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CARTER'S, INC. (CRI)

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1d ago CARTER'S, INC. : ex-dividend day
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CARTERS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/24/2014 | 03:43pm US/Eastern
The following is a discussion of our results of operations and current financial
condition. This should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and related notes and our Annual
Report on Form 10-K for the fiscal year ended December 28, 2013.

Our Business


We are the largest branded marketer in the United States of apparel exclusively
for babies and young children. We
own two of the most highly recognized and most trusted brand names in the
children's apparel industry, Carter's and OshKosh
B'gosh ("OshKosh"). Established in 1865, our Carter's brand is recognized and
trusted by consumers for high-quality apparel
for children sizes newborn to seven. Established in 1895, OshKosh is a
well-known brand, trusted by consumers for its line of
apparel for children sizes newborn to 12, with a focus on playclothes for
toddlers and young children. Given each brand's product category emphasis and
brand aesthetic, we believe the brands provide a complementary product offering.
We have extensive experience in the young children's apparel market and focus on
delivering products that satisfy our consumers' needs. Our strategy is to market
high-quality, essential core products at prices that deliver an attractive value
proposition for consumers.


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

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, (i) selected statement of operations data expressed as a percentage of net sales, and (ii) the number of retail stores open at the end of each period:

                                          Fiscal quarter ended           Two fiscal quarters ended
                                        June 28,          June 29,        June 28,         June 29,
                                          2014              2013            2014             2013

Net sales
Carter's Wholesale                          34.8  %          38.0  %        38.5  %           40.1  %
Carter's Retail                             40.7  %          38.5  %        37.9  %           36.8  %
Total Carter's                              75.5  %          76.5  %        76.4  %           76.9  %

OshKosh Retail                              11.8  %          10.9  %        10.7  %           10.1  %
OshKosh Wholesale                            2.0  %           2.2  %         2.2  %            2.7  %
Total OshKosh                               13.8  %          13.1  %        12.9  %           12.8  %

International                               10.7  %          10.4  %        10.7  %           10.3  %

Consolidated net sales                     100.0  %         100.0  %       100.0  %          100.0  %
Cost of goods sold                          57.2  %          57.5  %        58.6  %           58.2  %

Gross margin                                42.8  %          42.5  %        41.4  %           41.8  %
Selling, general, and administrative
expenses                                    35.9  %          37.7  %        34.0  %           34.3  %
Royalty Income                              (1.4 )%          (1.4 )%        (1.5 )%           (1.5 )%

Operating income                             8.3  %           6.3  %         8.9  %            9.0  %
Interest expense                             1.2  %           0.2  %         1.1  %            0.2  %
Interest income                                -  %             -  %           -  %              -  %
Other expense (income), net                    -  %           0.1  %           -  %            0.1  %

Income before income taxes                   7.1  %           6.0  %         7.8  %            8.7  %
Provision for income taxes                   2.6  %           2.2  %         2.9  %            3.2  %
Net income                                   4.5  %           3.8  %         4.9  %            5.5  %

Number of retail stores at end of period:
Carter's - U.S.                                                              509               438
OshKosh - U.S.                                                               187               164
International                                                                110               107

Total retail stores                                                          806               709


Note: Results may not be additive due to rounding.

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

SECOND QUARTER AND TWO FISCAL QUARTERS ENDED JUNE 28, 2014 COMPARED WITH SECOND QUARTER AND TWO FISCAL QUARTERS ENDED JUNE 29, 2013

CONSOLIDATED NET SALES


In the second fiscal quarter of 2014, consolidated net sales increased $56.2
million, or 10.9%, to $574.1 million. For the first two fiscal quarters of 2014,
consolidated net sales increased $116.8 million, or 10.5%, to $1,225.7 million.
For both periods, the increase reflects sales growth in our Carter's Wholesale,
Carter's Retail, OshKosh Retail, and International segments. Changes in foreign
currency exchange rates in the second quarter and first two quarters of fiscal
2014 as compared to the second quarter and first two quarters of fiscal 2013
negatively impacted International segment net sales by approximately $2.9
million and $6.8 million, respectively.

