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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2002

OR

| 
|-
|o

For the transition period from _________ to _________

Commission File No. 0-21496

WESTPOINT STEVENS INC.
(Exact name of registrant as specified in its charter)

|                                                                                                                                                           |  |                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)507 West Tenth Street, West Point, Georgia
(Address of principal executive offices) |  | 36-3498354
(I.R.S.Employer
Identification No.)31833
(Zip Code)

Registrants telephone number, including area code (706) 645-4000

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

|                         |  |                                               
|------------------------ |  | ----------------------------------------------
|Title of each Class
None |  | Name of each exchange on which registered
None

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

Common Stock, $.01 par value
Title of each Class

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 oNo x

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrants knowledge, in definitive
proxy or information statement incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K    x

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes  x No  o

The aggregate market value of voting stock held by non-affiliates of the
registrant was approximately $1,229,223 at May 15, 2003. The number of shares
of Common Stock outstanding at May 15, 2003, was 49,896,816.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrants
classes of common stock, as of the latest practicable date:49,896,816 at May
15, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

None



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TABLE OF CONTENTS



|                                                 |                                                                                                         |                |  |  |  |  |  | 
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------- | -------------- |  |  |  |  |  | 
|                                                 | Item 1. Business                                                                                       
|                                                 | Item 2. Properties                                                                                     
|                                                 | Item 3. Legal Proceedings                                                                              
|                                                 | Item 4. Submission of Matters to a Vote of Security Holders                                            
|Part II                                         
|                                                 | Item 5. Market for Registrants Equity and Related Stockholder Matters                                 
|                                                 | Item 6. Selected Financial Data                                                                        
|                                                 | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                 | Item 7A. Qualitative and Quantitative Disclosures About Market Risk                                    
|                                                 | Item 8. Financial Statements and Supplementary Data                                                    
|                                                 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|PART III                                        
|                                                 | Item 10. Directors and Executive Officers of the Registrant                                            
|                                                 | Item 11. Executive Compensation                                                                        
|                                                 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                 | Item 13. Certain Relationships and Related Transactions                                                
|PART IV                                         
|                                                 |                                                                                                         | SIGNATURES    
|                                                 |                                                                                                         | CERTIFICATIONS
|EX-10.51 RELEASE & CONFIDENTIALITY AGREEMENT    
|EX-10.52 AMENDMENT OF EMPLOYMENT AGREEMENT      
|EX-10.53 FIRST AMENDMENT AGREEMENT DATED 3/31/03
|EX-10.54 WAIVER AGREEMENT DATED 3/31/03         
|EX-10.55 EIGHT AMEND & TEMP WAIVER AGMT 3/31/03 
|EX-21 LIST OF SUBSIDIARIES OF THE REGISTRANT    
|EX-23.1 CONSENT OF ERNST & YOUNG LLP            
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO    
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO    



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TABLE OF CONTENTS

Part I

|     |  |  |     |  |  |                                                                                                |  |  |    |          |  | 
|---- |  |  | --- |  |  | ---------------------------------------------------------------------------------------------- |  |  | -- | -------- |  | 
|     |  |  |     |  |  |                                                                                                |  |  |    | Page No.
|Item |  |  | 1.  |  |  | Business                                                                                       |  |  | 2  |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 2.  |  |  | Properties                                                                                     |  |  | 9  |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 3.  |  |  | Legal Proceedings                                                                              |  |  | 10 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 4.  |  |  | Submission of Matters to a Vote of Security Holders                                            |  |  | 12 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  | Part II                                                                                        |  |  |    |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 5.  |  |  | Market for
Registrants Equity Stock and Related Stockholder Matters                           |  |  | 12 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 6.  |  |  | Selected Financial Data                                                                        |  |  | 14 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 7.  |  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  |  | 16 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 7A. |  |  | Quantitative and Qualitative Disclosures About Market Risk                                     |  |  | 26 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 8.  |  |  | Financial Statements and Supplementary Data                                                    |  |  | 27 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 9.  |  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  |  | 61 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  | Part III                                                                                       |  |  |    |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 10. |  |  | Directors and Executive Officers of the Registrant                                             |  |  | 61 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 11. |  |  | Executive Compensation                                                                         |  |  | 64 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 12. |  |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  |  | 70 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 13. |  |  | Certain Relationships and Related Transactions                                                 |  |  | 72 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 14. |  |  | Controls and Procedures                                                                        |  |  | 73 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  | Part IV                                                                                        |  |  |    |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|Item |  |  | 15. |  |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |  |  | 73 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  | Signatures                                                                                     |  |  | 81 |         
|     |  |  |     |  |  |                                                                                                |  |  |    |         
|     |  |  |     |  |  | Certifications                                                                                 |  |  | 83 |         

