**UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 **______________**
 
 **FORM
        10-Q**
 **______________**
 
 **x** **QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**
 
 **For
        the quarterly period ended October 1, 2005**
 
 OR
 
 **o** **TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
        1934**
 For
        the
        transition period from ______ to ______
 
 Commission
        File Number: 001-32568
 __________________
 
 **MAIDENFORM
        BRANDS, INC.**
 (Exact
        name of registrant as specified in its charter)
  **Delaware**
              **06-1724014**(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)**154
                  Avenue E, Bayonne, NJ**
              **07002**(Address
                  of principal executive offices)
              (Zip
                  Code)
  **(201)
        436-9200**
 (Registrant’s
        telephone number, including area code)
 __________________
 
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes x No o
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes o No x
 
 As
        of
        November 4, 2005, there were 23,488,357 shares of the registrant’s common stock,
        par value $0.01 per share, outstanding.
  **Table
            of Contents**
  **INDEX**
 **PART
                  I - FINANCIAL INFORMATION**
              **PAGE**Item
                  1. Financial Statements (Unaudited)Condensed
                  Consolidated Balance Sheets at October 1, 2005
                  (Successor) and January 1, 2005 (Successor)
              2Condensed
                  Consolidated Statements of Operations for the three
                  and nine months ended October 1, 2005, and for the three months
                  ended
                  September 25, 2004 (Successor), and for the periods from May 11,
                  2004
                  through September 25, 2004 (Successor) and from December 28, 2003
                  through
                  May 10, 2004 (Predecessor)
              3Condensed
                  Consolidated Statements of Cash Flows for the nine
                  month period ended October 1, 2005 (Successor), and for the periods
                  from
                  May 11, 2004 through September 25, 2004 (Successor) and from December
                  28,
                  2003 through May 10, 2004 (Predecessor)
              4Notes
                  to the Condensed Consolidated Financial
                  Statements
              5Item
                  2. Management’s Discussion and Analysis of Financial
                  Condition and Results of Operations
              15Item
                  3. Quantitative and Qualitative Disclosure About Market
                  Risk
              42Item
                  4. Controls and Procedures
              42**PART
                  II - OTHER INFORMATION**Item1.
                  Legal Proceedings
              43Item
                  2. Unregistered Sales of Equity Securities and Use of
                  Proceeds
              43Item
                  3. Defaults Upon Senior Securities
              43Item
                  4. Submission of Matters to a Vote of Security
                  Holders
              43Item
                  5. Other Information
              43Item
                  6. Exhibits
              43**SIGNATURES**
              44
   -1-
 **Table
            of Contents**
 
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1. Financial Statements (Unaudited)**
 **MAIDENFORM
                    BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                    CONSOLIDATED BALANCE
                    SHEETS****(in
                    thousands, except share and per share amounts)****(unaudited)**
  **Successor
                      at**
                  
                  **Successor
                      at****October
                      1, 2005**
                  
                  **January
                      1, 2005****Assets**Current
                      assetsCash
                      and cash equivalents
                  
                  $
                  5,831
                  
                  $
                  23,212Accounts
                      receivable, net
                  
                  
                  51,550
                  
                  
                  24,004Inventories
                  
                  
                  40,861
                  
                  
                  37,067Deferred
                      income taxes
                  
                  
                  9,103
                  
                  
                  9,103Prepaid
                      expenses and other current assets
                  
                  
                  12,426
                  
                  
                  7,562Total
                      current assets
                  
                  
                  119,771
                  
                  
                  100,948Property,
                      plant and equipment, net
                  
                  
                  18,120
                  
                  
                  27,944Goodwill
                  
                  
                  7,884
                  
                  
                  7,884Intangible
                      assets, net
                  
                  
                  101,128
                  
                  
                  101,998Other
                      non-current assets
                  
                  
                  3,422
                  
                  
                  5,357Total
                      assets
                  
                  $
                  250,325
                  
                  $
                  244,131**Liabilities
                      and stockholders’ equity (deficit)**Current
                      liabilitiesShort-term
                      debt
                  
                  $
                  111
                  
                  $
                  –Current
                      portion of long-term debt
                  
                  
                  –
                  
                  
                  12,162Accounts
                      payable
                  
                  
                  18,426
                  
                  
                  11,724Accrued
                      expenses and other current liabilities
                  
                  
                  22,464
                  
                  
                  22,334Total
                      current liabilities
                  
                  
                  41,001
                  
                  
                  46,220Long-term
                      debt
                  
                  
                  140,000
                  
                  
                  135,588Deferred
                      income taxes
                  
                  
                  9,591
                  
                  
                  7,002Other
                      non-current liabilities
                  
                  
                  7,128
                  
                  
                  8,596Total
                      liabilities
                  
                  
                  197,720
                  
                  
                  197,406Commitments
                      and contingencies (Note 15)Preferred
                      stock - Subject to redemption, $0.01 par value;liquidation
                      value $100; 50,000,000 shares authorized;360,000
                      shares issued and outstanding at January 1, 2005
                  
                  
                  –
                  
                  
                  41,491Common
                      stock - Subject to put option, $0.01 par value;4,125,000
                      issued and outstanding at January 1, 2005 (out of a total100,000,000
                      shares authorized)
                  
                  
                  –
                  
                  
                  6,356Stockholders’
                      equity (deficit)Preferred
                      stock - Subject to redemption, $0.01 par value;10,000,000
                      shares authorized and none issued and outstanding
                  
                  
                  –
                  
                  
                  –Common
                      stock - $0.01 par value; 100,000,000shares
                      authorized; 23,488,357 shares at October 1, 2005 and15,675,000
                      shares at January 1, 2005 issued and outstanding
                  
                  
                  235
                  
                  
                  157Additional
                      paid-in capital
                  
                  
                  58,548
                  
                  
                  2,098Accumulated
                      deficit
                  
                  
                  (6,600
                  )
                  
                  (3,368
                  )Accumulated
                      other comprehensive income (loss)
                  
                  
                  422
                  
                  
                  (9
                  )Total
                      stockholders’ equity (deficit)
                  
                  
                  52,605
                  
                  
                  (1,122
                  )Total
                      liabilities and stockholders’ equity (deficit)
                  
                  $
                  250,325
                  
                  $
                  244,131
 The
                      accompanying notes are an integral part of these condensed
                      consolidated
                      financial
                      statements.


-2-
 **Table
            of Contents**
 **MAIDENFORM
                      BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                      CONSOLIDATED STATEMENTS OF
                      OPERATIONS****(in
                      thousands, except share and per share amounts)****(unaudited)**
  Three
                        Months Ended
                    
                    Nine
                        Months EndedSuccessor
                    
                    Successor
                    
                    Successor
                    
                    Successor
                    
                    PredecessorFor
                        the period
                    
                    For
                        the periodfrom
                    
                    fromMay
                        11, 2004
                    
                    December
                        28, 2003through
                    
                    throughOctober
                        1, 2005
                    
                    September
                        25, 2004
                    
                    October
                        1, 2005
                    
                    September
                        25, 2004
                    
                    May
                        10, 2004Net
                        sales
                    
                    $
                    100,121
                    
                    $
                    90,060
                    
                    $
                    302,622
                    
                    $
                    140,116
                    
                    $
                    122,415Cost
                        of sales
                    
                    
                    63,458
                    
                    
                    61,030
                    
                    
                    193,631
                    
                    
                    100,240
                    
                    
                    77,113Gross
                        profit
                    
                    
                    36,663
                    
                    
                    29,030
                    
                    
                    108,991
                    
                    
                    39,876
                    
                    
                    45,302Selling,
                        general and administrative expenses
                    
                    
                    28,703
                    
                    
                    23,193
                    
                    
                    76,874
                    
                    
                    36,277
                    
                    
                    31,960Acquisition-related
                        charges
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    14,286Operating
                        income (loss)
                    
                    
                    7,960
                    
                    
                    5,837
                    
                    
                    32,117
                    
                    
                    3,599
                    
                    
                    (944
                    )Interest
                        expense, net
                    
                    
                    2,582
                    
                    
                    2,857
                    
                    
                    13,486
                    
                    
                    4,537
                    
                    
                    2,180Income
                        (loss) before provision for income taxes
                    
                    
                    5,378
                    
                    
                    2,980
                    
                    
                    18,631
                    
                    
                    (938
                    )
                    
                    (3,124
                    )Income
                        tax expense (benefit)
                    
                    
                    3,263
                    
                    
                    1,303
                    
                    
                    9,482
                    
                    
                    (213
                    )
                    
                    1,122Net
                        income (loss)
                    
                    
                    2,115
                    
                    
                    1,677
                    
                    
                    9,149
                    
                    
                    (725
                    )
                    
                    (4,246
                    )Preferred
                          stock dividends and changes in redemption value
                    
                    
                    (1,714
                    )
                    
                    (1,215
                    )
                    
                    (17,264
                    )
                    
                    (3,360
                    )
                    
                    –Net
                        income (loss) available to common stockholders
                    
                    $
                    401
                    
                    $
                    462
                    
                    $
                    (8,115
                    )
                    $
                    (4,085
                    )
                    $
                    (4,246
                    )Basic
                        earnings (loss) per common share
                    
                    $
                    0.02
                    
                    $
                    0.02
                    
                    $
                    (0.39
                    )
                    $
                    (0.21
                    )
                    $
                    (0.31
                    )Diluted
                        earnings (loss) per common share
                    
                    $
                    0.02
                    
                    $
                    0.02
                    
                    $
                    (0.39
                    )
                    $
                    (0.21
                    )
                    $
                    (0.31
                    )Basic
                        weighted average number of shares outstanding
                    
                    
                    22,718,260
                    
                    
                    19,800,000
                    
                    
                    20,772,753
                    
                    
                    19,800,000
                    
                    
                    13,727,879Diluted
                        weighted average number of shares outstanding
                    
                    
                    23,902,295
                    
                    
                    20,544,355
                    
                    
                    20,772,753
                    
                    
                    19,800,000
                    
                    
                    13,727,879
 The
                        accompanying notes are an integral part of these condensed
                        consolidated
                        financial
                        statements.
   -3-
 **Table
            of Contents**
 **MAIDENFORM
                      BRANDS, INC. AND SUBSIDIARIES****CONDENSED
                      CONSOLIDATED STATEMENTS OF CASH
                      FLOWS****(in
                      thousands)****(unaudited)**
  Nine
                        Months EndedSuccessor
                    
                    Successor
                    
                    PredecessorFor
                        the period
                    
                    For
                        the periodfrom
                        May 11, 2004
                    
                    from
                        December 28, 2003through
                    
                    throughOctober
                        1, 2005
                    
                    September
                        25, 2004
                    
                    May
                        10, 2004**Cash
                        flows from operating activities**Net
                        income (loss)
                    
                    $
                    9,149
                    
                    $
                    (725
                    )
                    $
                    (4,246
                    )Adjustments
                        to reconcile net income (loss) to net cash from operating
                        activitiesDepreciation
                        and amortization
                    
                    
                    4,927
                    
                    
                    3,188
                    
                    
                    1,636Amortization
                        of intangible assets
                    
                    
                    870
                    
                    
                    428
                    
                    
                    –Amortization
                        of deferred financing costs
                    
                    
                    5,759
                    
                    
                    465
                    
                    
                    895Purchase
                        accounting step-up of inventory
                    
                    
                    –
                    
                    
                    18,956
                    
                    
                    –Stock
                        compensation
                    
                    
                    1,095
                    
                    
                    62
                    
                    
                    6,869Deferred
                        income taxes
                    
                    
                    2,589
                    
                    
                    5,359
                    
                    
                    (1,637
                    )Tax
                        benefit from exercise of stock options
                    
                    
                    2,774
                    
                    
                    –
                    
                    
                    1,420Other
                        non-cash items
                    
                    
                    835
                    
                    
                    57
                    
                    
                    –Net
                        changes in operating assets and liabilities, (net of
                        Acquisition)Accounts
                        receivable
                    
                    
                    (27,546
                    )
                    
                    1,053
                    
                    
                    (16,746
                    )Inventories
                    
                    
                    (3,794
                    )
                    
                    2,901
                    
                    
                    (6,358
                    )Prepaid
                        expenses and other current and non-current assets
                    
                    
                    (4,564
                    )
                    
                    259
                    
                    
                    1,313Accounts
                        payable
                    
                    
                    6,702
                    
                    
                    (1,363
                    )
                    
                    6,874Accrued
                        expenses and other current and non-current liabilities
                    
                    
                    (4,359
                    )
                    
                    (1,938
                    )
                    
                    8,176Income
                        taxes payable
                    
                    
                    5,871
                    
                    
                    (7,325
                    )
                    
                    1,017Net
                        cash from operating activities
                    
                    
                    308
                    
                    
                    21,377
                    
                    
                    (787
                    )**Cash
                        flows from investing activities**Capital
                        expenditures
                    
                    
                    (1,353
                    )
                    
                    (991
                    )
                    
                    (681
                    )Proceeds
                        from sale of assets
                    
                    
                    1,455
                    
                    
                    –
                    
                    
                    –Payments
                        in connection with the Acquisition
                    
                    
                    –
                    
                    
                    (158,473
                    )
                    
                    –Net
                        cash from investing activities
                    
                    
                    102
                    
                    
                    (159,464
                    )
                    
                    (681
                    )**Cash
                        flows from financing activities**Short-term
                        debt, net
                    
                    
                    111
                    
                    
                    94
                    
                    
                    –Borrowings
                        under revolving facility
                    
                    
                    10,000
                    
                    
                    12,500
                    
                    
                    109,391Repayments
                        under revolving facility
                    
                    
                    (10,000
                    )
                    
                    (43,265
                    )
                    
                    (101,661
                    )Term
                        loan facility borrowings
                    
                    
                    61,037
                    
                    
                    150,000
                    
                    
                    –Term
                        loan facility repayments
                    
                    
                    (68,787
                    )
                    
                    (24,045
                    )
                    
                    (2,080
                    )Common
                        stock options purchased
                    
                    
                    (140
                    )
                    
                    –
                    
                    
                    –Special
                        cash dividends paid to preferred shareholders
                    
                    
                    (13,320
                    )
                    
                    –
                    
                    
                    –Proceeds
                        from issuance of preferred and common stock
                    
                    
                    52,579
                    
                    
                    57,000
                    
                    
                    –Redemption
                        of preferred stock and preferred options and payment of accumulated
                        dividends
                    
                    
                    (46,828
                    )
                    
                    –
                    
                    
                    –Deferred
                        financing costs
                    
                    
                    (2,428
                    )
                    
                    (6,684
                    )
                    
                    (217
                    )Net
                        cash from financing activities
                    
                    
                    (17,776
                    )
                    
                    145,600
                    
                    
                    5,433Effects
                        of exchange rate changes on cash
                    
                    
                    (15
                    )
                    
                    259
                    
                    
                    (328
                    )Net
                        (decrease) increase in cash
                    
                    
                    (17,381
                    )
                    
                    7,772
                    
                    
                    3,637**Cash
                        and cash equivalents**Beginning
                        of period
                    
                    
                    23,212
                    
                    
                    4,871
                    
                    
                    1,234End
                        of period
                    
                    $
                    5,831
                    
                    $
                    12,643
                    
                    $
                    4,871**Supplementary
                        disclosure of cash flow information**Cash
                        paid during the periodInterest
                    
                    $
                    7,080
                    
                    $
                    3,644
                    
                    $
                    884Income
                        taxes
                    
                    $
                    1,565
                    
                    $
                    4,660
                    
                    $
                    144
 The
                        accompanying notes are an integral part of these condensed
                        consolidated
                        financial
                        statements.
   -4-
 **Table
            of Contents**
  **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **1.** **CHANGE
        IN OWNERSHIP**
  On
        May
        11, 2004, MF Acquisition Corporation acquired 100% of Maidenform, Inc. (the
        ‘‘Acquisition’’) through a merger of its wholly-owned subsidiary into
        Maidenform, Inc. Stockholders of Maidenform, Inc. received either cash or
        stock
        of MF Acquisition Corporation in exchange for their shares of Maidenform,
        Inc.
        On April 5, 2005, MF Acquisition Corporation changed its name to Maidenform
        Brands, Inc. Financing for this Acquisition totaled $237,265 and was provided
        by
        a first lien term loan of $100,000, revolver borrowings of $12,500, a second
        lien term loan of $50,000 and $74,765 of cash and capital from investors,
        including rollover equity by certain members of management of $2,765 and
        continuing stockholders of $15,000. The financial statements for the period
        including and after May 11, 2004 are those of Maidenform Brands, Inc. and
        subsidiaries (the ‘‘Successor’’). The financial statements for periods prior to
        May 11, 2004 are those of Maidenform, Inc. and subsidiaries (the
‘‘Predecessor’’). As a result of the Acquisition, the financial statements
        including and after May 11, 2004 are not comparable to those prior to that
        date.
 
 The
        proceeds of the Acquisition and financing were used to pay selling stockholders
        $147,430, selling stockholders’ transaction expenses of $6,570, special
        compensation of $1,567 paid to management, buyers’ transaction expenses of
        $2,526, and to retire all of Maidenform, Inc.’s previously outstanding current
        and long-term debt of $54,065, including a debt redemption premium of $380.
        In
        addition, $658 of proceeds were held as cash for working capital purposes
        and
        $6,684 was used to pay debt issuance costs.
 
 The
        Acquisition was accounted for as a purchase in accordance with Statement
        of
        Financial Accounting Standards (SFAS) No. 141, ‘‘Business Combinations,’’ and
        Emerging Issues Task Force (EITF) No. 88-16, ‘‘Basis In Leveraged Buyout
        Transactions.’’ In accordance with EITF 88-16, the basis of continuing
        stockholders that have a residual interest in Maidenform Brands, Inc. and
        have a
        20% or greater voting interest has been carried over at their predecessor
        basis.
        In addition, in accordance with EITF 88-16, the basis of management’s residual
        interest, which consisted of stock options, has also been carried over at
        their
        predecessor basis, as management actively participated in promoting the
        transaction. The retained interest of the stockholders has been recorded
        at
        predecessor basis (carryover basis) and aggregated 23.8% (20.1% related to
        continuing stockholders and 3.7% related to certain members of management).
        The
        remainder of the investment in the assets and liabilities acquired (the 76.2%
        acquired by new stockholders) was recorded at fair value. As a result, the
        assets and liabilities were assigned new values, which are part carryover
        basis
        and part fair value basis. The excess of the purchase price over carryover
        basis
        of net assets acquired, the deemed dividend to continuing stockholders, was
        recognized as a reduction of stockholders’ equity (deficit).
 
