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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K
(MARK ONE)

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

               FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

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

                         COMMISSION FILE NUMBER: 1-5256

                           GERBER CHILDRENSWEAR, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      62-1624764
       (State or other jurisdiction of                       (I.R.S. employer
       incorporation or organization)                     identification number)
</TABLE>

                                7005 PELHAM ROAD
                              GREENVILLE, SC 29615
                    (Address of principal executive offices)

                                 (864) 987-5200
              (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                               NAME OF EACH
             TITLE OF EACH CLASS                       EXCHANGE ON WHICH REGISTERED
             -------------------                       ----------------------------
<S>                                            <C>
        Common Stock, $0.01 par value                     New York Stock Exchange
</TABLE>

        Securities registered pursuant to Section 12(g) of the Act: None

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

     As of March 20, 2000, there were outstanding 8,291,075 shares of Common
Stock and 8,692,315 shares of Class B Common Stock. As of that date, the
aggregate market value of the shares of Common Stock held by nonaffiliates of
the registrant (based on the closing price for the Common Stock on the New York
Stock Exchange on March 20, 2000) was approximately $21,697,000.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Stockholders of the Company
to be held May 16, 2000, which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1999.

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                               TABLE OF CONTENTS

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                                                                         PAGE
                                                                         ----
<S>        <C>                                                           <C>
                                   PART I
Item 1.    Business....................................................    4
Item 2.    Properties..................................................    9
Item 3.    Legal Proceedings...........................................   10
Item 4.    Submission of Matters to a Vote of Security Holders.........   10

                                   PART II
Item 5.    Market for the Registrant's Common Equity and Related
           Stockholder Matters.........................................   10
Item 6.    Selected Financial Data.....................................   11
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................   13
Item 7A    Quantitative and Qualitative Disclosures About Market
           Risk........................................................   18
Item 8.    Financial Statements and Supplementary Data.................   18
Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure....................................   18

                                  PART III
Item 10.   Directors and Executive Officers of the Registrant..........   19
Item 11.   Executive Compensation......................................   19
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management..................................................   19
Item 13.   Certain Relationships and Related Transactions..............   19

                                   PART IV
Item 14.   Exhibits, Financial Statement Schedules and Reports on Form
           8-K.........................................................   20
</TABLE>

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           SAFE-HARBOR STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE

     This report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs concerning future events that involve
known and unknown risks and uncertainties, including, without limitation, those
associated with the effect of national and regional economic conditions, the
overall level of consumer spending, the performance of the Company's products
within the prevailing retail environment, customer acceptance of both new
designs and newly-introduced product lines, competition and financial
difficulties encountered by customers. All statements other than statements of
historical facts included in this annual report, including, without limitation,
the statements under Management's Discussion and Analysis of Financial Condition
and Results of Operations, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct and actual results, performance or events could differ materially
from those expressed in such statements.

     References in this annual report on Form 10-K (the "Report") to the
"Company" shall, as the context requires, refer to Gerber Childrenswear, Inc.
(and its predecessor), together with its wholly-owned direct and indirect
subsidiaries. References in this Report to "Gerber" shall, as the context
requires, collectively refer to Gerber Childrenswear, Inc., Costura Dominicana,
Inc., Gerber Childrenswear Canada, Inc. (a Delaware corporation formed in 1998),
GCI IP Sub, Inc., Costura Matamoros S.A. de C.V. (a Mexican corporation formed
in 1998) and GCW Mexico S.A. de C.V. (a Mexican corporation formed in 1998).
References in this Report to "Auburn" shall, as the context requires,
collectively refer to Auburn Hosiery Mills, Inc., GCI Spainco, S.L. (a Spanish
corporation formed in 1998), Sports Socks Co. (Belgium) BVBA (a Belgian
corporation formed in 1999), Sport Socks Co. (UK) Limited and Sport Socks Co.
(Ireland) Limited, each a wholly-owned direct or indirect subsidiary of Gerber
Childrenswear, Inc.

                                        3
<PAGE>   4

                                     PART I

ITEM 1. BUSINESS

HISTORY

     Gerber Childrenswear, Inc. was formed and became a single corporate entity
through the merger in April 1989 of four separate companies acquired by Gerber
Products Company ("GPC"). In January 1996, Gerber Childrenswear, Inc. was
acquired by GCIH, Inc. ("GCIH") from GPC for approximately $61.5 million in cash
(subject to purchase price adjustments) and a $12.5 million promissory note (the
"Original Acquisition"). Since the Original Acquisition, GPC has not owned any
capital stock of the Company, nor have GPC and the Company shared common
directors, officers or employees. In connection with such acquisition and
related financing, Citicorp Venture Capital, Ltd. ("CVC"), management, directors
and others purchased the equity of GCIH. Gerber conducts the apparel segment of
the Company's business which consists of the production and sale of infant and
toddler sleepwear, playwear, underwear, bedding, bath, cloth diapers and other
products under the Gerber, Baby Looney Tunes, Little Suzy's Zoo and Curity
licensed brand names, the Onesies trademark and private labels.

     The Company acquired all of the capital stock of Auburn in December 1997
for approximately $40.0 million in cash (the "Auburn Acquisition"). Auburn
conducts the hosiery segment of the Company's business which consists of the
production and sale of branded sport socks under licensed brand names such as
Wilson, Coca-Cola, Converse and Dunlop to major retailers in the United States
and/or Europe.

     In connection with the consummation of the Company's Initial Public
Offering ("Offering") in June 1998, GCIH and Gerber consummated a series of
transactions pursuant to which GCIH was recapitalized and reorganized and Gerber
was merged into GCIH (the "Reorganization"). The principal transactions that
comprised the Reorganization which occurred in connection with the consummation
of the Offering were: (i) the conversion of all of the outstanding shares of
preferred stock of GCIH into either common stock of GCIH or the right to receive
cash; (ii) the merger of Gerber into and with GCIH, with GCIH being the
surviving entity of such merger; and (iii) the amendment of the certificate of
incorporation of GCIH to provide for (a) the reclassification and exchange of
all of the outstanding shares of all classes of common stock and warrants to
purchase common stock of GCIH for shares of Common Stock, Class B Common Stock
or warrants to purchase Class B Common Stock of GCIH and (b) a change of the
corporate name from GCIH, Inc. to Gerber Childrenswear, Inc.

     The Company is a Delaware corporation. The Company's principal offices are
located at 7005 Pelham Road, Greenville, SC 29615, and its telephone number is
(864) 987-5200.

                                        4
<PAGE>   5

BUSINESS SEGMENTS

  Apparel Segment

     The apparel segment consists of the production and sale of infant and
toddler sleepwear, playwear, underwear, bedding, bath, cloth diapers and other
products under the Gerber, Baby Looney Tunes, Little Suzy's Zoo and Curity brand
names, the Onesies trademark and private labels. Gerber Childrenswear, Inc. is a
leading marketer of infant and toddler apparel and related products, offering
products under its flagship brand, Gerber, as well as the Baby Looney Tunes and
Curity brand names, the Onesies trademark and the Little Suzy's Zoo brand which
was recently introduced in the apparel market. The Gerber name and baby head
logo are among the best recognized in the infant and toddler industry. The
Company believes that Gerber is the leading provider of infant and toddler
apparel and related products, based on dollar volume and breadth of product
offering to volume retailers, which constitute the fastest growing segment of
the retail industry. The Company also distributes products to mid-tier
department stores and specialty retailers. Gerber holds a leading market share,
based on dollar volume, in its distribution channels in the underwear, blanket
sleeper and cloth diaper categories. The Company believes that these leading
positions, in addition to strong consumer recognition of its brands, provide
opportunities for Gerber to leverage its brands into other product categories
including sleep 'n play, bed & bath, playwear, bibs, hosiery and gift sets where
Gerber has an existing presence.

     The Company believes the market offers continued growth prospects due to
demographic factors including: (i) more women having children at an older age
and returning to work thereafter, resulting in greater disposable income for
expenditures on children; and (ii) an increasing number of grandparents, who
represent a key consumer segment for infant and toddler products. Within the
infant and toddler industry, greater emphasis on value has shifted consumer
purchases away from traditional department stores and toward more
value-conscious retail channels, including volume retailers and mid-tier
department stores. Additionally, the industry is highly fragmented and supplies
volume retailers who are interested in limiting their purchases to a smaller
number of well-capitalized vendors with a broad base of branded products. The
Company believes that its strong brand names, leading market positions, broad
product offerings and strong customer relationships with volume retailers and
mid-tier department stores position it to benefit from industry trends.

  Hosiery Segment

     The hosiery segment consists of the production and sale of sport and casual
socks under the Wilson, Coca-Cola, Converse and Dunlop names to major retailers
in the United States and/or Europe. The hosiery segment conducted by Auburn
manufactures, markets and sells branded sport socks for men, women and children
under established brand names such as Wilson, Coca-Cola, Converse and Dunlop in
the United States ("U.S.") and/or Europe. Auburn has operations in the United
States and Ireland. Auburn markets to a diversified customer base in the U.S.
and Europe, including volume retailers, department stores, wholesale clubs and
major sporting good chains. These strong brand names and Auburn's long-term
reputation for quality facilitate a multi-channel distribution strategy. Auburn
competes effectively in these distribution channels by offering its branded
products at competitive prices, operating as a low-cost producer, servicing
customers with quick turnaround and maintaining strong customer relations.

  Business Segment Data

     For information regarding net sales, income (loss) before interest and
income taxes and assets by industry segment, reference is made to the
information presented in Note 18 "Business Segments and Geographic Areas" to the
consolidated financial statements.

GENERAL

  Manufacturing and Sourcing

     Through its own and third party manufacturing operations, Gerber is able to
control the knitting, cutting, sewing, embroidering and packaging of its
products. Over the last several years, Gerber has focused its operations on its
manufacturing strengths such as knitting, cutting and sewing and has
discontinued its inefficient manufacturing operations such as spinning yarn and
dyeing fabric. The Company believes that the combination of
                                        5
<PAGE>   6

domestic and foreign production helps Gerber maintain competitive pricing by
keeping costs low while fulfilling customer demand for fast turnaround on
orders.

     Gerber has seven manufacturing operations, including one in each of South
Carolina and Texas, two locations in North Carolina and two "9802" facilities in
the Dominican Republic and one location in Mexico. The facility in Mexico began
operations in the fourth quarter of 1998. By the end of 1999, the Mexican plant
was manufacturing 20,000 dozen garments per week, up from approximately 10,000
dozen per week in the first quarter of 1999. By the end of 2000, the facility is
expected to generate close to 30,000 dozen garments per week. The lower labor
costs in Mexico and proximity to new and existing markets ensures the Company's
cost competitiveness and "just in time" deliveries. In addition, the facility
can service the Canadian market under the NAFTA agreement, as well as parts of
South America without incurring duties. In "9802" facilities, U.S. components
are shipped abroad, assembled, packaged and re-imported with duty charges
assessed only on the value added abroad.

     In addition, the Company utilizes third party manufacturers (both
domestically and offshore) and has entered into exclusive production agreements
with certain contractors in the U.S., Estonia, Guatemala and Mexico. These
agreements are generally for terms of one year, payment is due within 30 days,
the contractors must provide labor and conduct hiring practices consistent with
local laws and the Company's condition of employment standards, and pricing
terms are negotiated on an item by item basis.

     Hosiery segment manufacturing requires a capital intensive process through
which the sock is knit in the greige, the toe is closed, the sock is bleached or
dyed and then packaged for distribution. In the U.S., Auburn conducts knitting
and toe closing operations at its manufacturing facility in Adairville,
Kentucky. The Adairville facility houses technologically advanced knitting and
sewing equipment with no significant equipment older than six years. Auburn has
implemented a computerized monitoring system of this machinery which increases
efficiency, usage rates and productivity. Auburn's bleaching, dyeing, finishing,
packaging and shipping operations are conducted at its facility in Auburn,
Kentucky. Technological advances and other control mechanisms at both the
Adairville and Auburn facilities allow Auburn to maximize productivity. The
Company intends to invest in further technological advances as they become
available.

     Outside the U.S., Auburn operates a facility in Cahirciveen, County Kerry,
Ireland which conducts knitting, sewing, bleaching, packaging and shipping
functions using machinery, processes and technology virtually identical to those
of the U.S. facilities. The Ireland facility primarily supplies the European
market (including Western Europe and Eastern Europe west of Russia) with the
same branded American-style sports socks. In addition, the Company recently
installed in the Ireland facility a computerized monitoring system similar to
that which Auburn implemented in its Adairville facility. Now fully operational
in Ireland, the system has significantly increased efficiency and productivity
at that facility. The Company plans to spend approximately $8.0 million to
establish a second manufacturing facility in Tralee, Ireland. When the new plant
is completed in 2001, it will increase the potential capacity to service the
European market. The Company believes that Auburn's ability to offer high
quality, branded socks at competitive prices has been recognized by
value-conscious Europeans and which will enable Auburn to expand its branded
business in Europe.

  Customers

     Certain of the Company's volume retailer and mid-tier department store
customers account for significant portions of the Company's net sales. The
Apparel segment directly services approximately 1,100 retail accounts, with its
top 10 customers representing approximately 84%, 82% and 82% of total 1999, 1998
and 1997 sales, respectively. The Apparel segment had sales to Wal-Mart and two
other customers that accounted for 37%, 11%, and 11% of total Apparel sales in
1999, respectively; 40%, 11% and 10% of total Apparel sales in 1998,
respectively; 43%, 10%, and 11% of total Apparel sales in 1997. The Hosiery
segment had sales to Wal-Mart that accounted for 51% and 45% of 1999 and 1998
sales, respectively, and 49% of its 1997 sales on a pro forma basis.

     The Company generally does not enter into long-term or other purchase
agreements with its customers. Customer orders are received by the Company
through one of two methods. With the exception of fashion-oriented and seasonal
products, most customer orders are tied to a planogram, which is established by
customers for setting up displays within their stores. Generally planograms are
revised annually in these merchandise categories. The Company's customers, based
on sales data captured at cash registers, generate orders for replenishment
goods

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<PAGE>   7

which are transmitted to the Company through its electronic data interchange
("EDI") systems. Replenishment orders for planogram merchandise are generally
filled within three days. Under the second program, customer orders for
fashion-oriented and seasonal products (e.g., blanket sleepers) are received on
a purchase order basis, and such orders are filled without an in-season reorder
expectation.

  Competition

     The infant and toddler apparel market is highly competitive. Both branded
and private label manufacturers compete in the infant and toddler apparel
markets. Competition generally is based upon product quality, brand name
recognition, price, selection, service and convenience. Gerber's primary
competitors include the Hanes subsidiary of the Sara Lee Corporation ("Hanes"),
The William Carter Company ("Carter's"), licensed products and firms using
character licenses from Walt Disney Company, Inc. ("Disney") and others. Gerber
also competes with certain retailers, including several which are customers of
the Company, which have significant private label product offerings. Gerber's
ability to compete depends, in substantial part, on the continued high regard
for the Gerber brand name and the ability of Gerber to continue to offer
high-quality products at competitive prices.