                                  Fiscal quarter ended                                       Two fiscal quarters ended
(dollars in                         % of                           % of                           % of                          % of
thousands)       June 28, 2014      Total      June 29, 2013       Total   
   June 28, 2014      Total      June 29, 2013      Total

Net sales:
Carter's
Wholesale      $       200,059      34.8 %   $       196,734        38.0 %   $       471,688      38.5 %   $       444,912      40.1 %
Carter's
Retail                 233,690      40.7 %           199,370        38.5 %           464,018      37.9 %           407,799      36.8 %
Total Carter's         433,749      75.5 %           396,104        76.5 %           935,706      76.4 %           852,711      76.9 %

OshKosh Retail $        67,515      11.8 %   $        56,423        10.9 %   $       131,073      10.7 %   $       111,768      10.1 %
OshKosh
Wholesale               11,649       2.0 %            11,301         2.2 %            27,235       2.2 %            29,487       2.7 %
Total OshKosh           79,164      13.8 %            67,724        13.1 %           158,308      12.9 %           141,255      12.8 %
International           61,152      10.7 %            54,046        10.4 %           131,695      10.7 %           114,917      10.3 %
Total net
sales          $       574,065     100.0 %   $       517,874       100.0 %   $     1,225,709     100.0 %   $     1,108,883     100.0 %



CARTER'S WHOLESALE SALES

Carter's wholesale sales increased $3.3 million, or 1.7%, in the second fiscal
quarter of 2014 to $200.1 million. This increase was primarily due to a 5.4%
increase in average price per unit, partially offset by a 3.5% decline in the
number of units shipped as compared to the second fiscal quarter of 2013.

Carter's wholesale sales increased 26.8 million, or 6.0%, in the first two fiscal quarters of 2014 to 471.7 million. This increase was primarily due to a 4.2% increase in the average price per unit and a 1.8% increase in units shipped, as compared to the first two fiscal quarters of 2013.

CARTER'S RETAIL SALES


Carter's retail sales increased $34.3 million, or 17.2%, in the second fiscal
quarter of 2014 to $233.7 million. The increase was driven by incremental sales
of $19.6 million generated by new store openings, an eCommerce sales increase of
$10.3 million, and a comparable stores sales increase of $4.9 million primarily
driven by an increase in the number of transactions during the second quarter.
This increase was partially offset by the impact of store closings of $0.4
million.

Carter's retail sales increased $56.2 million, or 13.8%, in the first two fiscal
quarters of 2014 to $464.0 million. The increase was driven by incremental sales
of $39.5 million generated by new store openings and $20.5 million generated by
eCommerce sales. This increase was partially offset by a comparable stores sales
decrease of $3.2 million, primarily driven by a decrease in the number of
transactions during the first two fiscal quarters of 2014 and the impact of
store closings of $0.6 million.

In the second quarter of 2014, Carter's direct-to-consumer comparable sales
increased 7.7%, comprised of eCommerce comparable sales growth of 36.5% and a
retail stores comparable sales increase of 2.9%. In the first two quarters of
2014, Carter's direct-to-consumer comparable sales, increased 4.3%, comprised of
eCommerce comparable sales growth of 32.0% partially offset by a retail stores
comparable sales decline of 0.9%.

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




During the second fiscal quarter of 2014, we opened 20 Carter's retail stores
and closed two stores. During the first two fiscal quarters of 2014, we opened
36 Carter's stores and closed three stores. There were a total of 509 Carter's
retail stores as of June 28, 2014. In total, we plan to open approximately 60
Carter's retail stores and close four stores during fiscal 2014.

OSHKOSH RETAIL SALES


OshKosh retail sales increased $11.1 million, or 19.7%, in the second fiscal
quarter of 2014 to $67.5 million. The increase was driven by incremental sales
of $5.2 million generated by new store openings, a comparable store sales
increase of $3.4 million driven by an increase in the average transaction value
due to improved price realization, and an eCommerce sales increase of $3.0
million. This increase was partially offset by the impact of store closings of
$0.6 million.