 The
        following table summarizes both the cash and non-cash consideration, including
        transaction costs related to the Acquisition.
 **Cash
                    consideration (1)**Cash
                    paid to sellers
                
                $
                147,430Repayment
                    of seller’s debt
                
                
                54,065Transaction
                    costs
                
                
                10,663**Non-cash
                    consideration**Securities
                    issued to continuing stockholders at carryover basis (2)
                
                
                14,520Carryover
                    basis allocated to management’s residual interest (3)
                
                
                –**Deemed
                    dividend to continuing stockholders**
                
                
                (21,529
                )Total
                    purchase price
                
                $
                205,149
 (1)
              Cash
                  consideration was paid with new financing of $155,158, net of debt
                  issuance costs of $6,684 and proceeds held as cash of $658, and
                  cash from
                  new stockholders of $57,000. New stockholders received half of
                  their
                  interest in preferred stock and half of their interest in common
                  stock.
                  The allocation of the equity interest for the preferred stock and
                  common
                  stock was based on their fair values as determined by an independent
                  third-party appraisal. Securities issued to new stockholders amounted
                  to
                  285,000 shares of preferred stock and 15,675,000 shares of common
                  stock.
 (2)
              Securities
                  issued to the continuing stockholders were 75,000 shares of preferred
                  stock and 4,125,000 shares of common
                  stock.
 (3)
              As
                  management’s residual interest consisted entirely of options which had no
                  predecessor basis, no carryover basis was allocated to their residual
                  interest.
   -5-
 **Table
            of Contents**
 
 **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 The
        total
        purchase price of $205,149 was allocated to the acquired assets and liabilities
        based on their estimated fair values at the Acquisition date, after taking
        into
        account the carryover basis discussed above. These allocations were determined
        by valuation reports provided by independent third party appraisal firms.
        The
        excess of the purchase price over the underlying assets acquired and liabilities
        assumed was allocated to goodwill, none of which is deductible for tax purposes.
        The following table summarizes the estimated values of the assets acquired
        and
        liabilities assumed on May 11, 2004.
 Other
                    current assets
                
                $
                51,254Inventory
                
                
                62,234Deferred
                    income taxes
                
                
                9,716Property,
                    plant and equipment
                
                
                31,425Intangible
                    assets, amortizing
                
                
                26,241Intangible
                    assets, non-amortizing
                
                
                76,476Other
                    non-current assets
                
                
                707Goodwill
                
                
                7,884Total
                    assets acquired
                
                
                265,937Other
                    current liabilities
                
                
                39,522Employee
                    termination costs
                
                
                2,159Defined
                    benefit pension plan
                
                
                7,378Postretirement
                    plans
                
                
                1,240Deferred
                    income taxes
                
                
                10,013Other
                    non-current liabilities
                
                
                476Total
                    liabilities assumed
                
                
                60,788Net
                    assets acquired
                
                $
                205,149
 The
        following unaudited pro forma operating data presents the results of operations
        for the nine months ended September 25, 2004 as if the Acquisition had occurred
        on December 28, 2003, with financing obtained as described above, and assumes
        that there were no other changes in our operations. The pro forma results
        are
        not necessarily indicative of the financial results that might have occurred
        had
        the transaction actually taken place on December 28, 2003, or of future results
        of operations:
 Pro
                    forma forthe
                    ninemonths
                    endedSeptember
                    25, 2004Net
                    sales
                
                $
                262,531Operating
                    income
                
                
                450Interest
                    expense, net
                
                
                (9,909
                )Net
                    loss
                
                
                (11,578
                )Preferred
                    stock dividends and accretion
                
                
                (6,203
                )Net
                    loss available to common stockholders
                
                
                (17,781
                )Basic
                    loss per common share
                
                
                (0.90
                )Diluted
                    loss per common share
                
                
                (0.90
                )
 -6-
 **Table
            of Contents**
 
 **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 Included
        in the pro forma operating income shown above are the Predecessor’s
        Acquisition-related charges of $6,570 for sellers’ transaction fees and
        expenses, $1,960 in special compensation paid to management, $5,639 in stock
        compensation expense from settlement of stock options, and $117 of other
        Acquisition-related charges. Also, included is a $19,838 charge to cost of
        sales
        related to the opening balance sheet step-up of inventory to fair market
        value,
        plus amortization related to intangible assets, advisory fees and depreciation
        related to the closing of our cutting and sewing facilities.
 
 Included
        in interest expense shown above are charges of $895 related to the write-off
        of
        deferred financing costs in connection with the retirement of all of the
        outstanding debt, a debt redemption premium of $380, interest expense related
        to
        the borrowings necessary to finance the Acquisition and amortization expense
        related to deferred financing costs for the additional borrowings.
 
 **2.** **BASIS
        OF PRESENTATION**
  Maidenform
        Brands, Inc. and its subsidiaries (the “Company,”  “we,”  “us” or
“our”) design, source and market an extensive range of intimate apparel
        products, including bras, panties and shapewear. We sell through multiple
        distribution channels including department stores / national chain stores,
        mass
        merchants (including warehouse clubs), and other (including specialty stores
        and
        off-price retailers). In addition, we also operated 77 and 88 retail outlet
        stores as of October 1, 2005 and September 25, 2004, respectively, and sell
        products on our website.
 
 In
        our
        opinion, the accompanying unaudited condensed consolidated financial statements
        contain all adjustments necessary to state fairly our financial position
        as of
        October 1, 2005 (Successor), the results of our operations for the three
        month
        periods ended October 1, 2005 (Successor) and September 25, 2004 (Successor),
        the results of our operations for the nine month period ended October 1,
        2005
        (Successor), for the period from May 11, 2004 through September 25, 2004
        (Successor), and for the period December 28, 2003 through May 10, 2004
        (Predecessor), and cash flows for the nine month period ended October 1,
        2005
        (Successor) and for the period from May 11, 2004 through September 25, 2004
        (Successor) and for the period from December 28, 2003 through May 10, 2004
        (Predecessor). These adjustments consist of normal recurring adjustments.
        Operating results for the three and nine month periods ended October 1, 2005
        (Successor) are not necessarily indicative of the results that may be expected
        for any other future interim period or for a full fiscal year. The condensed
        consolidated balance sheet at January 1, 2005 has been derived from our audited
        consolidated financial statements at that date.
 
 These
        condensed consolidated financial statements have been prepared in accordance
        with Article 10 of Regulation S-X promulgated by the Securities and Exchange
        Commission. Accordingly, certain information and disclosures normally included
        in financial statements prepared in accordance with accounting principles
        generally accepted in the United States of America have been condensed or
        omitted pursuant to the rules and regulations of the Securities and Exchange
        Commission. The financial statements included herein should be read in
        conjunction with our audited consolidated financial statements for the year
        ended January 1, 2005, which were included as part of our registration statement
        on Form S-1 (Registration No. 333-124228), as declared effective by the
        Securities and Exchange Commission on July 21, 2005.
 
 **3.** **INITIAL
        PUBLIC OFFERING**
 
 On
        July
        22, 2005, we priced an initial public offering of 14,513,889 shares of common
        stock of which 3,375,000 and 11,138,889 shares were offered by us and selling
        stockholders, respectively, at a price of $17.00 per share. Upon the
        consummation of the offering on July 27, 2005, net proceeds of $52,579 and
        $176,106 were distributed to us and selling stockholders, respectively. We
        did
        not receive any of the proceeds from the sale of shares by the selling
        stockholdetrs.
 
 Net
        proceeds of $46,828 were used to redeem all the outstanding shares of our
        preferred stock, including shares of preferred stock acquired upon the exercise
        of all outstanding options to purchase shares of our preferred stock, and
        pay
        all accrued and unpaid dividends associated with the preferred stock and
        preferred stock options. In addition, the put option on certain shares of
        common
        stock classified as temporary equity was extinguished as a result of the
        initial
        public offering and such common stock is no longer being classified as temporary
        equity.
  -7-
 **Table
            of Contents**
 
 **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **4.** **INVENTORIES**
  Inventories
        at October 1, 2005 and January 1, 2005 consist of the following:
 **Successor
                    at**
                
                **Successor
                    at****October
                    1, 2005**
                
                **January
                    1, 2005**Raw
                    materials
                
                $
                468
                
                $
                1,741Work-in-process
                
                
                12
                
                
                2,335Finished
                    goods
                
                
                40,381
                
                
                32,991$
                40,861
                
                $
                37,067
 **5.** **DEBT**
  On
        June
        29, 2005, we amended our existing First Lien Facilities and prepaid the
        outstanding balance of our Second Lien Facility. The amended First Lien
        Facilities (“Credit Facility”) provides for borrowings in the aggregate amount
        of $200,000 maturing on May 11, 2010 and is composed of: (i) a $150,000
        amortizing term loan facility (the ‘‘Term Loan Facility’’) and (ii) a $50,000
        revolving credit facility (the ‘‘Revolving Facility’’). The Credit Facility is
        collateralized by a first priority perfected lien, subject to certain permitted
        liens, on substantially all of the personal property assets and certain real
        property of Maidenform, Inc. and the guarantors.
 
 In
        general, borrowings under the Term Loan Facility bear interest based, at
        our
        option, on the Prime rate or the London Interbank Offered Rate (“LIBOR”), plus a
        margin. Through December 29, 2005, the Prime rate margin will be fixed at
        1.25%
        and the LIBOR rate margin will be fixed at 2.25%. These interest rate margins
        will be reduced by 0.25% on December 29, 2005. Upon delivery of a pricing
        certificate indicating that our leverage ratio is less than 3 to 1, then,
        after
        that date, but not before December 29, 2005, these margins will be further
        reduced by 0.25%. Payments of principal will be made in quarterly installments
        based on an amortization schedule commencing on October 1, 2005.
 
 The
        Revolving Facility provides direct borrowings and issuance of stand-by letters
        of credit on our behalf. Borrowings under the Revolving Facility are limited
        by
        the borrowing base, which consists of eligible accounts receivable and
        inventory, as defined. Borrowings under the Revolving Facility will bear
        interest at the same rate as the Term Loan Facility. Additional fees, including
        a letter of credit fee of 2.25% and a letter of credit fronting fee of 0.25%,
        are charged on the outstanding stand-by letters of credit. Additionally,
        an
        unused line of credit fee of 0.50% is charged on the maximum principal amount
        available under the Revolving Facility.
 
 As
        of
        October 1, 2005, we had $140,000 outstanding under our Term Loan Facility.
        At
        October 1, 2005, approximately $47,818 was available for borrowings under
        the
        Revolving Facility, after giving effect to $2,182 of outstanding letters
        of
        credit. We use the letters of credit as collateral for our workers’ compensation
        insurance programs and bonds issued on our behalf to collateralize our
        obligation to pay customs duties. During the third quarter of 2005, we repaid
        the total amount of outstanding borrowings on our Revolving Facility, which
        totaled $10,000, and, in addition, we voluntarily prepaid $10,000 of our
        Term
        Loan Facility. As a result the Term Loan Facility prepayment, our amortization
        schedule has been revised. Our next scheduled principal payment is not due
        until
        September 29, 2007.
 
 The
        Credit Facility contains affirmative and restrictive covenants, including:
        (a)
        maintenance of a minimum fixed charge coverage ratio, (b) maintenance of
        a
        maximum leverage ratio, (c) limitations on consolidated capital expenditures,
        (d) limitations on the incurrence of indebtedness and liens, (e) limitations
        on
        investments/acquisitions and (f) restrictions on payments between Maidenform
        Brands, Inc. and its subsidiaries. There are a number of circumstances in
        which
        additional partial prepayments are required based upon conditions set forth
        in
        the Credit Facility, including net asset sales and net insurance/condemnation
        proceeds not reinvested in other assets of the business, net securities proceeds
        from the issuance of capital stock (excluding the initial public offering
        proceeds), additional debt facilities, and a percentage of annual consolidated
        excess cash flows, as defined. We were in compliance with all debt covenants
        at
        October 1, 2005.
  -8-
 **Table
            of Contents**
 
 **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 In
        connection with the amendment of the Credit Facility, we paid fees of $2,428,
        and in connection with the repayment of the Second Lien Facility, we paid
        a
        prepayment penalty fee of $1,000. For the nine month period ended October
        1,
        2005, amortization of financing costs included in interest expense was $5,759
        (which includes the write-off of deferred financing costs of $4,943 in
        connection with the amendment of the First Lien Facilities and the prepayment
        of
        the Second Lien Facility).
 
 **6.** **BENEFIT
        PLANS AND POSTRETIREMENT PLANS**
  We
        sponsor a defined benefit pension plan covering substantially all eligible
        employees not covered by the union plans. We also maintain postretirement
        medical benefit plans for certain eligible retirees for which postretirement
        benefit expense on a quarterly basis is insignificant.
 
 The
        components of pension benefit expense charged to operations are as
        follows:
 **Three
                    Months Ended**
                
                **Nine
                    Months Ended****Successor**
                
                **Successor**
                
                **Successor**
                
                **Successor**
                
                **Predecessor****For
                    the period**
                
                **For
                    the period****from**
                
                **from****May
                    11, 2004**
                
                **December
                    28, 2003****through**
                
                **through****October
                    1, 2005**
                
                **September
                    25, 2004**
                
                **October
                    1, 2005**
                
                **September
                    25, 2004**
                
                **May
                    10, 2004**Service
                    cost
                
                $
                429
                
                $
                341
                
                $
                1,286
                
                $
                507
                
                $
                416Interest
                    cost
                
                
                308
                
                
                289
                
                
                925
                
                
                430
                
                
                347Expected
                    return on plan assets
                
                
                (274
                )
                
                (256
                )
                
                (821
                )
                
                (380
                )
                
                (300
                )Recognized
                    net actuarial loss
                
                
                8
                
                
                –
                
                
                23
                
                
                –
                
                
                132Net
                    periodic benefit cost
                
                $
                471
                
                $
                374
                
                $
                1,413
                
                $
                557
                
                $
                595
 
 **7.** **CLOSURE
        OF MANUFACTURING FACILITIES**
  In
        connection with the Acquisition, we made the decision to exit our cutting
        and
        sewing facilities located in Mexico and Florida. We closed one facility in
        Mexico in January 2005, closed the facility in Florida in June 2005, and
        closed
        the remaining facility in Mexico in July 2005. As part of the allocation
        of the
        purchase price, we accrued probable employee termination costs of $2,159
        relating to services already rendered and vested for employees at these
        locations. Other costs of $446 associated with retention bonuses have been
        expensed during the Successor period from May 11, 2004 through January 1,
        2005.
        At January 1, 2005, we had accrued employee termination costs of $2,077 related
        to the closing of these facilities. During the nine months ended October
        1,
        2005, we incurred additional retention bonus expense of $287 and paid $1,723.
        At
        October 1, 2005, we have accrued employee termination costs of $641. The
        retention bonus expense is recorded as part of our wholesale segment.
        Approximately 17 remaining employees will be terminated by the end of 2005.
 
 In
        May
        2005, we sold the Mexican facility that was closed in January 2005. We have
        included $3,921 of property, plant and equipment related to our cutting facility
        in Jacksonville and sewing facility in Mexico as prepaid expenses and other
        current assets in our condensed consolidated balance sheet at October 1,
        2005,
        as they are being held for sale and no longer being depreciated.
  -9-
 **Table
            of Contents**
  **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **8.** **STOCKHOLDERS’
        EQUITY (DEFICIT)**
 **Accumulated**
                
                **Total****Additional**
                
                
                
                **other**
                
                **stockholders'****Common
                    stock**
                
                **paid-in**
                
                **Accumulated**
                
                **comprehensive**
                
                **equity****Shares**
                
                **$**
                
                **capital**
                
                **deficit**
                
                **(loss)
                    income**
                
                **(deficit)****Balance
                    at January 1, 2005**
                
                
                15,675,000
                
                $
                157
                
                $
                2,098
                
                $
                (3,368
                )
                $
                (9
                )
                $
                (1,122
                )Preferred
                    stock dividends and changes in redemption value
                
                
                
                
                
                
                
                
                (4,883
                )
                
                (12,381
                )
                
                
                
                
                (17,264
                )Initial
                    public offering and exercise of stock options
                
                
                3,688,357
                
                
                37
                
                
                52,542
                
                
                
                
                
                
                
                
                52,579Reclassification
                    of common stock subject to put option - upon extinguishment of
                    put
                    option
                
                
                4,125,000
                
                
                41
                
                
                5,547
                
                
                
                
                
                
                
                
                5,588Preferred
                    stock options purchased
                
                
                
                
                
                
                
                
                (1,393
                )
                
                
                
                
                
                
                
                (1,393
                )Adjust
                    common stock, subject to put option, to redemption value
                
                
                
                
                
                
                
                
                768
                
                
                
                
                
                
                
                
                768Tax
                    effect from exercise of stock options
                
                
                
                
                
                
                
                
                2,774
                
                
                
                
                
                
                
                
                2,774Stock
                    compensation
                
                
                
                
                
                
                
                
                1,095
                
                
                
                
                
                
                
                
                1,095**Comprehensive
                    income**Net
                    income
                
                
                
                
                
                
                
                
                
                
                
                9,149
                
                
                
                
                
                9,149Changes
                    during the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                431
                
                
                431Total
                    comprehensive income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                9,580**Balance
                    at October 1, 2005**
                
                
                23,488,357
                
                $
                235
                
                $
                58,548
                
                $
                (6,600
                )
                $
                422
                
                $
                52,605
 In
        accordance with the terms of the preferred stock as defined in our Certificate
        of Incorporation, we reduced the redemption value from $108 per share to
        $106
        per share on May 1, 2005.
 
 On
        June
        1, 2005, the Board of Directors approved a special cash dividend to all holders
        of preferred stock as of June 1, 2005 in the aggregate amount of $13,320.
        This
        dividend was paid on June 21, 2005 and was accounted for as a reduction to
        additional paid-in capital to the extent available and as a reduction to
        retained earnings (accumulated deficit).
 
 On
        July
        22, 2005, we completed our initial public offering. See Note 3.
 
 **9.** **STOCK
        OPTION PLAN**
 
 On
        July
        6, 2005, the Board of Directors adopted the Maidenform Brands, Inc. 2005
        Stock
        Incentive Plan pursuant to which the Company can grant to employees, consultants
        and non-employee directors equity-based awards. Under this plan, 1,750,000
        shares were set aside and reserved for issuance. The Board of Directors also
        amended the Maidenform Brands, Inc. 2004 Rollover Stock Option Plan, the
        Maidenform Brands, Inc. 2004 Stock Option Plan and the Maidenform Brands,
        Inc.
        2004 Stock Option Plan for Non-Employees Directors to provide that no additional
        equity-based awards shall be available for issuance under these plans, although
        previously granted stock options will continue to remain outstanding in
        accordance with the terms of the applicable option agreement and the applicable
        plan.
 
 On
        July
        22, 2005, we granted non-qualified stock options to purchase an aggregate
        of
        509,000 shares of our common stock, including options to our four executive
        officers, under the Maidenform Brands, Inc. 2005 Stock Incentive Plan. Each
        option granted (i) has a strike price equal to the initial public offering
        price
        of $17.00, the fair value on date of grant; (ii) vests in four equal annual
        installments commencing on the first anniversary of the date of grant; and
        (iii)
        expires seven years from the date of grant.
 
 -10-
 **Table
            of Contents**
  **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **10.** **COMPREHENSIVE
        INCOME (LOSS)**
  The
        changes in comprehensive income (loss) are as follows:
 Nine
                    Months EndedSuccessor
                
                Successor
                
                PredecessorFor
                    the period
                
                For
                    the periodfrom
                
                fromMay
                    11, 2004
                
                December
                    28, 2003through
                
                throughOctober
                    1, 2005
                
                September
                    25, 2004
                
                May
                    10, 2004Net
                    income (loss)
                
                $
                9,149
                
                $
                (725
                )
                $
                (4,246
                )Foreign
                    currency translation adjustments (1)
                
                
                (15
                )
                
                259
                
                
                (149
                )Interest
                    rate swaps, (net of tax)
                
                
                446
                
                
                (330
                )
                
                –Minimum
                    pension liability (2)
                
                
                –
                
                
                –
                
                
                (179
                )Comprehensive
                    income (loss)
                
                $
                9,580
                
                $
                (796
                )
                $
                (4,574
                )
 (1)
                    No
                        tax benefit has been provided associated with the foreign
                        currency
                        translation adjustment due to management’s intention to permanently
                        reinvest the earnings of our foreign
                        subsidiaries.
 (2)
                    No
                        tax benefit has been provided associated with the minimum
                        pension
                        liability due to the limitations of the realizability of
                        deferred tax
                        assets at the time the minimum pension liability was recorded.
 **11.** **INCOME
          TAXES**
  We
        review
        our annual effective tax rate on a quarterly basis and we make necessary
        changes
        if information or events warrant such changes. The annual effective tax rate
        is
        forecasted quarterly using actual historical information and forward-looking
        estimates. The estimated annual effective tax rate may fluctuate due to changes
        in forecasted annual operating income; changes to the valuation allowance
        for
        deferred tax assets; changes to actual or forecasted permanent book to tax
        differences (non-deductible expenses); impacts from future tax settlements
        with
        state, federal or foreign tax authorities; or impacts from tax law changes.
        Our
        effective income tax rate for the three and nine month Successor periods
        ended
        October 1, 2005 was 60.7% and 50.9%, respectively, as compared to an effective
        income tax rate for the three month period ended September 25, 2004 and for
        the
        combined Predecessor and Successor nine month periods ended September 25,
        2004
        of  43.7% and 22.4%, respectively.  Our income tax expense
        for the
        three and nine month periods ended October 1, 2005 was negatively impacted
        by
        non-deductible expenses incurred during those periods in connection with
        our
        initial public offering. During the three and nine month periods ended September
        25, 2004, we incurred losses before the provision for income taxes.  The
        income tax benefit from the losses was negatively impacted by non-deductible
        expenses incurred during those periods in connection with the Acquisition.
 