     The hosiery industry is highly fragmented and has significant branded and
private label components. Competition is generally in terms of price, quality,
service, brand recognition and style. Auburn's primary competitors include
Hanes, which has the largest share of the market, Renfro Corporation ("Renfro"),
Neuville Industries, Inc. ("Neuville") and the Russell Corporation ("Russell").
Auburn also competes with certain retailers, including several which are
customers of the Company, which have significant private label product
offerings. In addition, Auburn competes with private label manufacturers,
including small, local manufacturers and large, public companies.

  Patents, Licenses and Trademarks

     The Company is largely dependent on the use of the Gerber name. The Gerber
name and trademark are exclusively licensed to the Company from GPC for use on
certain clothing and textile products in the infant and toddler apparel market
sold in the U.S., Canada and the Caribbean. The product categories covered by
the Gerber license include infant and toddler shoes, underwear, sleepwear
(including blanket sleepers, pajamas and sleep 'n play), playwear, bed and bath
products, reusable cloth diapers and diaper liners, bibs, hosiery, swimwear and
gift sets and layette incorporating the above articles, in each case targeted to
infants and toddlers. The terms and conditions for use of the Gerber name for
other product categories and geographic areas must be negotiated by the Company
on an individual basis. The Gerber license extends through 2006, after which
there are two five-year renewal periods. GPC retains the rights under the
license to produce, distribute, advertise and sell, and to authorize others to
produce, distribute, advertise and sell, products under the Gerber name other
than clothing and textile products. The Company is not required to pay royalty
fees to GPC until 2002, although the Company is recording royalty expense to
reflect such fees over the initial license period.

     The Company also licenses the Baby Looney Tunes brand name from the Warner
Brothers division of Time-Warner, Inc. ("Warner Brothers"), the Curity brand
name from The Kendall Company and the Little Suzy's Zoo brand name from Suzy's
Zoo. The Company is licensed to use the Baby Looney Tunes and Little Suzy's Zoo
brand names in the U.S. and Canada and the Curity brand name in the U.S. and
internationally. The Baby Looney Tunes, Curity and Little Suzy's Zoo licenses
are limited to certain product categories, including, in the case of Baby Looney
Tunes and Little Suzy's Zoo, bath products, bedding, sleepwear, underwear,
footwear, socks, layettes and infant and toddler playwear, and in the case of
Curity, cloth diapers and diaper liners, underwear, hosiery, sleepwear
(including blanket sleepers and sleep 'n play) and certain other products, in
each case for infants and toddlers. The Curity license automatically renews for
periods of ten years. The Baby Looney Tunes license extends through December 31,
2000. Any subsequent renewals will be the subject of good faith negotiations.
The Little Suzy's Zoo license expires on December 31, 2001 but can be
automatically renewed for one additional year if a certain minimum royalty is
earned in the final year of the agreement. Any subsequent renewals will be the
subject of good faith negotiations. The Company owns the Onesies trademark.

     Auburn also licenses properties from different companies for its products.
The license from Wilson Sporting Goods Co. ("Wilson") expires in 2002 with a
five year renewal period if certain sales targets are exceeded. Auburn has held
this license since 1982. The license from Wilson can be terminated by Wilson if
the employment of either Kevin K. Angliss or Donald J. Murphy with Auburn
terminates. The license from Converse

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Inc. ("Converse") expires on December 31, 2004 with a two year renewal option if
certain sales targets are met. This license can be terminated by Converse if
Kevin K. Angliss and/or Timothy Graham are no longer the principal managers of
Auburn's Converse brand product line. Messrs. Angliss, Murphy and Graham have
not entered into employment agreements with Auburn. The Company decided not to
renew the Coca-Cola Company ("Coca-Cola") license in the U.S. as sales under
this license were not sufficient to warrant its renewal at December 31, 1999.
The license from Dunlop Slazenger International Ltd. ("Dunlop") expires in 2001
(with a five year renewal period if certain sales targets are exceeded). All of
these licenses have particular geographic and other limitations, and the Company
negotiates the terms and conditions for the use of such trademarks outside such
limitations on an individual basis. The products covered by the licenses
include: (i) sport socks in the case of Wilson; (ii) men's, women's and youth's
hosiery in all color combinations and styles in the case of Converse; (iii)
athletic and casual socks in the case of Coca-Cola; and (iv) sport and casual
socks in the case of Dunlop.

     The Company has not experienced any proprietary license infringements or
legal actions that have had a material impact on its consolidated financial
condition or results of operations.

  Raw Materials

     The Company depends on certain raw materials such as yarn for the
manufacturing of its products. In order to hedge against price increases of
yarn, the Company actively manages its cost through contracts with its yarn
suppliers with terms of up to one year. With the exception of suppliers located
in Ireland, the United Kingdom, Spain, Italy and Germany which provide yarn to
the Company's Irish subsidiary, all of the Company's yarn suppliers are located
in the U.S. None of the foreign suppliers, either individually or in the
aggregate, provide material quantities of yarn to the Company. Management
believes that none of these suppliers are material and that there are many
alternate sources from which yarn may be readily obtained.

  Cost of Environmental Compliance

     The Company's manufacturing facilities and operations are subject to
certain federal, state, local and foreign laws and regulations relating to
environmental protection and occupational health and safety, including those
governing wastewater discharges, air emissions, the management and disposal of
solid and hazardous wastes, and the remediation of contamination associated with
the release of hazardous substances. Prior to its acquisition, Auburn was cited
for discharging contaminants into the sewer system from its facility in Auburn,
Kentucky in excess of the amounts allowed under its permits. The condition
underlying such violations were either fully remediated at an immaterial cost or
are expected to be remediated at an immaterial cost. Gerber and, other than the
above, Auburn have never been cited, fined or otherwise held liable for
violations of environmental statutes or regulations. In addition, the Company is
not aware of any noncompliance with such laws and regulations. The Company has
incurred, and will continue to incur, capital expenditures and operating
expenses to comply with such requirements. However, the Company does not
currently anticipate any material capital expenditures for environmental control
facilities for the current or succeeding year. Nonetheless, there can be no
assurance that such laws will not become more stringent or be interpreted and
applied more stringently. Such future changes or interpretations or the
identification of adverse environmental conditions previously unknown to the
Company could result in additional compliance costs or in remediation costs to
the Company.

     The Company's older facilities contain asbestos materials and lead-based
paint in inactive areas utilized for the storage of records, machine parts and
obsolete supplies, where the potential for worker exposure to such materials is
minimal. If the Company were to elect to utilize such areas as active
manufacturing or distribution facilities such that the potential for worker
exposure would be increased, as a matter of policy the Company would undertake
to remediate or encapsulate such materials. The cost of removing or
encapsulating such materials from the Company's Pelzer, South Carolina
facilities would be a material expenditure.

  Backlog of Orders

     The Company delivers products throughout the year and generally experiences
buy cycles during the first and third quarters. The EDI system and Vendor
Managed Inventory ("VMI") programs have significantly reduced the average order
period, which effectively reduces backlog. At December 31, 1999, the Company's
backlog of orders for its products, all of which were expected to be shipped
during 2000, was approximately $19.5 million compared to approximately $21.9
million at December 31, 1998 and approximately $20.2 million at December 31,

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1997. Backlog as of any given date may not be indicative of backlog at a
subsequent date. Therefore, a comparison of backlog from period to period is not
necessarily an accurate indicator of eventual shipments.

  Employees

     As of December 31, 1999, the Company had approximately 3,100 employees
including approximately 1,500 in the U.S. and approximately 1,600 in foreign
countries. None of the Company's employees are members of unions or are
otherwise party to a collective bargaining agreement. Certain of the Company's
employees in Ireland are subject to the national wage agreement in Ireland. The
Company considers its relations with its employees to be good.

ITEM 2.  PROPERTIES

     The following table sets forth the principal real property owned or leased
by the Company and used as production, distribution, warehouse, manufacturing or
other facilities as of December 31, 1999:

<TABLE>
<CAPTION>
                                                               OWNED OR        APPROXIMATE
         LOCATION                         USE                   LEASED     FLOOR SPACE (S.F.)
         --------                         ---                  --------    -------------------
<S>                         <C>                                <C>         <C>
APPAREL SEGMENT:
---------------
  Ballinger, TX...........  Manufacturing                        Owned            85,000
  Ballinger, TX...........  Warehouse, Distribution             Leased            70,000
  Evergreen, AL...........  Warehouse, Distribution             Leased           255,000
  Dominican Republic
     (Two Facilities).....  Manufacturing                       Leased            53,000
  Lumberton, NC
     (Two Facilities).....  Manufacturing                        Owned           183,000
  Pelzer, SC
     (Two Facilities).....  Manufacturing, Distribution          Owned           804,000
  Matamoros, Mexico.......  Manufacturing                       Leased            74,000

HOSIERY SEGMENT:
---------------
  Adairville, KY..........  Manufacturing                        Owned            72,000
  Auburn, KY..............  Manufacturing, Distribution and
                              Administration                     Owned           160,000
  Cahirciveen, Ireland
     (Two Facilities).....  Manufacturing, Distribution and
                              Administration                    Leased            62,000
</TABLE>

     In addition to the facilities described above, the Company leases 48,000
square feet for its headquarters in Greenville, South Carolina. The Company also
renewed in April 1999, its lease for approximately 21,000 square feet for its
executive offices and showroom in New York, New York. From time to time, the
Company also uses storage space in warehouses in Adairville, Kentucky for
Hosiery and Evergreen, Alabama and Brewton, Alabama for Apparel. The Company
holds a purchase option for the Evergreen, Alabama warehouse which is
exercisable at any time during the 15 year lease term at a price of two dollars.
The Company also holds a purchase option on the Matamoros, Mexico lease which is
exercisable during the life of the lease for a price of approximately $2.6
million. The Company plans to spend approximately $8.0 million to establish a
second manufacturing facility in Tralee, Ireland. When the new plant is
completed in 2001, it will increase the potential capacity to service the
European market.

ENVIRONMENTAL AND OTHER REGULATORY MATTERS

     For a discussion of environmental and other regulatory matters see "Item 1.
Business -- General -- Cost of Environmental Compliance."

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ITEM 3.  LEGAL PROCEEDINGS

     The Company is involved from time to time in various routine legal and
administrative proceedings and threatened legal and administrative proceedings
incidental to the ordinary course of its business. The Company has been active
in pursuing actions against infringements on its trademarks. In the opinion of
the Company's management, the resolution of such matters will not have a
material adverse effect on the Company's business, financial condition or
results of operations.

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

     None.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION FOR COMMON STOCK

     Gerber Childrenswear, Inc.'s Common Stock is traded on the New York Stock
Exchange. The following table reflects the range of high and low selling prices
of Gerber Childrenswear, Inc.'s Common Stock by quarter from the time of the
Company's initial public offering in June 1998.

<TABLE>
<CAPTION>
                                                                 1999           1998
                                                              -----------    -----------
                                                              HIGH    LOW      HIGH     LOW
                                                              ----    ---      ----     ---
<S>                                                           <C>     <C>      <C>      <C>
First Quarter...............................................  8 12/16 5 14/16  N/A      N/A
Second Quarter (for 1998 -- beginning June 11, 1998)........  8 8/16  5 14/16  16 1/16  14 7/16
Third Quarter...............................................  7 12/16 4 4/16   16 10/16  7 6/16
Fourth Quarter..............................................  5 14/16 3 12/16  10 6/16   5 4/16
</TABLE>

HOLDERS

     At March 20, 2000, there were approximately 93 holders of record of Common
Stock and two holders of record of Class B Common Stock.

DIVIDENDS

     The Company has not paid any dividends with respect to the Common Stock.
The Company presently intends to retain future earnings to finance its growth
and development and therefore does not expect to pay any cash dividends in the
foreseeable future. The Company's credit facility, which was entered into with
certain lenders in connection with the Auburn Acquisition ("Credit Agreement"),
restricts the payment of cash dividends by the Company (subject to certain
limited exceptions), and the Company may in the future enter into loan or other
agreements or issue debt securities or preferred stock that restrict the payment
of dividends. The declaration and payment of dividends by the Company are
subject to the discretion of the Board of Directors of the Company (the
"Board"). Any future determination to pay dividends will depend on the Company's
results of operations, financial condition, capital requirements, contractual
restrictions and other factors deemed appropriate by the Board.

                                       10
<PAGE>   11

ITEM 6.  SELECTED FINANCIAL DATA

ANNUAL FINANCIAL DATA

     The following table presents (i) selected historical consolidated financial
data of the Predecessor Company for the year ended December 31, 1995 and (ii)
selected historical consolidated financial information of the Company at
December 31, 1996 and for the period from January 22, 1996 to December 31, 1996
and as of and for the years ended December 31, 1997, 1998 and 1999. The selected
consolidated financial data of the Predecessor has been derived from the
financial statements of the Predecessor for the year ended December 31, 1995,
the selected financial data of the Company for the period from January 22, 1996
to December 31, 1996, as well as the year ended December 31, 1997, 1998 and 1999
has been derived from the financial statements of the Company. The selected
financial data should be read in conjunction with the Consolidated Financial
Statements and the related notes as indexed on page F-1 and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7.

<TABLE>
<CAPTION>
                                                                                             PREDECESSOR
                                                                  COMPANY                      COMPANY
                                                  ----------------------------------------   -----------
                                                                               PERIOD FROM
                                                   YEAR     YEAR      YEAR     JANUARY 22,      YEAR
                                                  ENDED    ENDED     ENDED       1996 TO        ENDED
                                                                       DECEMBER 31,
                                                  ------------------------------------------------------
                                                   1999     1998    1997 (A)    1996 (B)      1995 (C)
                                                  ------   ------   --------   -----------   -----------
                                                           (IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                                               <C>      <C>      <C>        <C>           <C>
STATEMENT OF INCOME DATA:
Net sales.......................................  $277.7   $278.5    $202.0      $185.2        $197.4
Cost of sales...................................   210.7    209.5     146.3       138.6         156.4
                                                  ------   ------    ------      ------        ------
Gross margin....................................    67.0     69.0      55.7        46.6          41.0
Selling, general and administrative expenses....    42.4     38.5      27.7        23.9          24.6
Stock compensation (d)..........................      --       --       9.5          --            --
Other (e).......................................    (1.8)      --        .2          .7            --
                                                  ------   ------    ------      ------        ------
Total operating expenses........................    40.6     38.5      37.4        24.6          24.6
                                                  ------   ------    ------      ------        ------
Income before interest and income taxes.........    26.4     30.5      18.3        22.0          16.4
Interest expense, net...........................     2.7      5.8       5.8         6.3            --
                                                  ------   ------    ------      ------        ------
Income before income taxes and extraordinary
  item, net.....................................    23.7     24.7      12.5        15.7          16.4
Provision for income taxes......................     8.0      8.7       4.8         6.2           6.3
                                                  ------   ------    ------      ------        ------
Income before extraordinary item, net...........    15.7     16.0       7.7         9.5          10.1
Extraordinary item, net (f).....................      --      (.2)      (.7)         --            --
                                                  ------   ------    ------      ------        ------
Net income......................................    15.7     15.8       7.0         9.5          10.1
Less preferred stock dividends..................      --      (.8)     (1.6)       (1.3)           --
                                                  ------   ------    ------      ------        ------
Net income available to common shareholders.....  $ 15.7   $ 15.0    $  5.4      $  8.2        $ 10.1
                                                  ======   ======    ======      ======        ======

Earnings per common share.......................  $  .94   $ 1.06    $  .48      $  .72
Earnings per common share - assuming dilution...  $  .79   $  .85    $  .37      $  .53
</TABLE>

<TABLE>
<CAPTION>
                                                                                          PREDECESSOR
                                                                   COMPANY                  COMPANY
                                                      ---------------------------------   -----------
                                                                       DECEMBER 31,
                                                      -----------------------------------------------
                                                       1999     1998     1997     1996       1995
                                                      ------   ------   ------   ------   -----------
                                                                       (IN MILLIONS)
<S>                                                   <C>      <C>      <C>      <C>      <C>
BALANCE SHEET DATA:
Working capital.....................................  $ 90.8   $ 82.7   $ 65.9   $ 56.2     $ 69.6
Total assets........................................   178.4    185.7    163.9    106.1      103.2
Total debt..........................................    19.5     39.7     77.0     43.4         --
Preferred stock including accrued dividends.........      --       --     14.6     13.1         --
Investment by GPC...................................      --       --       --       --       79.1
Shareholders' equity................................  $111.9   $ 98.9   $ 19.4   $  9.1         --
</TABLE>

See following page for notes to the selected financial data.