OshKosh retail sales increased $19.3 million, or 17.3%, in the first two fiscal
quarters of 2014 to $131.1 million. The increase was driven by incremental sales
of of $9.8 million generated by new store openings, an eCommerce sales increase
of $5.9 million, and a comparable store sales increase of $4.8 million driven by
an increase in the average transaction value due to improved price realization.
This increase was partially offset by the impact of store closings of $1.1
million.

In the second quarter of 2014, OshKosh direct-to-consumer comparable sales
increased 11.6%, comprised of eCommerce comparable sales growth of 43.2% and a
retail stores comparable sales increase of 7.0%. In the first two quarters of
2014, OshKosh direct-to-consumer comparable sales increased 9.7%, comprised of
eCommerce comparable sales growth of 36.8% and a retail stores comparable sales
increase of 5.0%.

During the second fiscal quarter of 2014, we opened four OshKosh retail stores
and closed three stores. During the first two fiscal quarters, we opened ten
stores and closed four stores. There were a total of 187 OshKosh retail stores
as of June 28, 2014. In total, we plan to open approximately 24 and close four
OshKosh retail stores during fiscal 2014.


OSHKOSH WHOLESALE SALES


OshKosh wholesale sales increased $0.3 million, or 3.1%, in the second fiscal
quarter of 2014 to $11.6 million. This increase was primarily the result of a
12.0% increase in the average price per unit, partially offset by a 8.5% decline
in units shipped, as compared to the second fiscal quarter of 2013.

OshKosh wholesale sales decreased $2.3 million, or 7.6%, in the first two fiscal
quarters of 2014 to $27.2 million. This decrease was primarily the result of a
12.0% decrease in units shipped, partially offset by a 4.9% increase in the
average price per unit, as compared to the two fiscal quarters ended 2013.

INTERNATIONAL SALES


International sales increased $7.1 million, or 13.1%, in the second fiscal
quarter of 2014 to $61.2 million. Our international wholesale sales increased
$6.7 million, or 39.2%, to $23.6 million, driven by incremental sales of $3.0
million in Canada and $3.6 million in our other international locations. Our
international retail sales increased by $0.5 million driven by a $5.1 million
dollar increase in our Canadian retail locations and international eCommerce
business, partially offset by a $4.7 million decrease in our retail operations
in Japan. Comparable store sales in Canada increased $1.0 million, or 3.3%.

International sales increased $16.8 million, or 14.6%, in the first two quarters
of 2014 to $131.7 million. Our international wholesale sales increased $15.7
million, or 35.6%, to $59.8 million, driven by incremental sales of $10.0
million in Canada and $5.7 million in our other international locations. Our
international retail sales increased by $1.1 million driven by a $4.9 million
increase in our Canadian retail locations and our international eCommerce
business, partially offset by a $3.8 million decrease in our retail operations
in Japan. Comparable store sales in Canada declined $1.8 million, or 3.2%.

During the second fiscal quarter of 2014, we opened seven retail stores in
Canada and closed zero. During the first two fiscal quarters of 2014, we opened
nine stores and closed one. There were a total of 110 retail stores in Canada as
of June 28, 2014. In fiscal 2014, we plan to open a total of approximately 22
retail stores in Canada and close two.

GROSS PROFIT

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



Our gross profit increased $25.2 million, or 11.5%, to $245.5 million in the
second fiscal quarter of 2014. Gross margin increased from 42.5% in the second
fiscal quarter of 2013 to 42.8% in the second fiscal quarter of 2014.

Our gross profit increased $43.9 million, or 9.5%, to $507.2 million in the first two fiscal quarters of 2014. Gross margin decreased from 41.8% in the first two fiscal quarters in 2013 to 41.4% in the first two fiscal quarters of 2014.