 **12.** **SEGMENT
        INFORMATION**
  We
        report
        segment information in accordance with the provisions of SFAS No. 131,
‘‘Disclosures about Segments of an Enterprise and Related Information,’’ which
        requires segment information to be disclosed based on a ‘‘management approach.’’
        The management approach refers to the internal reporting that we use for
        making
        operating decisions and assessing the performance of reportable segments.
        SFAS
        No. 131 also requires disclosure about products and services, geographic
        areas
        and major customers. For purposes of complying with SFAS No. 131, we identified
        our two reportable segments as ‘‘Wholesale’’ and ‘‘Retail.’’ Our wholesale sales
        are to department stores / national chain stores, mass merchants (including
        warehouse clubs), and other (including specialty stores and off-price
        retailers). Licensing income is also included in our wholesale segment. Within
        our reportable segments, wholesale includes corporate-related assets and
        expenses. Our retail segment reflects our operations from our retail stores
        and
        internet operations. Each segment’s results include the costs directly related
        to the segment’s net sales and all other costs allocated based on the
        relationship to consolidated net sales or units produced to support each
        segment’s net sales. Intersegment sales and transfers are recorded at cost and
        treated as a transfer of inventory.
 
  -11-
 **Table
            of Contents**
  **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 Information
        on segments and reconciliation to income (loss) before provision for income
        taxes, are as follows:
 Three
                    Months Ended
                
                Nine
                    Months EndedSuccessor
                
                Successor
                
                Successor
                
                Successor
                
                PredecessorFor
                    the period
                
                For
                    the periodfrom
                
                fromMay
                    11, 2004
                
                December
                    28, 2003through
                
                throughOctober
                    1, 2005
                
                September
                    25, 2004
                
                October
                    1, 2005
                
                September
                    25, 2004
                
                May
                    10, 2004Net
                    salesWholesale
                
                $
                83,614
                
                $
                73,414
                
                $
                261,363
                
                $
                115,676
                
                $
                105,225Retail
                
                
                16,507
                
                
                16,646
                
                
                41,259
                
                
                24,440
                
                
                17,190Total
                
                $
                100,121
                
                $
                90,060
                
                $
                302,622
                
                $
                140,116
                
                $
                122,415Operating
                    income (loss)Wholesale
                
                $
                5,996
                
                $
                6,205
                
                $
                30,755
                
                $
                4,707
                
                $
                14,558Retail
                
                
                1,964
                
                
                (368
                )
                
                1,362
                
                
                (1,108
                )
                
                (1,216
                )Acquisition
                    - related charges
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                (14,286
                )Operating
                    income (loss)
                
                
                7,960
                
                
                5,837
                
                
                32,117
                
                
                3,599
                
                
                (944
                )Interest
                    expense, net
                
                
                2,582
                
                
                2,857
                
                
                13,486
                
                
                4,537
                
                
                2,180Income
                    (loss) before provision for income taxes
                
                $
                5,378
                
                $
                2,980
                
                $
                18,631
                
                $
                (938
                )
                $
                (3,124
                )Depreciation
                    and amortizationWholesale
                
                $
                575
                
                $
                2,123
                
                $
                4,639
                
                $
                2,915
                
                $
                1,164Retail
                
                
                389
                
                
                469
                
                
                1,158
                
                
                701
                
                
                472Total
                
                $
                964
                
                $
                2,592
                
                $
                5,797
                
                $
                3,616
                
                $
                1,636Net
                    sales by geographic areaUnited
                    States
                
                $
                91,480
                
                $
                84,738
                
                $
                281,682
                
                $
                132,644
                
                $
                116,574International
                
                
                8,641
                
                
                5,322
                
                
                20,940
                
                
                7,472
                
                
                5,841Total
                
                $
                100,121
                
                $
                90,060
                
                $
                302,622
                
                $
                140,116
                
                $
                122,415Intercompany
                    sales from wholesale to retail
                
                $
                1,720
                
                $
                3,254
                
                $
                4,749
                
                $
                5,157
                
                $
                4,508Successor
                    at
                
                
                Successor
                    atOctober
                    1, 2005
                
                
                January
                    1, 2005Identifiable
                    assetsWholesale
                
                $
                223,822
                
                $
                215,959Retail
                
                
                26,503
                
                
                28,172Total
                
                $
                250,325
                
                $
                244,131
 At
        October 1, 2005 and January 1, 2005, our five largest uncollaterized receivables
        represented approximately 61% and 55% of total accounts receivable,
        respectively.
 
 For
        the
        three month Successor periods ended October 1, 2005 and September 25, 2004,
        one
        customer in the wholesale segment accounted for more than 10% of our
        consolidated net sales. For the nine month Successor period ended October
        1,
        2005 and for the combined Predecessor and Successor nine month period from
        December 28, 2003 through September 25, 2004, one customer in the wholesale
        segment accounted for more than 10% of our consolidated net sales.
  -12-
 **Table
            of Contents**
  **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **13.** **EARNINGS
        PER SHARE**
  The
        following is a reconciliation of basic number of common shares outstanding
        to
        diluted common and common equivalent shares outstanding:
 Three
                    Months Ended
                
                Nine
                    Months EndedSuccessor
                
                Successor
                
                Successor
                
                Successor
                
                PredecessorFor
                    the period
                
                For
                    the periodfrom
                
                fromMay
                    11, 2004
                
                December
                    28, 2003through
                
                throughOctober
                    1, 2005
                
                September
                    25, 2004
                
                October
                    1, 2005
                
                September
                    25, 2004
                
                May
                    10, 2004Net
                    income (loss)
                
                $
                2,115
                
                $
                1,677
                
                $
                9,149
                
                $
                (725
                )
                $
                (4,246
                )Less:
                    Preferred stock dividends and changes in redemption value
                
                
                (1,714
                )
                
                (1,215
                )
                
                (17,264
                )
                
                (3,360
                )
                
                –Net
                    income (loss) available to common shareholders
                
                $
                401
                
                $
                462
                
                $
                (8,115
                )
                $
                (4,085
                )
                $
                (4,246
                )Weighted
                    average number of common and common equivalent shares
                    outstanding:Basic
                    number of common shares outstanding
                
                
                22,718,260
                
                
                19,800,000
                
                
                20,772,753
                
                
                19,800,000
                
                
                13,727,879Impact
                    of dilutive securities
                
                
                1,184,035
                
                
                744,355
                
                
                –
                
                
                –
                
                
                –Dilutive
                    number of common and common equivalent shares outstanding
                
                
                23,902,295
                
                
                20,544,355
                
                
                20,772,753
                
                
                19,800,000
                
                
                13,727,879Basic
                    earnings (loss) per common share
                
                $
                0.02
                
                $
                0.02
                
                $
                (0.39
                )
                $
                (0.21
                )
                $
                (0.31
                )Diluted
                    earnings (loss) per common share
                
                $
                0.02
                
                $
                0.02
                
                $
                (0.39
                )
                $
                (0.21
                )
                $
                (0.31
                )
 The
        dilutive potential common shares of 1,280,096 options, 550,856 options and
        1,216,317 options for the Successor nine month period ended October 1, 2005,
        the
        Successor period from May 11, 2004 through September 25, 2004, and the
        Predecessor period December 28, 2003 through May 10, 2004, respectively,
        were
        not included in the computation of diluted earnings per share because of
        their
        anti-dilutive effect.
 
 Options
        to purchase approximately 507,000 shares of common stock were outstanding
        during
        the three and nine month periods ended October 1, 2005, but were not included
        in
        the computation of diluted earnings per share because the option exercise
        prices
        were greater than the average market price of the shares of common
        stock.
  -13-
 **Table
            of Contents**
 
 **MAIDENFORM
        BRANDS, INC. AND SUBSIDIARIES**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
        (Continued)**
 ***(in
        thousands, except share and per share amounts)***
 ***(unaudited)***
 
 **14.** **COMMITMENTS
        AND CONTINGENCIES**
  **Purchase
        commitments**
  In
        the
        normal course of business, we enter into purchase commitments covering inventory
        requirements of finished goods. At October 1, 2005, we believe that we have
        adequate reserves for expected losses arising from all purchase
        commitments.
 
 **Litigation**
  We
        are
        party to various legal actions arising in the ordinary course of business.
        Based
        on information presently available to us, we believe that we have adequate
        legal
        defenses, reserves or insurance coverage for these actions and that the ultimate
        outcome of these actions will not have a material adverse effect on our
        consolidated statements of financial position, results of operations or cash
        flows.
 
 **15.** **RECENTLY
        ISSUED ACCOUNTING STANDARDS**
 
 In
        December 2004, the FASB issued SFAS No. 123-R (revised 2004), ‘‘Share Based
        Payment,’’ which is a revision of SFAS No. 123, ‘‘Accounting for Stock-Based
        Compensation.’’ This Statement supersedes APB Opinion No. 25, ‘‘Accounting for
        Stock Issued to Employees,’’ and its related implementation guidance. This
        Statement focuses primarily on accounting for transactions in which an entity
        obtains employee services in share-based payment transactions and is effective
        for fiscal years beginning after June 15, 2005. As we have already adopted
        SFAS
        No. 123, we do not believe that this revision will have a significant effect
        on
        our consolidated statements of financial position, results of operations
        and
        cash flows.
 
  -14-
 **Table
            of Contents**
  **Item
        2. Management’s Discussion and Analysis of Financial Conditions
        and Results of Operations**
 
 *You
        should read the following discussion and analysis in conjunction with our
        financial statements and related notes included elsewhere in this report. 
        This report contains forward-looking statements relating to future events
        and
        our future performance within the meaning of Section 27A of the Securities
        Act
        of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
        as
        amended, including, without limitation, statements regarding our expectations,
        beliefs, intentions or future strategies that are signified by the
        words“anticipates,”  “believes,”  “estimates,”  “expects,” 
“intends,”  “plans,”  “potential,”  “predicts,” 
“projects” or similar words or phrases, although not all forward-looking
        statements contain such identifying words.  All forward-looking statements
        included in this report are based on information available to us on the date
        hereof.  It is routine for our internal projections and expectations
        to
        change as the year or each quarter in the year progress, and therefore it
        should
        be clearly understood that the internal projections and beliefs upon which
        we
        base our expectations may change prior to the end of each quarter or the
        year.  Although these expectations may change, we are under no obligation
        to inform you if they do.  Actual events or results may differ materially
        from those contained in the projections or forward-looking statements. 
        Factors that could cause or contribute to such differences include those
        discussed below and elsewhere in this report, particularly in the section
        captioned “Management’s Discussion and Analysis of Financial Condition and
        Results of Operations — Risk Factors That May Affect Future
        Results.”*
 
 **Management
        Overview**
  We
        are a
        global intimate apparel company with a portfolio of established, well-known
        brands, top-selling products and an iconic heritage. We design, source and
        market an extensive range of intimate apparel products, including bras, panties
        and shapewear. We sell through multiple distribution channels, including
        department stores / national chain stores, mass merchants (including warehouse
        clubs), other (including specialty stores and off-price retailers), and our
        company-operated outlet stores and our website.
 
 We
        sell
        our products under some of the most recognized brands in the intimate apparel
        industry, including Maidenform, Flexees, Lilyette, Sweet Nothings, Self
        Expressions, Rendezvous, Subtract and Bodymates. Our Maidenform *,* Flexees
        and Lilyette brands are broadly sold in department stores and national chain
        stores. Our other brands are distributed through national chain stores and
        selected mass merchants. These other brands carry our corporate endorsement
        and
        leverage our product technology, but are separate brands with distinctly
        different logos. In addition to our owned brands, we also supply private
        brand
        products to selected retailers.
 
 We
        operate in two segments, wholesale and retail. Our wholesale segment includes
        both our domestic and international wholesale markets. Our retail segment
        includes our company-operated outlet stores and our website.
 
 **Trends
        in Our Business**
 
 We
        have
        identified many near-term opportunities for growth and operational improvements,
        as well as challenges to our business. In particular, management believes
        that
        there are many factors influencing the intimate apparel industry, including
        but
        not limited to: consistent demand for foundation garments, consumer demand
        for
        product innovation and leading brands, sourcing and supply chain efficiencies,
        continued growth of the mass merchant channel, pressure from retailers caused
        by
        the ongoing consolidation in the retail industry, increases in the cost of
        the
        raw materials used in intimate apparel products and uncertainty surrounding
        import restrictions.
 
 We
        believe we are well-positioned to capitalize on or address these trends by,
        among other things:
 
 Ø
              increasing
                  consumer identification with our brands through further marketing
                  investments;Ø
              continuing
                  to launch innovative products, such as the Maidenform Dream collection
                  first introduced in the third quarter of
                  2005;
 
 Ø
              increasing
                  our presence in department stores and national chain stores through
                  the
                  use of Maidenform, Flexees, Lilyette, Rendezvous, Subtract and
                  private
                  brands;Ø
              increasing
                  our presence in the mass merchant channel through the use of our
                  Self
                  Expressions, Sweet Nothings, Bodymates and private
                  brands;
 
 Ø
              expanding
                  our international presence;Ø
              being
                  a marketer, rather than a manufacturer, of intimate apparel by
                  sourcing
                  all of our products from third-party
                  suppliers;
 
 Ø
              making
                  selective acquisitions, entering into licenses, and developing
                  products
                  and marketing that will complement our existing products or distribution
                  channels; andØ
              merchandising,
                  marketing and selling private brand product for selected retailers.
   -15-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
  *Wholesale
        Segment*
  The
        following trends are among the key variables that will affect our wholesale
        segment:
  *Department
        Stores / National Chain Stores.* The
        department stores / national chain stores are where we generally sell the
        Maidenform, Flexees and Lilyette brands. ** We
        plan
        to continue to invest in increasing our net sales with department store
        customers, which we believe is important to our long-term positioning in
        the
        channel. There has been a growing trend toward consolidation of department
        stores, such as the announced merger of Federated Department Stores, Inc.
        and
        May Company. As a result of planned store closings announced by Federated
        Department Stores, Inc., we expect sales in this channel to be lower next
        year
        but expect continued growth in the remaining stores. We expect the rate of
        our
        future net sales growth with department stores to be moderated by the reduction
        in both the number of department store customers and the number of doors
        (distinct locations operated by a particular retailer) operated by those
        customers. We have grown both our market share and our net sales significantly
        in the past several years with national chain stores. We expect to see continued
        growth with national chain stores in the future as consumers continue to
        seek
        out value alternatives and as our customers in this channel continue to open
        new
        doors. We have customers located outside the United States that purchase
        our
        Maidenform, Flexees and Lilyette brands. The majority of these net sales
        to
        these customers are included in the department stores / national chain stores
        channel.
 
 *Mass
        Merchants.* T he
        mass
        merchant channel includes both mass merchants and warehouse clubs. We intend
        to
        improve our penetration with mass merchants through the use of our Self
        Expressions, Sweet Nothings, Bodymates, and private brands. We have experienced
        significant growth in this channel over the past several years and expect
        to
        achieve significant growth in the future as we are able to increase both
        the
        floor space and number of doors at which our products are sold. We expect
        that
        both our net sales to this channel and our net sales to this channel as a
        percentage of our total net sales is likely to increase over time. Net sales
        to
        customers in the mass channel that are located outside the United States
        are
        included in this channel.
 
 *Other.* Our
        net
        sales from this channel, which include sales to specialty retailers and to
        off-price retailers, have historically been a relatively small component
        of our
        overall net sales. We participate in private brands in the specialty retailer
        area as opportunities present themselves. Because of fluctuations in
        opportunities in this channel we continually reevaluate for growth
        opportunities. Our licensing income is included in this channel as well as
        sales
        to foreign distributors.
 
 We
        will
        selectively target strategic acquisitions or licenses to grow our consumer
        base
        and would utilize the acquired companies to complement the products, channels
        and geographic reach of our existing portfolio. We believe that acquisitions
        could enhance our product offerings to retailers and provide potential growth.
        We believe we can leverage our core competencies such as product development,
        brand management, logistics and marketing to create significant value from
        the
        acquired businesses. The opportunity to license designer brands is also a
        potential opportunity for us.
 
 *Retail
        Segment*
  We
        believe our retail sales volume is driven by our ability to service our existing
        consumers and obtain new consumers, as well as overall general economic
        conditions, such as the general retail environment, that can affect our
        consumers and ultimately their levels of overall spending. Additionally,
        identifying optimal retail outlet locations, favorable leasing arrangements,
        and
        improving our store productivity are factors important to growing our retail
        segment’s net sales. We also sell our products through our websites, www.maidenform.com and maidenform.co.uk .
        Although we currently do not generate a significant amount of net sales through
        these sites, we do expect it to continue to grow.
 
 Our
        objectives in our retail segment are to continue to increase the productivity
        of
        our portfolio of stores through effective merchandising and focused advertising,
        as well as selectively closing a few of our less productive locations and
        potentially opening new stores in more productive locations. Even in those
        situations where we selectively close less productive outlet stores and do
        not
        open a new location in that region, we believe those consumers can still
        purchase many of our Maidenform brands from our other outlet stores, our
        website
        or our wholesale segment customers that carry these brands. Historically,
        we
        have primarily sold excess and, to a lesser extent, obsolete inventories
        through
        our outlet stores at a higher margin than that achieved through other
        liquidation alternatives.
  -16-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 ***Definitions***
  In
        reviewing our operating performance, we evaluate both the wholesale and retail
        segments by focusing on each segment’s operating income, cash flows from
        operations and inventory turns.
 
 *Net
        Sales* .
        Our net
        sales are derived from two operating segments, wholesale and retail. Our
        net
        sales in the wholesale segment are sales recorded net of cooperative advertising
        allowances, sales returns, sales discounts, and markdown allowances provided
        to
        our customers. Net sales in our retail segment are recorded at the
        point-of-sale.
 
 *Cost
        of Sales* .
        During
        2005, we closed our remaining manufacturing facilities in Mexico and Florida;
        therefore, the principal elements of our cost of sales are for finished goods
        inventories purchased from our sourced vendors. Included in cost of sales
        and
        affecting our overall gross margins are freight expenses from the manufacturers
        to our distribution centers in situations where such expenses are charged
        separately. Also included in cost of sales is the cost of warehousing, labor
        and
        overhead related to receiving and warehousing at our distribution centers,
        and
        depreciation of assets related to our receiving and warehousing in our
        distribution centers. Direct labor, cost of fabrics, as well as raw materials
        for fabrics, are the primary components driving the overall cost of our sourced
        finished goods inventories from our sourcing vendors.
 
 *Selling,
        General and Administrative (SG&A).* Our
        SG&A expenses include all of our marketing, selling, distribution and
        general and administrative expenses for both the wholesale and retail segments
        (which include our retail outlet store payroll and related benefits), and
        rent
        expense. General and administrative expenses include management payroll,
        benefits, travel, information systems, accounting, insurance and legal.
        Additionally, depreciation related to the shipping function in our distribution
        centers and our corporate office assets such as furniture, fixtures, and
        equipment, as well as amortization of intellectual property, is included
        in
        SG&A.
 