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Item 1. Business

General

On June 1, 2003, WestPoint Stevens Inc., a Delaware corporation (the
Company), and several of its subsidiaries (together with the Company, the
Debtors) filed a petition for reorganization under Chapter 11 of the U.S.
Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New
York (the Bankruptcy Court). On June 2, 2003, the Bankruptcy Court approved
a series of the Companys first-day motions that will enable the Company to
continue regular operations throughout the reorganization proceedings. The
Bankruptcy Court also approved, under interim order, access to $175 million in
debtor-in-possession financing for use by the Company, pursuant to a
Post-Petition Credit Agreement, dated as of June 2, 2003, among WestPoint
Stevens Inc. and certain of its subsidiaries, the financial institutions named
therein and Bank of America, N.A. and Wachovia Bank, National Association (the
DIP Credit Agreement). A copy of the DIP Credit Agreement constitutes
Exhibit No. 99.2 to the Current Report on Form 8-K, which the Company filed
with the Securities and Exchange Commission on June 5, 2003 (see Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations  DIP Credit Agreement).

Since filing the Chapter 11 petition, the Debtors have been operating as
debtors-in-possession under Chapter 11 and conducting business in the ordinary
course. Pursuant to the Bankruptcy Code, pre-petition obligations of the
Debtors (including obligations under debt instruments) generally may not be
enforced against the Debtors, and any actions to collect pre-petition
indebtedness are automatically stayed, unless the stay is lifted by the
Bankruptcy Court. In addition, as debtors-in-possession, the Debtors have the
right, subject to Bankruptcy Court approval and certain other limitations, to
assume or reject executory contracts and unexpired leases.

The Company has reached an agreement in principle with the holders of
approximately 52% of the outstanding aggregate principal amount of its Senior
Notes on the terms of a financial restructuring to be implemented through the
Chapter 11 process. For information concerning the circumstances that led to
the Companys Chapter 11 filing and proposed terms of the financial
restructuring which it will seek to implement, see   Chapter 11 Filing
below. For information with respect to the Companys current liquidity and
financial resources, see Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  Liquidity and Capital
Resources below.

The Company which was organized in 1987, is the successor corporation to West
Point-Pepperell, Inc. through a series of mergers occurring in December 1993.
The Company is a leading manufacturer, marketer and distributor of an extensive
range of bed and bath home fashions (Home Fashions) products. The Companys
trademark brands include ATELIER MARTEX®, CHATHAM®, GRAND PATRICIAN®, MARTEX®,
PATRICIAN®, UTICA®, STEVENS®, LADY PEPPERELL®, LUXOR®, and VELLUX®. In
addition, certain Home Fashions products are manufactured and sold pursuant to
licensing agreements under designer names that include, among others, Ralph
Lauren Home, Sanderson, Glynda Turley, Simmons Beautyrest and Disney Home. The
Company is also a manufacturer of the Martha Stewart and Joe Boxer bed and bath
lines. The Companys products are marketed through leading department stores,
mass merchants, specialty stores, institutional channels, and WestPoint Stevens
Stores Inc.

The Company estimates that it has one of the largest market shares in both
the domestic sheet and pillowcase market and the domestic bath towel market.
With the acquisition of the Chatham Consumer Products Division of CMI
Industries, Inc. in January 2001, the Company has the largest market share in
domestic blankets. The Company also has significant market share in the
domestic accessories market, which includes comforters, bedspreads, bed
pillows, throw pillows, and mattress pads, among others.