                                       11
<PAGE>   12

---------------

(a)  Includes the following operating results for Auburn for the period December
     17, 1997 through December 31, 1997 (in millions).

<TABLE>
<S>                                                           <C>
Net sales...................................................  $1.5
Gross margin................................................    .2
SG&A expenses...............................................    .2
Loss before interest and income taxes.......................     *
Net loss....................................................     *
</TABLE>

*    Less than $50,000.
(b)  Excludes the Predecessor Company's unaudited operations for the period
     January 1, 1996 through January 21, 1996 (in millions).

<TABLE>
<S>                                                           <C>
Net sales...................................................  $6.7
Gross margin................................................   1.1
SG&A expenses...............................................   1.4
Loss before interest and income taxes.......................   (.3)
Net loss....................................................   (.2)
</TABLE>

(c)  The Predecessor Company operated as a wholly-owned subsidiary of GPC until
     being divested by GPC on January 22, 1996. The financial data for the
     Predecessor Company is not entirely comparable to that of the Company due
     to certain factors including the following:

     (i)    The Predecessor Company did not incur any royalty expense for the
            use of the Gerber name and baby head logo. During the period from
            January 22, 1996 to December 31, 1996 and for the years ended
            December 31, 1997, 1998 and 1999, the royalty expense to GPC was
            approximately $1.9 million, $3.5 million, $2.8 million and $1.4
            million, respectively.

     (ii)   The Predecessor Company's net sales in 1995 included approximately
            $8.3 million of net sales at cost to GPC that generated no gross
            margin. Net sales to GPC in 1996, 1997 and 1998 of approximately
            $6.2 million, $4.3 million and $1.1 million, respectively, generated
            gross margins in 1996, 1997 and 1998 of approximately $1.0 million,
            $.6 million and $.2 million, respectively. There were no sales to
            GPC in 1999.

     (iii)  The Predecessor Company was included in various self-insurance
            programs provided by GPC, including medical, dental, workers'
            compensation, comprehensive general and excess liability and
            property damage and business interruption. GPC also provided
            management information services to the Predecessor Company and
            allocated a portion of the expenses incurred to the Predecessor
            Company. In addition, the Predecessor Company was allocated a
            portion of legal and professional costs for services directly
            attributable to the Predecessor Company. Certain services were
            provided by GPC's corporate staff, for which no charge was made to
            the Predecessor Company. Management believes the aggregate cost of
            these unallocated services was insignificant. The Predecessor
            Company was charged for all outside legal and professional expenses
            directly attributable to it.

      (iv)  In 1995, the Predecessor Company had no long term debt and was not
            charged any interest expense as a subsidiary of GPC.

      (v)   The provision for income taxes of the Predecessor Company results
            from applying the Federal and state statutory rates to the
            operations of a stand-alone company.

(d)  Represents expense related to stock compensation incurred in connection
     with the sale of capital stock below fair market value to executives and
     management of the Company.

                                       12
<PAGE>   13

(e)  Represents the settlement with its insurance providers of the Company's
     losses associated with Hurricane Georges for a net casualty gain of
     approximately $1.3 million and a one-time curtailment of postretirement
     benefits gain associated with the Company's decision to downsize its
     domestic Apparel operations in 1999.

(f)  In June 1998, the Company repaid senior and junior subordinated notes in
     the principal amount of $22.5 million and $11.0 million, respectively. The
     write-off of unamortized discount and loan costs totaled $.2 million (net
     of an income tax benefit of $.2 million). In 1997, the Company expensed
     unamortized loan costs and a prepayment penalty of $.7 million (net of an
     income tax benefit of $.5 million) in connection with the replacement of
     the Company's then existing credit facility with the current Credit
     Agreement.

QUARTERLY FINANCIAL DATA

     For information regarding quarterly financial data, reference is made to
Note 19 "Selected Quarterly Financial Data -- (Unaudited)" to the consolidated
financial statements.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

YEAR 2000 COMPLIANCE

     During 1999, the Company discussed the nature and progress of its plans to
become Year 2000 ("Y2K") compliant. In late 1999, the Company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
mission critical information technology and non-information technology systems
and believes those systems successfully responded to the Y2K date change. The
Company expensed approximately $50,000 and $300,000 during 1999 and 1998,
respectively, in connection with remediating its systems. The Company is not
aware of any material problems resulting from Y2K issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors to ensure that any latent Y2K matters
that may arise are addressed promptly.

CASUALTY EVENT -- HURRICANE GEORGES

     For information regarding the Company's insured casualty loss, reference is
made to the information presented in Note 16 "Casualty Event" to the
consolidated financial statements.

SEASONALITY

     In the Apparel segment, sales are typically higher in the third and fourth
quarters. The Company believes that there are three main reasons for this trend:
(i) sales of blanket sleepers and fleece products occur mostly during this
period; (ii) a portion of the Company's underwear business is seasonal in that a
product line for the fall season incorporates seasonal designs, prints, colors
and fabric weight; and (iii) sales in general rise as retailers prepare for
events such as back-to-school season (as consumers visit stores to buy clothing
for older children) and retailer initiated promotions of baby apparel. In the
fourth quarter, such trend is primarily due to greater sales of blanket sleepers
in the early fourth quarter and increased sales of playwear in the late fourth
quarter.

     In the Hosiery segment, sales are generally non-seasonal, but Auburn does
experience somewhat higher sales in the second and third quarters as a result of
the seasonal use of the product and back to school sales. Auburn's business is
also influenced by promotions instituted by its customers.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of net sales. Any trends reflected by the
following table may not be indicative of future results.

                                       13
<PAGE>   14

<TABLE>
<CAPTION>
                                                                PERCENTAGE OF NET SALES
                                                                -----------------------
                                                                YEAR ENDED DECEMBER 31,
                                                                1999     1998     1997
                                                                -----    -----    -----
<S>                                                             <C>      <C>      <C>
Net sales...................................................    100.0%   100.0%   100.0%
Cost of sales...............................................     75.9     75.2     72.4
                                                                -----    -----    -----
Gross margin................................................     24.1     24.8     27.6
Selling, general & administrative expenses..................     15.3     13.8     13.7
Stock compensation..........................................      0.0      0.0      4.7
Other.......................................................     (0.7)     0.0      0.1
                                                                -----    -----    -----
Income before interest and income taxes.....................      9.5     11.0      9.1
Interest expense, net.......................................      1.0      2.1      2.9
                                                                -----    -----    -----
Income before income taxes and extraordinary item, net......      8.5      8.9      6.2
Provision for income taxes..................................      2.9      3.1      2.4
                                                                -----    -----    -----
Income before extraordinary item, net.......................      5.6      5.8      3.8
Extraordinary item, net.....................................      0.0     (0.1)    (0.3)
                                                                -----    -----    -----
Net income..................................................      5.6%     5.7%     3.5%
                                                                =====    =====    =====
</TABLE>

BUSINESS SEGMENT DATA

     For information regarding net sales, income (loss) before interest and
income taxes and assets by industry segment, reference is made to the
information presented in Note 18 "Business Segments and Geographic Areas" to the
consolidated financial statements.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     Net sales.  Apparel net sales were $205.6 million for 1999, a decrease of
$6.8 million or 3.2% below net sales of $212.4 million for 1998 due to decreased
unit volume sales. Hosiery net sales were $72.1 million in 1999, an increase of
$6.0 million or 9.1% above net sales of $66.1 million in 1998 due to customer
pipe line stocking early in the year and strong retail sales, particularly for
multi packs.

     Gross margin.  Gross margin as a percentage of net sales declined from
24.8% in 1998 to 24.1% in 1999. The decrease in gross margin was due in part to
the higher percentage of Hosiery sales that typically have lower gross margins
than Apparel sales and in part to higher manufacturing costs for Apparel due to
both lower than planned overall production levels to reduce inventories and a
higher percentage of domestic production due to a slower than planned start up
of the new Mexican production facility.

     Selling, general & administrative expenses.  Selling, general and
administrative expenses ("SG&A") as a percentage of net sales increased to 15.3%
in 1999 from 13.8% in 1998. The percentage increase was due to lower sales and
higher costs for warehousing and startup of the new Mexican production facility.

     Other.  Represents the settlement with its insurance providers of the
Company's losses associated with Hurricane Georges for a net casualty gain of
approximately $1.3 million and a one-time curtailment of postretirement benefits
gain associated with the Company's decision to downsize its domestic Apparel
operations in 1999.

     Income before interest and income taxes.  Apparel income before interest
and income taxes ("EBIT") was 9.1% of Apparel sales in 1999 compared to 12.0% in
1998. The drop in Apparel EBIT was the result of the higher manufacturing costs
and SG&A expenses as discussed above. Hosiery EBIT was 10.6% of Hosiery sales in
1999 compared to 7.7% in 1998. The increase in Hosiery EBIT was the result of
improved margins due to lower material cost and an increase in unit sales.

     Interest expense, net.  Interest expense was approximately $2.7 million in
1999 and $5.8 million in 1998. The decrease in interest expense reflects the
lower debt levels resulting from the use of proceeds from the Company's initial
public offering on June 11, 1998, partially offset by higher Apparel inventories
during most of

                                       14
<PAGE>   15

1999 and a $0.6 million provision in 1999 for possible interest charges in
connection with resolving differences between the Company and the Internal
Revenue Service ("IRS") on the amount of current income taxes due for 1996 and
1997. The tax differences arise from ongoing examinations by the IRS.

     Provision for income taxes.  Provision for income taxes was $8.1 million in
1999, compared to $8.6 million in 1998. The effective tax rate was 34.0% for
1999 compared to 35.0% for 1998. The Company's effective income tax rate
differed from the prior period effective rate due to greater impact of foreign
earnings, certain of which are taxed at lower rates than in the United States,
partially offset by goodwill amortization, most of which are not deductible for
federal and state income tax purposes.

     Extraordinary item, net.  The Company repaid senior and junior subordinated
notes in June 1998 with the proceeds from the Offering, resulting in the
write-off of unamortized discount and loan costs of approximately $.3 million
(net of an income tax benefit of $.2 million).

     Net income.  As a result of the above, net income was $15.7 million for
1999 and $15.8 million for 1998.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

     Net sales.  Apparel net sales were $212.4 million for 1998, an increase of
$11.9 million or 5.9% over net sales of $200.5 million for 1997 due to increased
unit volume sales. Hosiery net sales were $66.1 million in 1998 compared to $1.5
million and $69.6 million for the two week period ended December 31, 1997 and
pro forma net sales for 1997, respectively.

     Gross margin.  Gross margin as a percentage of net sales declined from
27.6% in 1997 to 24.8% in 1998. The decrease in gross margin was due in part to
Hosiery sales, which typically have lower gross margins than Apparel sales, and
in part to underabsorbed overhead, sales allowances and inventory markdowns for
Apparel due to lost production associated with Hurricane Georges and inventory
reduction efforts in late 1998.

     Selling, general & administrative expenses, excluding stock compensation.
Selling, general and administrative expenses (excluding stock compensation) as a
percentage of net sales increased to 13.8% in 1998, from 13.7% in 1997. The
increase is primarily due to higher than expected distribution costs at the
Apparel segment.

     Stock compensation.  In 1997, stock compensation of $9.5 million was
incurred in connection with the sale of stock below its fair market value to
certain executives and managers of the Company.

     Income before interest and income taxes.  Apparel income before interest
and income taxes as a percentage of Apparel sales was 12.0% in 1998 compared to
9.1% in 1997. Excluding stock compensation, Apparel income before interest and
income taxes as a percentage of Apparel sales was 13.9% in 1997 due to higher
gross margins. The Hosiery segment income before interest and taxes was 7.7% of
Hosiery sales in 1998 compared to 3.7% for pro forma 1997. The improvement
resulted from reduced SG&A expenses in 1998, including a $1.8 million year over
year reduction in expense from forward foreign currency exchange contracts.

     Interest expense, net.  Interest expense was approximately $5.8 million in
both 1998 and 1997. Interest expense reflects the higher debt levels maintained
most of the year associated with the acquisition of the Hosiery operations and
higher Apparel inventories, offset by the Offering proceeds used to repay debt
in June 1998.

     Provision for income taxes.  Provision for income taxes was $8.6 million in
1998, compared to $4.8 million in 1997. The effective tax rate was 35.0% for
1998 compared to 38.2% for 1997. The Company's effective income tax rate
differed from the prior period effective rate due to the impact of foreign
earnings, certain of which are taxed at lower rates than in the United States,
partially offset by goodwill amortization, most of which is not deductible for
federal and state income tax purposes.

     Extraordinary item, net.  The Company repaid senior and junior subordinated
notes in June 1998 with the proceeds from the Offering, resulting in the
write-off of unamortized discount and loan costs of approximately $0.3 million
(net of an income tax benefit of $0.2 million). In 1997, unamortized loan costs
and a prepayment penalty of

                                       15
<PAGE>   16

$0.7 million (net of an income tax benefit of $0.5 million) were expensed in
connection with the replacement of the Company's then existing credit facility
with its current Credit Agreement.

     Net income.  As a result of the above, net income was $15.8 million for
1998, a 124.8% increase over the $7.0 million in 1997.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary cash needs are working capital, capital expenditures,
and debt service. 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 Credit
Agreement.

     For the Apparel segment, working capital requirements vary throughout the
year. Working capital increases during the first half of the year as inventory,
primarily blanket sleepers, builds to support peak shipping periods. The Hosiery
segment is less seasonal and, while working capital tends to increase slightly
during the second half of the year, the variation is small.