 *Income
        Taxes.* We
        account for income taxes using the liability method, which recognizes the
        amount
        of income tax payable or refundable for the current year and recognizes deferred
        tax liabilities and assets for the future tax consequences of the events
        that
        have been recognized in the financial statements or tax returns. We routinely
        evaluate all deferred tax assets to determine the likelihood of their
        realization and record a valuation allowance if it is more likely than not
        that
        a deferred tax asset will not be realized. For more information, see
        Note 11 to our unaudited condensed consolidated financial statements
        included elsewhere in this Form 10-Q. Net operating loss carryforwards (NOLs)
        enable a company to apply net operating losses incurred during a current
        period
        against a future period's profits in order to reduce cash tax liabilities
        in
        those future periods. In periods when a company is generating operating losses,
        its NOLs will increase. The tax effect of the NOLs is recorded as a deferred
        tax
        asset. If the company does not believe that it is more likely than not that
        it
        will be able to utilize the NOLs, it records a valuation allowance against
        the
        deferred tax asset. Additionally, Section 382 of the Internal Revenue
        Code
        ("Section 382") imposes limitations on a corporation's ability to
        utilize
        its NOLs if it experiences an "ownership change." In general terms, an ownership
        change results from transactions increasing the ownership of certain existing
        stockholders and, or, new stockholders in the stock of a corporation by more
        than 50 percentage points during a three year testing period. Upon
        emergence from bankruptcy in 1999, our NOLs were subject to Section 382
        limitations. As a result of the Acquisition (defined below) in 2004, we
        experienced a change in control, as defined by Section 382. As a result
        of
        this ownership change, the utilization of our NOLs were subject to a new
        annual
        limitation under Section 382. Any unused annual limitation may be
        carried
        over to later years, and the amount of the limitation may, under certain
        circumstances, be increased to reflect both recognized and deemed recognized
        "built-in gains" that occur during the 60-month period after the ownership
        change. Based on fair values of certain assets as determined in connection
        with
        the Acquisition and compared with those values in connection with the initial
        public offering, we have approximately $66.7 million of deemed built-in
        gains that are anticipated to be recognized or deemed recognized during the
        aforementioned 60-month period. We have approximately $92.6 million
        of NOLs
        available for utilization in the years from 2005 through 2023. In addition,
        the
        sale of shares in the July 2005 initial public offering resulted in another
        change in control for the purpose of Section 382; however, the annual limitation
        of our NOLs did not change.
 
 *Acquisition-Related
        Charges.* On
        May 11, 2004, MF Acquisition Corporation acquired 100% of
        Maidenform, Inc. (the "Acquisition") through a merger of its wholly-owned
        subsidiary into Maidenform, Inc. Stockholders of Maidenform, Inc.
        received either cash or stock of MF Acquisition Corporation in exchange for
        their shares of Maidenform, Inc. On April 5, 2005, MF Acquisition
        Corporation changed its name to Maidenform Brands, Inc. Our capitalization
        structure changed significantly as a result of the Acquisition. Financing
        for
        the Acquisition totaled $237.3 million and was provided by a first
        lien
        term loan of $100.0 million, revolver borrowings of $12.5 million,
        a
        second lien term loan of $50.0 million and $74.8 million of
        cash and
        capital invested by MF Acquisition Corporation and other investors, including
        rollover equity by certain members of management of $2.8 million and
        continuing stockholders of $15.0 million.
  -17-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 The
        Acquisition was accounted for as a purchase in accordance with Statement
        of
        Financial Accounting Standards (SFAS) No. 141, "Business
        Combinations *,* "
        and
        Emerging Issues Task Force (EITF) No. 88-16, "Basis In Leveraged Buyout
        Transactions." Accordingly, the retained interest of the continuing stockholders
        (the 23.8% retained by certain members of management and continuing
        stockholders) was recorded at carryover basis. The remainder of the investment
        in the assets and liabilities acquired (the 76.2% acquired by new stockholders)
        was recorded at fair value. The excess of the purchase price over carryover
        basis of net assets acquired, treated as a deemed dividend of $21.5 million
        to continuing stockholders, was recognized as a reduction of stockholders'
        equity (deficit). As a result, the total purchase price of $205.2 million
        was allocated to the assets and liabilities based on their estimated fair
        values
        at the Acquisition date, after taking into account carryover basis as discussed
        above. The estimated fair values were determined by valuation reports provided
        by independent third-party appraisals.
 
 **Results
        of Operations**
  For
        discussion purposes only, our results for the nine month period ended September
        25, 2004 discussed below represent the mathematical addition of the historical
        results for the Predecessor period from December 28, 2003 through May 10,
        2004
        and the Successor period from May 11, 2004 through September 25, 2004. This
        approach is not consistent with generally accepted accounting principles
        and
        yields results that are not comparable on a period-to-period basis due to
        the
        new basis of accounting established at the Acquisition date. However, we
        believe
        it is the most meaningful way to comment on the results of operations for
        the
        nine month period ended October 1, 2005 compared to the nine month period
        ended
        September 25, 2004 because a discussion of partial periods would not be
        meaningful.
 
 The
        combined financial results shown below include certain purchase accounting
        adjustments and one-time charges directly related to the Acquisition, the
        most
        significant of which are $14.3 million of Acquisition-related charges incurred
        during the Predecessor period from December 28, 2003 through May 10, 2004
        and a
        $19.0 million non-cash charge related to inventory recorded at fair market
        value
        in connection with the Acquisition and sold during the Successor period from
        May
        11, 2004 through September 25, 2004.
 
  -18-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 Three
                      Months Ended
                  
                  Nine
                      Months EndedSuccessor
                  
                  Successor
                  
                  Successor
                  
                  Combined
                      forthe
                      period fromDecember
                      28, 2003throughOctober
                      1, 2005
                  
                  September
                      25, 2004
                  
                  October
                      1, 2005
                  
                  September
                      25, 2004**OPERATING
                      DATA:**Wholesale
                      sales
                  
                  $
                  83.6
                  
                  $
                  73.4
                  
                  $
                  261.3
                  
                  $
                  220.9Retail
                      sales
                  
                  
                  16.5
                  
                  
                  16.6
                  
                  
                  41.3
                  
                  
                  41.6Net
                      sales
                  
                  
                  100.1
                  
                  
                  90.0
                  
                  
                  302.6
                  
                  
                  262.5Cost
                      of sales
                  
                  
                  63.4
                  
                  
                  61.0
                  
                  
                  193.6
                  
                  
                  177.3Gross
                      profit
                  
                  
                  36.7
                  
                  
                  29.0
                  
                  
                  109.0
                  
                  
                  85.2Selling,
                      general and administrative
                  
                  
                  28.7
                  
                  
                  23.2
                  
                  
                  76.9
                  
                  
                  68.2Acquisition-related
                      charges
                  
                  
                  –
                  
                  
                  –
                  
                  
                  –
                  
                  
                  14.3Operating
                      income
                  
                  $
                  8.0
                  
                  $
                  5.8
                  
                  $
                  32.1
                  
                  $
                  2.7
  As
                      a percentage of net salesThree
                      Months Ended
                  
                  Nine
                      Months EndedSuccessor
                  
                  Successor
                  
                  Successor
                  
                  Combined
                      forthe
                      period fromDecember
                      28, 2003throughOctober
                      1, 2005
                  
                  September
                      25, 2004
                  
                  October
                      1, 2005
                  
                  September
                      25, 2004**OPERATING
                      DATA:**Wholesale
                      sales
                  
                  
                  83.5
                  %
                  
                  81.6
                  %
                  
                  86.4
                  %
                  
                  84.2
                  %Retail
                      sales
                  
                  
                  16.5
                  
                  
                  18.4
                  
                  
                  13.6
                  
                  
                  15.8Net
                      sales
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  100.0
                  
                  
                  100.0Cost
                      of sales
                  
                  
                  63.3
                  
                  
                  67.8
                  
                  
                  64.0
                  
                  
                  67.5Gross
                      profit
                  
                  
                  36.7
                  
                  
                  32.2
                  
                  
                  36.0
                  
                  
                  32.5Selling,
                      general and administrative
                  
                  
                  28.7
                  
                  
                  25.8
                  
                  
                  25.4
                  
                  
                  26.0Acquisition-related
                      charges
                  
                  
                  –
                  
                  
                  –
                  
                  
                  –
                  
                  
                  5.4Operating
                      income
                  
                  
                  8.0
                  %
                  
                  6.4
                  %
                  
                  10.6
                  %
                  
                  1.0
                  %
 Our
        net
        sales are derived from two segments, wholesale and retail.  We have
        recently enhanced the disclosure of our net sales within our wholesale segment.
         We have decided to group our sales within that segment by channel,
        based
        upon the brands we sell and the customers we sell them to, as follows: (1)
        department stores / national chain stores, (2) mass merchants and (3) other.
 
 Our
        department stores / national chain stores channel primarily consists of sales
        of
        our Maidenform, Flexees, Lilyette, and private brands on a worldwide basis
        to
        customers in those categories.  Within the mass merchants channel,
        we sell
        brands such as Self Expressions, Sweet Nothings, Bodymates and private brands
        that are primarily dedicated to specific customers.  These brands
        are all
        sold on a worldwide basis to mass merchants and, to a lesser degree, warehouse
        clubs. Our remaining sales are grouped within a channel designated as other
        and
        include private brand products sold to specialty retailers and all brand
        sales
        to off-price retail stores.  In addition, licensing income is included
        in
        our other channel.
 
 The
        following information summarizes our net sales for the first three quarters
        of
        2005 compared to 2004 for each of these three channels within the wholesale
        segment as well as retail.  We previously disclosed sales increases
        or
        decreases within certain channels; however, during the third quarter 2005
        we
        have made changes in the way we are managing our sales by channel including
        certain insignificant allocations or adjustments to reduce gross sales for
        returns and allowances within the channel.
  -19-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 **First
                      Quarter**
                  
                  **Second
                      Quarter****Three
                      Months Ended**
                  
                  **Three
                      Months Ended****April
                      2, 2005**
                  
                  **March
                      27, 2004**
                  
                  **%
                      change**
                  
                  **July
                      2, 2005**
                  
                  **June
                      26, 2004**
                  
                  **%
                      change**Department
                      Stores / National Chain Stores
                  
                  $
                  51.7
                  
                  $
                  44.3
                  
                  
                  16.7
                  %
                  $
                  53.9
                  
                  $
                  50.7
                  
                  
                  6.3
                  %Mass
                      Merchant
                  
                  
                  22.5
                  
                  
                  8.4
                  
                  
                  167.9
                  %
                  
                  22.7
                  
                  
                  15.7
                  
                  
                  44.6
                  %Other
                  
                  
                  16.0
                  
                  
                  15.4
                  
                  
                  3.9
                  %
                  
                  10.9
                  
                  
                  13.0
                  
                  
                  -16.2
                  %Total
                      Wholesale
                  
                  
                  90.2
                  
                  
                  68.1
                  
                  
                  32.5
                  %
                  
                  87.5
                  
                  
                  79.4
                  
                  
                  10.2
                  %Retail
                  
                  
                  10.0
                  
                  
                  10.5
                  
                  
                  -4.8
                  %
                  
                  14.8
                  
                  
                  14.5
                  
                  
                  2.1
                  %Total
                      Consolidated Net Sales
                  
                  $
                  100.2
                  
                  $
                  78.6
                  
                  
                  27.5
                  %
                  $
                  102.3
                  
                  $
                  93.9
                  
                  
                  8.9
                  %
  **Third
                      Quarter**
                  
                  **Year-To-Date****Three
                      Months Ended**
                  
                  **Nine
                      Months Ended****October
                      1, 2005**
                  
                  **September
                      25, 2004**
                  
                  **%
                      change**
                  
                  **October
                      1, 2005**
                  
                  **September
                      25, 2004**
                  
                  **%
                      change**Department
                      Stores / National Chain Stores
                  
                  $
                  54.8
                  
                  $
                  50.4
                  
                  
                  8.7
                  %
                  $
                  160.4
                  
                  $
                  145.4
                  
                  
                  10.3
                  %Mass
                      Merchant
                  
                  
                  15.1
                  
                  
                  11.8
                  
                  
                  28.0
                  %
                  
                  60.3
                  
                  
                  35.9
                  
                  
                  68.0
                  %Other
                  
                  
                  13.7
                  
                  
                  11.2
                  
                  
                  22.3
                  %
                  
                  40.6
                  
                  
                  39.6
                  
                  
                  2.5
                  %Total
                      Wholesale
                  
                  
                  83.6
                  
                  
                  73.4
                  
                  
                  13.9
                  %
                  
                  261.3
                  
                  
                  220.9
                  
                  
                  18.3
                  %Retail
                  
                  
                  16.5
                  
                  
                  16.6
                  
                  
                  -0.6
                  %
                  
                  41.3
                  
                  
                  41.6
                  
                  
                  -0.7
                  %Total
                      Consolidated Net Sales
                  
                  $
                  100.1
                  
                  $
                  90.0
                  
                  
                  11.2
                  %
                  $
                  302.6
                  
                  $
                  262.5
                  
                  
                  15.3
                  %
 In
        addition, our mix of products sold between bras, shapewear, and panties in
        the
        wholesale segment for the nine month periods ended October 1, 2005 and September
        25, 2004, respectively, are summarized below:
 **2005**
                
                **2004**Bras
                
                
                69
                %
                
                68
                %Shapewear
                
                
                21
                %
                
                25
                %Panties
                
                
                10
                %
                
                7
                %100
                %
                
                100
                %
 Our
        retail segment consists of both outlet and clearance stores. A reconciliation
        of
        stores opened and closed for the first nine months of 2005 and 2004 are as
        follows:
 **2005**
                
                **2004**Beginning
                    fiscal year
                
                
                81
                
                
                94Open
                
                
                1
                
                
                3Closed
                
                
                (5
                )
                
                (9
                )Ending
                    third quarter
                
                
                77
                
                
                88
 ***Net
        Sales***
  Consolidated
        net sales increased $10.1 million, or 11.2%, from $90.0 million for the three
        months ended September 25, 2004 to $100.1 million for the three months ended
        October 1, 2005. Net sales in our wholesale segment increased by $10.2 million,
        or 13.9%, from $73.4 million for the three months ended September 25, 2004
        to
        $83.6 million for the three months ended October 1, 2005. Net sales in our
        retail segment decreased $0.1 million, or 0.6%, from $16.6 million for the
        three
        months ended September 25, 2004 to $16.5 million for the three months ended
        October 1, 2005.
  -20-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 Of
        the
        $10.2 million increase in wholesale net sales during the three months ended
        October 1, 2005, $4.4 million of the total increase was from increased sales
        in
        the department stores / national chain stores channel primarily as a result
        of
        new door growth, new product introductions and additional product placement
        within the stores. Mass merchant channel sales increased $3.3 million, primarily
        driven by increased allotted selling space, additional product placement
        within
        the stores and new door growth. Other sales increased $2.5 million as a result
        of increased sales to a specialty retailer and increased sales to off-price
        retailers.
 
 Consolidated
        net sales increased $40.1 million, or 15.3%, from $262.5 million for the
        nine
        months ended September 25, 2004 to $302.6 million for the nine months ended
        October 1, 2005. Net sales in our wholesale segment increased by $40.4 million,
        or 18.3%, from $220.9 million for the nine months ended September 25, 2004
        to
        $261.3 million for the nine months ended October 1, 2005. Our year-to-date
        net sales in 2005 benefited significantly from a roll-out of certain
        products to all stores of a mass merchant accounting for approximately $8.0
        million of the mass channel increase in net sales during the first quarter
        of
        2005. Additionally, the launch of a line of panties at a national chain store
        accounting for approximately $2.0 million of the total net sales increase
        in the
        department stores / national chain stores channel during the first quarter
        of
        2005. Excluding these two events during the first quarter of 2005, net sales
        for
        the year-to-date period ended October 1, 2005 increased 13.8%. Net sales
        in our
        retail segment decreased $0.3 million, or 0.7%, from $41.6 million for the
        nine
        months ended September 25, 2004 to $41.3 million for the nine months ended
        October 1, 2005.
 
 Of
        the
        $40.4 million increase in wholesale segment net sales during the nine months
        ended October 1, 2005, $24.4 million of the total increase was from increased
        sales in the mass merchant channel driven by increased allotted selling space,
        additional product placement within the stores and new door growth as compared
        to the nine months ended September 25, 2004. Approximately $8.0 million of
        this
        amount was a result of having product placement in all of the stores for
        one of
        the mass merchant customers in the nine months of 2005 as compared to fewer
        stores for this comparable period of 2004. Excluding this incremental sales
        growth, net sales in the mass channel grew at approximately 45.7% over the
        comparable prior year period. An additional $15.0 million increase came from
        department stores / national chain stores, primarily as a result of new product
        introductions, new door growth and additional product placement within this
        channel. Approximately $2.0 million of this increase was a result of the
        launch
        of a line of panties at a national chain store occurring during the first
        quarter of 2005. The remaining sales increase resulted from $1.0 million
        sales
        in the other channel, which included higher sales to off-price retailers
        and
        lower sales to a specialty retailer.
 
 In
        our
        retail segment, we had 88 open outlet stores as of September 25, 2004 compared
        to 77 open outlet stores as of October 1, 2005.  Same store sales,
        defined
        as sales from stores open for more than one year, increased by 7.6% for the
        three months ended October 1, 2005, due primarily to increased promotional
        offerings. However, the decline in retail net sales caused by fewer stores
        was
        offset by increased same store sales and internet sales.  Same stores
        sales
        for the nine month period ended October 1, 2005 increased 4.6% as compared
        to
        the nine months ended September 25, 2004 due primarily to increased promotional
        offerings. Our internet sales increased by $0.4 million from $0.3 million
        for
        the three months ended September 25, 2004 to $0.7 million for the three months
        ended October 1, 2005. Our internet sales increased by $0.9 million from
        $0.9
        million for nine months ended September 25, 2004 to $1.8 million for the
        nine
        months ended October 1, 2005.
 
 ***Gross
        Profit***
  Consolidated
        gross profit increased by $7.7 million from $29.0 million for the three months
        ended September 25, 2004 to $36.7 million for the three months ended October
        1,
        2005. As a percentage of net sales, gross margin increased by 4.5 percentage
        points from 32.2% for the three months ended September 25, 2004 to 36.7%
        for the
        three months ended October 1, 2005.  Consolidated gross profit increased
        by
        $23.8 million from $85.2 million during the nine months ended September 25,
        2004
        to $109.0 million for the nine months ended October 1, 2005. As a percentage
        of
        net sales, gross profit increased by 3.5 percentage points from 32.5% for
        the
        nine month periods ended September 25, 2004 to 36.0% for the nine months
        ended
        October 1, 2005.
   -21-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 The
        three
        months ended September 25, 2004 include non-recurring adjustments of $8.2
        million ($5.8 million recognized by our wholesale segment and $2.4 million
        recognized by our retail segment) related to increasing inventories to fair
        market value at the date of the Acquisition. The nine months ended September
        25,
        2004 include non-recurring adjustments of $19.0 million ($15.5 million
        recognized by our wholesale segment and $3.5 million recognized by our retail
        segment) related to increasing inventories to fair market value at the date
        of
        the Acquisition.
 
 In
        our
        wholesale segment, our gross margins for both the three and nine month periods
        ended October 1, 2005 have been negatively affected by increased manufacturing
        costs as a result of operating our plants at less than optimum capacity as
        we
        phased out our internal manufacturing with the closing of our remaining
        production facilities and the disposal of plant assets. This negatively affected
        our gross margins by approximately 225 basis points for the three months
        ended
        October 1, 2005 and approximately 210 basis points for the nine months
        ended October 1, 2005. On a consolidated basis, this negatively affected
        our
        gross margins by approximately 190 basis points for the three months ended
        October 1, 2005 and approximately 180 basis points for the nine months ended
        October 1, 2005. Additionally, increased markdown expenses for excess and
        close-out inventories, including increased net sales to off-price retailers
        at a
        lower gross margin, negatively impacted our gross margins by
        approximately 180 basis points for the three months ended October
        1, 2005
        and by approximately 210 basis points for the nine months ended October 1,
        2005.
        On a consolidated basis, this negatively affected our gross margins by
        approximately 150 basis points for the three months ended October 1, 2005
        and
        approximately 180 basis points for the nine months ended October 1,
        2005.
 