As a result of a strategic review of the Companys businesses,
manufacturing, other facilities, and products during the year 2000, the
Companys Board of Directors approved a $222.0 million pre-tax charge to cover
the cost of implementing a restructuring plan having eight key elements
designed to streamline operations and improve profitability (the Eight-Point
Plan). The majority of the charge, $203.2 million pretax, was recorded during
the year 2000, and the remaining $18.8 million pretax charge was recorded in
2001. Of the $203.2 million pretax charge recorded in 2000, $85.3 million was
reflected in cost of goods sold, the majority of which reflected inventory
write-off, and $117.9 million was reflected in a reduction of goodwill and
fixed assets in addition to severance benefits and other costs. The
Eight-Point Plan addressed the following points: 1) expansion of brands; 2)
exploration of new licensing opportunities; 3) rationalization of manufacturing
operations; 4) reduction in overhead expense; 5) increase in global sourcing;
6) improvement of inventory utilization; 7) enhancement of supply chain and
logistics functions; and 8) improvement in capital structure. Since the
adoption of the Eight-Point Plan, the Company closed four plants and terminated
and paid severance (including continuing termination benefits) to approximately
1,700 employees. The restructuring charge was completed in the

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fourth quarter of 2001. For a more complete discussion of the Eight-Point
Plan, see Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations.

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of WestPoint Stevens Stores Inc. The Company
expects the latest restructuring initiatives to result in a $36.5 million
pretax charge for restructuring, impairment and other charges. Approximately
$20 million of the pretax charge is expected to be non-cash items with annual
pretax savings estimated at $10 million once the restructuring initiatives are
fully implemented. The charges for the restructuring initiatives began in the
third quarter of 2002 and will continue throughout 2003.

As a result of the restructuring initiatives in 2002, the Company announced the
closure of its Rosemary (NC) towel finishing facility and the conversion of its
Rosemary (NC) towel fabrication and distribution facilities to basic bedding
facilities. The Company announced on April 25, 2003, that the Rosemary towel
fabrication and distribution facilities would be closed rather than converted
to basic bedding facilities. The Company closed three retail stores in 2002.
The Company expects that closure of other retail stores and other facilities
will be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002. The components of the
restructuring and impairment charge included $4.4 million for the impairment of
fixed assets and $2.2 million in reserves to cover cash expenses related to
severance benefits.

For a comprehensive discussion of the Companys overall financial condition,
see Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations.

Products

The Company markets a broad range of manufactured and sourced bed, bath and basic bedding products, including:



| |                                  
| | ---------------------------------
| | Bed and Bath Products, including:

| |  |  bath accessories;           
| |  | ------------------------------
| |  |  bath rugs;                  
| |  |  bath towels;                
| |  |  beach towels;               
| |  |  bedskirts;                  
| |  |  bedspreads;                 
| |  |  comforters and duvet covers;
| |  |  decorative throw pillows;   
| |  |  drapes and valances;        
| |  |  quilts;                     
| |  |  scatter rugs;               
| |  |  sheets and pillowcases;     
| |  |  shower curtains;            
| |  |  table covers; and           

| |                                  
| | ---------------------------------
|
| | Basic Bedding Products, including

| |  |  bed pillows;                                         
| |  | -------------------------------------------------------
| |  |  flocked blankets;                                    
| |  |  mattress pads;                                       
| |  |  natural fill pillows, comforters and featherbeds; and
| |  |  woven blankets and throws.                           

Such products are made from a variety of fabrics, such as chambray, twill,
sateen, flannel, linen, cotton and cotton blends and are available in a wide
assortment of colors and patterns. The Company has positioned itself as a
single-source supplier to retailers of bed and bath products, offering a broad
assortment of products across multiple price points. Such product and price
point breadth allows the Company to provide a comprehensive product offering
for each major distribution channel.