We include distribution costs in selling, general, and administrative expenses. Accordingly, our gross profit may not be comparable to other companies that include such distribution costs in their cost of goods sold.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES


Selling, general, and administrative expenses in the second fiscal quarter of
2014 increased $11.3 million, or 5.8%, to $206.3 million. As a percentage of net
sales, selling, general, and administrative expenses decreased from 37.7% to
35.9% in the second fiscal quarter of 2014.

The decrease in selling, general, and administrative expenses as a percentage of net sales reflects:

$5.5 million in lower costs associated with the office consolidation;

$4.2 million in lower costs associated with our exit from Japan
             retail operations;


$2.6 million in lower provisions for performance-based compensation; and

Offsetting these decreases were $4.6 million in increased amortization expense for the H.W. Carter tradename.


Selling, general, and administrative expenses in the first two fiscal quarters
of 2014 increased $36.0 million, or 9.5%, to $416.4 million. As a percentage of
sales, selling, general, and administrative expenses decreased from 34.3% to
34.0% in the first two fiscal quarters of 2014.

The decrease in selling, general, and administrative expenses as a percentage of
net sales reflects approximately $11.5 million in lower costs associated with
the office consolidation, partially offset by increases of $10.9 million in
amortization expense for the H.W. Carter tradename.

ROYALTY INCOME


We license the use of our Carter's, Just One You, Child of Mine, OshKosh B'gosh,
OshKosh, Genuine Kids from OshKosh, and Precious Firsts brand names. Royalty
income from these brands for the second quarter and two fiscal quarters ending
June 28, 2014 was approximately $8.2 million and $18.1 million (including $1.2
million and $2.6 million of international royalty income), respectively. The
increase of 9.0% and 8.0%, for the second quarter and two fiscal quarters ending
June 28, 2014, respectively, as compared to the same periods in 2013, reflects
strength in domestic and international royalties.

OPERATING INCOME


Operating income increased $14.6 million, or 44.6%, to $47.3 million in the
second quarter of 2014 as compared to the second quarter of 2013 and increased
$9.2 million, or 9.2%, to $108.9 million in the first two fiscal quarters of
2014 as compared to the first two fiscal quarters of 2013, in each case due to
the factors described above.

INTEREST EXPENSE


Interest expense in the second fiscal quarter of 2014 increased $5.6 million to
$6.9 million, compared to the second fiscal quarter of 2013. Weighted-average
borrowings for the second fiscal quarter of 2014 were $586.0 million at an
effective interest rate of 4.65%, as compared to weighted-average borrowings for
the second fiscal quarter of 2013 of $186.0 million at an effective interest
rate of 2.61%.


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



Interest expense in the first two fiscal quarters of 2014 increased $11.2
million to $13.8 million, compared to the first two fiscal quarters of 2013.
Weighted-average borrowings for the first two fiscal quarters of 2014 were
$586.0 million at an effective interest rate of 4.65%, as compared to
weighted-average borrowings for the first two fiscal quarters of 2013 of $186.0
million at an effective interest rate of 2.59%.

The effective interest rate in the second fiscal quarter and first two fiscal
quarters of 2014 was higher than the comparable period of 2013 as a result of
our senior notes issuance in the third fiscal quarter of 2013.

Effective interest rates include the effect of the amortization of debt issuance costs.


INCOME TAXES

Our effective tax rate for the second fiscal quarter of 2014 was 36.5% as compared to 36.8% for the second fiscal quarter of 2013. Our effective tax rate for the first two fiscal quarters of both 2014 and 2013 was 36.6%.

NET INCOME


Our net income for the second fiscal quarter of 2014 increased $6.2 million, or
31.6%, to $25.9 million as compared to $19.7 million in the second fiscal
quarter of 2013. Our net income for the first two fiscal quarters of 2014
decreased $0.9 million, or 1.5%, to $60.2 million as compared to $61.1 million
in the first two fiscal quarters of 2013.

FINANCIAL CONDITION, CAPITAL RESOURCES, AND LIQUIDITY


Our primary cash needs are working capital and capital expenditures. We expect
our primary source of liquidity to be cash and cash equivalents on hand, cash
flow from operations, and borrowings under our revolving credit facility, and we
expect that these sources will fund our ongoing cash requirements for the
foreseeable future, although no assurance can be given in this regard.