 Gross
        profit as a percentage of sales for the wholesale segment was 30.2% for the
        three months ended September 25, 2004 as compared to 32.9% for the three
        months
        ended October 1, 2005 and 30.2% for the nine months ended September 25, 2004
        as
        compared to 33.3% for the nine months ended October 1, 2005. Our gross margins
        for both the three and nine month periods ended September 25, 2004 have been
        negatively affected by the non-recurring adjustments related to increasing
        inventories to fair market value at the date of the Acquisition as discussed
        above. Additionally, our gross margins for both the three and nine month
        periods
        ended October 1, 2005 have been negatively impacted by the closing of our
        remaining production facilities and by increased net sales to off-price
        retailers as discussed above. ****
 
 Gross
        profit for the retail segment was 41.0% for the three months ended September
        25,
        2004 as compared to 55.8% for the three months ended October 1, 2005 and
        44.5%
        for the nine months ended September 25, 2004 as compared to 53.5% for the
        nine
        months ended October 1, 2005. Our gross margins for both the three and nine
        month periods ended October 1, 2005 have been favorably impacted by increased
        internet sales offset by a change in sales mix in our retail stores. Our
        gross
        margins for both the three and nine month periods ended September 25, 2004
        have
        been negatively impacted by the non-recurring adjustments related to increasing
        inventories to fair market value at the date of the Acquisition as discussed
        above.
 
 ***Selling,
        General and Administrative Expenses (SG&A)***
  Consolidated
        SG&A increased by $5.5 million, or 23.7%, from $23.2 million for the three
        months ended September 25, 2004 to $28.7 million for the three months ended
        October 1, 2005. As a percentage of net sales, SG&A increased from 25.8% for
        the three months ended September 25, 2004 to 28.7% for the three months ended
        October 1, 2005. The $5.5 million increase is primarily a result of the
        following items within our wholesale segment: $2.7 million of payroll and
        related benefits, primarily bonus expense, stock option expense and higher
        payroll expense with certain new positions; $1.9 million of expenses associated
        with our initial public offering; $1.5 million special cash bonus paid prior
        to
        the initial public offering in connection with the credit facility amendment;
        $0.6 million of other expenses. Partially offsetting these changes was a
        decrease in advertising of $1.2 million primarily due to the timing of when
        the
        advertisements were shown.
 
 Consolidated
        SG&A increased by $8.7 million, or 12.8%, from $68.2 million for the nine
        months ended September 25, 2004 to $76.9 million for the nine months ended
        October 1, 2005. However, as a percentage of net sales, SG&A decreased from
        26.0% for the nine months ended September 25, 2004 to 25.4% for the nine
        months
        ended October 1, 2005, primarily as a result of increased net sales. The
        $8.7
        million increase is primarily a result of the following items within our
        wholesale segment: $3.8 million of expenses associated with our initial public
        offering; $1.5 million special cash bonus paid prior to the initial public
        offering in connection with the credit facility amendment; $0.9 million
        severance expense and other costs associated with the closing of the
        manufacturing facilities; $0.7 million of increased professional fees associated
        with Sarbanes-Oxley readiness and legal services; $1.8 million of other
        expenses.
   -22-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
  Wholesale
        segment SG&A, which includes corporate-related expenses, increased by $5.4
        million, or 33.5%, from $16.1 million for the three months ended September
        25,
        2004 to $21.5 million for the three months ended October 1, 2005. As a
        percentage of net sales, wholesale segment SG&A increased from 21.9% for the
        three months ended September 25, 2004 to 25.7% for the three months ended
        October 1, 2005. Our wholesale segment SG&A increased by $8.7 million, or
        18.3%, from $47.5 million for the nine months ended September 25, 2004 to
        $56.2
        million for the nine months ended October 1, 2005. However, as a percentage
        of
        net sales, SG&A remained constant at 21.5% for the nine month periods ended
        September 25, 2004 and October 1, 2005. The increase of $5.4 million for
        the
        three months ended October 1, 2005 and the increase of $8.7 million for the
        nine
        months ended October 1, 2005 are a result of the fluctuations discussed above.
 
 SG&A
        for our retail segment increased by $0.1 million, or 1.4%, from $7.1 million
        for
        the three months ended September 25, 2004 to $7.2 million for the three months
        ended October 1, 2005. As a percentage of net sales, SG&A increased from
        42.8% for the three months ended September 25, 2004 to 43.6% for the three
        months ended October 1, 2005. Our retail segment SG&A was $20.7 million for
        the nine month periods ended September 25, 2004 and October 1, 2005. However,
        as
        a percentage of net sales, SG&A increased from 49.8% for the nine months
        ended September 25, 2004 to 50.1% for the nine months ended October 1,
        2005.
 
 As
        a
        result of our initial public offering in July 2005, we are incurring additional
        expenses associated with being a public company. The three and nine month
        periods discussed above include such expenses of approximately $0.8 million.
 
 ***Acquisition-Related
        Charges***
  Acquisition-related
        charges of $14.3 million were recorded in May 2004 in connection with the
        Acquisition, including (i) $6.6 million for sellers’ transaction fees and
        expenses, (ii) $5.6 million for stock compensation expense from settlement
        of
        stock options on May 10, 2004, (iii) $2.0 million in special compensation
        paid
        to management and (iv) $0.1 million in other Acquisition-related
        charges.
 
 ***Operating
        Income***
  Our
        consolidated operating income increased by $2.2 million from $5.8 million
        for
        the three months ended September 25, 2004 to $8.0 million for the three months
        ended October 1, 2005. Our consolidated operating income increased by $29.4
        million from $2.7 million for the nine months ended September 25, 2004 to
        $32.1
        million for the nine months ended October 1, 2005. Both the three and nine
        months ended September 25, 2004 were negatively affected by certain adjustments
        and non-recurring charges, including the Acquisition-related charges of $14.3
        million, as discussed above.
 
 For
        the
        foregoing reasons, operating income for the wholesale segment was $6.1 million
        during the three months ended September 25, 2004 as compared to $6.0 million
        during the three months ended October 1, 2005. Operating income for the
        wholesale segment increased by $11.5 million, from $19.2 million during the
        nine
        months ended September 25, 2004 to $30.7 million during the nine months ended
        October 1, 2005.
 
 Also,
        for
        the reasons discussed above, operating income for the retail segment increased
        by $2.3 million, from a loss of $(0.3) million during the three months ended
        September 25, 2004 to $2.0 million during the three months ended October
        1,
        2005. The retail segment’s operating income increased by $3.6 million, from a
        loss of $(2.2) million during the nine months ended September 25, 2004 to
        $1.4
        million during the nine months ended October 1, 2005.
 
 ***Interest
        Expense, Net***
  On
        June
        29, 2005, we amended our Credit Facility by prepaying the total balance of
        $50.0
        million outstanding on our Second Lien Facility bearing an interest rate
        of
        LIBOR plus 7.5%. Simultaneously, we increased the borrowings on our First
        Lien
        Term Facility from $88.9 million to $150.0 million and modified the interest
        rate from LIBOR plus 2.75% to LIBOR plus 2.25%. The interest rate margin
        will be
        reduced by 0.25% on December 29, 2005. Upon delivery of a pricing certificate
        indicating that our leverage ratio is less than 3 to 1, then, after that
        date,
        but not before December 29, 2005, the margin will be further reduced by 0.25%.
  Interest
        expense, net decreased by $0.3 million from $2.9 million for the three months
        ended September 25, 2004 to $2.6 million for the three months ended October
        1,
        2005.
   -23-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 Interest
        expense, net increased $6.8 million from $6.7 million for the nine months
        ended
        September 25, 2004 to $13.5 for the nine months ended October 1, 2005. This
        increase was a result of expensing deferred financing costs of $4.9 million
        in
        connection with the amendment of our Credit Facility and the repayment of
        the
        Second Lien Facility on June 29, 2005, and higher debt outstanding at a higher
        interest rate during the nine months ended October 1, 2005. The average balance
        of total debt outstanding increased from $103.6 million for the nine months
        ended September 25, 2004 to $146.3 million for the nine months ended October
        1,
        2005, and the average interest rate during the nine months ended September
        25,
        2004 was 6.0% as compared to a 7.0% average interest rate during the nine
        months
        ended October 1, 2005.
 
 ***Income
        Tax Expense (Benefit)***
  We
        review
        our annual effective tax rate on a quarterly basis and we make necessary
        changes
        if information or events warrant such changes. The annual effective tax rate
        is
        forecasted quarterly using actual historical information and forward-looking
        estimates. The estimated annual effective tax rate may fluctuate due to changes
        in forecasted annual operating income; changes to the valuation allowance
        for
        deferred tax assets; changes to actual or forecasted permanent book to tax
        differences (non-deductible expenses); impacts from future tax settlements
        with
        state, federal or foreign tax authorities; or impacts from tax law changes.
        Our
        effective income tax rate for the three and nine month Successor periods
        ended
        October 1, 2005 was 60.7% and 50.9%, respectively,  as compared to
        an
        effective income tax rate for the combined Predecessor and Successor three
        and
        nine month periods ended September 25, 2004 of  43.7% and 22.4%,
        respectively.  Our income tax expense for the three and nine month
        periods
        ended October 1, 2005 was negatively impacted by non-deductible expenses
        incurred during those periods in connection with our initial public offering.
         During the three and nine month periods ended September 25, 2004,
        we
        incurred losses before the provision for income taxes.  The income
        tax
        benefit from the losses was negatively impacted by non-deductible expenses
        incurred during those periods in connection with the Acquisition.
 
 Our
        cash
        income taxes to be paid will be at a rate significantly lower than our effective
        income tax rate as a result of net operating loss carryforwards (NOLs) available
        to offset income taxes payable and tax deductions for stock options exercised.
        These items have the effect of reducing the effective income tax rate as
        reported on our income statement to a lower income tax rate to be paid on
        a cash
        basis.
 
 ***Net
        Income (Loss)***
  For
        the
        foregoing reasons, our net income increased from $1.7 million for the three
        months ended September 25, 2004 to $2.1 million for the three months ended
        October 1, 2005. Our net income (loss) for the nine months ended increased
        from
        a loss of $(5.0) million for the nine months ended September 25, 2004 to
        net
        income of $9.1 million for the nine months ended October 1, 2005.
 
 ***Preferred
        Stock Dividends and Changes in Redemption Value***
  On
        July
        22, 2005, our preferred stock and options to purchase our preferred stock
        were
        redeemed in connection with the initial public offering. However, for the
        three
        months ended October 1, 2005, preferred stock dividends and changes in
        redemption value include the accrual of $1.7 million of preferred stock
        dividends and preferred options dividends. The three months ended September
        25,
        2004 include $1.2 million of preferred stock dividends.
 
 For
        the
        nine months ended October 1, 2005, preferred stock dividends and changes
        in
        redemption value include a special preferred stock dividend of $13.3 million,
        the accrual of $4.7 million of preferred stock dividends and dividends on
        preferred stock options, and the reduction of the preferred stock redemption
        premium of $(0.7) million. The nine months ended September 25, 2004 include
        $1.2
        million of preferred stock dividends and $2.2 million of accretion related
        to
        the preferred stock issued in connection with the Acquisition.
 
 ***Net
        Income (Loss) Available to Common Stockholders***
  For
        the
        foregoing reasons, the net income available to common stockholders for the
        three
        months ended October 1, 2005 was $0.4 million as compared to $0.5 million
        for
        the three months ended September 25, 2004. The net loss available to common
        stockholders for the nine months ended October 1, 2005 was $(8.1) million
        as
        compared to net loss of $(8.3) million for the nine months ended September
        25,
        2004.
   -24-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **Liquidity
        and Capital Resources**
  For
        discussion purposes only, our nine months ended September 25, 2004 cash flow
        data discussed below represent the mathematical addition of the historical
        cash
        flow data for the Predecessor period from December 28, 2003 through May 10,
        2004
        and the Successor period from May 11, 2004 through September 25, 2004. This
        approach is not consistent with generally accepted accounting principles
        and
        yields results that are not comparable on a period-to-period basis due to
        the
        new basis of accounting established at the Acquisition date. However, we
        believe
        it is the most meaningful way to comment on the cash flows for the nine months
        ended September 25, 2004 compared to the nine months ended October 1, 2005
        because a discussion of partial periods would not be meaningful.
 
 *Operating
        activities.* Cash
        flows provided by operating activities were $0.3 million in the nine months
        ended October 1, 2005 compared to cash flows provided by operating activities
        of
        $20.6 million in the nine months ended September 25, 2004. This change in
        cash
        from operating activities was due to increased accounts receivable and
        inventory, and lower accrued expenses and other liabilities. Year-end fiscal
        2004 inventories were abnormally low as a result of import restrictions related
        to the China safeguards in place at the end of fiscal 2004. Accounts receivable
        at the end of the third quarter of 2005 rose to $51.6 million from $43.1
        million
        for the comparable period of 2004 and up from $24.0 million at the end
        of
        fiscal 2004 as wholesale net sales have increased by 37.4% in the third quarter
        of 2005 as compared to the fourth quarter of 2004. These factors were partially
        offset by higher net income, an increase in accounts payable associated with
        the
        increased inventory and an increase in higher income taxes payable (primarily
        due to non-deductible expenses associated with our initial public offering
        and
        the collection of our income tax receivable outstanding at fiscal year end
        2004). Cash flows provided by operating net activities for the nine months
        ended
        October 1, 2005 have been negatively impacted by non-recurring items such
        as the
        initial public offering, special bonuses paid in connection with the credit
        facility amendment, manufacturing costs, and prepayment penalty fee.
 
 *Investing
        activities.* Cash
        flows provided by investing activities were $0.1 million in the nine months
        ended October 1, 2005 compared to cash flows used in investing activities
        of
        $160.1 million in the nine months ended September 25, 2004. The significant
        use
        of cash in the nine months ended September 25, 2004 was primarily due to
        payments of $158.5 million related to the Acquisition.
  *Financing
        activities.* Cash
        flows used in financing activities were $17.8 million in the nine months
        ended
        October 1, 2005 compared to cash flows provided by financing activities of
        $151.0 million in the nine months ended September 25, 2004. The decrease
        is
        mainly due to lower net borrowings and the payment of a special preferred
        stock
        dividend partially offset by the excess proceeds from our initial public
        offering during the nine months ended October 1, 2005. The cash provided
        from
        financing activities during the nine months ended September 25, 2004 was
        primarily from borrowings from new credit facilities entered into at the
        time of
        the Acquisition, offset by payment of all debt outstanding at May 11, 2004.
 
 On
        June
        29, 2005, we amended our existing First Lien Facilities and prepaid the
        outstanding balance of our Second Lien Facility. The amended First Lien
        Facilities (“Credit Facility”) provides for borrowings in the aggregate amount
        of $200.0 million maturing on May 11, 2010 and is comprised of: (i) a $150.0
        million amortizing term loan facility (the “Term Loan Facility’’) and (ii) a
        $50.0 million revolving credit facility (the ‘‘Revolving Facility’’). In
        connection with the Credit Facility, we paid fees of $2.4 million, and in
        connection with the repayment of the Second Lien Facility, we paid a prepayment
        penalty fee of $1.0 million. For the nine month period ended October 1, 2005,
        amortization of financing costs included in interest expense was $5.8 million
        (which includes $4.9 million of deferred financing expense in connection
        with
        the amendment of the First Lien Facilities and the prepayment of the Second
        Lien
        Facility).
 
 As
        of
        October 1, 2005, we had $140.0 million outstanding under our Term Loan Facility,
        after a voluntary prepayment of $10.0 million, and we had approximately $47.8
        million available for borrowings under the Revolving Facility after giving
        effect to $2.2 million of outstanding letters of credit. We use the letters
        of
        credit as collateral for our workers’ compensation insurance programs and bonds
        issued on our behalf to secure our obligation to pay customs duties. We were
        in
        compliance with all debt covenants at October 1, 2005.
   -25-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 On
        July
        22, 2005, we priced an initial public offering of 14,513,889 shares of common
        stock of which 3,375,000 and 11,138,889 shares were offered by us and selling
        stockholders, respectively, at a price of $17.00 per share. Upon the
        consummation of the offering on July 27, 2005, net proceeds of $52.6 million
        and
        $176.1 million were distributed to us and selling stockholders, respectively.
        We
        did not receive any of the proceeds from the sale of shares by the selling
        stockholders. Approximately $46.8 million of the net proceeds to us was used
        to
        redeem all the outstanding shares of our preferred stock, including shares
        of
        preferred stock acquired upon the exercise of all outstanding options to
        purchase shares of our preferred stock, and to pay all accrued and unpaid
        dividends associated with the preferred stock and preferred stock options.
        In
        addition, the put option on certain shares of common stock classified as
        temporary equity was extinguished as a result of the initial public offering
        and
        such common stock is no longer classified as temporary equity.
 
 We
        believe that our existing cash balances and available borrowings under the
        Revolving Facility, along with our future cash flow from operations, will
        enable
        us to meet our liquidity needs and capital expenditure requirements for at
        least
        the next 12 months.
 
 ***Contractual
        Obligations***
  We
        have
        various contractual obligations which are recorded as liabilities in our
        consolidated financial statements. Other items, such as certain purchase
        commitments and other executory contracts are not recognized as liabilities
        in
        our consolidated financial statements but are required to be disclosed. For
        example, we are contractually committed to make certain minimum lease payments
        for the use of property under operating lease agreements.
 
 The
        following table summarizes our significant contractual obligations and
        commercial commitments at October 1, 2005 and the future periods in which
        such
        obligations are expected to be settled in cash. In addition, the table reflects
        the timing of principal payments on outstanding borrowings. Additional details
        regarding these obligations are provided in the notes to our condensed
        consolidated financial statements included elsewhere in this Form
        10-Q.
 **Balance
                    of****fiscal**
                
                **In
                    fiscal**
                
                **In
                    fiscal**
                
                **In
                    fiscal**
                
                **In
                    fiscal****2005**
                
                **2006**
                
                **2007**
                
                **2008**
                
                **2009**
                
                **Thereafter**
                
                **Total****(in
                    millions)**Short-term
                    debt
                
                $
                0.1
                
                $
                –
                
                $
                –
                
                $
                –
                
                $
                –
                
                $
                –
                
                $
                0.1Long-term
                    debt (1)
                
                
                –
                
                
                –
                
                
                0.7
                
                
                1.1
                
                
                35.4
                
                
                102.8
                
                
                140.0Interest
                    on long-term debt (2)
                
                
                2.2
                
                
                8.6
                
                
                8.6
                
                
                8.4
                
                
                7.8
                
                
                1.4
                
                
                37.0Operating
                    leases
                
                
                1.3
                
                
                4.2
                
                
                2.7
                
                
                2.1
                
                
                1.0
                
                
                0.7
                
                
                12.0Total
                    financial obligations
                
                
                3.6
                
                
                12.8
                
                
                12.0
                
                
                11.6
                
                
                44.2
                
                
                104.9
                
                
                189.1Purchase
                    obligations (3)
                
                
                29.6
                
                
                19.9
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                49.5Total
                    financial obligations and commitments
                
                $
                33.2
                
                $
                32.7
                
                $
                12.0
                
                $
                11.6
                
                $
                44.2
                
                $
                104.9
                
                $
                238.6
 *(1)*
              *For
                  the years 2006 through the expiration date of the Credit Facility,
                  we may
                  be required to make annual consolidated excess cash flow payments
                  depending on applicable leverage
                  ratios.*
 *(2)*
              *The
                  interest rate for the variable portion of long-term debt was the
                  rate in
                  effect at October 1, 2005.*
 *(3)*
              *Unconditional
                  purchase obligations are defined as agreements to purchase goods
                  that are
                  enforceable and legally binding on us and that specify all significant
                  terms, including fixed or minimum quantities to be purchased; fixed,
                  minimum, or variable price provisions; and the approximate timing
                  of the
                  transaction. The purchase obligations category above relates to
                  commitments for inventory purchases. Amounts reflected in our condensed
                  consolidated balance sheets in accounts payable or other current
                  liabilities are excluded from the table
                  above.*
 
 In
        addition to the total contractual obligations and commitments included in
        the
        table above, we have pension and post-retirement benefit obligations included
        in
        other non-current liabilities.
 