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Trademarks and Licenses

The Companys products are marketed under well-known and firmly established
trademarks, brand names and private labels. The Company uses trademarks, brand
names and private labels as merchandising tools to assist its customers in
coordinating their product offerings and differentiating their products from
those of their competitors. Registered trademarks include ATELIER MARTEX®,
CHATHAM®, GRAND PATRICIAN®, MARTEX®, PATRICIAN®, UTICA®, STEVENS®, LADY
PEPPERELL®, LUXOR® and VELLUX®. In addition, products are manufactured and
sold pursuant to licensing agreements under designer names that include, among
others, Ralph Lauren Home, Disney Home, Sanderson, Glynda Turley and Simmons
Beautyrest. A portion of the Companys sales is derived from licensed designer
brands. The license agreements for the Companys designer brands generally are
for a term of two or three years. Some of the licenses are automatically
renewable for additional periods, provided that certain sales thresholds set
forth in the license agreements are met. No single license has accounted for
more than 13% of the Companys total sales volume during any of the last five
fiscal years. Although the Company has no reason to believe that it will lose
any of its licenses, the loss of a significant license could have an adverse
effect upon the Companys business, which effect could be material. The
licensing agreements with fixed expiration dates are: Ralph Lauren Home,
December 31, 2005 (with an option to renew until December 31, 2008); Glynda
Turley, December 31, 2003; Simmons Beautyrest, June 30, 2004; and Disney Home,
December 31, 2005. By letter dated May 28, 2003, Disney Enterprises, Inc.
notified the Company that the license agreement would expire December 31, 2003,
because performance goals had not been reached. In its letter to the Company
Disney also expressed its interest in entering into negotiations beginning on
January 1, 2004, for a new license agreement for some of the items previously
licensed to the Company.

Marketing

The Company is committed to developing and maintaining integral relationships
with its customers through Strategic Partnering, a program designed to
improve customers operating results by leveraging the Companys merchandising,
manufacturing and inventory management skills. Strategic Partnering includes
Electronic Data Interchange (EDI) direct electronic entry systems, Quick
Response and Vendor Managed Inventory customer delivery programs and
point-of-sale processing. The Company incorporates Strategic Partnering into
its planning, manufacturing and shipping systems, in order to enable it to
efficiently and economically anticipate and respond to customers inventory
requirements. As a result, the Company is better able to plan and forecast its
own production and inventory requirements. Sales and marketing of the
Companys Home Fashions products are conducted through an organizational
format consisting of divisions for Bed and Bath Products and
Basic Bedding Products, each with supporting domestic sales, marketing and
merchandising teams and international sales and marketing teams. Distribution
specific teams focused on targeted key accounts are linked with product
management, operations, customer service and distribution to service each
segment of retail.

The Bed and Bath Products Division and the Basic Bedding Products Division
focus sales on the following channels of distribution:



| |  |  catalogs;                               
| |  | ------------------------------------------
| |  |  chain stores;                           
| |  |  department stores;                      
| |  |  mass merchants;                         
| |  |  specialty stores;                       
| |  |  warehouse clubs; and                    
| |  |  healthcare and hospitality institutions.

For the Bed and Bath Products Division and the Basic Bedding Products Division
marketing is comprised of the following functions that create products and
services in direct response to recognized consumer trends:



| |  |  design;               
| |  | ------------------------
| |  |  marketing;            
| |  |  advertising;          
| |  |  licensing;            
| |  |  consumer research; and
| |  |  product innovation.   

For the Bed and Bath Products Division and the Basic Bedding Products Division
merchandising is comprised of the following functions:



| |  |  product management; 
| |  | ----------------------
| |  |  business management;

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| |  |  productivity analysis;                  
| |  | ------------------------------------------
| |  |  stock keeping unit, or SKU, control; and
| |  |  design technology.                      

The Retail/International Division is comprised of the following operating units:



| |  |  Europe  which has distribution facilities and sales offices
located in the United Kingdom supplying European department stores
for private label, company brands and licensed programs such as Ralph
Lauren Home.                                                                                                                                                                                                               
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  Americas  which markets to all major stores in Canada, Mexico
and other parts of Latin America with US-made and foreign sourced
products.                                                                                                                                                                                                                                                                                       
| |  |  WestPoint Stevens Stores Inc.  a wholly-owned subsidiary of
the Company (WestPoint Stores). WestPoint Stores currently
consists of 52 geographically dispersed, value-priced outlets
throughout the United States and in Canada, most of which are located
in factory outlet shopping centers. The products sold in WestPoint
Stores are first quality (including overstocks), seconds,
discontinued items and other products.

The Company works closely with its major customers to assist them in
merchandising and promoting its products to consumers. In addition, the Company
periodically meets with its customers in an effort to maximize product exposure
and sales and to jointly develop merchandise assortments and plan promotional
events specifically tailored to the customer. The Company provides
merchandising assistance with store layouts, fixture designs, advertising and
point-of-sale displays. A national consumer and trade advertising campaign and
comprehensive internet website have served to enhance brand recognition. The
Company also provides its customers with suggested customized advertising
materials designed to increase its product sales. A heightened focus on
consumer research provides needed products on a continual basis.