     Net cash provided by (used in) operating activities was $43.7 million,
$(3.9) million and $(5.0) million for 1999, 1998 and 1997, respectively. The
increase in cash provided by operating activities in 1999 was due to a decrease
in inventory of $21.4 million related to lower than planned overall production
levels in the fourth quarter of 1999. The decrease in net cash provided by
operating activities for 1998 and 1997 is primarily due to an increase in
inventory and accounts receivable. Inventory increased $15.9 million and $15.0
million in 1998 and 1997, respectively. The higher inventories in 1998 resulted
from inefficiencies in the Company's production planning system (which is
currently being upgraded) and inefficiencies still occurring at the Company's
new distribution center. The higher inventories in 1997 represented higher
levels of safety stocks maintained on hand to minimize delivery time and
properly service customers to limit disruptions to customers during the
transition to a new distribution warehouse in 1997 and as a result of the need
to keep more inventory on hand due to increased reliance on offshore sourcing.
The increase in accounts receivable of $1.1 million, $2.9 million and $8.1
million in 1999, 1998 and 1997, respectively, is primarily due to the timing of
sales and collections. The lower accrued expenses in 1998 compared to 1999 and
1997 were primarily related to: (i) the payment of the 1997 stock compensation
withholding taxes of approximately $4.6 million; (ii) $2.1 million reduction of
corporate incentives; and (iii) $2.8 million reduction in interest due to the
repayment of all or a portion of the senior subordinated note payable, junior
subordinated note payable and term loan in connection with the Company's
Offering. Income taxes payable (decreased) increased $(2.6) million, $10.3
million and $(10.2) million in 1999, 1998 and 1997, respectively. The change
year over year primarily relates to: (i) differences in the timing of payments;
(ii) changes in temporary differences in 1998; and (iii) the tax impact of stock
compensation late in 1997.

     The Company invested $7.4 million, $5.0 million and $4.2 million in capital
expenditures during 1999, 1998 and 1997, respectively. These expenditures
consisted primarily of normal replacement of manufacturing equipment, purchases
of office equipment and upgrades to information systems. In addition, the
Company relocated its distribution center in 1997 resulting in a one-time
capital expenditure of $2.0 million. The Company is budgeting an aggregate of
$15.2 million for capital expenditures for 2000. Included in this amount is $6.4
million to begin construction/renovation of a second manufacturing facility in
Tralee, Ireland, $2.9 million to replace or upgrade manufacturing equipment and
$5.0 million to upgrade MIS systems. Gerber's portion of the overall capital
expenditures, $7.6 million, includes $5.0 million for MIS systems upgrades;
which the Company believes, when fully implemented, could provide efficiencies
in the areas of product development, forecasting and production planning.

     Net cash (used in) provided by financing activities was $(20.3) million,
$10.0 million and $30.3 million for 1999, 1998 and 1997, respectively. The
decrease in cash provided by financing activities in 1999 was due to repayments
made under the Company's Credit Agreement. The increase in cash provided by
financing activities for 1998 and 1997 consisted of borrowings under the
Company's revolving credit agreement to fund the seasonally increased working
capital needs as well as higher inventory levels maintained. In addition, in
1998 the Company used the net proceeds of $48.7 million from its Offering and
the exercise of the over-allotment option to: (a) repay a senior subordinated
note in the aggregate principal amount of $22.5 million; (b) repay a junior
subordinated note in the aggregate principal amount of $11.0 million; (c) repay
certain other indebtedness of the Company in the

                                       16
<PAGE>   17

aggregate principal amount of $14.8 million; and (d) redeem 2,828.4 shares of
the Company's redeemable preferred stock in the aggregate amount of
approximately $0.4 million held by certain of its officers.

     Under the terms of a ten year license agreement between the Company and
GPC, the initial term of which expires in 2006, the Company is not required to
pay royalty fees to GPC until the year 2002. Commencing in 2002, the Company is
required to pay an escalating royalty fee as a percentage of net sales of Gerber
licensed products during the remaining term of the license agreement and in each
year of the two consecutive five-year renewal terms if such agreements are
renewed. The Company is recording charges against earnings in accordance with
generally accepted accounting principles in order to ensure a straight-line
effect of the total royalty expense expected to be incurred over the initial ten
year license term. The charges recorded prior to 2002 represent non-current
liabilities that will begin to be paid to GPC in 2002. The initiation of such
royalty payments in year 2002 may adversely affect the Company's cash flow.

     In connection with the Auburn Acquisition, the Company's then-existing
senior credit facility was refinanced and replaced with the Credit Agreement
which consisted of a $40.0 million term loan to finance the acquisition and a
$60.0 million revolving facility to fund current working capital requirements.
The Company had no amounts outstanding under the revolving credit portion of the
Credit Agreement at December 31, 1999 and $15.3 million outstanding at December
31, 1998. The Credit Agreement subjects the Company to standard covenants and
events of default. As of December 31, 1999, the Company was in compliance with
all such covenants and was not in default.

     Auburn's Irish operations maintains an IRL1.6 million loan facility (U.S.
$2.0 million as of December 31, 1999) with the National Irish Bank consisting of
a combined term loan, overdraft, guarantee and foreign exchange line. This
facility is subject to annual review. The overdraft facility and foreign
exchange line are available at the Company's discretion with each term loan draw
down subject to the National Irish Bank's approval. At present, the Irish entity
has no outstanding balances under any portion of the loan facility. In addition,
the Irish entity has received capital and employment grants from the Industrial
Development Authority (the "IDA") which could become repayable to the IDA (if
certain conditions are not met) in the aggregate amount of up to IRL1.8 million
(U.S. $2.3 million) as of December 31, 1999. Auburn is a party to two loan
agreements with the County of Logan, Kentucky related to the issuance in 1989 of
two series of industrial revenue bonds of which approximately $2.0 million
remained outstanding at December 31, 1999.

     The Company believes that cash generated from operations, together with
amounts available under the Credit Agreement and the Irish entity's loan
facility with the National Irish Bank, will be adequate to meet its working
capital, capital expenditures, and debt service requirements for the next 12
months.

INFLATION

     In general, costs are affected by inflation and the Company may experience
the effects of inflation in future periods. The Company does not currently
consider the impact of inflation to be significant in the businesses or
countries in which the Company operates.

RECENT ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). This statement established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Adoption of FAS 133 is not anticipated to have a material impact on the
Company's consolidated financial statements.

                                       17
<PAGE>   18

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company considered the provisions of Financial Reporting Release No. 48
"Disclosure of Accounting Policies for Derivative Financial Instruments and
Derivative Commodity Instruments, and Disclosure of Quantitative and Qualitative
Information about Market Risk Inherent in Derivative Financial Instruments,
Other Financial Instruments and Derivative Commodity Instruments." The Company
had no holdings of derivative financial or commodity-based instruments at
December 31, 1999. A review of the Company's other financial instruments and
risk exposures at that date revealed that the Company had exposure to interest
rate and foreign currency exchange rate risks.

  Interest rates

     The Company's balance sheet consists of a revolving credit facility and a
term loan that are subject to interest rate risk. Both loans are priced at
floating rates of interest, with a basis of LIBOR or prime rate at the Company's
option. As a result of these factors, at any given time, a change in interest
rates could result in either an increase or decrease in the Company's interest
expense. At December 31, 1999, the Company performed sensitivity analysis to
assess the potential effect of a 1% increase or decrease in interest rates and
concluded that near-term changes in interest rates should not materially affect
the Company's consolidated financial position, results of operations or cash
flows.

  Foreign currency exchange rates

     The Company's earnings are affected by fluctuations in the value of the
U.S. Dollar as compared to foreign currencies, predominately in European
countries, as a result of the sale of its products in foreign markets and
translation adjustments associated with the conversion of the Company's foreign
subsidiaries into the reporting currency (U.S. Dollar). As such, the Company's
exposure to changes in foreign currency exchange rates could impact the
Company's consolidated financial position, results of operations or cash flows.
At December 31, 1999, the Company performed sensitivity analysis to assess the
potential effect of a 10% increase or decrease in foreign exchange rates and
concluded that near-term changes in exchange rates should not materially affect
the Company's consolidated financial position, results of operations or cash
flows. This calculation assumes that each exchange rate would change in the same
direction relative to the U.S. Dollar. In addition to the direct effects of
changes in exchange rates, which are a changed dollar value of the resulting
sales, changes in exchange rates also affect the volume of sales or the foreign
currency sales price as competitors' products become more or less attractive.
The Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates did not factor in a potential change in sales levels or local
currency prices.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Index to Consolidated Financial Statements which appears on page F-1
herein.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

                                       18
<PAGE>   19

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information required by this Item will be contained in the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders, to be filed
on or before April 29, 2000, and such information is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

     Information required by this Item will be contained in the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders, to be filed
on or before April 29, 2000, and such information is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information required by this Item will be contained in the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders, to be filed
on or before April 29, 2000, and such information is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information required by this Item will be contained in the Company's
definitive Proxy Statement for its Annual Meeting of Stockholders, to be filed
on or before April 29, 2000, and such information is incorporated herein by
reference.

                                       19
<PAGE>   20

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(1) Listing of Documents.

     (a) Financial Statements. The financial statements filed as part of this
report are listed on the Index to Consolidated Financial Statements on page F-1.

     (b) Financial Statement Schedules.

          (i) Schedule II -- Supplemental Schedule of Valuation and Qualifying
              Accounts

              All other schedules for which provision is made in the applicable
              regulations of the Securities and Exchange Commission are not
              required under the related instructions, are inapplicable or not
              material, or the information called for thereby is otherwise
              included in the financial statements and therefore have been
              omitted.

(2) Reports on Form 8-K.

     None.

(3) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
  3.1 (1)  --  Form of Amended and Restated Certificate of Incorporation of
               the registrant.
  3.2 (1)  --  Form of Amended and Restated Bylaws of the registrant.
  4.1 (1)  --  Form of Certificate representing shares of Common Stock,
               $0.01 par value per share.
  4.2 (1)  --  Credit Agreement by and among GCIH, Auburn, GCI, the
               domestic subsidiaries of the same and various lending
               institutions dated as of April 3, 1998.
  4.3 (1)  --  First Amendment to Credit Agreement by and among GCIH,
               Auburn, GCI, the domestic subsidiaries of the same and
               various lending institutions dated as of April 3, 1998.
  4.4 (1)  --  Second Amendment to Credit Agreement by and among GCIH,
               Auburn, GCI, the domestic subsidiaries of the same and
               various lending institutions dated as of June 4, 1998.
  4.5 (2)  --  Gerber Childrenswear, Inc. 1998 Long-Term Performance
               Incentive Plan, dated as of March 3, 1998.
  4.6 (3)  --  Third Amendment to Credit Agreement by and among GCIH,
               Auburn, GCI, the domestic subsidiaries of the same and
               various lending institutions dated as of August 24, 1999.
 10.1 (1)  --  Stock Purchase Agreement by and between GPC and GCIH dated
               as of December 14, 1995.
 10.2 (1)  --  Form of Executive Stock Purchase Agreement between GCIH and
               certain of its Executives, each dated January 22, 1996.
 10.3 (1)  --  Form of Manager Securities Purchase Agreement between GCIH
               and certain of its Managers.
 10.4 (1)  --  Securities Purchase Agreement by and between GCIH and CVC,
               dated as of January 22, 1996.
 10.5 (1)  --  Form of Director Stock Purchase Agreement between GCIH and
               certain of its directors.
 10.6 (1)  --  Amended and Restated Registration Rights Agreement by and
               between GCIH, Citicorp Venture Capital, Ltd., and other
               stockholders of GCIH, dated as of June 5, 1998.
 10.7 (1)  --  Stock Purchase Agreement by and among GCIH, James P.
               Manning, Eileen Manning and Certain Charitable Remainder
               Trusts dated as of November 12, 1997.
 10.8 (1)  --  Share Purchase Agreement by and among GCIH, James P. Manning
               and Eileen Manning dated as of December 16, 1997.
 10.9 (1)  --  Amended and Restated Senior Subordinated Credit Agreement
               dated as of December 17, 1997 by and among GCIH, GCI, CMP
               and others.
 10.10(1)  --  Subordination and Intercreditor Agreement by and among
               Nationsbank, CMP, GCI and others dated as of December 17,
               1997.
</TABLE>

                                       20
<PAGE>   21

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                 DESCRIPTION
-------                                -----------
<C>       <C>  <S>
 10.11(1)  --  12% Junior Subordinated Note in the face amount of
               $11,000,000, issued by GCIH to GPC as of December 29, 1997.
 10.12(3)  --  License Agreement by and between Warner Bros. Division of
               Time Warner Entertainment Company, L.P. and GCI dated as of
               December 3, 1998.
 10.13(1)  --  License Agreement by and between GPC and GCI dated as of
               January 22, 1996.
 10.14(1)  --  License Agreement among The Kendall Company, GPC, and Soft
               Care Apparel, Inc. (n/k/a GCI), dated as of July 31, 1986,
               as amended pursuant to that certain Letter Agreement dated
               January 19, 1996 by and among The Kendall Company, GPC, GCI
               and GCIH.
 10.15(1)  --  Trademark License Agreement between Auburn and Wilson
               Sporting Goods Co. dated April 29, 1997; as sublicensed to
               Sport Socks Ireland as of October 1, 1997, effective as of
               January 1, 1998; as amended as of December 5, 1997.
 10.16(1)  --  Lease Agreement by and between GCI and Operadora Zona Franca
               De la Romana, S.A. for property located at Zona Franca
               Industrial La Romana (Sewing, Packaging).
 10.17(1)  --  Lease Agreement by and between GCI and Operadora Zona Franca
               De la Romana, S.A. for property located at Altos
               Buvillaverde.
 10.18(1)  --  Lease Agreement by and between GCI and Operadora Zona Franca
               De la Romana, S.A. for property located at Altos
               Buvillaverde.
 10.19(1)  --  Lease Amendment by and between GCI and the Industrial
               Development Board of the City of Evergreen, Alabama, dated
               as of August 28, 1997, and assignment and assumption
               agreement and resolution of the Industrial Development Board
               dated as of the same date.
 10.20(1)  --  Lease Agreement between GCI and Highland Properties, LLC
               dated as of November 25, 1996, and amendments thereto, for
               the lease of the Greenville facility.
 10.21(1)  --  Severance Agreement by and between GPC, GCI and David E.
               Uren, dated as of March 18, 1995.
 10.22(1)  --  Form of Amendment No. 1 to the Executive Stock Purchase
               Agreement.
 10.23(2)  --  Lease Agreement by and between GCW Mexico, S.A. de C.V. and
               Parques Industriales Amistad Alaianzas, S.A. de C.V. for
               property located in Matamoros, Mexico.
 10.24(2)  --  Waiver and termination agreement by and between Citicorp
               Venture Capital, Ltd. and GCI related to Manager, Investor,
               Director and Executive Stock Purchase Agreements.
 10.25(3)  --  Lease Agreement by and between GCI and 1333 Broadway
               Associates, dated as of April 1, 1999, for the lease of the
               New York Sales Office.
 10.26(3)  --  License Agreement by and between Suzy's Zoo and GCI
               effective as of October 1, 1998.
 21.1 (3)  --  Subsidiaries of the registrant.
 23   (3)  --  Consent of Ernst & Young LLP, independent auditors.
 27   (3)  --  Financial Data Schedule.
</TABLE>

---------------

(1) Incorporated by reference from the Registrant's Registration Statement
    #333-47327 on Form S-1 filed on June 10, 1998 with the Securities and
    Exchange Commission, and herein incorporated by reference.
(2) Incorporated by reference from the Registrant's Form 10-K filed on March 31,
    1999 with the Securities and Exchange Commission, and herein incorporated by
    reference.
(3) Filed herewith.

