the total number of outlet stores operating as of March 29, 1997 to 136 as 
compared to 120 as of March 30, 1996.
 
    Management is addressing the comparable store sales decline by improving 
product mix; emphasizing core layette and sleepwear products; improving store 
layouts; assessing location, demographics and stores sizes; and upgrading 
management and retailing skills at corporate, regional and store levels. 
Although management believes that such improvements have slowed the rate of 
decline in comparable store results, comparable store sales for the fiscal 
year 1997 are expected to be lower than fiscal year 1996.
 
    The Company's gross profit increased $4.8 million (21.1%) to $27.4 
million in the first quarter of 1997 from $22.6 million in the first quarter 
of 1996. Gross profit as a percentage of net sales in the first quarter of 
1997 increased to 36.4% from 32.2% in the first quarter of 1996. This 
increase resulted primarily from pricing improvements in the Company's 
wholesale and retail business; improvement in margins from off-price sales; 
the maturing effect of the Company's three off-shore sewing plants; higher 
utilization of internal manufacturing capacity, particularly in the Company's 
textile operations; and the change in the retail store product mix toward 
higher margin sleepwear and layette products.
 
    Selling, general and administrative expenses for the first quarter of 
1997 increased 16.3% to $26.4 million from $22.7 million in the first quarter 
of 1996. Selling, general and administrative expenses as a percentage of net 
sales increased to 35.1% in the first quarter of 1997 from 32.3% in the first 
quarter of 1996. This increase in selling, general and administrative 
expenses as a percentage of net sales was attributable to the costs of 
amortization of intangible assets and prepaid management fees recorded in 
connection with the Acquisition; comparable store sales declines experienced 
by the Company's retail outlet stores; higher retail store expenses 
associated with 16 additional stores opened since the end of the first 
quarter of 1996; and additional expenses associated with establishing a new 
retail management team.
 
    Operating income for the first quarter of 1997 was $1.0 million compared 
to a loss of $0.1 million in the first quarter of 1996. This increase 
reflects the net result from improvements in gross margin and increases in 
selling, general and administrative expenses described above.

                                          3
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
    Interest expense in the first quarter of 1997 increased to $4.0 million 
from $2.2 million in the first quarter of 1996. This increase reflects higher 
interest expense on additional indebtedness resulting from the Acquisition. 
Average revolver borrowings during the first quarter of 1997 were $2.8 
million compared to $5.3 million in the first quarter of 1996. At March 29, 
1997, outstanding debt aggregated $147.0 million.

    The Company recorded an income tax benefit of $1.5 million in the first 
quarter of 1997 compared to an income tax benefit of $0.8 million in the 
first quarter of 1996. This increase was due to higher pretax losses in the 
first quarter of 1997 resulting principally from higher interest costs on 
additional indebtedness recorded in connection with the Acquisition. The 
Company's effective tax rate was approximately 48.9% during the first quarter 
of 1997 compared to 36.4% during the first quarter of 1996. The Company's 
first quarter 1997 tax rate was impacted by goodwill, recorded in connection 
with the Acquisition, which was not deductible for tax purposes.
 
    As a result of the factors described above, the Company reported a net 
loss of $1.5 million in the first quarter of 1997 compared to a net loss of 
$1.4 million in the first quarter of 1996.
 
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
 
    The Company has financed its working capital, capital expenditures and 
debt service requirements primarily through internally generated cash flow, 
in addition to funds borrowed under the Company's revolving credit facility.
 
    Net accounts receivable at March 29, 1997 were $21.2 million compared to 
$20.0 million at March 30, 1996. This increase reflects the higher levels of 
wholesale revenues in the first quarter of 1997. The net increase of $0.7 
million in wholesale sales in the first quarter of 1997 includes a $3.1 
million increase in March 1997 wholesale sales compared to March 1996 
wholesale sales. The Company improved the number of days sales outstanding as 
of March 29, 1997 to 37 days from 39 days as of March 30, 1996. Due to the 
seasonal nature of the Company's operations, the net accounts receivable 
balance at March 29, 1997 is not comparable to the net accounts receivable 
balance at December 28, 1996.
 
    Inventories at March 29, 1997 were $82.6 million compared to $99.9 
million at March 30, 1996. This decrease reflects management's efforts to 
reduce inventories by moderating production plans, the benefits derived from 
investments in production planning systems, the aggressive sell-off of excess 
finished goods through "off-price" secondary markets and the reduction in 
scope of certain lower margin product offerings in the Company's retail 
outlet stores. The Company has achieved a net reduction in inventory levels 
despite higher levels of inventory required to support increases in its sales 
plans. Due to the seasonal nature of the Company's operations, inventories at 
March 29, 1997 are not comparable to inventories at December 28, 1996.
 
    Improvements in production planning and reporting have been made possible 
with new information systems installed in the first quarter of fiscal 1996, 
as well as with the implementation of an automatic replenishment system which 
was fully functioning at the retail stores as of August 1996. In addition, 
the Company continues to aggressively reduce the scope of its product 
offerings and reduce the amount of open-market purchases, which will help 
mitigate the Company's exposure to excess finished goods and will allow the 
Company to continue moderating inventory levels prospectively.


                                       4


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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS(CONTINUED)
 
    The Company invested $1.0 million and $0.6 million in capital 
expenditures during the first quarter of 1997 and 1996, respectively. The 
Company plans to invest a total of $14.0 million in capital expenditures in 
1997.

   
    The Company incurred additional indebtedness in connection with the 
Acquisition. At March 29, 1997, the Company had $147.0 million of debt 
outstanding, consisting of $100.0 million of 10 3/8% Series A Senior 
Subordinated Notes, and $45.0 million in term loan borrowings and $2.0 
million in revolver borrowings under the Senior Credit Facility. At March 29,
1997, the Company had approximately $43.8 million of financing available under
the revolving credit portion of the Senior Credit Facility, including 
approximately $4.2 million of outstanding letters of credit.
    

    The Company believes that cash generated from operations, together with 
availability under the revolving portion of the 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 April 23, 1997, the Company's Board of Directors declared a semiannual 
dividend of 12% on the $20.0 million of redeemable preferred stock to be paid 
on May 1, 1997. The Company intends to pay a similar dividend on November 1, 
1997.
 
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. The Company believes that seasonality of 
sales and profitability is a factor that affects the baby and children's 
apparel industry generally and is primarily due to retailers' emphasis on 
Fall and Holiday sales, including back to school promotions, which results in 
higher sales and profitability in the third and fourth quarters.
 
    Accordingly, the results of operations for the three month period ended 
March 29, 1997 are not indicative of the results to be expected for the full 
year.







                                        5
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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: May 21, 1997              /s/ FREDERICK J. ROWAN, II      
                                --------------------------
                                Frederick J. Rowan, II
                                Chairman of the Board, President, 
                                Chief Executive Officer and Director 

                                /s/ JAY A. BERMAN      
                                -----------------
                                Jay A. Berman 
                                Senior Vice President, Treasurer, Chief 
                                Financial Officer and Director

                                     6