Approximately 82% of the Companys total sales in 2002 were made to retail
establishments in the United States, including catalog retailers, chain and
department stores, mass merchants, specialty bed and bath stores, warehouse
clubs and WestPoint Stores. Finished products are distributed to retailers
directly from the Companys plants. The majority of the remaining portion of
the Companys sales of Home Fashions products are through the institutional
channel, which includes hospitality and healthcare establishments, as well as
laundry supply businesses. In addition to domestic sales, the Company
distributes its Home Fashions products for eventual sale to certain foreign
markets, principally Australia, Canada, Mexico, the United Kingdom, continental
Europe, the Middle East and the Far East. International operations accounted
for approximately 5% of the total sales of the Company in 2002.

Inventory Management, Electronic Communication and Delivery

The Company has been recognized as a leader and innovator of advanced
technology, having led the industry with advanced, innovative e-commerce
applications and has been selected as a preferred vendor for customers web
exchange pilot programs, Quick Response, EDI and Vendor Management Inventory.
The Company utilizes collaborative planning, forecasting and replenishment
practices supported by systems from i2Technologies, Inc., including its retail
merchandising and inventory replenishment system (Inforem®) combined with its
forecasting and planning system (Demand Planner®). It also deploys Hyperion
business intelligence technologies for inventory optimization and performance
measurement to complement the Companys highly integrated core business
systems, including its supply chain, sourcing and logistics systems. The
Company combines the use of an advanced, customer order fulfillment system,
real-time radio frequency and in-line label printing distribution systems, and
in-house transportation to compress the order to delivery cycle time, maintain
low inventory levels, and achieve high customer scorecard objectives. The
Company has placed a strong emphasis on the supply chain and logistics
function, and believes that continued investment in planning, sourcing,
distribution and transportation capabilities will enhance its ability to
provide its customers with superior service.

Customers

The Company is pursuing strategic relationships with key merchandisers. An
important component of the Companys strategy is to increase its share of shelf
and floor space by strengthening its partnership with its customers. The
Company is working closely with retailers and is sharing information and
business practices with them to improve service and achieve higher
profitability for both the retailer and the Company.

The Companys Home Fashions products are sold to catalog retailers, chain
stores, mass merchants, department stores, specialty stores, warehouse clubs,
and its own retail stores. The Companys six largest customers, Federated
Department Stores, Inc., J.C. Penney Company, Inc., Kmart Corporation, Sears
Roebuck & Co., Inc., Target Corporation and Wal-Mart Stores, Inc. accounted

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for approximately 51% of the net sales of the Company during the fiscal year ended
December 31, 2002. In 2002, sales to Target Corporation and Kmart Corporation
were 14% and 12%, respectively of the net sales of the Company. Each of such
customers has purchased goods from the Company in each of the last 10 years.
Although the Company has no reason to believe that it will lose the business of
any of its largest customers, a loss of any of the largest accounts (or a
material portion of any thereof) would have an adverse effect upon the Companys business, which could be material.

On January 22, 2002, Kmart Corporation filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United States Bankruptcy
Code. Kmart Corporation subsequently received approval of its plan of
reorganization and emerged from Chapter 11 on May 6, 2003. In conjunction with
the restructuring, Kmart Corporation initially announced the closing of 284
retail store locations and, on January 14, 2003, announced the closing of 318
additional stores. The collective closings represent approximately 28% of its
total store base.

Manufacturing

The Company currently uses the latest manufacturing and distribution equipment
and technologies in its mills. Management therefore believes that the Company
is one of the most efficient manufacturers in the home fashions industry. Over
the past five years, the Company has spent approximately $480 million to
modernize its manufacturing and distribution systems and has spent
approximately $46 million of that amount during 2002. The capital expenditures
have been used to, among other things, replace projectile looms with faster,
more efficient air jet looms and further automate the Companys cut and sew
operations. Air jet looms produce at higher speeds than projectile looms,
yielding fewer defects, requiring less maintenance and providing cleaner and
safer working environments. Using air jet technology, compressed air propels
the filling yarn at high speeds, with robotics handling the cutting and tucking
of the filling yarn. The Company intends to invest approximately $50 million
in capital improvements in the aggregate in 2003, which includes the further
automation of the cut and sew operations and continued modernization and
upgrading of distribution centers, upgrading of open end spinning and
conversion of certain bath product manufacturing operations to pillow and
comforter manufacturing. These capital programs have resulted, and are
expected to continue to result, in improved product quality, increased
efficiency and capacity, lower costs and shorter response time to customer
orders. As of June 17, 2003, the Company (including its subsidiaries) owns and
utilizes 22 manufacturing facilities and leases 5 manufacturing facilities.
These facilities are located primarily in the Southeastern United States. See
Item 2. Properties.