Net accounts receivable at June 28, 2014 were $133.9 million compared to $133.3
million at June 29, 2013 and $193.6 million at December 28, 2013, an increase of
$0.6 million, or 0.5%, as compared to June 29, 2013. Due to the seasonal nature
of our operations, the net accounts receivable balance at June 28, 2014 is not
comparable to the net accounts receivable balance at December 28, 2013.

Net inventories at June 28, 2014 were $538.2 million compared to $429.2 million
at June 29, 2013 and $417.8 million at December 28, 2013. The increase of $109.0
million, or 25.4%, as compared to June 29, 2013, primarily reflects the impact
of planned supply chain initiatives, higher product costs, and planned sales and
store openings. Due to the seasonal nature of our operations, the net
inventories balance at June 28, 2014 is not comparable to the net inventories
balance at December 28, 2013.

Net cash provided by operating activities for the first two fiscal quarters of
2014 was 33.1 million compared to net cash provided by operating activities of
$69.8 million in the first two fiscal quarters of 2013. The decrease in
operating cash flow primarily reflects increased working capital requirements,
reflecting planned inventory increases, higher product costs, and the timing of
inventory purchases and payments.

Our capital expenditures were $61.3 million in the first two fiscal quarters of
2014 compared to $70.6 million in the first two fiscal quarters of 2013,
primarily reflecting expenditures of approximately $23.1 million for our U.S.
and international retail store openings and remodelings, $14.5 million for the
Braselton, Georgia distribution facility, $10.8 million for information
technology initiatives, and $8.2 million for our new headquarters facility.

We plan to invest approximately $100 million in capital expenditures in fiscal
2014, primarily for U.S. and international retail store openings and
remodelings, information technology, and further expansion of our distribution
capacity at the Braselton, Georgia facility.

Secured Revolving Credit Facility

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



The aggregate principal amount of the secured revolving credit facility as of
June 28, 2014, was $375 million, consisting of a $340 million U.S. dollar
revolving credit facility and a $35 million multicurrency revolving credit
facility. The sub-limit for U.S. dollar letters of credit is $175 million. The
revolving credit facility expires August 31, 2017.  Amounts outstanding under
the revolving credit facility currently accrue interest at a LIBOR rate plus
2.00%, which, as of June 28, 2014, was 2.15%.
At June 28, 2014, we had $186.0 million in borrowings under the revolving credit
facility, exclusive of $8.0 million of outstanding letters of credit, leaving
approximately $181.0 million available for future borrowings.

As of June 28, 2014, we were in compliance with the financial debt covenants
under our secured revolving credit facility.
Senior Notes

As of June 28, 2014, TWCC had $400 million principal amount of senior notes
outstanding, bearing interest at a rate of 5.25% per annum, and maturing on
August 15, 2021. TWCC received net proceeds from the offering of the senior
notes of approximately $394.2 million, after deducting bank fees. The senior
notes are unsecured and are fully and unconditionally guaranteed by Carter's,
Inc. and certain subsidiaries of TWCC.

FACILITY CLOSURES


In conjunction with our plan to consolidate our Shelton, Connecticut and
Atlanta, Georgia offices, as well as certain functions from our other offices,
into a new headquarters facility in Atlanta, Georgia, we incurred approximately
$4.6 million and $6.6 million in closing-related costs for the second fiscal
quarter and two fiscal quarters ended June 28, 2014. We expect approximately
$0.5 million in additional costs in fiscal 2014 related to the office
consolidation. The June 28, 2014 severance accrual of approximately $2.7 million
is expected to be paid by the end of fiscal 2014.

In the fourth quarter of 2013, we made the decision to exit retail operations in
Japan based on revised forecasts which do not meet our investment objectives. We
incurred approximately $0.9 million and $1.5 million in closing related costs in
the second fiscal quarter and first two fiscal quarters ended June 28, 2014,
respectively. For the two fiscal quarters ended June 28, 2014, we also recorded
approximately $1.0 million in cost of goods sold related to a favorable recovery
on inventory. We expect to incur approximately $0.3 million of additional costs
in fiscal 2014 in connection with the exit of retail operations in Japan. The
June 28, 2014 accrual of approximately $0.6 million is expected to be paid by
the end of fiscal 2014.