     The Company will furnish a copy of any of the above exhibits not included
herein upon the written request of such shareholder and the payment to the
Company of the reasonable expenses incurred by the Company in furnishing such
copy or copies.

                                       21
<PAGE>   22

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                Gerber Childrenswear, Inc.
                                                       (Registrant)

Date: March 24, 2000                      By:     /s/ RICHARD L. SOLAR
                                            ------------------------------------
                                                      Richard L. Solar
                                                 Senior Vice President and
                                                  Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<C>                                                    <S>                              <C>

                /s/ EDWARD KITTREDGE                   Director, Chairman, Chief        March 24, 2000
-----------------------------------------------------    Executive Officer and
                  Edward Kittredge                       President (Principal
                                                         Executive Officer)

                /s/ RICHARD L. SOLAR                   Director, Senior Vice President  March 24, 2000
-----------------------------------------------------    and Chief Financial Officer
                  Richard L. Solar                       (Chief Financial Officer)

                  /s/ DAVID E. UREN                    Vice President of Finance,       March 24, 2000
-----------------------------------------------------    Secretary and Treasurer
                    David E. Uren                        (Chief Accounting Officer)

                 /s/ RICHARD CASHIN                    Director                         March 24, 2000
-----------------------------------------------------
                   Richard Cashin

                /s/ LAWRENCE R. GLENN                  Director                         March 24, 2000
-----------------------------------------------------
                  Lawrence R. Glenn

                /s/ JAMES P. MANNING                   Director                         March 24, 2000
-----------------------------------------------------
                  James P. Manning

                 /s/ JOSEPH MEDALIE                    Director                         March 24, 2000
-----------------------------------------------------
                   Joseph Medalie

                  /s/ JOHN D. WEBER                    Director                         March 24, 2000
-----------------------------------------------------
                    John D. Weber
</TABLE>

                                       22
<PAGE>   23

                           GERBER CHILDRENSWEAR, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>

<S>                                                           <C>
Report of Independent Auditors..............................   F-2

Consolidated Balance Sheets at December 31, 1999 and 1998...   F-3

Consolidated Statements of Income and Comprehensive Income
  for the years ended December 31, 1999, 1998 and 1997......   F-5

Consolidated Statement of Changes in Shareholders' Equity
  for the years ended December 31, 1999, 1998 and 1997......   F-6

Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997..........................   F-8

Notes to Consolidated Financial Statements..................  F-10
</TABLE>

                                       F-1
<PAGE>   24

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
Gerber Childrenswear, Inc.

We have audited the accompanying consolidated balance sheets of Gerber
Childrenswear, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of income and comprehensive income, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. Our audits also included the financial statement
schedule listed in the Index at Item 14 (1)(b). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Gerber Childrenswear, Inc. at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

                                          /s/ ERNST & YOUNG LLP

Greenville, South Carolina
February 29, 2000

                                       F-2
<PAGE>   25

                           GERBER CHILDRENSWEAR, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 17,503   $  1,780
  Accounts receivable, net of allowances for doubtful
     accounts of approximately $1,103,000 (1999) and
     $1,487,000 (1998)......................................    37,261     36,621
  Inventories...............................................    65,286     87,020
  Deferred income taxes.....................................     3,100      4,806
  Other.....................................................     1,831      2,534
                                                              --------   --------
          Total current assets..............................   124,981    132,761

Property, plant and equipment, net..........................    26,876     25,224
Deferred income taxes.......................................     6,043      4,678
Excess of cost over fair value of net assets acquired, net..    18,395     20,607
Debt issuance costs, net....................................       662        880
Other.......................................................     1,467      1,588
                                                              --------   --------
                                                              $178,424   $185,738
                                                              ========   ========
</TABLE>

See accompanying notes.

                                       F-3
<PAGE>   26

                           GERBER CHILDRENSWEAR, INC.

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  9,239   $ 11,815
  Accrued expenses..........................................    15,155     12,387
  Income taxes payable......................................     3,054      5,666
  Current portion of obligations under capital leases.......         8        101
  Revolving credit loan payable.............................         -     15,300
  Current portion of long-term debt.........................     6,678      4,746
                                                              --------   --------
          Total current liabilities.........................    34,134     50,015

Accrued pension and post-retirement benefit cost............     6,928      6,092
Other accrued liabilities...................................    12,593     11,074
Long-term debt, less current portion........................    12,843     19,631

Shareholders' equity:
  Common stock, par value $.01, 20,774,000 shares
     authorized; 8,291,075 shares outstanding (1999),
     8,352,949 shares outstanding (1998)....................        84         84
  Common stock, Class B, par value $.01 per share,
     11,842,000 shares authorized and 8,692,315 shares
     outstanding............................................        87         87
  Treasury stock............................................      (150)       (33)
  Detachable stock warrants.................................       189        189
  Additional paid-in capital................................    69,676     69,776
  Other comprehensive income................................    (1,923)       745
  Retained earnings.........................................    44,177     28,511
                                                              --------   --------
                                                               112,140     99,359
  Less unearned compensation under restricted stock plan....       214        433
                                                              --------   --------
          Total shareholders' equity........................   111,926     98,926
                                                              --------   --------
                                                              $178,424   $185,738
                                                              ========   ========
</TABLE>

See accompanying notes.

                                       F-4
<PAGE>   27

                           GERBER CHILDRENSWEAR, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                 1999         1998         1997
                                                              ----------   ----------   ----------
                                                              (IN THOUSANDS, EXCEPT FOR PER SHARE
                                                                             DATA)
<S>                                                           <C>          <C>          <C>
Net sales...................................................   $277,702     $278,496     $202,037
Cost of sales...............................................    210,713      209,458      146,294
                                                               --------     --------     --------
Gross margin................................................     66,989       69,038       55,743
Expenses:
  Selling, general and administrative expenses..............     42,416       38,559       37,231
  Other, net................................................     (1,824)          --          231
                                                               --------     --------     --------
                                                                 40,592       38,559       37,462
                                                               --------     --------     --------
Income before interest and income taxes.....................     26,397       30,479       18,281
Interest expense, net of interest income....................      2,678        5,808        5,798
                                                               --------     --------     --------
Income before income taxes..................................     23,719       24,671       12,483
Provision for income taxes..................................      8,053        8,646        4,764
                                                               --------     --------     --------
Income before extraordinary item............................     15,666       16,025        7,719
Extraordinary item, net of income tax benefit of
  approximately $163,000 (1998) and $452,000 (1997).........         --         (266)        (708)
                                                               --------     --------     --------
Net income..................................................     15,666       15,759        7,011
Foreign currency translation................................     (2,668)         745           --
                                                               --------     --------     --------
          Comprehensive income..............................   $ 12,998     $ 16,504     $  7,011
                                                               ========     ========     ========

Net income..................................................   $ 15,666     $ 15,759     $  7,011
Less preferred stock dividends..............................         --         (774)      (1,637)
                                                               --------     --------     --------
          Net income available to common shareholders.......   $ 15,666     $ 14,985     $  5,374
                                                               ========     ========     ========
Per share amounts:
  Earnings per common share:
     Income before extraordinary item.......................   $    .94     $   1.08     $    .55
     Extraordinary item.....................................         --         (.02)        (.07)
                                                               --------     --------     --------
  Net income................................................   $    .94     $   1.06     $    .48
                                                               ========     ========     ========
  Earnings per common share -- assuming dilution:
     Income before extraordinary item.......................   $    .79     $    .87     $    .41
     Extraordinary item.....................................         --         (.02)        (.04)
                                                               --------     --------     --------
  Net income................................................   $    .79     $    .85     $    .37
                                                               ========     ========     ========
</TABLE>

See accompanying notes.

                                       F-5
<PAGE>   28

                           GERBER CHILDRENSWEAR, INC.

           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                      CLASS A     CLASS A     CLASS B      CLASS B   CLASS C   CLASS C   CLASS D
                              COMMON      COMMON       COMMON     COMMON       COMMON      COMMON    COMMON    COMMON     COMMON
                              SHARES       STOCK       SHARES      STOCK       SHARES       STOCK    SHARES     STOCK     SHARES
                             ---------   ---------   ----------   -------   ------------   -------   -------   -------   --------
<S>                          <C>         <C>         <C>          <C>       <C>            <C>       <C>       <C>       <C>
Balance at December 31,
  1996.....................         --   $      --    661,655.1   $    7       144,594.9   $    1     2,500    $   --          --
  Repurchase of shares for
    treasury...............         --          --    (74,326.8)      --       (30,929.6)      --        --        --          --
  Pursuant to restricted
    stock plan:
    Shares issued..........         --          --           --       --        53,250.0        1        --        --          --
    Amortization...........         --          --           --       --              --       --        --        --          --
    Forfeitures............         --          --           --       --              --       --        --        --          --
  Net income...............         --          --           --       --              --       --        --        --          --
  Dividend on redeemable
    preferred stock........         --          --           --       --              --       --        --        --          --
                             ---------   ---------   ----------   -------   ------------   -------   -------   -------   --------
Balance at December 31,
  1997.....................         --          --    587,328.3        7       166,915.3        2     2,500        --          --
  Repurchase of shares for
    treasury...............         --          --           --       --              --       --        --        --          --
  Recapitalization and
    reorganization.........  4,177,220          42   (587,328.3)      (7)    8,580,463.7       86    (2,500)       --          --
  Initial public
    offering...............  4,140,000          41           --       --              --       --        --        --          --
  Conversion of stock......     55,064           1           --       --       (55,064.0)      (1)       --        --          --
  Pursuant to restricted
    stock plan:
    Amortization...........         --          --           --       --              --       --        --        --          --
    Forfeitures............         --          --           --       --              --       --        --        --          --
  Foreign currency
    translation
    adjustment.............         --          --           --       --              --       --        --        --          --
  Net income...............         --          --           --       --              --       --        --        --          --
  Dividend on redeemable
    preferred stock........         --          --           --       --              --       --        --        --          --
                             ---------   ---------   ----------   -------   ------------   -------   -------   -------   --------
Balance at December 31,
  1998.....................  8,372,284          84           --       --       8,692,315       87        --        --          --
  Repurchase of shares for
    treasury...............         --          --           --       --              --       --        --        --          --
  Pursuant to restricted
    stock plan:
    Amortization...........         --          --           --       --              --       --        --        --          --
    Forfeitures............         --          --           --       --              --       --        --        --          --
  Foreign currency
    translation
    adjustment.............         --          --           --       --              --       --        --        --          --
  Net income...............         --          --           --       --              --       --        --        --          --
                             ---------   ---------   ----------   -------   ------------   -------   -------   -------   --------
Balance at December 31,
  1999.....................  8,372,284   $      84           --   $   --       8,692,315   $   87        --    $   --          --
                             =========   =========   ==========   =======   ============   =======   =======   =======   ========
</TABLE>

See accompanying notes.

                                       F-6
<PAGE>   29

                           GERBER CHILDRENSWEAR, INC.

     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

                       (IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
                                  CLASS D                          DETACHABLE   ADDITIONAL       OTHER
                                  COMMON    TREASURY    TREASURY     STOCK       PAID-IN     COMPREHENSIVE   RETAINED
                                   STOCK     SHARES      STOCK      WARRANTS     CAPITAL        INCOME       EARNINGS
                                  -------   ---------   --------   ----------   ----------   -------------   --------
<S>                               <C>       <C>         <C>        <C>          <C>          <C>             <C>
Balance at December 31, 1996....   $ --            --    $  --        $189       $   752        $    --      $ 8,152
  Repurchase of shares for
    treasury....................     --     105,256.4     (128)         --            --             --           --
  Pursuant to restricted stock
    plan:
    Shares issued...............     --     (53,250.0)      53          --         5,857             --           --
    Amortization................     --            --       --          --            --             --           --
    Forfeitures.................     --            --       --          --           (72)            --           --
  Net income....................     --            --       --          --            --             --        7,011
  Dividend on redeemable
    preferred stock.............     --            --       --          --            --             --       (1,637)
                                   ----     ---------    -----        ----       -------        -------      -------
Balance at December 31, 1997....     --      52,006.4      (75)        189         6,537             --       13,526
  Repurchase of shares for
    treasury....................     --      20,835.0      (42)         --            --             --           --
  Recapitalization and
    reorganization..............     --     (53,506.4)      84          --        14,805             --           --
  Initial public offering.......     --            --       --          --        48,617             --           --
  Conversion of stock...........     --            --       --          --            --             --           --
  Pursuant to restricted stock
    plan:
    Amortization................     --            --       --          --            --             --           --
    Forfeitures.................     --            --       --          --          (183)            --           --
  Foreign currency translation
    adjustment..................     --            --       --          --            --            745           --
  Net income....................     --            --       --          --            --             --       15,759
  Dividend on redeemable
    preferred stock.............     --            --       --          --            --             --         (774)
                                   ----     ---------    -----        ----       -------        -------      -------
Balance at December 31, 1998....     --        19,335      (33)        189        69,776            745       28,511
  Repurchase of shares for
    treasury....................     --        61,874     (117)         --            --             --           --
  Pursuant to restricted stock
    plan:
    Amortization................     --            --       --          --            --             --           --
    Forfeitures.................     --            --       --          --          (100)            --           --
  Foreign currency translation
    adjustment..................     --            --       --          --            --         (2,668)          --
  Net income....................     --            --       --          --            --             --       15,666
                                   ----     ---------    -----        ----       -------        -------      -------
Balance at December 31, 1999....   $ --        81,209    $(150)       $189       $69,676        $(1,923)     $44,177
                                   ====     =========    =====        ====       =======        =======      =======

<CAPTION>

                                    UNEARNED
                                  COMPENSATION    TOTAL
                                  ------------   --------
<S>                               <C>            <C>
Balance at December 31, 1996....    $    --      $  9,101
  Repurchase of shares for
    treasury....................         --          (128)
  Pursuant to restricted stock
    plan:
    Shares issued...............     (1,000)        4,911
    Amortization................        161           161
    Forfeitures.................         72            --
  Net income....................         --         7,011
  Dividend on redeemable
    preferred stock.............         --        (1,637)
                                    -------      --------
Balance at December 31, 1997....       (767)       19,419
  Repurchase of shares for
    treasury....................         --           (42)
  Recapitalization and
    reorganization..............         --        15,010
  Initial public offering.......         --        48,658
  Conversion of stock...........         --            --
  Pursuant to restricted stock
    plan:
    Amortization................        151           151
    Forfeitures.................        183            --
  Foreign currency translation
    adjustment..................         --           745
  Net income....................         --        15,759
  Dividend on redeemable
    preferred stock.............         --          (774)
                                    -------      --------
Balance at December 31, 1998....       (433)       98,926
  Repurchase of shares for
    treasury....................         --          (117)
  Pursuant to restricted stock
    plan:
    Amortization................        119           119
    Forfeitures.................        100            --
  Foreign currency translation
    adjustment..................         --        (2,668)
  Net income....................         --        15,666
                                    -------      --------
Balance at December 31, 1999....    $  (214)     $111,926
                                    =======      ========
</TABLE>

See accompanying notes.