Sourcing

The Company has had a long-standing history of domestic and international
sourcing of selected component products such as specialty yarns and specialty
greige sheeting fabric for use in domestic production of Home Fashion products.
Historically the percentage of sourced components used in domestic production
was not material. However, following the implementation of the Eight-Point
Plan in 2000 increased focus was placed on global sourcing. As such, the
Company today views sourcing as a means to drive business growth and improve
profitability by providing products and services that accelerate product and
packaging innovation resulting in a competitive market advantage. In 2002, the
Company imported both component and finished products from 21 countries and has
established strong relationships in several key export countries to include
China, India and Pakistan. To accelerate speed to market and improve customer
service, in 2001 the Company successfully implemented Third Party Logistics
operations on the east coast and on the Mexican border. The Company continues
to increase the number of vendors and sourced product categories and estimates
that sales from sourced products accounted for roughly 20% of the Companys
sales in 2002. Through global sourcing operations, the categories of product
offerings by the Company to its customers has been significantly expanded to
increase focus on high growth product categories such as bath accessories, rugs
and quilts.

The Companys policy on sourcing prohibits the purchase of merchandise that is
produced in whole or in part by indentured, prison or illegal immigrant or
child labor. The Company requires that vendors certify the locations used for
the production of products it purchases and that the vendors submit to
compliance inspections from the Company or its representatives to ensure that
the Company does not do business with suppliers who violate human rights.

Raw Materials

The principal raw materials used in the manufacture of Home Fashions products
are cotton of various grades and staple lengths, polyester and nylon in staple
and filament form. Cotton, polyester and nylon presently are available from
several sources in quantities sufficient to meet the Companys requirements.
The Company is not dependent on any one supplier as a source of raw materials.
Since cotton is an agricultural product, its supply and quality are subject to
weather patterns, disease and other factors. The price of cotton is also
influenced by supply and demand considerations, both domestically and
worldwide, and by the cost of

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polyester. Although the Company has always been
able to acquire sufficient quantities of cotton for its operations in the past,
any shortage in the cotton supply by reason of weather, disease or other
factors could adversely affect the Companys operations. The price of man-made
fibers such as polyester and nylon is influenced by demand, manufacturing
capacity and costs, petroleum prices, cotton prices and the cost of polymers
used in producing man-made fibers. Any significant prolonged petrochemical
shortages could significantly affect the availability of man-made fibers and
cause a substantial increase in demand for cotton, resulting in decreased availability and, possibly, increased price. The
Company also purchases substantial quantities of dyes and chemicals. Dyes and
chemicals have been and are expected to continue to be available in sufficient
supply from a wide variety of sources.

Seasonality; Cyclicality; Inventory

Traditionally, the home fashions industry has been seasonal, with peak sales in
the fall. In accordance with industry practice, the Company increases its Home
Fashions inventory levels during the first six months of the year to meet
customer demands for the fall peak season. The Companys commitment to EDI,
Quick Response, and Vendor Managed Inventory, however, has facilitated a more
even distribution of products throughout the calendar year and reduced some of
the need to stockpile inventory to meet peak season demands.

The home fashions industry is also cyclical. While the Companys performance
may be negatively affected by downturns in consumer spending, management
believes the effects thereof are somewhat mitigated by the Companys large market shares
and broad distribution base.

Backlog Orders

The backlog of the Companys unfilled customer orders believed by management to
be firm was approximately $83.2 million at June 1, 2003, as compared with
approximately $81.6 million at June 1, 2002. The Company does not believe that
its backlogs are a meaningful indicator of its business due in part to its use
of Vendor Managed Inventory systems.