 ***Contingent
        Commitments and Contingencies***
  We
        also
        have certain contractual arrangements that would require us to make payments
        or
        provide funding if certain circumstances occur. We do not currently expect
        that
        the remaining contingent commitments will result in any amounts being paid
        by
        us.
   -26-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **Critical
        Accounting Policies and Estimates**
  Our
        discussion and analysis of our financial condition and results of operations
        is
        based upon our condensed consolidated financial statements, which have been
        prepared in accordance with accounting principles generally accepted in the
        United States. The 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. A
        summary
        of our significant accounting policies and a description of accounting policies
        that we believe are most critical may be found in the Management’s Discussion
        and Analysis of Financial Conditions and Results of Operations included in
        our
        registration statement on Form S-1 (Registration No. 333-124228), as declared
        effective by the Securities and Exchange Commission on July 21, 2005.
 
 ***Recently
        Issued Accounting Standards***
 
 In
        December 2004, the FASB issued SFAS No. 123-R (revised 2004), ‘‘Share Based
        Payment,’’ which is a revision of SFAS No. 123, ‘‘Accounting for Stock-Based
        Compensation.’’ This Statement supersedes APB Opinion No. 25, ‘‘Accounting for
        Stock Issued to Employees,’’ and its related implementation guidance. This
        Statement focuses primarily on accounting for transactions in which an entity
        obtains employee services in share-based payment transactions and is effective
        for fiscal years beginning after June 15, 2005. As we have already adopted
        SFAS
        No. 123, we do not believe that this revision will have a significant effect
        on
        our consolidated statements of financial position, results of operations
        and
        cash flows.
 
 **Risk
        Factors That May Affect Future Results**
  *Any
        investment in our common stock involves a high degree of risk.  You
        should
        consider carefully the risks described below, together with the other
        information contained in this report.  If any of the following events
        actually occurs, our business, financial condition and results of operations
        may
        suffer materially.  As a result, the market price of our common stock
        could
        decline, and you could lose all or part of your investment in our common
        stock.*
 
 ***Risks
        Related To Our Business and Our Industry***
  **Our
        growth cannot be assured. Even if we do experience growth, we cannot assure
        you
        that we will grow profitably.**
  Although
        we have experienced significant growth in our net sales since 2001, historical
        growth rates may not be sustainable and are not necessarily indicative of
        future
        operating results. Our efforts to generate future growth in net sales might
        not
        result in increased net sales, higher margins or continued profitability.
        To the
        extent that net sales do not grow at anticipated rates, that increases in
        operating expenses precede or are not subsequently followed by commensurate
        increases in net sales, or that we are unable to adjust operating expense
        levels
        accordingly, our business, results of operations and financial condition
        could
        be materially and adversely affected.
 
 **We
        have experienced losses in the past and may incur losses in the
        future.**
  We
        experienced net losses for our 2004 fiscal year and for each of the fiscal
        years
        from 1995 to 2001. Furthermore, our predecessor company declared bankruptcy
        in
        July 1997 and emerged from bankruptcy in July 1999. We expect that our expenses
        will increase in the near term in order to continue expanding our business
        and
        to meet the requirements related to being a public company. We may incur
        losses
        in future periods. If we are not able to maintain profitability, our stock
        price
        is likely to decline.
   -27-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **If
        we experience fluctuations in our results of operations or rate of growth
        and
        fail to meet net sales and earnings expectations, our stock price may fall
        rapidly and without advance notice.**
  We
        base
        our current and future expense levels and our investment plans on estimates
        of
        our future net sales, our furture estimated gross margin, and our future
        rate of
        growth, and our actual results may vary significantly from these estimates.
        We
        expect that our expenses will generally increase in the future, but may
        fluctuate from period to period. We may not be able to adjust our spending
        quickly enough if our net sales fall short of our expectations or our gross
        margins erode.
 
 Our
        results of operations depend on both the continued growth of demand for the
        products we offer and, to a lesser extent, general economic and business
        conditions. Any softening of demand for the products we offer will harm our
        operating results.
 
 A
        new
        product introduction by us may result in higher growth in our net sales in
        the
        quarter in which the product is introduced as compared to subsequent quarters,
        when the customer is re-stocking the item rather than stocking it for the
        first
        time.
 
 Our
        results of operations may fluctuate on a quarterly basis, which could result
        in
        decreases in our stock price. Growth in net sales may not be sustainable
        and may
        decrease in the future. We believe that period-to-period comparisons of our
        results of operations may not be meaningful, and you should not rely upon
        them
        as an indication of future performance.
 
 **We
        depend on a limited number of customers for a significant portion of our
        sales,
        and our financial success is linked to the success of our customers, our
        customers’ commitment to our products and our ability to satisfy and retain our
        customers. Some of our customers have experienced financial difficulties
        during
        the past several years.**
  We
        depend
        on a limited number of customers for a significant portion of our sales.
        We
        expect that this customers will continue to represent a significant portion
        of
        our net sales in the future, especially with the consolidation that is occurring
        in the retail industry.  One customer accounted for more than 10%
        of our
        net sales in the three and nine months ended October 1, 2005.
  We
        sell
        the majority of our products to department stores, national chain stores
        and
        mass merchants which in turn sell our products to consumers. We do not have
        long-term contracts with any of our customers, as sales to retailers are
        generally made on an order-by-order basis. If we cannot fill customers’ orders
        on time, orders may be cancelled and relationships with customers may suffer,
        which could have an adverse effect on us. Furthermore, if any of our customers
        experiences a significant downturn in its business, or fails to remain committed
        to our products or brands, the customer may reduce or discontinue purchases
        from
        us. The loss of a customer or a reduction in the amount of our products
        purchased by one or more of our customers could have a material adverse effect
        on our business, results of operations or financial condition.
  During
        the past several years, various retailers, including some of our customers,
        have
        experienced significant changes and difficulties, including restructurings,
        bankruptcies and liquidations. These and other financial problems experienced
        by
        some of our customers, as well as general weakness in the retail environment,
        increase the risk of extending credit to these customers. A significant adverse
        change in a customer relationship or in a customer’s financial position could
        cause us to limit or discontinue business with that customer, require us
        to
        assume more credit risk relating to that customer’s receivables or limit our
        ability to collect amounts related to previous purchases by that customer,
        all
        of which could have a material adverse effect on our business, results of
        operations or financial condition.
   -28-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **We
        operate in a highly competitive market, and the size and resources of some
        of
        our competitors may allow them to compete more effectively than we can,
        resulting in a loss of market share and, as a result, a decrease in net sales
        and profitability.**
  The
        intimate apparel industry is highly competitive. Competition is generally
        based
        upon product quality, brand name recognition, price, selection, service and
        purchasing convenience. Both branded and private brand manufacturers compete
        in
        the intimate apparel industry. Our primary competitors include Cupid Foundations
        Inc., Gap Inc., Jockey International, Inc., Kellwood Company, the Lane Bryant
        division of Charming Shoppes, Inc., Sara Lee Corporation, Triumph International,
        VF Corporation, the Victoria’s Secret division of Limited Brands, Inc., Wacoal
        Corp., and The Warnaco Group, Inc. Because of the highly fragmented nature
        of
        the balance of the industry, both domestically and internationally, we also
        compete with many small manufacturers and retailers. Additionally, department
        stores, specialty stores and other retailers, including our customers, have
        significant private brand product offerings that compete with us, and these
        retailers may choose to source these private brand product offerings directly
        from third-party manufacturers.
 
 Specialty
        retailers, such as Victoria’s Secret, have grown at a faster rate in recent
        years than the industry in general and more than department stores and national
        chain stores, to which we sell the majority of our products, in particular.
        Furthermore, many specialty retailers primarily sell private brand products,
        and
        we cannot predict the future growth, if any, for our products in the specialty
        retailer channel.
 
 Many
        of
        our competitors have significantly greater financial, marketing and other
        resources, broader product lines outside of intimate apparel and larger customer
        bases than we have and are less financially leveraged than we are. As a result,
        these competitors may be able to:
 Ø
              adapt
                  to changes in customer requirements more quickly;Ø
              introduce
                  new and more innovative products more
                  quickly;
 
 Ø
              better
                  adapt to downturns in the economy or other decreases in
                  sales;Ø
              better
                  withstand pressure to accept customer returns of their products
                  or
                  reductions in inventory levels carried by our
                  customers;
 
 Ø
              take
                  advantage of acquisition and other opportunities more
                  readily;Ø
              devote
                  greater resources to the marketing and sale of their
                  products;
 
 Ø
              adopt
                  more aggressive pricing policies and provide greater contributions
                  to
                  retailer price markdowns and cooperative advertising arrangements
                  than we
                  can; andØ
              control
                  sourcing production, thereby creating delays for our
                  products.
 
 The
        elimination of quotas and other trade barriers could increase competition
        further, as barriers to entry into the industry are reduced.
 
 We
        might
        not be able to compete successfully with these competitors in the future.
        If we
        fail to compete successfully, our market share and results of operations
        would
        be materially and adversely affected.
 
 **Retail
        trends could result in increased downward pressure on our prices, reduced
        floor
        space for our products and other changes that could be harmful to our
        business.**
  There
        has
        been a growing trend toward retailer consolidation and, as a result, we
        increasingly sell our products to a reduced number of customers. As a result
        of
        this consolidation, we have observed an increased centralization of buying
        decisions and greater negotiating power by such retailers. Policy changes
        by our
        customers, such as reductions in inventory levels, limitations on access
        to
        display space, development of private brands and other changes by customers,
        could result in lower net sales and lower gross margins. These consolidations
        in
        the retail industry, as well as further consolidations that may occur in
        the
        future, could result in price and other competition that could damage our
        business. Additionally, as our customers grow larger, they may increasingly
        require us to provide them with our products on an exclusive basis, which
        would
        cause an increase in the number of stock keeping units, or SKUs, we must
        carry
        and, consequently, our inventory levels and working capital requirements
        would
        increase. The potential impact of these types of policy changes by our customers
        has been amplified by the recent consolidation of retailers, as each retailer
        now represents a greater portion of our sales.
   -29-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **The
        intimate apparel industry is subject to pricing pressures that may cause
        us to
        lower the prices we charge for our products.**
 
 Average
        prices in the intimate apparel industry have been declining over the past
        several years, primarily as a result of the growth of the mass merchant channel
        of distribution, increased competition, consolidation in the retail industry
        and
        a general economic slowdown.
 
 To
        remain
        competitive, we must adjust our prices from time to time in response to these
        industry-wide pricing pressures. Many of our competitors source their product
        requirements, as we do, from lesser-developed countries to achieve lower
        operating costs. Our competitors may possibly source from regions with lower
        costs than those of our sourcing partners and those competitors may apply
        such
        additional cost savings to further reduce prices.
 
 Moreover,
        increased customer demands for markdown allowances, incentives and other
        forms
        of economic support reduce our gross margins and affect our profitability.
        Our
        financial performance may be negatively affected by these pricing pressures
        if
        we are forced to reduce our prices without being able to correspondingly
        reduce
        our production costs or if our production costs increase and we cannot increase
        our prices.
 
 **We
        may not be able to keep pace with constantly changing fashion trends, and
        if we
        misjudge consumer preferences, the image of one or more of our brands may
        suffer
        and the demand for our products may decrease.**
  Our
        success depends, in part, on management’s ability to anticipate and respond
        effectively to rapidly changing fashion trends and consumer tastes and to
        translate market trends into appropriate, saleable product offerings. If
        we are
        unable to successfully anticipate, identify or react to changing styles or
        trends and misjudge the market for our products or any new product lines,
        our
        sales may be lower and we may be faced with a significant amount of unsold
        finished goods inventory. In response, we may be forced to increase our
        marketing promotions, to provide markdown allowances to our customers, or
        to
        liquidate excess merchandise, any of which could have a material adverse
        effect
        on our net sales and profitability. Our brand image may also suffer if customers
        believe that we are no longer able to offer innovative products, respond
        to the
        latest fashion trends or maintain the quality of our products.
 
 Even
        if
        we are able to anticipate and respond effectively to changing fashion trends
        and
        consumer preferences, our competitors may quickly duplicate or imitate one
        or
        more aspects of our products, promotions, advertising, brand image and business
        processes, whether or not they are protected under applicable intellectual
        property law, which may materially reduce our sales and
        profitability.
 
 -30-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **Our
        customers may decide to discontinue carrying one or more of our brands or
        product lines in their stores if the brand or product line does not generate
        sufficient retail sales.**
 
 Retailers
        have in the past sought, and may in the future seek, to consolidate their
        product offerings and reduce the number of overlapping products they carry
        in an
        effort to reduce their inventory and other costs. In doing so, retailers
        may
        decide not to purchase one or more of our brands or product lines if that
        brand
        or product line does not generate sufficient retail sales and profits for
        the
        retailer. The decision by any one of our major customers to stop selling
        one or
        more of our brands or product lines may result in other retailers following
        suit. Even if other retailers do not stop selling the brand or product line,
        the
        loss of economies of scale may make it less profitable for us to continue
        selling the brand or product line. We may ultimately be required to discontinue
        selling that brand or product line, which may have a material adverse effect
        on
        our net sales and profitability.
 
 **Our
        substantial leverage could adversely affect our financial
        condition.**
  Our
        substantial indebtedness could have significant negative consequences. For
        example, it could:
 
 Ø
              increase
                  our sensitivity to interest rate fluctuations;Ø
              limit
                  our ability to obtain additional financing to fund future working
                  capital,
                  capital expenditures, and other general corporate requirements,
                  or to
                  carry out other aspects of our business
                  plan;
 
 Ø
              require
                  us to dedicate a substantial portion of our cash flows from operations
                  to
                  pay principal of, and interest on, our indebtedness, thereby reducing
                  the
                  availability of that cash flow to fund working capital, capital
                  expenditures or other general corporate purposes, or to carry out
                  other
                  aspects of our business plan;Ø
              limit
                  our flexibility in planning for, or reacting to, changes in our
                  business
                  and the industry;
 
 Ø
              cause
                  our suppliers to institute more onerous payment terms generally
                  or require
                  us to purchase letters of credit for this purpose;Ø
              limit
                  our ability to enter into new store leases or renew existing store
                  leases;
 
 Ø
              make
                  us more sensitive to any future reduction in our long-term credit
                  rating,
                  which could result in reduced access to the capital markets and
                  higher
                  interest costs on future financings;Ø
              lead
                  us to have less favorable credit terms which would increase the
                  amount of
                  working capital necessary to conduct our business;
                  and
 
 Ø
              place
                  us at a competitive disadvantage compared to our competitors that
                  have
                  less debt.
 
 In
        addition, our credit facility contains financial and other restrictive covenants
        that may limit our ability to engage in activities that may be in our long-term
        best interests such as selling assets, strategic acquisitions, paying dividends,
        and borrowing additional funds. Our failure to comply with those covenants
        could
        result in an event of default which, if not cured or waived, could result
        in the
        acceleration of all of our debt which could leave us unable to meet some
        or all
        of our obligations. See Note 5 to our condensed consolidated financial
        statements included elsewhere in this Form 10-Q.
 
 **External
        events may cause disruptions to our supply chain, result in increased cost
        of
        sales or lead to an inability to deliver our products to our
        customers.**
  Historically,
        we sourced a substantial portion of our offshore production through a network
        of
        various vendors predominately in the Asia-Pacific region, including China.
        Commencing in August 2005, we moved all of our production offshore. There
        are
        myriad potential events that could disrupt our foreign supply chain, including
        the following:
 
 Ø
              political
                  instability, acts of war or terrorism, or other international events
                  resulting in the disruption of trade with countries where our sourcing
                  partners’ manufacturing facilities are located;Ø
              disruptions
                  in shipping and freight forwarding services, including as a result
                  of
                  dockworker or port strikes;
 
 Ø
              increases
                  in oil prices, which would increase the cost of
                  shipping;Ø
              interruptions
                  in the availability of basic services and infrastructure, including
                  power
                  shortages;
 
 Ø
              extraordinary
                  weather conditions (such as hurricanes) or natural disasters (such
                  as
                  earthquakes or tsunamis); orØ
              the
                  occurrence of an epidemic, the spread of which may impact our ability
                  to
                  obtain products on a timely basis.
 
 
 -31-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 These
        and
        other events could interrupt production in offshore facilities, increase
        our
        cost of sales, disrupt merchandise deliveries, delay receipt of the products
        into the United States or prevent us from sourcing our products at all.
        Depending on timing, these events could also result in lost sales, cancellation
        charges or excessive markdowns. Our future performance may be subject to
        the
        occurrence of such events, which are beyond our control, and which could
        have a
        material adverse effect on our financial condition and results of
        operations.
 
 **The
        loss of one or more of our suppliers of finished goods or raw materials may
        interrupt our supplies.**
  We
        purchase intimate apparel designed by us from a limited number of third-party
        manufacturers. In addition, approximately 80% of our total sourcing is
        concentrated in two foreign countries, China and Indonesia. We do not have
        any
        material or long-term contracts with any of our suppliers. Furthermore, our
        finished goods suppliers also purchase the fabrics and accessories used in
        our
        products from a limited number of suppliers. The loss of one or more of these
        vendors could interrupt our supply chain and impact our ability to deliver
        products to our customers, which would have a material adverse effect on
        our net
        sales and profitability.
 
 **Increases
        in the price of raw materials used to manufacture our products could materially
        increase our costs and decrease our profitability.**
  The
        principal fabrics used in our business are made from cotton, synthetic fabrics
        and cotton-synthetic blends. The prices for these fabrics are dependent on
        the
        market price for the raw materials used to produce them, primarily cotton
        and
        chemical components of synthetic fabrics, and there can be no assurance that
        prices for these and other raw materials will not increase in the near future.
        These raw materials are subject to price volatility caused by weather, supply
        conditions, power outages, government regulations, economic climate and other
        unpredictable factors. Fluctuations in crude oil or petroleum prices may
        also
        influence the prices of related items such as chemicals, dyestuffs, man-made
        fiber and foam. Any raw material price increase would increase our cost of
        sales
        and decrease our profitability unless we are able to pass higher prices on
        to
        our customers. In addition, if one or more of our competitors is able to
        reduce
        its production costs by taking advantage of any reductions in raw material
        prices or favorable sourcing agreements, we may face pricing pressures from
        those competitors and may be forced to reduce our prices or face a decline
        in
        net sales, either of which could have a material and adverse effect on our
        business, results of operations and financial condition.
 
 **Changing
        international trade regulation and future quantitative limits, duties or
        tariffs
        may increase our costs or limit the amount of products that we can import
        from
        suppliers in a particular country.**
  Our
        operations are, or may become, subject to various existing and proposed
        international trade agreements and regulations such as the North American
        Free
        Trade Agreement, the Central American Free Trade Agreement and the Caribbean
        Basin Initiative, and the activities and regulations of the World Trade
        Organization, or WTO. These trade agreements can impose requirements that
        negatively affect our business, such as limiting the countries from which
        we can
        source our products, restricting availability of raw material sourcing by
        requiring fabric from a particular country and setting quantitative limits
        on
        products that may be imported from a particular country. We are exposed to
        these
        risks as we import goods from third-party suppliers in Asia and Central America.
 