BONNIE TOGS ACQUISITION

As of June 28, 2014, a discounted contingent consideration liability related to
our 2011 acquisition of Bonnie Togs of approximately $16.8 million remains. The
liability is based upon the high probability that Bonnie Togs will attain its
earnings targets. Approximately $9.4 million of the total liability is included
in other current liabilities and the remainder is included in other long-term
liabilities on the accompanying unaudited condensed consolidated balance sheet.

SHARE REPURCHASES


Pursuant to the previously announced share repurchase authorizations by the
Board of Directors, during the first two quarters of fiscal 2014, the Company
repurchased and retired 499,151 shares in open market transactions, or
approximately $36.1 million, at an average price of $72.28 per share. The total
remaining capacity under the repurchase authorizations as of June 28, 2014, was
approximately $231.2 million. The share repurchase authorizations have no
expiration date.

Accelerated Stock Repurchase Program


The Company's previously announced 2013 ASR agreements were settled during the
first fiscal quarter of 2014 and approximately one million additional shares
were received in the first quarter with a fair market value, at trade date, of
approximately $70.3 million. We received a total of approximately 5.6 million
shares under the ASR program and all shares received were retired upon receipt.

DIVIDENDS


In the first and second fiscal quarters of 2014, the Company's Board of
Directors paid quarterly cash dividend of $0.19 per share. Future declarations
of quarterly dividends and the establishment of future record and payment dates
are at the discretion

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

of the Company's Board of Directors based on a number of factors, including the Company's future financial performance and other investment priorities.


Provisions in the Company's secured revolving credit facility and indenture
governing its senior notes could have the effect of restricting the Company's
ability to pay future cash dividends on or make future repurchases of its common
stock.

EFFECTS OF INFLATION AND DEFLATION


In recent years, we have experienced increased costs of cotton, labor, fuel, and
transportation, and have also had higher costs
for foreign sourced products as a result of the devaluation of the U.S. dollar
relative to certain foreign currencies. While we
raised our selling prices on many of our products over the past two years, we
have been unable to fully absorb the cost increases
and our profitability has been adversely impacted. We anticipate increased
product costs in 2014 principally due to higher labor costs for our foreign
manufacturers. If future product cost increases are more than anticipated, or if
we are unable to offset such cost increases through selling price increases or
otherwise, our profitability could be adversely affected. Future deflationary
pressures on our selling prices could also adversely affect our profitability.

SEASONALITY


We experience seasonal fluctuations in our sales and profitability due to the
timing of certain holidays and key retail shopping
periods, which generally has resulted in lower sales and gross profit in the
first half of our fiscal year versus the second half of
the year. Accordingly, our results of operations during the first half of the
year may not be indicative of the results we expect
for the full year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with U.S. GAAP. Preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses, and related disclosure of contingent assets and
liabilities. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 to our audited
consolidated financial statements for fiscal 2013, filed on Form 10-K. Our
critical accounting policies and estimates are those policies that require
management's most difficult and subjective judgments and may result in the need
to make estimates about the effect of matters that are inherently uncertain. Our
critical accounting policies and estimates include: revenue recognition,
inventory, goodwill and tradename, accrued expenses, loss contingencies,
accounting for income taxes, foreign currency, employee benefit plans and
stock-based compensation arrangements. There have been no significant changes in
the application of these policies since December 28, 2013.

FORWARD-LOOKING STATEMENTS


Statements contained herein that relate to our future performance, including,
without limitation, statements with respect to our anticipated results of
operations or level of business for fiscal 2014 or any other future period, are
forward-looking statements within the meaning of the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Such statements are based
on current expectations only and are subject to certain risks, uncertainties,
and assumptions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Our risks are
described herein under Item 1A of Part II.

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