Competition

The home fashions industry is highly competitive. The Company competes on the
basis of price, quality, design and customer service, among other factors. In
the sheet and towel markets, the Company competes primarily with Springs
Industries, Inc. and Pillowtex Corporation. In the other bedding and
accessories markets, the Company competes with many companies, most of which
are much smaller in size than the Company. The Company has pursued a
competitive strategy focused on providing the best fashion, quality, service
and value to its customers and to the ultimate consumer. The Company believes
that there has been an increase in the sale of imported Home Fashion products
in the domestic market and is actively pursuing its own foreign sourcing
opportunities to meet the demand for such products. The Company believes the
level of foreign competition has been increasing. There can be no assurance
that foreign competition will not grow to a level that could have an adverse
effect upon the Companys ability to compete effectively.

Other Operations

The Companys operations also include Grifftex Chemicals (Grifftex), which
formulates chemicals primarily used in the Companys finishing processes, and
WestPoint Stevens Graphics (Graphics), which prints product packaging and
labeling. Neither Grifftex nor Graphics represents a material portion of the
Companys business.

Research and Development

Management believes that research and development in product innovation and
differentiation is important to maintain the Companys competitive edge. The
Company continually seeks to develop new specialty finishes and finishing
techniques that would improve fabric quality and enhance fabric aesthetics.
Research also is conducted to develop new products in response to changing
customer demands and environmental concerns. The Company has continued to
invest in product development to maintain a leadership position in the market
place.

Environmental Matters

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the storage, handling, usage,
discharge and disposal of a variety of hazardous and non-hazardous substances
and wastes used in or

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resulting from its operations, including, but not limited
to, the Water Pollution Control Act, as amended; the Clean Air Act, as amended;
the Resource Conservation and Recovery Act, as amended; the Toxic Substances
Control Act; and the Comprehensive Environmental Response, Compensation and
Liability Act.

The Companys operations also are governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health Act
and regulations thereunder which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate chemical, physical
and ergonomic hazards in the workplace.

Although the Company does not expect that compliance with any of the
aforementioned laws and regulations will have a material adverse effect on its
capital expenditures, earnings or competitive position in the foreseeable
future, there can be no assurances that environmental requirements will not
become more stringent in the future or that the Company will not incur
significant costs in the future to comply with such requirements.

Employees

The Company (including its subsidiaries) employed approximately 14,706 active
employees as of June 2, 2003. The Company believes that its relations with all
of its employees are excellent. The Company has not experienced a strike or
work stoppage by any of its unionized employees during the past 20 years.
Currently, less than 10% of the Companys employees are unionized.

The Company has developed an effective employee relations and communications
program that includes rules and regulations for employee conduct and procedures
for employee complaints. This long-standing program focuses on and, in the
view of management, has resulted in, strong, positive employee relations
practices, good working conditions, progressive human resources policies and
expansive safety programs.

Recent Developments

In its Form 10-Q filed for the quarter ended September 30, 2002, the Company
reported that the independent issuer of receivables-backed commercial paper
under the Companys Trade Receivables Program had indicated that it would not
extend the maturity date of its agreement with the Company for another year,
but would work with the Company to effect an orderly transition to another
financing provider. On January 15 and February 10, 2003, the Company announced
amendments to the maturity dates of its Trade Receivables Program extending it
to February 17 and March 31, 2003, respectively. On March 28, 2003, the
Company and WPS Receivables Corporation (WPSRC), the Companys wholly-owned
bankruptcy remote receivables subsidiary (which is not a Debtor in the
Companys current Chapter 11 proceedings), entered into a loan and security
agreement (the Receivables Loan Agreement) with Congress Financial
Corporation (Southern), as Agent (Congress), pursuant to which the lenders
thereunder agreed to provide receivables-backed loans as part of the Companys
Trade Receivables Program. Under the terms of the Trade Receivables Program,
the Company agreed to sell, on an ongoing basis and without recourse for credit
loss on the receivables, its accounts receivable portfolio to WPSRC. WPSRC
used the receivables as collateral for loans pursuant to the Receivables Loan
Agreement. Proceeds from the loans and collections on receivables were used by
WPSRC to purchase receivables from the Company. The Company maintained the
balance in the designated pool of accounts receivable sold by selling its new
receivables on a revolving basis as they were created. The Receivables Loan
Agreement permitted outstanding loans of up to $160.0 million against the
accounts receivable portfolio. The interest payable by WPSRC on the loans
under the Receivables Loan Agreement is a 2-month LIBOR rate plus 2.50%. See
Item 8. Financial Statements and Supplemental Data  Notes to Consolidated
Financial Statements  3. Indebtedness and Financial Arrangements. On June
4, 2003, Congress notified WPRSC that, as a result of the Companys Chapter 11
filing, Congress was terminating the Receivables Loan Agreement and that no
further loans would be made thereunder. Congress will continue to apply
proceeds of receivables previously pledged to it to reduce the obligations of
WPRSC to Congress under the Receivables Loan Agreement. The Company currently
believes that all outstanding loans under the Receivables Loan Agreement will
be repaid in full from such proceeds. The Company is currently financing its
accounts receivable through borrowings under the DIP Credit Agreement and
expects to continue to do so during the pendency of its Chapter 11 proceedings.