                                       F-7
<PAGE>   30

                           GERBER CHILDRENSWEAR, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                               1999      1998       1997
                                                              -------   -------   --------
                                                                     (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
OPERATING ACTIVITIES
Net income..................................................  $15,666   $15,759   $  7,011
Adjustments to reconcile net income to net cash provided by
  (used in) operating activities:
  Depreciation..............................................    4,900     4,527      1,976
  Amortization of excess of cost over fair value of net
    assets acquired and acquisition costs...................    1,103     1,130         84
  Amortization of debt issuance costs and discount..........      218       283        478
  Amortization of deferred income...........................     (313)     (340)        --
  Provision for allowance for doubtful accounts.............      (13)      700        252
  Provision for deferred income taxes.......................      341    (6,798)     3,461
  Compensation expense pursuant to restricted stock plan
    (noncash)...............................................       --        --      4,858
  Amortization pursuant to restricted stock plan............      119       151        161
  Gain on disposal of property, plant and equipment.........     (105)      (28)        (2)
  Extraordinary item........................................       --       266        708
  Other.....................................................        2         2         --
  Changes in operating assets and liabilities:
    Accounts receivable.....................................   (1,129)   (2,908)    (8,051)
    Inventories.............................................   21,438   (15,876)   (15,048)
    Other assets............................................      771      (776)       538
    Accounts payable........................................   (2,498)   (1,813)       253
    Accrued expenses........................................    2,990   (12,542)     3,824
    Income taxes payable....................................   (2,555)   10,344    (10,204)
    Accrued pension and post-retirement benefit cost........      836     1,034      1,037
    Other accrued liabilities...............................    1,938     2,980      3,628
                                                              -------   -------   --------
        Net cash provided by (used in) operating
        activities..........................................   43,709    (3,905)    (5,036)
                                                              -------   -------   --------

INVESTING ACTIVITIES
Collections on notes receivable.............................       --        --        207
Purchases of property, plant and equipment..................   (7,364)   (5,029)    (4,180)
Proceeds from sale of property, plant and equipment.........      216        84        445
Purchase of Auburn Hosiery Mills, Inc. and Sport Socks
  Company (Ireland) Limited, net............................       --        --    (38,840)
                                                              -------   -------   --------
        Net cash used in investing activities...............  $(7,148)  $(4,945)  $(42,368)
                                                              -------   -------   --------

</TABLE>

                                       F-8
<PAGE>   31

                           GERBER CHILDRENSWEAR, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                               1999      1998       1997
                                                              -------   -------   --------
                                                                     (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
FINANCING ACTIVITIES
Borrowings under revolving credit agreement.................  $60,800   $88,240   $ 88,824
Repayments under revolving credit agreement.................  (76,100)  (73,190)   (88,574)
Proceeds from long-term borrowings..........................        -         -     41,600
Principal payments on long-term borrowings..................   (4,821)  (53,156)   (10,205)
Principal payments on capital leases........................      (92)     (132)       (88)
Proceeds from initial public offering, net of expenses......        -    48,658          -
Repurchase of common stock..................................     (117)      (42)      (128)
Repurchase of preferred stock...............................        -      (374)       (95)
Proceeds from sale of restricted stock......................        -         -         53
Debt issuance costs.........................................        -         -     (1,039)
                                                              -------   -------   --------
Net cash (used in) provided by financing activities.........  (20,330)   10,004     30,348
                                                              -------   -------   --------

Effect of foreign exchange rate changes on cash.............     (508)       90          -
                                                              -------   -------   --------

Net increase (decrease) in cash and cash equivalents........   15,723     1,244    (17,056)
Cash and cash equivalents at beginning of period............    1,780       536     17,592
                                                              -------   -------   --------
Cash and cash equivalents at end of period..................  $17,503   $ 1,780   $    536
                                                              =======   =======   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash items:
  Conversion of redeemable preferred stock into capital
    stock In capital stock..................................        -   $15,010          -
  Reduction of notes payable, offset by reduction of notes
    receivable..............................................        -         -   $  1,500
</TABLE>

See accompanying notes.

                                       F-9
<PAGE>   32

                           GERBER CHILDRENSWEAR, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1999


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Gerber Childrenswear, Inc. (formerly known as GCIH, Inc., and referred to herein
as, the "Company") acquired 100% of the outstanding stock of certain apparel
operations from Gerber Products Company. The acquisition was effective as of the
start of business on January 22, 1996 and was accounted for as a purchase. The
purchase price was allocated to the net assets acquired based on their
respective fair values and the balance was treated as excess of cost over fair
value of net assets acquired. The total cost of the acquisition was
approximately $74 million. The excess of cost over fair value of net assets
acquired is being amortized over twenty years on a straight-line basis.

On December 17, 1997, the Company acquired Auburn Hosiery Mills, Inc. ("Auburn")
and Sport Socks Company (Ireland) Limited ("Sport Socks") for $28 million and
$12 million in cash, respectively. Both companies are engaged in the production
and sale of various styles of socks to retail chain stores. The acquisitions
were financed through a term loan of $40 million. The acquisitions have been
recorded using the purchase method of accounting. Accordingly, the purchase
price has been allocated to assets and liabilities of the acquired companies
based on their estimated fair values as of the effective date of acquisition.
The purchase price exceeded the fair value of net assets acquired by
approximately $20 million, which is being amortized on a straight-line basis
over twenty years. The results of operations of Auburn and Sport Socks are
included in the accompanying consolidated financial statements from the date of
acquisition.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries GCI IP Sub. Inc., Gerber Childrenswear Canada,
Inc., Costura Dominicana, Inc., Costura Matamoros S.A. de C.V., GCW Mexico S.A.
de C.V. and GCW Holdings, Inc. All material intercompany balances and
transactions have been eliminated in consolidation.

EARNINGS PER COMMON SHARE

Earnings per common share are calculated by dividing net income by the weighted
average shares outstanding in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Immediately prior to and in connection
with the consummation of the Company's initial public offering in June 1998, the
Company declared a 15.4693 to 1 stock split. All references to the weighted
average shares and per share amounts elsewhere in the consolidated financial
statements and the related footnotes have been restated as appropriate to
reflect the effect of the split for all periods presented.

                                      F-10
<PAGE>   33
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Substantially all revenue is recognized when products are shipped to customers.

ROYALTY EXPENSE RECOGNITION

The Company has certain royalty agreements and recognizes royalty expenses for
products sold under such agreements over the life and terms of the specific
royalty agreements on an accrual basis.

One such ten-year royalty agreement with Gerber Products Company contains a
"royalty-free" period for the first six years and escalating royalty rates for
the last four years of the agreement. The Company has estimated the total
royalties to be paid over the life of the agreement based on estimated sales
during the last four years and is recording current charges to operations for
these royalties on a straight-line basis over the ten-year term of the
agreement. The Company lowered the estimate of its future liability to be paid
related to this royalty contract in 1999. This change in estimate is not
material to the twelve months ended December 31, 1999.

CONCENTRATION OF CREDIT RISK

The Company manufactures infant apparel and products that are primarily sold to
retail entities throughout the United States. The Company's primary customers
are mass merchants and discount stores. Sales to three customers represented
approximately 58%, 57% and 65% for 1999, 1998 and 1997, respectively. Sales to
one customer were 41%, 42% and 44% for 1999, 1998 and 1997, respectively. The
Company performs periodic credit evaluations of their customers and does not
require collateral for credit sales.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.

Undesignated cash is invested each night through participation in a bank
investment plan and bears interest at a variable rate. Under this agreement, the
bank sells securities that are direct obligations of or are fully guaranteed by
the United States government to the Company each night and repurchases the
investments the next business day.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method.

                                      F-11
<PAGE>   34
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEBT ISSUANCE COSTS

Debt issuance costs are being amortized over the lives of the related debt.
Accumulated amortization amounted to approximately $444,000 and $226,000 at
December 31, 1999 and 1998, respectively. Amortization expense is included in
interest expense in the accompanying consolidated statements of income and
comprehensive income.

ADVERTISING

Advertising costs of approximately $5,042,000, $5,241,000 and $5,071,000 for
1999, 1998 and 1997, respectively, were expensed as incurred.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment is computed by the straight-line method over the estimated
useful lives of the assets for financial reporting purposes which generally
range from 10 to 30 years for buildings and leasehold improvements and 3 to 10
years for machinery, furniture, vehicles and equipment. Depreciation is computed
based upon "Modified Accelerated Cost Recovery System" guidelines for income tax
reporting purposes.

INCOME TAXES

The Company accounts for its income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income
taxes are recognized for the tax consequences of "temporary differences" by
applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities.

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS OF BUSINESSES ACQUIRED

The excess of investments in consolidated subsidiaries over the net asset value
at acquisition ("goodwill") is being amortized on a straight-line basis over
periods not exceeding twenty years. On an annual basis the Company reviews the
recoverability of goodwill based primarily upon an analysis of undiscounted cash
flows from the acquired businesses. Accumulated amortization amounted to
approximately $2,268,000 and $1,286,000 at December 31, 1999 and 1998,
respectively.

                                      F-12
<PAGE>   35
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSLATION

The financial statements of the European subsidiaries were prepared in their
respective local currencies and translated into United States ("U.S.") dollars
based on the current exchange rate at the end of the period for the consolidated
balance sheet and a weighted average rate for the period on the consolidated
statements of income and comprehensive income.

FORWARD EXCHANGE CONTRACTS

The Company enters into forward foreign currency exchange contracts in the
regular course of business to manage its exposure against foreign currency
fluctuations on sales, raw materials and fixed asset purchase transactions
denominated in foreign currencies. The Company does not utilize financial
instruments for trading or other speculative purposes. The terms of these
contracts are generally less than one year. Unrealized gains or losses resulting
from changes in currency exchange rates on uncommitted contracts are recognized
currently.

STOCK-BASED COMPENSATION

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price of
underlying stock on the date of grant, no compensation expense is recorded. The
Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123").

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). This statement established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Adoption of FAS 133 is not anticipated to have a material impact on the
Company's consolidated financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.

                                      F-13
<PAGE>   36
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECLASSIFICATIONS

Certain amounts in 1998 and 1997 have been reclassified to conform to current
presentations.

2. RECAPITALIZATION, MERGER AND INITIAL PUBLIC OFFERING

Immediately prior to and in connection with the consummation of the Company's
Initial Public Offering ("Offering"), GCIH, Inc. (former parent of Gerber
Childrenswear, Inc.) and Gerber Childrenswear, Inc. consummated a series of
transactions pursuant to which the certificate of incorporation of GCIH, Inc.
was amended and restated ("Recapitalization") to provide for the
reclassification of its authorized common stock into two classes of capital
stock (Common Stock and Class B Common Stock). Each share of the Common Stock
has one vote per share and the Class B Common Stock has no voting rights. The
amended and restated certificate also provides that each share of Class B Common
Stock will be convertible at the option of the holder at any time into one share
of Common Stock and each share of Common Stock held by a holder of Class B
Common Stock will be convertible at the option of the holder at any time into
one share of Class B Common Stock.

Prior to the consummation of the Offering and immediately after giving effect to
the Recapitalization, Gerber Childrenswear, Inc. was merged into GCIH, Inc. with
GCIH, Inc. being the surviving entity (the "Merger"). The amended and restated
certificate provided for the change of the corporate name from GCIH, Inc. to
Gerber Childrenswear, Inc. The Merger resulted in a tax-free liquidation of the
non-surviving entity. The following capital stock transactions occurred in
connection with the Merger. All of the Company's Class A and Class C Common
Stock outstanding as of the Merger were exchanged for either shares of Class B
Common Stock (new Class B) or Common Stock pursuant to a stock split of 15.4693
to 1. All of the outstanding shares of the Company's Class B Common Stock (old
Class B) of the Company were exchanged for shares of the Company's Common Stock
at a specified ratio of 15.4693 to 1. All of the outstanding warrants to
purchase shares of Class D Common Stock of the Company were exchanged into
warrants to purchase shares of the Class B Common Stock (new Class B) of the
Company at a specified ratio of 15.4693 to 1. Upon consummation of the Merger,
113,623.6 shares of the Company's Redeemable Preferred stock were converted into
1,241,537 shares of Common Stock of the Company and 2,828.4 shares of Preferred
stock were redeemed for cash equal to the liquidation value per share at the
time of the Merger. The Company retired all shares held in the treasury prior to
the Offering.

During June 1998, the Company consummated its Offering of 4,140,000 shares
(including the exercise of the underwriters' over-allotment option) of its
Common Stock at a price of $13.00 per share. The net proceeds from the Offering
were $48.7 million and were used to: (a) repay a senior subordinated note in the
aggregate principal amount of $22.5 million; (b) repay a junior subordinated
note in the aggregate principal amount of $11.0 million; (c) repay certain other
indebtedness of the company in the aggregate principal amount of $14.8 million;
and (d) redeem 2,828.4 shares of the Company's redeemable preferred stock in the
aggregate amount of approximately $0.4 million held by certain of its officers.

                                      F-14
<PAGE>   37
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


3. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Raw materials...............................................  $10,058   $11,863
Work in process.............................................   12,583    13,515
Finished goods..............................................   42,645    61,642
                                                              -------   -------
                                                              $65,286   $87,020
                                                              =======   =======
</TABLE>

Inventory mark-downs are periodically recorded based on analysis by the Company
in order to reflect inventories at the lower of cost or market. If the cost of
the inventories exceeds their market value, provisions are made currently for
the difference between the cost and the market value. Provision for potentially
obsolete, irregular or slow moving inventory is made based on management's
analysis of inventory levels, future sales forecasts and expected sales prices.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Land........................................................  $   819   $   805
Buildings and leasehold improvements........................   11,982    11,690
Machinery and equipment.....................................   18,285    15,953
Furniture and other equipment...............................    3,854     2,887
Vehicles....................................................      338       360
Construction in progress....................................    3,871     1,240
                                                              -------   -------
                                                               39,149    32,935
Less accumulated depreciation...............................   12,273     7,711
                                                              -------   -------
                                                              $26,876   $25,224
                                                              =======   =======
</TABLE>

Interest was capitalized in connection with the design and implementation of the
Company's new enterprise resource system. The capitalized interest is recorded
as part of the asset to which it relates and is amortized over the asset's
estimated useful life. In 1999, approximately $114,000 of interest was
capitalized. No interest was capitalized in 1998 or 1997.