 The
        countries in which our products are manufactured, or into which they are
        imported, may from time to time impose additional new regulations, or modify
        existing regulations, including:
 
 Ø
              additional
                  quantitative limits, duties, taxes, tariffs and other charges on
                  imports,
                  including retaliatory duties or other trade sanctions, which may
                  or may
                  not be based on WTO rules, and which would increase the cost of
                  products
                  purchased from suppliers in such countries;Ø
              quantitative
                  limits that may limit the quantity of goods which may be imported
                  into the
                  United States or other jurisdictions from a particular country,
                  including
                  the imposition of a ‘‘safeguard’’ mechanism by the U.S. government or
                  governments in other jurisdictions, such as the European Union
                  and its
                  member countries, limiting our ability to import goods from
                  China;
 
 Ø
              changes
                  in classification of products that could result in higher duty
                  rates than
                  we have historically paid;Ø
              modification
                  of the trading status of certain
                  countries;
 
 Ø
              requirements
                  as to where raw materials must be purchased;Ø
              creation
                  of export licensing requirements, imposition of restriction on
                  export
                  quantities or specification of minimum export pricing;
                  or
 
 Ø
              creation
                  of other restrictions on imports.
   -32-
 **Table
            of Contents**
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 Adverse
        changes in these costs and restrictions could interrupt production in offshore
        facilities or delay receipt of our products in the United States and
        international markets, which would harm our business. Safeguard actions have
        been initiated with respect to panties and bras by the United States for
        the
        2005 calendar year. The safeguard action with respect to panties has resulted
        in
        an embargo on panties imported from China into the United States, which
        forecloses any such imports through the end of the 2005 calendar year. The
        safeguard actions with respect to bras will probably result in an embargo
        sometime in the fourth quarter of 2005 for the balance of the 2005 calendar
        year. The European Union (EU) has entered into a trade agreement with China
        that
        has resulted in an embargo on bras imported from China into the EU for the
        balance of 2005 and quantitative restrictions on other categories. Furthermore,
        future trade agreements could provide our competitors with an advantage over
        us,
        or increase our costs, either of which could have a material adverse effect
        on
        our business, results of operations or financial condition.
 
 **Decreases
        in the value of the U.S. dollar could materially increase our cost of
        sales.**
  We
        have
        shifted all of our production to third-party suppliers, primarily in countries
        in the Asia-Pacific region. While we pay these third-party suppliers in U.S.
        dollars, their costs are typically based upon the local currency of the country
        in which they operate. Any decrease in the value of the U.S. dollar against
        these foreign currencies could result in a corresponding increase in our
        future
        cost of sales and decrease in our profitability, which could have a material
        adverse effect on our financial condition and operating results.
 
 **We
        expect to continue to expand our sales operations outside of the United States
        and we may be unsuccessful in these efforts.**
  We
        expect
        to continue to expand our operations outside of the United States. There
        are
        certain risks inherent in doing business in international markets, which
        include:
 
 Ø
              difficulties
                  in staffing and managing foreign operations;Ø
              understanding
                  consumer tastes and fashion trends in foreign
                  jurisdictions;
 
 Ø
              the
                  inability to manage and coordinate the various regulatory requirements
                  of
                  multiple jurisdictions that are constantly evolving and subject
                  to
                  unexpected change;Ø
              reduced
                  or no protection for intellectual property
                  rights;
 
 Ø
              fluctuations
                  in exchange rates;Ø
              less
                  developed technological
                  infrastructures;
 
 Ø
              inability
                  to change management in these other countries due to applicable
                  local law,
                  severance obligations and social norms;Ø
              difficulty
                  in obtaining the necessary regulatory approvals for planned expansion,
                  if
                  any, and the possibility that any approvals that are obtained may
                  impose
                  restrictions on the operation of our
                  business;
 
 Ø
              reductions
                  in business activity in those markets due to holidays and other
                  seasonal
                  slowdowns in the localized retail industry; andØ
              potentially
                  adverse tax consequences.
 
 Our
        inability to manage these risks effectively could adversely affect our business
        and limit our ability to expand our international operations, which could
        have a
        material adverse effect on our business, financial condition and results
        of
        operations.
 
 **Our
        independent registered public accounting firm previously reported a material
        weakness in our internal control over financial reporting. If such material
        weakness were to recur, it could result in a material misstatement in our
        financial statements that would not be prevented or detected, cause investors
        to
        lose confidence in our reported financial information and have a negative
        effect
        on the trading price of our stock.**
  In
        connection with the audit of our financial statements for the 2003 fiscal
        year,
        in March 2004, our independent registered public accounting firm reported
        to our
        audit committee a ‘‘material weakness’’ in our internal control over financial
        reporting. In general, a material weakness is defined as a control deficiency,
        or combination of control deficiencies, that results in more than a remote
        likelihood that a material misstatement of the annual or interim financial
        statements will not be prevented or detected. The material weakness reported
        by
        our independent registered public accounting firm was that the overall design
        and operation of our internal control over financial reporting were insufficient
        to effectively provide reasonable assurance of our ability to generate reliable
        financial information in accordance with generally accepted accounting
        principles. This was because:
   -33-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 Ø
              our
                  accounting systems were not sufficiently integrated, thereby requiring
                  an
                  excessive amount of manual intervention to initiate, record, process
                  and
                  report financial data;Ø
              our
                  staffing levels of accounting personnel who possessed the requisite
                  knowledge of generally accepted accounting principles to accurately
                  prepare analyses and support accounting entries was
                  insufficient;
 
 Ø
              our
                  monitoring and oversight of the accounting function was
                  inadequate;Ø
              our
                  internal control over financial reporting did not include appropriate
                  reviews and approvals of transactions, accounting entries or the
                  data
                  output from our accounting systems;
                  and
 
 Ø
              matters
                  raised in the management letter relating to the audit for the 2002
                  fiscal
                  year were not addressed in a timely
                  fashion.
 
 We
        have
        employed qualified personnel and adopted and implemented policies and procedures
        to address the material weakness identified by our independent registered
        public
        accounting firm. Specifically, we hired a new Chief Financial Officer, Dorvin
        Lively, in November 2004, and a director of financial reporting. We have
        also
        engaged an accounting firm to augment the quality of our
 internal
        control over financial reporting. However, the process of designing and
        implementing effective internal control over financial reporting is a continuous
        effort that requires us to anticipate and react to changes in our business
        and
        the economic and regulatory environments and to expend significant resources
        to
        maintain a system of controls that is adequate to satisfy our reporting
        obligations as a public company.
 
 In
        preparing our financial statements for our 2004 fiscal year, management did
        not
        identify any material weaknesses or significant deficiencies related to our
        internal control over financial reporting or our operations. In addition,
        in
        connection with the audit of our consolidated financial statements for our
        2004
        fiscal year, our independent registered public accounting firm did not advise
        our management or the audit committee of any material weaknesses or significant
        deficiencies related to our internal control over financial
        reporting.
  Although
        we believe we have addressed all elements of the material weakness identified
        as
        a result of the fiscal 2003 audit with the remedial measures we have
        implemented, the measures we have taken to date or any future measures we
        may
        take might not sufficiently allow us to maintain adequate controls over our
        financial processes and reporting in the future. Furthermore, additional
        material weaknesses in our internal control over financial reporting could
        be
        discovered in the future.
 
 To
        the
        extent we identify any additional weaknesses in our internal control over
        financial reporting, significant resources from our management team and
        additional expenses may be required to implement and maintain effective controls
        and procedures. In addition, we may need to hire additional employees and
        outside consultants, and further train our existing employees. If the material
        weakness previously reported by our independent registered public accounting
        firm were to recur, if we fail to implement required new or improved controls,
        or if we encounter difficulties in their implementation, our operating results
        could be adversely affected. Therefore, we may fail to meet our reporting
        obligations or we may have material misstatements in our financial statements.
        Any such failure also could adversely affect the results of the periodic
        management evaluations and annual independent registered public accounting
        firm
        attestation reports regarding the effectiveness of our ‘‘internal control over
        financial reporting’’ that will be required when the Securities and Exchange
        Commission’s rules under Section 404 of the Sarbanes-Oxley Act of 2002 (the
‘‘Sarbanes-Oxley Act’’) become applicable to us, which is currently expected to
        occur beginning with our Annual Report on Form 10-K for the year ending December
        30, 2006. Ineffective internal control over financial reporting could also
        cause
        investors to lose confidence in our reported financial information, which
        could
        have a negative effect on the trading price of our common stock.
 
 **Any
        problems at our distribution centers could materially affect our ability
        to
        distribute our products.**
  Our
        distribution centers in Fayetteville, North Carolina and Shannon, Ireland
        serve
        our domestic and foreign customers. We do not have a backup facility or any
        alternate distribution arrangements in place. In the event that we experience
        problems at our distribution centers that impede the timeliness or fulfillment
        quality of the products being distributed, or that either of our distribution
        centers is partially or completely destroyed, becomes inaccessible, or is
        otherwise not fully usable, it would have a material adverse effect on our
        ability to distribute our products, which in turn would have a material adverse
        effect on our sales, profitability, financial condition and operating
        performance.
   -34-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **We
        may suffer negative publicity or be sued if the manufacturers of our merchandise
        violate labor laws or engage in practices that are viewed as
        unethical.**
 
 We
        rely
        on our sourcing personnel, utilizing established procedures, to select
        manufacturers with legal and ethical labor practices, but we cannot control
        the
        business and labor practices of our manufacturers. If one of these manufacturers
        violates, or is accused of violating, labor laws or other applicable
        regulations, or if such a manufacturer engages in labor or other practices
        that
        would be viewed as unethical if such practices occurred in the United States,
        we
        could in turn suffer negative publicity or be sued. In addition, if such
        negative publicity affected one of our customers, it could result in a loss
        of
        business for us.
 
 **If
        we are unable to renew or replace our store leases or enter into leases for
        new
        stores on favorable terms, or if we violate any of the terms of our current
        leases, our growth and profitability could be harmed.**
  We
        lease
        all of our outlet store locations. The majority of our store leases contain
        provisions for base rent plus an additional amount based on a percentage
        of
        sales in excess of an agreed upon minimum annual sales level. A number of
        our
        leases include a termination provision which applies if we do not meet certain
        sales levels during a specified period, typically in the third to fourth
        year of
        the lease. In addition, most of our leases will expire within the next ten
        years
        and generally do not contain options to renew. Furthermore, some of these
        leases
        contain various restrictions relating to the change of control of our company.
        Our leases also subject us to risks relating to compliance with changing
        outlet
        center rules and the exercise of discretion by our landlords on various matters
        within the outlet centers. If we are unable to renew or replace our store
        leases
        or enter into leases for new stores on favorable terms, or if we violate
        any of
        the terms of our current leases, our growth and profitability could be
        harmed.
 
 **Our
        company-operated outlet stores are heavily dependent on the ability and desire
        of consumers to travel and shop.**
  Our
        company-operated outlet stores are located principally in outlet centers,
        which
        are typically located at or near vacation destinations or away from large
        population centers where department stores and other traditional retailers
        are
        concentrated. As a result, developments that would lead to decreased travel,
        such as fuel shortages, increased fuel prices, travel restrictions, travel
        concerns, bad weather and other circumstances, including as a result of war,
        terrorist attacks or the perceived threat of war or terrorist attacks, could
        have a material adverse effect on us, as was the case after the September
        11th
        terrorist attacks. Other factors which could affect the success of our stores
        include:
 
 Ø
              the
                  location of the outlet center or the location of a particular store
                  within
                  an outlet center;Ø
              the
                  other tenants occupying space at the outlet
                  center;
 
 Ø
              increased
                  competition in areas where outlet centers are located;Ø
              the
                  opening of outlet centers closer to population centers, which could
                  materially decrease the traffic to existing outlet centers that
                  are
                  located further away from established population
                  centers;
 
 Ø
              a
                  downturn in the economy generally or in a particular area where
                  an outlet
                  center is located; andØ
              the
                  amount of advertising and promotional dollars spent by the landlord
                  of the
                  outlet center to attract consumers to the outlet
                  center.
 
 **We
        experience fluctuations in our comparable outlet store sales and
        margins.**
  Our
        continued success depends, in part, upon our ability to continue to further
        improve sales, as well as both gross margins and operating margins, at our
        company-operated outlet stores. A variety of factors affect comparable store
        sales, including competition, current economic conditions, the timing of
        release
        of new merchandise and promotional events, changes in our merchandise mix,
        the
        success of marketing programs and weather conditions. These factors may cause
        our comparable store sales results to differ materially from prior periods
        and
        from expectations.
 
 Our
        ability to further improve our comparable store sales results and margins
        depends in large part on improving our forecasting of demand and fashion
        trends,
        selecting effective marketing techniques, providing an appropriate mix of
        merchandise for our broad and diverse consumer base, managing inventory
        effectively, using effective pricing strategies, and optimizing store
        performance by controlling operating costs and closing underperforming stores.
        Any failure to meet the expectations of investors, security analysts or credit
        rating agencies in one or more future periods could reduce the market price
        of
        our common stock and cause our credit ratings to decline.
   -35-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **We
        are implementing changes to our IT systems that may disrupt
        operations.**
  We
        continue to evaluate and are currently implementing, in a phased approach,
        modifications and upgrades to our information technology systems for sourcing
        and distribution operations, financial reporting, planning and forecasting.
        Modifications involve replacing legacy systems with successor systems, making
        changes to legacy systems or acquiring new systems with new functionality.
        We
        might not successfully launch these new systems as planned or without
        disruptions to our operations. Information technology system disruptions,
        if not
        anticipated and appropriately mitigated, could have a material adverse effect
        on
        our operations.
 
 **We
        are subject to potential challenges relating to overtime pay and other
        regulations, and union contracts, that affect our relationship with our
        employees, which could adversely affect our business.**
  Federal
        and state laws governing our relationships with our employees affect our
        operating costs. These laws include wage and hour laws and regulations, fair
        labor standards, minimum wage requirements, overtime pay, unemployment tax
        rates, workers’ compensation rates, citizenship requirements and payroll taxes.
        A determination that we do not comply with these laws could harm our
        profitability or business reputation. Additional government-imposed increases
        in
        minimum wages, overtime pay, paid leaves of absence or mandated health benefits
        could also materially adversely affect us.
 
 We
        are a
        party to contracts with two separate unions. Our contract with Local 153
        of
        OPEIU union expired in September 2005 and our contract with UNITE-HERE union
        expires in September 2006. Renewal negotiations are in process with Local
        153.
        Our failure or inability to renew either of these contracts could have a
        material adverse effect on our ability to operate our business and on our
        results of operations.
 
 **We
        are subject to various laws and regulations in the countries in which we
        operate.**
  We
        are
        subject to federal, state and local laws and regulations affecting our business,
        including those promulgated under the Occupational Safety and Health Act,
        the
        Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber
        Product Identification Act, the rules and regulations of the Consumer Products
        Safety Commission and various labor, workplace and related laws, as well
        as
        environmental laws and regulations. Our international business is subject
        to
        similar regulations in the foreign countries in which we operate. We may
        be
        required to make significant expenditures to comply with governmental laws
        and
        regulations, including labeling laws and privacy laws, compliance with which
        may
        require significant additional expense. Complying with existing or future
        laws
        or regulations may materially limit our business and increase our costs.
        Failure
        to comply with such laws may expose us to potential liability and have a
        material adverse effect on our results of operations.
 
 **We
        cannot predict our future capital needs or our ability to obtain additional
        financing if we need it.**
  Our
        business is dependent upon the availability of adequate funding. Historically,
        we have satisfied these needs primarily through debt financing and, more
        recently, internally-generated funds and our initial public offering. We
        believe
        there are a significant number of capital intensive opportunities for us
        to
        maximize our growth and strategic position, including, among others,
        acquisitions, joint ventures, strategic alliances or other investments. As
        a
        result, we may need to raise additional funds to:
 
 Ø
              support
                  more rapid growth in our business;Ø
              develop
                  new or enhanced products;
 
 Ø
              respond
                  to competitive pressures;Ø
              acquire
                  complementary companies or
                  technologies;
 
 Ø
              expand
                  one or more of our distribution centers to support the growth of
                  our
                  business or to lease or build additional space;Ø
              fund
                  the working capital requirements of carrying additional
                  inventory;
 
 Ø
              enter
                  into strategic alliances or make acquisitions; andØ
              respond
                  to unanticipated capital needs.
 
 
 -36-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 We
        might
        not be able to obtain additional financing, if needed, in amounts or on terms
        acceptable to us, if at all. If sufficient funds are not available or are
        not
        available on terms acceptable to us, our ability to fund our expansion, take
        advantage of acquisition opportunities, develop or enhance our products,
        or
        otherwise respond to competitive pressures would be significantly limited.
        These
        limitations could materially and adversely affect our business, results of
        operations and financial condition.
 
 **We
        might not successfully integrate future acquisitions, which could have a
        material adverse effect on our business, financial condition, results of
        operations and cash flows.**
  Although
        members of our current management team have previous experience in integrating
        acquisitions, they have not completed any acquisitions as a team. If appropriate
        opportunities present themselves, we may acquire or invest in businesses,
        products or technologies that we believe are strategic. We might not be able
        to
        identify, negotiate or finance any future acquisition or investment
        successfully. Even if we do succeed in acquiring or investing in a business,
        product or technology, such acquisitions and investments involve a number
        of
        risks, including:
 
 Ø
              we
                  may find that the acquired company or assets do not further our
                  business
                  strategy, or that we overpaid for the company or assets, or that
                  the
                  economic conditions underlying our acquisition decision
                  change;Ø
              we
                  may have difficulty integrating the products with our existing
                  product
                  lines;
 
 Ø
              we
                  may have difficulty integrating the operations and personnel of
                  the
                  acquired business, or retaining the key personnel of the acquired
                  business;Ø
              our
                  ongoing business and management’s attention may be disrupted or diverted
                  by transition or integration issues and the complexity of expanding
                  into
                  new markets; and
 
 Ø
              we
                  may acquire a company with a different customer base than ours,
                  and those
                  customers may elect to shift their business to other companies
                  following
                  the acquisition.
 
 Future
        acquisitions could have an adverse effect on our operating results, particularly
        in the fiscal quarters immediately following their completion while we integrate
        the operations of the acquired business. Once integrated, acquired operations
        may not achieve levels of revenues, profitability or productivity comparable
        with those achieved by our existing operations, or otherwise perform as
        expected.
 
 Furthermore,
        the consideration paid in connection with an investment or acquisition will
        affect our financial results. If we were to proceed with one or more significant
        acquisitions in which the consideration included cash, we could be required
        to
        use a substantial portion of our available cash and our available borrowing
        capacity to consummate any acquisition. To the extent we issue shares of
        capital
        stock or other rights to purchase capital stock, including options or other
        rights, existing stockholders may be diluted and earnings per share may
        decrease. In addition, acquisitions may result in the incurrence of debt,
        large
        one-time write-offs (such as those relating to acquired in-process research
        and
        development costs) or restructuring charges. They may also result in goodwill
        and other intangible assets that are subject to impairment tests, which could
        result in future impairment charges. Any of these factors could have a material
        adverse effect on our business, financial condition, results of operations
        and
        cash flows.
 
 **Our
        failure to register, renew or otherwise protect our trademarks and other
        intellectual property could have a negative impact on the value of our brand
        names and our ability to use those names in certain geographical
        areas.**
  We
        use
        trademarks on nearly all of our products, which is an important factor in
        creating a market for our goods, in identifying us, and in distinguishing
        our
        goods from those of others. We believe our trademarks, service marks,
        copyrights, trade secrets, patent applications and similar intellectual property
        are critical to our success. We rely on trademark, copyright and other
        intellectual property laws to protect our proprietary rights. We also depend
        on
        trade secret protection through confidentiality agreements with our employees,
        licensees and others and through license agreements with our licensees and
        other
        partners. We may not have agreements containing adequate protective provisions
        in every case and the contractual provisions that are in place may not provide
        us with adequate protection in all circumstances. The unauthorized reproduction
        or other misappropriation of our intellectual property could diminish the
        value
        of our brand, competitive advantages or goodwill and result in decreased
        net
        sales.
   -37-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 Despite
        our efforts to protect our intellectual property rights, intellectual property
        laws afford us only limited protection. A third party could copy our products,
        designs and/or brands, or otherwise obtain information from us without
        authorization. Accordingly, we may not be able to prevent misappropriation
        of
        our intellectual property or to deter others from developing similar products.
        Further, monitoring the unauthorized use of our intellectual property, including
        our trademarks and service marks, is difficult. Litigation has been and may
        continue to be necessary to enforce our intellectual property rights or to
        determine the validity and scope of the proprietary rights of others. Litigation
        of this type has resulted in and could in the future result in further
        substantial costs and diversion of resources, may result in counterclaims
        or
        other claims against us and could significantly harm our results of operations.
        In addition, the laws of some foreign countries do not protect our proprietary
        rights to the same extent as do the laws of the United States. In addition,
        we
        have not obtained trademark protection for all of our brands in all of the
        countries where we sell our products. This could leave us helpless to stop
        potential infringers or possibly even unable to sell our products in certain
        territories.
 