                                      F-15
<PAGE>   38
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


5. INCOME TAXES

Income before provision for income taxes consisted of (in thousands):

<TABLE>
<CAPTION>
                                                             1999      1998      1997
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
United States.............................................  $20,213   $21,281   $12,483
International.............................................    3,506     3,390        --
                                                            -------   -------   -------
                                                            $23,719   $24,671   $12,483
                                                            =======   =======   =======
</TABLE>

Current and deferred income tax expense are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             1999      1998      1997
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
Current:
  Federal.................................................  $ 7,232   $13,847   $ 1,168
  State...................................................       95     1,259       135
  International...........................................      385       344        --
                                                            -------   -------   -------
Total current.............................................    7,712    15,450     1,303
Deferred:
  Inventory mark-downs....................................   (1,267)   (3,932)      372
  Postretirement benefits.................................     (100)     (228)     (220)
  Accrued royalty.........................................     (515)   (1,059)   (1,309)
  Inventory methods.......................................    2,599        11     2,676
  Other...................................................     (376)   (1,596)    1,942
                                                            -------   -------   -------
Total deferred............................................      341    (6,804)    3,461
                                                            -------   -------   -------
Income tax expense........................................  $ 8,053   $ 8,646   $ 4,764
                                                            =======   =======   =======
</TABLE>

Income tax expense is different from the amount that would result from applying
the U.S. Federal statutory tax rate to income before income taxes as follows (in
thousands):

<TABLE>
<CAPTION>
                                                               1999     1998     1997
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Tax at U.S. Federal statutory rate..........................  $8,302   $8,635   $4,244
State income tax, net of U.S. Federal tax benefit...........     617      641      412
International rate difference...............................    (956)    (947)      --
Other.......................................................      90      317      108
                                                              ------   ------   ------
Income tax expense..........................................  $8,053   $8,646   $4,764
                                                              ======   ======   ======
</TABLE>

                                      F-16
<PAGE>   39
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


5. INCOME TAXES (CONTINUED)

The components of the Company's net deferred tax assets are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                               1999     1998
                                                              ------   ------
<S>                                                           <C>      <C>
Deferred tax assets:
  Inventory mark-downs......................................  $5,845   $4,579
  Postretirement benefits...................................   2,056    1,957
  Accrued royalty...........................................   3,599    3,084
  Other.....................................................   4,080    4,236
                                                              ------   ------
Total deferred tax assets...................................  15,580   13,856

Deferred tax liabilities:
  Depreciation..............................................   1,325    1,715
  Inventory methods.........................................   4,537    1,937
  Other.....................................................     575      720
                                                              ------   ------
Total deferred tax liabilities..............................   6,437    4,372
                                                              ------   ------
Net deferred tax assets.....................................  $9,143   $9,484
                                                              ======   ======
</TABLE>

Income taxes paid were approximately $10,511,000, $7,481,000 and $11,734,000 in
1999, 1998 and 1997, respectively.

6. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Interest....................................................  $   618   $    66
Salaries, wages and payroll taxes...........................    2,805     3,039
Incentives..................................................      834     1,541
Advertising.................................................    4,283       912
Self-insurance reserves.....................................      598       409
Royalties...................................................    1,399     1,399
Other.......................................................    4,618     5,021
                                                              -------   -------
                                                              $15,155   $12,387
                                                              =======   =======
</TABLE>

                                      F-17
<PAGE>   40
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


7. OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Royalties...................................................  $ 9,596   $ 8,224
Other.......................................................    2,997     2,850
                                                              -------   -------
                                                              $12,593   $11,074
                                                              =======   =======
</TABLE>

8. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Term loan with a bank, principal due on a quarterly payment
  schedule through September 30, 2002.......................  $17,366   $21,821
Industrial Revenue Bond, payable in annual principal
  installments of $200,000 through March 1, 2004, plus
  interest at a floating rate not to exceed 14% (2.55%-4.35%
  in 1999 and 3.20%-4.45% in 1998)..........................    1,000     1,100
Industrial Revenue Bond, payable in annual principal
  installments of $200,000 through October 1, 2004, plus
  interest at a floating interest rate not to exceed 14%
  (2.55%-4.35% in 1999 and 3.20%-4.45% in 1998).............    1,000     1,100
Other.......................................................      155       356
                                                              -------   -------
                                                               19,521    24,377
Less current portion........................................    6,678     4,746
                                                              -------   -------
                                                              $12,843   $19,631
                                                              =======   =======
</TABLE>

Substantially all of the Company's property, plant and equipment, accounts
receivable, and inventory have been pledged as collateral for the above
long-term debt. The loan agreements require the Company to maintain certain
financial ratios and restricts the payment of dividends.

                                      F-18
<PAGE>   41
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


8. LONG-TERM DEBT (CONTINUED)

Interest rates on borrowings under the term loan and related revolving credit
facility are set from time to time, at the Company's option, as (a) Base rate
loans which bear interest at a rate equal to the greater of 1) the Federal Funds
Rate plus 1/2 of 1%, or 2) the prime rate; plus an applicable percentage based
on the current Leverage Ratio, or a (b) Eurodollar loan which accrues interest
at the LIBOR rate plus an applicable percentage based on the current Leverage
Ratio. The term loan interest rate at December 31, 1999 and 1998 was 6.69% and
6.30%, respectively. The Company had no outstanding borrowings under its
revolving credit facility at December 31, 1999 and $15,300,000 outstanding at
December 31, 1998. The revolving credit facility's interest rate at December 31,
1998 was 6.9%. The revolving credit agreement permits the Company to borrow up
to a maximum of $60,000,000 subject to specified levels of eligible inventory,
eligible inventory on order under letters of credit, and accounts receivable
with the total amount reduced by outstanding letters of credit. At December 31,
1999 and 1998, the Company had available borrowings up to approximately
$51,300,000 and $37,600,000, respectively. The Company had outstanding letters
of credit for purchases from foreign vendors, to guarantee certain casualty
insurance activities and as guarantees for payment of the Company's industrial
revenue bonds of approximately $4,196,000 and $6,351,000 at December 31, 1999
and 1998, respectively.

The revolving credit facility and term loan agreement requires mandatory
principal prepayments based on excess annual cash flow as defined, commencing
with calendar year 2000.

The Company has available a foreign credit facility which had no outstanding
balance at December 31, 1999 and 1998. This credit facility permits the Company
to borrow up to a maximum of approximately $1,650,000 on a long-term basis and
approximately $380,000 as a bank overdraft.

Total interest paid was approximately $2,034,000, $8,449,000 and $6,000,000 in
1999, 1998 and 1997, respectively.

The aggregate annual maturities of long-term debt at December 31, 1999 are as
follows (in thousands):

<TABLE>
<S>                                                           <C>
     2000...................................................  $ 6,678
     2001...................................................    6,733
     2002...................................................    5,310
     2003...................................................      400
     2004...................................................      400
Thereafter..................................................       --
                                                              -------
                                                              $19,521
                                                              =======
</TABLE>

                                      F-19
<PAGE>   42
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


9. LEASES

The Company leases buildings, machinery and equipment under operating leases
with various renewal terms and expiring in various years through 2012. Three of
these leases contain renewal options totaling 20 years.

Future minimum lease payments as of December 31, 1999 under leases classified as
capital leases and operating leases, are as follows (in thousands):

<TABLE>
<CAPTION>
                      YEAR ENDING IN                        CAPITAL LEASES   OPERATING LEASES
                      --------------                        --------------   ----------------
<S>                                                         <C>              <C>
2000......................................................        $8              $1,547
2001......................................................        --               1,493
2002......................................................        --               1,452
2003......................................................        --               1,427
2004......................................................        --                 985
Thereafter................................................        --               1,787
                                                                  --              ------
Total minimum lease payments..............................         8              $8,691
                                                                                  ======
Less amounts representing interest........................        --
                                                                  --
Present value of net minimum lease payments...............         8
Less current portion......................................         8
                                                                  --
                                                                  $--
                                                                  ==
</TABLE>

Rent expense totaled approximately $2,888,000, $2,220,000 and $2,292,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.

Assets recorded under capital leases, net of accumulated amortization, were
approximately $1,160,000 and $1,400,000 at December 31, 1999 and 1998,
respectively. The assets recorded under capital leases are pledged as collateral
for the capital lease obligations. Amortization of assets recorded under capital
lease obligations is included with depreciation expense.

                                      F-20
<PAGE>   43
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


10. EMPLOYEE BENEFIT PLANS

The Apparel segment of the Company has a non-contributory defined benefit
pension plan ("Pension Plan") that covers substantially all full-time domestic
employees. Benefits are based on the employee's years of service and, for
salaried employees, each employee's compensation during the last five years of
employment. The Company's funding policy is to make the minimum annual
contributions required by applicable regulations. The plan assets are invested
primarily in mutual funds via the Gerber Childrenswear, Inc. Retirement Plans
Master Trust and in a group annuity contract with an insurance company.

The Apparel segment also sponsors a defined benefit postretirement health care
plan ("Postretirement Plan") covering all full-time domestic employees. The plan
is contributory, with retiree contributions adjusted annually, and contains
other cost sharing features such as deductibles and coinsurance. The accounting
for the plan anticipates future cost-sharing changes to the written plan that
are consistent with the Company's expressed intent to increase the retiree
contribution rate annually for the expected general inflation rate for that
year. The Company's policy is to fund the cost of medical benefits in amounts
determined at the discretion of management.

During 1999, the Company downsized its domestic Apparel operations resulting in
a significant reduction in the number of employees covered under the Company's
Pension and Postretirement Plans. This reduction of employees resulted in a
one-time curtailment of benefits gain in the Postretirement Plan of $487,000
that is included in "Other, net" in the Company's 1999 consolidated statement of
income and comprehensive income.

Change in benefit obligations and change in plan net assets, as estimated by
consulting actuaries, as of December 31, 1999 and 1998 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                         POSTRETIREMENT
                                                    PENSION BENEFITS        BENEFITS
                                                    -----------------   -----------------
                                                     1999      1998      1999      1998
                                                    -------   -------   -------   -------
<S>                                                 <C>       <C>       <C>       <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year...........  $26,793   $25,418   $ 3,808   $ 3,690
  Service cost....................................    1,066       883       474       483
  Interest cost...................................    1,804     1,746       320       215
  Actuarial (gains) losses........................   (1,567)      403      (433)     (526)
  Curtailments....................................      123        --      (487)       --
  Benefits paid...................................   (1,892)   (1,657)      (32)      (54)
                                                    -------   -------   -------   -------
Benefit obligation at end of year.................   26,327    26,793     3,650     3,808
                                                    -------   -------   -------   -------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year....   28,380    26,514        --        --
  Actual return on plan assets....................    2,299     3,523        --        --
  Company contributions...........................       --        --        32        54
  Benefits paid...................................   (1,892)   (1,657)      (32)      (54)
                                                    -------   -------   -------   -------
Fair value of plan assets at end of year..........  $28,787   $28,380   $    --   $    --
                                                    -------   -------   -------   -------
</TABLE>

                                      F-21
<PAGE>   44
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


10. EMPLOYEE BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
                                                                         POSTRETIREMENT
                                                    PENSION BENEFITS        BENEFITS
                                                    -----------------   -----------------
                                                     1999      1998      1999      1998
                                                    -------   -------   -------   -------
<S>                                                 <C>       <C>       <C>       <C>
RECONCILIATION OF PREPAID/(ACCRUED)
Funded status of plan (underfunded)...............  $ 2,460   $ 1,587   $(3,650)  $(3,808)
Unrecognized net actuarial gain...................   (3,905)   (2,461)   (1,833)   (1,410)
                                                    -------   -------   -------   -------
Accrued benefit cost..............................  $(1,445)  $  (874)  $(5,483)  $(5,218)
                                                    =======   =======   =======   =======
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate obligations.........................     7.50%     7.00%     7.50%     7.00%
Discount rate for expense.........................     7.00%     7.25%     7.00%     7.25%
Expected return on plan assets....................     9.00%     9.00%       --        --
Rate of compensation increase.....................     4.00%     4.00%       --        --
</TABLE>

Net pension and postretirement cost included the following components at
December 31, 1999, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                             1999      1998      1997
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
PENSION BENEFITS
Service cost -- benefits earned during the period.........  $ 1,066   $   883   $   851
Interest cost on projected benefit obligation.............    1,804     1,746     1,709
Actual return on plan assets..............................   (2,299)   (2,196)   (2,116)
                                                            -------   -------   -------
Net periodic pension cost.................................  $   571   $   433   $   444
                                                            =======   =======   =======
POSTRETIREMENT BENEFITS
Service cost -- benefits earned during the period.........  $   474   $   483   $   423
Interest cost on projected benefit obligation.............      320       215       222
Amortization of unrecognized net gain.....................       (9)      (62)      (29)
                                                            -------   -------   -------
Net periodic postretirement cost..........................      785       636       616
One-time curtailment (gain)...............................     (487)       --        --
                                                            -------   -------   -------
Total expense.............................................  $   298   $   636   $   616
                                                            =======   =======   =======
</TABLE>

The weighted-average annual assumed rate of increase in the per capita cost of
covered medical benefits for 1999 is 7.5 percent to 9.0 percent and is assumed
to decrease gradually to 5.5 percent by 2003 and remain at that level
thereafter.

                                      F-22
<PAGE>   45
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


10. EMPLOYEE BENEFIT PLANS (CONTINUED)

The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1999 by approximately
$663,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1999 by approximately $155,000.
Decreasing the assumed health care cost trend rate by one percentage point in
each year would decrease the accumulated postretirement benefit obligation as of
December 31, 1999 by approximately $562,000 and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for 1999 by
approximately $129,000.

Gerber Childrenswear, Inc. also has a 401(k) plan for its employees whereby the
Company will match 50% of the employee's contributions up to a maximum company
match of 3% of the employee's compensation. Total expense under the plan was
approximately $480,000, $489,000 and $439,000 for 1999, 1998 and 1997,
respectively.

Sport Socks has a defined contribution pension plan. The assets of the plan are
held in an independently administered fund. Total expense under the plan was
approximately $156,000 and $140,000 in 1999 and 1998, respectively. There was no
plan expense recognized between December 17, 1997 and December 31, 1997.

Auburn has a defined contribution plan covering all employees who have two years
of service with at least 1,000 hours each year. The contribution was determined
by its Board of Directors annually. Effective June 1, 1998, the plan was amended
and restated whereby the Company will match 50% of the employee's contributions
up to a maximum company match of 3% of the employee's compensation. Total
expense under the plan was $111,000 and $129,000 in 1999 and 1998, respectively.
There was no plan expense recognized between December 17, 1997 and December 31,
1997.

11. REDEEMABLE PREFERRED STOCK

The outstanding redeemable preferred stock had a scheduled redemption date of
January 31, 2007 at $100 per share plus all accrued and unpaid dividends
thereon. In connection with the Company's Offering in June 1998, 113,623.6
shares of the redeemable preferred stock were converted into 1,241,537 shares of
Common Stock of the Company and 2,828.4 shares were redeemed for cash equal to
the liquidation value per share at that time.

                                      F-23
<PAGE>   46
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


12. SHAREHOLDERS' EQUITY

During 1997, the Company sold shares of its Class B common stock to certain
employees for $1 per share. The total proceeds for the shares were $50,750 and
the total fair value for the shares was approximately $5,836,000. Some of these
shares were immediately vested while others vest over a five-year period. At the
time of issuance of the unvested shares, the difference between the amount paid
by the employees and the fair market value was credited to additional paid-in
capital with a corresponding charge to unearned compensation. The unearned
compensation is amortized to earnings over five years on a straight-line basis.
Amortization expense for 1999, 1998 and 1997 was $119,000, $151,000 and
$161,000, respectively. Previously amortized amounts for shares forfeited are
credited to compensation expense in the year of forfeiture. At the time of
issuance of the shares which were vested, the difference between the amount paid
by the employees and the fair market value was credited to additional paid-in
capital with a corresponding charge to expense for $4,858,000.

Certain shareholders have demand registration rights with respect to shares of
common stock owned by them.

In connection with obtaining the $22,500,000 note payable for the acquisition of
Gerber Childrenswear, Inc., the Company issued a warrant to the lender to
purchase 2,958,503 shares (191,250 shares prior to Merger) of Class B Common
Stock (non-voting Class D common stock prior to Merger) at a nominal price. The
warrant, in whole or in part, may be exercised at anytime through January 22,
2006. The recorded value of the warrant at the date of issuance was
approximately $189,000 (based on the relative fair values of the warrant and the
note) and reduced the face amount of the note payable.

13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments", requires disclosure of fair value information
about financial instruments for which it is practicable to estimate that value.
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

Cash and cash equivalents:  The carrying amounts reported in the consolidated
balance sheets for cash and cash equivalents approximate fair value due to the
short-maturity of these instruments.

Receivables:  The carrying amounts reported in the consolidated balance sheets
for receivables approximate their fair value.

Long and short-term liabilities:  The carrying amounts of the Company's long and
short-term borrowings approximate their fair value based on the Company's
analysis of long and short term rates available for similar financing.

                                      F-24
<PAGE>   47
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


13. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Forward exchange contracts:  The fair value of the Company's forward foreign
currency exchange contracts is estimated by reference to quoted prices. The
contract value and estimated fair value of uncommitted contracts at December 31,
1999 was approximately $857,000 and $920,000, respectively. The contract value
and estimated fair value of uncommitted contracts at December 31, 1998 was
approximately $3,982,000 and $4,235,000, respectively.

14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                     1999          1998          1997
                                                  -----------   -----------   -----------
<S>                                               <C>           <C>           <C>
Numerator:
  Income before extraordinary item..............  $15,666,000   $16,025,000   $ 7,719,000
  Preferred stock dividends.....................           --      (774,000)   (1,637,000)
                                                  -----------   -----------   -----------
  Income available to common shareholders.......   15,666,000    15,251,000     6,082,000
  Extraordinary item, net.......................           --      (266,000)     (708,000)
                                                  -----------   -----------   -----------
Numerator for basic and diluted earnings per
  share -- net income available to common
  shareholders..................................  $15,666,000   $14,985,000   $ 5,374,000
                                                  ===========   ===========   ===========
Denominator:
  Denominator for basic earnings per share --
     weighted-average shares....................   16,642,000    14,121,000    11,106,000
  Effect of dilutive securities:
     Warrants...................................    2,958,000     2,958,000     2,958,000
     Nonvested stock and options................      317,000       546,000       655,000
                                                  -----------   -----------   -----------
Denominator for diluted earnings per share --
  adjusted weighted-average shares..............   19,917,000    17,625,000    14,719,000
                                                  ===========   ===========   ===========
Basic earnings per share........................  $       .94   $      1.06   $       .48
                                                  ===========   ===========   ===========
Diluted earnings per share......................  $       .79   $       .85   $       .37
                                                  ===========   ===========   ===========
</TABLE>

                                      F-25
<PAGE>   48
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


15. EXTRAORDINARY ITEM

In June 1998, the Company repaid senior and junior subordinated notes in the
principal amount of $22.5 million and $11.0 million, respectively. The write-off
of unamortized discount and loan costs totaling $266,000 (net of an income tax
benefit of $163,000) is included as an extraordinary item in the accompanying
consolidated statements of income and comprehensive income for the year ended
December 31, 1998.

In December 1997, the Company repaid its term note payable in the principal
amount of $6,500,000. The Company was required to pay a prepayment penalty of
$160,000 in connection with this transaction. The write-off of unamortized loan
costs and prepayment penalty totaling $708,000 (net of the income tax benefit of
$452,000) is included as an extraordinary item in the accompanying consolidated
statement of income and comprehensive income for the year ended December 31,
1997.

16. CASUALTY EVENT

In September 1998, the Company's three plants in the Dominican Republic
sustained property damage and began to experience business interruption losses
associated with Hurricane Georges. The Company maintained property damage and
business interruption insurance and has settled a majority of the claim with its
insurance providers in November 1999 resulting in a net casualty gain of
approximately $1,337,000. This gain has been reflected in "Other, net" in the
Company's consolidated statement of income and comprehensive income for 1999.

17. LONG-TERM PERFORMANCE INCENTIVE PLAN AND EXECUTIVE DEFERRAL PLAN

In June 1998, the Company adopted a Long-Term Performance Incentive Plan (the
"Incentive Plan") designed to provide incentives to present and future key
employees of the Company and its subsidiaries as may be selected by the
Compensation Committee of the Board of Directors (the "Committee"). The
Incentive Plan provides for the granting to Participants the following types of
incentive awards: stock options, stock appreciation rights, restricted stock,
performance units, performance grants and other awards deemed appropriate by the
Committee. An aggregate of 750,000 shares of Common Stock will be reserved for
issuance under the Incentive Plan. The Incentive Plan affords the Company
latitude in tailoring incentive compensation for the retention of key employees.
This plan also limits the number of shares each participant in the plan shall be
entitled to receive to no more than 25,000 shares of Common Stock in any
calendar year and is scheduled to terminate ten years from the inception date of
the Plan.

                                      F-26
<PAGE>   49
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


17. LONG-TERM PERFORMANCE INCENTIVE PLAN AND EXECUTIVE DEFERRAL PLAN (CONTINUED)

During 1999 and 1998, stock options were granted to certain employees of the
Company at prices equal to the market value of the common shares at the date of
grant and generally vest and become exercisable ratably over a five year period,
commencing one year after the grant date and expire ten years after the date of
grant. The weighted average remaining contractual life of outstanding stock
options at December 31, 1999 was approximately 9 years. The following table
summarizes the transactions of the Incentive Plan during 1999 and 1998:

<TABLE>
<CAPTION>
                                                           WEIGHTED AVERAGE   EXERCISE PRICE
                                                  SHARES    EXERCISE PRICE        RANGE
                                                  ------   ----------------   --------------
<S>                                               <C>      <C>                <C>
1999
Outstanding at beginning of year................  34,000        $10.98        $8.38 - $13.00
  Granted.......................................  48,600          5.13          4.00 -  6.00
  Exercised.....................................      --            --                    --
  Forfeited.....................................      --            --                    --
  Expired.......................................      --            --                    --
                                                  ------        ------        --------------
Outstanding at end of year......................  82,600        $ 7.53        $4.00 - $13.00
                                                  ======        ======        ==============
Options exercisable at year-end.................   6,800        $10.98        $8.38 - $13.00
                                                  ======        ======        ==============
1998
Outstanding at beginning of year................      --        $   --        $           --
  Granted.......................................  34,000         10.98         8.38 -  13.00
  Exercised.....................................      --            --                    --
  Forfeited.....................................      --            --                    --
  Expired.......................................      --            --                    --
                                                  ------        ------        --------------
Outstanding at end of year......................  34,000        $10.98        $8.38 - $13.00
                                                  ======        ======        ==============
Options exercisable at year-end.................      --        $   --        $           --
                                                  ======        ======        ==============
</TABLE>

As permitted by FAS 123, the Company applies APB 25 and related interpretations
in accounting for stock options; accordingly, no compensation expense has been
recognized by the Company for its Incentive Plan in 1999 or 1998. Had
compensation expense been determined based upon the fair value of the stock
options at grant date consistent with the method of FAS 123, the Company's
consolidated net income and earnings per share for 1999 and 1998 would have not
been materially different from amounts reported.

The fair value of each stock option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumption for 1999 and
1998, respectively; risk-free interest rates of approximately 6.5% and 4.5%; no
expected dividend yield for both years; expected lives of 10 years for both
years and volatility of approximately 60.0% and 80.0%. Changes in these
assumptions can materially affect the fair value estimate. In management's
opinion the existing models do not necessarily provide a reliable single measure
of the fair value of its stock options.

                                      F-27
<PAGE>   50
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


17. LONG-TERM PERFORMANCE INCENTIVE PLAN AND EXECUTIVE DEFERRAL PLAN (CONTINUED)

Effective January 1, 1998, the Company established an Executive Deferral Plan
for certain officers of the Company. The Plan enables participants to defer
compensation on a pre-tax basis and is not funded. Participants are credited
interest at current market rates. The charge to interest expense was
approximately $48,000 and $24,000 in 1999 and 1998.

18. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

The Company operates in two business segments: apparel and hosiery. The apparel
segment consists of the production and sale of infant and toddler's sleepwear,
playwear, underwear, bedding, bath, cloth diapers and other products to mass
merchandise outlets in the U.S. under the Gerber trademark and private labels.
The hosiery segment, which was acquired on December 17, 1997, consists of the
production and sale of sport socks under the Wilson, Coca-Cola, Converse and
Dunlop names to major retailers in the United States and/or Europe.

Net sales, income (loss) before interest and income taxes, depreciation and
amortization, and capital additions are reported based on the operations of each
business segment or geographic region. Assets are those used exclusively in the
operations of each business segment or geographic region, or which are allocated
when used jointly.

The following tables present sales and other financial information by business
segment and geographic region for the years 1999, 1998 and 1997 (in thousands):

<TABLE>
<CAPTION>
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
BUSINESS SEGMENTS
Net sales:
  Apparel..............................................  $205,564   $212,403   $200,526
  Hosiery..............................................    72,138     66,093      1,511
                                                         --------   --------   --------
Total net sales........................................   277,702   $278,496   $202,037
                                                         ========   ========   ========
Income (loss) before interest and income taxes:
  Apparel..............................................  $ 18,724   $ 25,414   $ 18,322
  Hosiery..............................................     7,673      5,065        (41)
                                                         --------   --------   --------
Total income (loss) before interest and income taxes:..  $ 26,397   $ 30,479   $ 18,281
                                                         ========   ========   ========
Depreciation and amortization:
  Apparel..............................................  $  3,039   $  2,853   $  2,472
  Hosiery..............................................     3,182      3,087         66
                                                         --------   --------   --------
Total depreciation and amortization....................  $  6,221   $  5,940   $  2,538
                                                         ========   ========   ========
</TABLE>

                                      F-28
<PAGE>   51
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


18. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS (CONTINUED)

<TABLE>
<CAPTION>
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Capital additions:
  Apparel..............................................  $  4,741   $  3,657   $  4,180
  Hosiery..............................................     2,623      1,372         --
                                                         --------   --------   --------
Total capital additions................................  $  7,364   $  5,029   $  4,180
                                                         ========   ========   ========
Assets:
  Apparel..............................................  $129,897   $136,246
  Hosiery..............................................    48,527     49,492
                                                         --------   --------
Total assets...........................................  $178,424   $185,738
                                                         ========   ========
Inventories (included in assets):
  Apparel..............................................  $ 57,538   $ 79,748
  Hosiery..............................................     7,748      7,272
                                                         --------   --------
Total inventories (included in assets).................  $ 65,286   $ 87,020
                                                         ========   ========
GEOGRAPHIC AREAS
Net sales:
  United States........................................  $255,491   $256,253   $202,037
  All other............................................    22,211     22,243         --
                                                         --------   --------   --------
Total net sales........................................  $277,702   $278,496   $202,037
                                                         ========   ========   ========
Income before interest and income taxes:
  United States........................................  $ 21,608   $ 26,789   $ 18,281
  All other............................................     4,789      3,690         --
                                                         --------   --------   --------
Total income before interest and income taxes..........  $ 26,397   $ 30,479   $ 18,281
                                                         ========   ========   ========
Assets:
  United States........................................  $153,820   $161,175
  All other............................................    24,604     24,563
                                                         --------   --------
Total assets...........................................  $178,424   $185,738
                                                         ========   ========
</TABLE>

The Apparel segment had sales to Wal-Mart and two other customers that accounted
for 37%, 11%, and 11% of total Apparel sales in 1999, respectively; 40%, 11% and
10% of total Apparel sales in 1998, respectively; and 43%, 10%, and 11% of total
Apparel sales in 1997, respectively. The Hosiery segment had sales to Wal-Mart
that accounted for 51%, 45% and 80% of that segment's sales for 1999, 1998 and
1997 (two week period), respectively.

                                      F-29
<PAGE>   52
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited financial data regarding the Company's
consolidated quarterly results of operations.

<TABLE>
<CAPTION>
                                                    1ST       2ND       3RD       4TH
                                                  QUARTER   QUARTER   QUARTER   QUARTER    TOTAL
                                                  -------   -------   -------   -------   --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>       <C>       <C>       <C>       <C>
1999
Net sales.......................................  $66,285   $58,768   $80,159   $72,490   $277,702
Gross margin....................................   18,444    14,194    19,259    15,092     66,989
Net income......................................    4,769     2,215     4,355     4,327     15,666
Basic earnings per share........................  $   .29   $   .13   $   .26   $   .26   $    .94
Diluted earnings per share......................  $   .24   $   .11   $   .22   $   .22   $    .79

1998
Net sales.......................................  $64,647   $63,879   $73,879   $76,091   $278,496
Gross margin....................................   17,435    17,371    17,811    16,421     69,038
Income before extraordinary item................    3,420     3,883     4,262     4,460     16,025
Extraordinary item, net -- loss on early
  extinguishment of debt........................       --      (266)       --        --       (266)
Net income......................................    3,420     3,617     4,262     4,460     15,759
Basic earnings per share:
  Income before extraordinary item..............  $   .27   $   .28   $   .26   $   .27   $   1.08
  Extraordinary item, net.......................       --      (.02)       --        --       (.02)
Net income......................................  $   .27   $   .26   $   .26   $   .27   $   1.06
Diluted earnings per share:
  Income before extraordinary item..............  $   .20   $   .23   $   .21   $   .22   $    .87*
  Extraordinary item, net.......................       --      (.02)       --        --       (.02)
Net income......................................  $   .20   $   .21   $   .21   $   .22   $    .85*
</TABLE>

* Amounts do not foot across due to rounding.

                                      F-30
<PAGE>   53
                           GERBER CHILDRENSWEAR, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


20. COMMITMENTS AND CONTINGENT LIABILITIES

Employment Contracts

The Company has employment contracts in the normal course of business with three
of its officers with remaining terms of approximately one year.

Yarn Contracts

The Company depends on certain raw materials such as yarn for the manufacturing
of its products. In order to hedge against price increases of yarn, the Company
actively manages its cost through contracts with its yarn suppliers with terms
of up to one year. The Company has contracts to purchase up to approximately
15,200,000 pounds of yarn in 2000.

                                      F-31
<PAGE>   54

                                                                     SCHEDULE II
                           GERBER CHILDRENSWEAR, INC.

           SUPPLEMENTAL SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                 BALANCE AT      CHARGED                    BALANCE AT
                                                 BEGINNING     TO COST AND                    END OF
                  DESCRIPTION                    OF PERIOD      EXPENSES      DEDUCTIONS      PERIOD
                  -----------                    ----------    -----------    ----------    ----------
<S>                                              <C>           <C>            <C>           <C>
Year ended December 31, 1999:
  Allowance for doubtful accounts..............    $1,487          (13)          371(1)       $1,103
Year ended December 31, 1998:
  Allowance for doubtful accounts..............       876          700            89(1)        1,487
Year ended December 31, 1997:
  Allowance for doubtful accounts..............       791          252           167(1)          876
</TABLE>

(1) Allowances, uncollected amounts and credit balances written off against
reserve, net of recoveries.

                                      F-32