 **We
        may have disputes with, or be sued by, third parties for infringement or
        misappropriation of their proprietary rights, which could have a negative
        impact
        on our business.**
  Other
        parties have asserted in the past, and may assert in the future, claims with
        respect to trademark, patent, copyright or other intellectual property rights
        that are important to our business. Other parties might seek to block the
        use
        of, or seek monetary damages or other remedies for the prior use of, our
        trademarks or other intellectual property or the sale of our products as
        a
        violation of their trademark, patent or other proprietary rights. Defending
        any
        claims, even claims without merit, could be time-consuming, result in costly
        settlements, litigation or restrictions on our business and could damage
        our
        reputation.
 
 In
        addition, there may be prior registrations or use of intellectual property
        in
        the United States or foreign countries (including, but not limited to, similar
        or competing marks or other proprietary rights) of which we are not aware.
        In
        all such countries, it may be possible for any third-party owner of a trademark
        registration in that country or other proprietary right to enjoin or limit
        our
        expansion into those countries or to seek damages for our use of such
        intellectual property in such countries. In the event a claim against us
        were
        successful and we could not obtain a license to the relevant intellectual
        property or redesign or rename our products or operations to avoid infringement,
        our business, financial condition or results of operations could be harmed.
        In
        addition, securing registrations does not fully insulate us against intellectual
        property claims, as another party may have rights superior to our registration
        or our registration may be vulnerable to attack on various other grounds.
 
 Any
        such
        claims of infringement or misappropriation, whether meritorious or not,
        could
 
 Ø
              be
                  expensive and time consuming to defend;Ø
              prevent
                  us from operating our business, or portions of our
                  business;
 
 Ø
              cause
                  us to cease producing and marketing certain of our
                  products;Ø
              result
                  in the loss of one or more key
                  customers;
 
 Ø
              require
                  us to re-label or re-design our products, if feasible;Ø
              result
                  in significant monetary liability;
 
 Ø
              divert
                  management’s attention and resources; andØ
              potentially
                  require us to enter into royalty or licensing agreements in order
                  to
                  obtain the right to use necessary intellectual
                  property.
 
 Third
        parties might assert infringement claims against us in the future with respect
        to any of our products. Any such assertion might require us to enter into
        royalty arrangements or litigation that could be costly to us. Any of these
        events could have a material adverse effect on our business, results of
        operations or financial condition.
 
 **Sales
        of shares by us or our stockholders could limit our ability to utilize certain
        income tax benefits.**
  At
        January 1, 2005, we had approximately $92.6 million of federal and state
        net
        operating loss carryforwards available for future utilization during the
        years
        2005 through 2023. To the extent any sales of common stock by us or our
        stockholders subsequent to the initial public offering result in an ‘‘ownership
        change’’ within the meaning of Section 382 of the Internal Revenue Code, we may
        not be able to realize certain of these net operating loss carryforwards
        existing at the date of such ownership change or the timing of when we can
        use
        these net operating loss carryforwards may be modified.  For more
        information regarding these potential income tax benefits and our net operating
        loss carryforwards, see ‘‘Management’s Discussion and Analysis of Financial
        Condition and Results of Operations—Trends in Our Business—Income
        Taxes.’’
   -38-
 **Table
            of Contents**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **We
        are dependent on our management team, and the loss of any key member of this
        team may prevent us from implementing our business plan in a timely
        manner.**
  Our
        success depends largely upon the continued services of our executive officers
        and other key personnel, including senior design, marketing, operational
        and
        finance executives. Any loss or interruption of the services of one or more
        of
        our executive officers or key personnel could result in our inability to
        manage
        our operations effectively and/or pursue our business strategy.
 
 **Because
        competition for our employees is intense, we may not be able to attract and
        retain the highly skilled employees we need to support our planned
        growth.**
  Our
        ability to provide high quality products, as well as our ability to execute
        our
        business plan generally, depends in large part upon our ability to attract
        and
        retain highly qualified personnel. Competition for such personnel is intense.
        We
        have in the past experienced, and we expect to experience in the future,
        difficulty in hiring and retaining highly skilled employees with appropriate
        qualifications. The location of our corporate offices outside of New York
        City
        has made it increasingly difficult to recruit personnel in certain fields,
        such
        as finance, marketing and design. We might not be successful in our efforts
        to
        recruit and retain the required personnel. If we fail to attract new personnel
        or fail to retain and motivate our current personnel, our business and future
        growth prospects could be severely harmed.
 
 **As
        we enter new markets, we may not be able to successfully adapt our products
        and
        marketing strategy for use in those markets.**
  Our
        strategy includes leveraging our brands and products to enter new markets.
        We
        might not be successful in our efforts to adapt our products and marketing
        strategy for use in those markets. If these efforts are not successful, we
        may
        realize less than expected earnings, which in turn could result in a decrease
        in
        the market value of our common stock. Furthermore, these efforts may divert
        management attention or inefficiently utilize our resources.
 
 **The
        requirements of being a public company may strain our resources and require
        significant management time and attention.**
  As
        a
        public company, we are subject to the reporting requirements of the Securities
        Exchange Act of 1934, the Sarbanes-Oxley Act and the rules of the New York
        Stock
        Exchange (NYSE). The requirements of these rules and regulations have in
        the
        past increased, and may further increase in the future, our legal and financial
        compliance costs, make some activities more difficult, time-consuming or
        costly
        and may also place undue strain on our systems and resources. The Securities
        Exchange Act of 1934 requires, among other things, that we file annual,
        quarterly and current reports with respect to our business and financial
        condition. The Sarbanes-Oxley Act requires, among other things, that we report
        on the effectiveness of our disclosure controls and procedures, and internal
        controls over financial reporting. In order to maintain and improve the
        effectiveness of our disclosure controls and procedures, and internal control
        over financial reporting, significant resources and management oversight
        will be
        required. As a result, management’s attention may be diverted from other
        business concerns, which could have a material adverse effect on our business,
        financial condition, results of operations and cash flows.
 
 These
        rules and regulations could also make it more difficult for us to attract
        and
        retain qualified independent members of our board of directors and qualified
        members of our management team. As an example, being a public company has
        significantly increased our cost for director and officer liability insurance.
        We may be required to accept reduced coverage or incur substantially higher
        costs to obtain such insurance coverage in the future. NYSE marketplace rules
        require that a majority of our board of directors and all of certain committees
        of the board of directors consist of independent directors. While each of
        the
        committees of our board of directors currently meet the NYSE independence
        requirements, the board of directors currently does not meet these requirements,
        with four out of eight directors being independent. We intend to have a board
        of
        directors comprised of a majority of independent directors within 12 months
        after our initial public offering, in reliance upon the transition period
        provided by the rules of the NYSE for issuers listing in conjunction with
        their
        initial public offering. We might not be able to expand our board of directors
        to include a majority of independent directors in a timely fashion to comply
        with the applicable requirements.
   -39-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
 
 **The
        worldwide apparel industry is heavily influenced by general economic
        conditions.**
 
 The
        apparel industry is highly cyclical and heavily dependent upon the overall
        level
        of consumer spending. Purchases of apparel and related goods tend to be highly
        correlated with changes in the disposable income of consumers. Consumer spending
        is dependent on a number of factors, including actual and perceived economic
        conditions affecting disposable consumer income (such as unemployment, wages
        and
        salaries), business conditions, interest rates, availability of credit and
        tax
        rates in the general economy and in the international, regional and local
        markets where our products are sold. Our wholesale customers may anticipate
        and
        respond to adverse changes in economic conditions and uncertainty by reducing
        inventories and canceling orders. Furthermore, in such circumstances, our
        customers may encounter difficulties in other apparel categories or their
        non-apparel businesses that may cause them to change their strategy with
        respect
        to intimate apparel. As a result, any deterioration in general economic
        conditions, reductions in the level of consumer spending or increases in
        interest rates in any of the regions in which we compete could adversely
        affect
        the sales of our products.
 
 A
        return
        to recessionary or inflationary conditions, whether in the United States
        or
        globally, additional terrorist attacks or similar events could have further
        adverse effects on consumer confidence and spending and, as a result, could
        have
        a material adverse effect on our financial condition and results of
        operations.
 
 ***Other
        Risks***
  **The
        market price of our common stock may be highly volatile or may decline
        regardless of our operating performance.**
  The
        trading price of our common stock may fluctuate substantially. The price
        of our
        common stock may be higher or lower than the price you pay to purchase your
        shares, depending on many factors, some of which are beyond our control.
        Broad
        market and industry factors may adversely affect the market price of our
        common
        stock, regardless of our actual operating performance. The fluctuations could
        cause you to lose all or part of your investment in our shares of common
        stock.
        Factors that could cause fluctuation in the trading price of our common stock
        may include, but are not limited to, the following:
  Ø
              price
                  and volume fluctuations in the overall stock market from time to
                  time;Ø
              significant
                  volatility in the market price and trading volume of apparel companies
                  generally or intimate apparel companies in particular or other
                  consumer
                  product companies;
 
 Ø
              actual
                  or anticipated variations in our earnings or operating results;Ø
              actual
                  or anticipated changes in financial estimates by us or by any securities
                  analysts who might cover our stock;
 
 Ø
              market
                  conditions or trends in our industry and the economy as a whole;Ø
              announcements
                  by us or our competitors of significant acquisitions, strategic
                  partnerships or divestitures;
 
 Ø
              announcements
                  of investigations or regulatory scrutiny of our operations or lawsuits
                  filed against us;Ø
              capital
                  commitments;
 
 Ø
              loss
                  of a major customer or the loss of a particular product line with
                  a major
                  customer;Ø
              additions
                  or departures of key personnel; and
 
 Ø
              sales
                  of our common stock, including sales of large blocks of our common
                  stock
                  or sales by our directors and officers.
  In
        addition, if the market for apparel company stocks or the stock market in
        general experiences loss of investor confidence, the trading price of our
        common
        stock could decline for reasons unrelated to our business, results of operations
        or financial condition. The trading price of our common stock might also
        decline
        in reaction to events that affect other companies in our industry or related
        industries even if these events do not directly affect us.
  In
        the
        past, following periods of volatility in the market price of a company's
        securities, securities class action litigation has often been brought against
        that company. Due to the potential volatility of our stock price, we may
        therefore be the target of securities litigation in the future. Securities
        litigation could result in substantial costs and divert management's attention
        and resources from our business.
   -40-
 **Table
            of Contents**
 
 **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
        (Continued)**
  **The
        concentrated ownership of our capital stock by insiders will likely limit
        your
        ability to influence corporate matters.**
  Our
        executive officers, directors, current 5% or greater stockholders and affiliated
        entities together beneficially own approximately 33.9% of our common stock
        outstanding. Additionally, Ares Corporate Opportunities Fund, L.P. (“Ares”), who
        is our largest stockholder, beneficially owns approximately 31.5% of our
        common
        stock outstanding. As a result, Ares may be able to influence or control
        matters
        that require approval by our stockholders, including the election of directors
        and approval of significant corporate transactions such as mergers and
        acquisitions. Ares may also have interests that differ from yours and may
        vote
        in a way with which you disagree and which may be adverse to your interests.
        Corporate action might be taken even if other stockholders, including those
        who
        purchase shares in this offering, oppose them. This concentration of ownership
        might also have the effect of delaying or preventing a change of control
        of our
        company that other stockholders may view as beneficial, could deprive our
        stockholders of an opportunity to receive a premium for their common stock
        as
        part of a sale of our company and might ultimately affect the market price
        of
        our common stock.
  **The
        future sale of shares of our common stock may negatively affect our stock
        price.**
  We
        currently have 8,974,468 shares of common stock that are “restricted
        securities.” These shares will become available for resale in the public market
        commencing on January 19, 2006. If our stockholders sell substantial amounts
        of
        our common stock, including shares issuable upon the exercise of outstanding
        options and warrants in the public market, or if our stockholders are perceived
        by the market as intending to sell substantial amounts of our common stock,
        the
        market price of our common stock could fall. These sales also might make
        it more
        difficult for us to sell equity securities in the future at a time and price
        that we deem appropriate.
 
 **We
        do not expect to pay any dividends on our common stock for the foreseeable
        future.**
  We
        do not
        anticipate that we will pay any dividends to holders of our common stock
        in the
        foreseeable future. Accordingly, investors must rely on sales of their common
        stock after price appreciation, which may never occur, as the only way to
        realize any future gains on their investment. Investors seeking cash dividends
        should not purchase our common stock.
 
 **Provisions
        in our amended and restated certificate of incorporation and bylaws or Delaware
        law might discourage, delay or prevent a change of control of our company
        or
        changes in our management and, therefore, depress the trading price of our
        common stock.**
  Delaware
        corporate law and our amended and restated certificate of incorporation and
        bylaws contain provisions that could discourage, delay or prevent a change
        in
        control of our company or changes in our management that the stockholders
        of our
        company may deem advantageous. These provisions:
  Ø
              authorize
                  the issuance of “blank check” preferred stock that our board could issue
                  to increase the number of outstanding shares and to discourage
                  a takeover
                  attempt;Ø
              provide
                  that the board of directors is expressly authorized to make, alter
                  or
                  repeal our bylaws; and
 
 Ø
              establish
                  advance notice requirements for nominations for election to our
                  board or
                  for proposing matters that can be acted upon by stockholders at
                  stockholder meetings.
 
 -41-
 **Table
            of Contents**
  **Item
        3. Quantitative and Qualitative Disclosures about Market
        Risk**
 
 *Foreign
        Currency Risk.* We
        do not
        believe that we have significant foreign currency transactional exposures.
        For
        the three and nine month periods ended October 1, 2005, approximately $7.0
        million and $18.1 million, respectively, of our total net sales were in
        currencies other than U.S. dollars. During the three and nine month periods
        ended October 1, 2005, our net sales were favorably impacted by $0.2 million
        and
        $0.8 million, respectively, due to foreign exchange rates. Most of our purchases
        are denominated in U.S. dollars. Approximately 80% of our total sourcing
        is
        concentrated in two foreign countries, China and Indonesia. The impact of
        a 10%
        unfavorable change in the exchange rate of the U.S. dollar against the
        prevailing market rates of the foreign currencies in which we have transactional
        exposures would be immaterial.
 
 *Interest
        Rate Risk.* Interest
        rate risk is managed through a combination of variable and fixed rate debt
        composed of long-term instruments. The objective is to maintain a cost-effective
        mix that we deem appropriate and have entered into interest rate swap agreements
        to maintain that balance. At October 1, 2005, our debt portfolio was composed
        of
        variable-rate debt of which we hedge approximately 16% to a fixed-rate. With
        respect to our variable-rate debt, a 1% change in interest rates would be
        immaterial.
 
 *Commodity
        Price Risk.* We
        are
        subject primarily to commodity price risk arising from fluctuations in the
        market prices of raw materials used in the garments purchased from our sourcing
        vendors if they pass along these increased costs. During the past five years,
        there has been no significant impact from commodity price fluctuations, nor
        do
        we currently use derivative instruments in the management of these risks.
        On a
        going-forward basis, fluctuations in crude oil or petroleum prices may also
        influence the prices of the related items such as chemicals, dyestuffs, man
        made
        fibers and foam. Any raw material price increase would increase our cost
        of
        sales and decrease our profitability unless we are able to pass our higher
        costs
        on to our customers.
  *Inflation
        Risk.* We
        are
        affected by inflation and changing prices primarily through the cost of raw
        materials, increased operating costs and expenses, and fluctuations in interest
        rates. The effects of inflation on our net sales and operations have not
        been
        material in recent years. We do not believe that inflation risk is material
        to
        our business or our consolidated financial position, results of operations
        or
        cash flows.
 
 *Seasonality.* We
        have
        not experienced any significant seasonal fluctuations in our net sales or
        our
        profitability.
 
 **Item
        4. Controls and Procedures**
 
 *Evaluation
        of Disclosure Controls and Procedures.*
  Our
        management, including the Chief Executive Officer and Chief Financial Officer,
        evaluated the effectiveness of our “disclosure controls and procedures,” as that
        term is defined in Rule 13a-15(e) promulgated under the Securities Exchange
        Act
        of 1934, as amended (the “Exchange Act”), as of October 1, 2005. Based on that
        evaluation, the Chief Executive Officer and Chief Financial Officer concluded
        that the disclosure controls and procedures are effective to ensure that
        information required to be disclosed by us in the reports that we file or
        submit
        under the Exchange Act is recorded, processed, summarized and reported within
        the time periods specified in the Securities and Exchange Commission’s rules and
        forms, and to ensure that information is accumulated and communicated to
        our
        management, including the Chief Executive Officer and Chief Financial Officer,
        as appropriate to allow timely decisions regarding required
        disclosure.
 
 *Changes
        in Internal Controls Over Financial Reporting.*
  There
        were no changes in our internal controls over financial reporting during
        the
        quarter ended October 1, 2005 identified in connection with the evaluation
        thereof by our management, including the Chief Executive Officer and Chief
        Financial Officer, that have materially affected, or are reasonably likely
        to
        materially affect, our internal controls over financial reporting.
   -42-
 **Table
            of Contents**
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        1. Legal Proceedings**
  We
        are
        not currently a party to any material legal proceedings. We are subject to
        various claims and legal actions arising from time to time in the ordinary
        course of business. We do not believe that the outcome of any of these
        proceedings will have a material adverse effect on our financial conditions,
        results of operations or cash flows.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
  None.
 
 **Item
        3. Defaults Upon Senior Securities**
  None.
 
 **Item
        4. Submission of Matters to a Vote of Security
        Holders**
 
 On
        July
        7, 2005, all of our stockholders took action by written consent in lieu of
        a
        special meeting of the stockholders pursuant to Section 228 of the Delaware
        General Corporation Law. In that consent, our stockholders approved the
        following matters in connection with our initial public offering: (i) the
        amendment and restatement of our Certificate of Incorporation to implement
        certain changes with respect to our capital stock structure and to provide
        for
        certain corporate governance requirements and increases to our authorized
        capital stock that became effective immediately prior to the closing of the
        offering, (ii) the amendment and restatement of our Bylaws to provide for
        certain changes consistent with our becoming a public company that became
        effective immediately prior to the closing of the offering, (iii) the adoption
        of our 2005 Stock Incentive Plan and 2005 Annual Performance Plan, and an
        amendment to our 2004 Stock Option Plan for Non-Employee Directors, and (iv)
        the
        redemption of all outstanding shares of preferred stock and rollover preferred
        stock options, subject to and in connection with the closing of the offering.
        The holders of all 19,800,000 shares of our then outstanding common stock
        approved these matters.
 
 **Item
        5. Other Information**
  None.
 
 **Item
        6. Exhibits**
 
 The
        following exhibits are filed as part of this Quarterly Report on Form
        10-Q:
 
 31.1
              Certification
                  by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 31.2
              Certification
                  by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 32.1
              Certification
                  by Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 32.2
              Certification
                  by Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
  -43-
 **Table
            of Contents**
  **SIGNATURES**
 
 Pursuant
        to the requirements 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.
  **MAIDENFORM
                    BRANDS, INC.**
                  **(Registrant)**Date: November
                  10, 2005
                By:
                /s/ Dorvin
                  D. LivelyName:  Dorvin
                    D. Lively
                  Title:   
                    Chief Financial Officer
                  (principal financial officer and duly authorized
                    officer)
   -44-
 **Table
            of Contents**
  **EXHIBIT
        INDEX**
 
 31.1
              Certification
                  by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 31.2
              Certification
                  by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 32.1
              Certification
                  by Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 32.2
              Certification
                  by Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   -45-