Chapter 11 Filing

As noted above, on June 1, 2003, the Company and the other Debtors filed a
petition for reorganization under Chapter 11 of the Bankruptcy Code. Since
that date, the Debtors have been operating as debtors-in-possession under
Chapter 11. A brief chronology of the circumstances that led to such filing is
set forth below.

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Despite the restructuring initiatives which the Company undertook in 2000 and
2002 (see - General above), during 2003 the Company continued to experience
financial difficulty related primarily to restrictive covenants under its
Senior Credit Facility and its overleveraged debt structure. The Company
therefore entered into negotiations with its Senior Credit Facility lenders to
amend the Senior Credit Facility to permit certain restructuring, impairment
and other charges and to revise certain financial ratios and minimum EBITDA
covenants in its Senior Credit Facility. The Company and such lenders were
unable to agree to amend the Senior Credit Facility and the Company continued
to experience financial difficulties which led to a default under its Senior
Credit Facility and Second-Lien Facility. Effective March 31, 2003, the Senior
Credit Facility lenders and Second-Lien Facility lenders agreed to refrain from
exercising any rights or remedies in respect of the Companys failure to comply
with financial and other covenants until June 10, 2003. As the June 10
deadline approached, the Companys board of directors determined that, in order
to be able to operate successfully in todays market environment and compete
with increasing foreign competition, it would be necessary for the Company to
reduce its debt burden and de-lever its balance sheet. Thus, on May 16, 2003,
the board of directors approved the retention of Rothschild Inc., an
independent financial advisor, to evaluate alternatives aimed at reducing the
existing debt structure and strengthening the balance sheet. After
negotiations with its Senior Lenders regarding various alternatives, the
Company concluded it would be in the best interests of its creditors and
shareholders to effect a consensual restructuring under Chapter 11 of the U.S.
Bankruptcy Code and filed its Chapter 11 petition on June 1, 2003.

The Company has reached an agreement in principle with the holders of
approximately 52% of the aggregate principal amount of its Senior Notes on the
terms of a financial restructuring to be implemented through the Chapter 11
process. An outline of such terms is set forth in the revised Restructuring
Proposal, dated as of June 1, 2003, which constitutes Exhibit 99.1 to the
Current Report on Form 8-K, which the Company filed with the Securities and
Exchange Commission on June 9, 2003. As indicated therein, the agreement in
principle is subject to numerous conditions and further agreements, including
the entry of an order confirming the plan of reorganization contemplated by the
proposal as required by Chapter 11. Consequently, there can be no assurance
that any of the transactions described in the Restructuring Proposal will be
undertaken or consummated.

On June 2, 2003, the Bankruptcy Court approved a series of the Companys first
day motions that will enable the Company to continue regular operations
throughout the reorganization proceeding. These motions authorized, among
other things, normal payment of employee salaries, wages and benefits;
continued participation in workers compensation insurance programs; payment to
vendors for post-petition delivery of goods and services; payment of certain
pre-petition obligations to customers; and continued payment of utilities. The
Bankruptcy Court also approved, under interim order, access to $175 million in
debtor-in-possession financing for use by the Company, pursuant to the DIP
Credit Agreement. See Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  DIP Credit Agreement.

Other Factors

Except for historical information contained herein, certain matters set forth
in this Annual Report on Form 10-K are forward looking statements that involve
certain risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements. Such risks and
uncertainties may be attributable to important factors which include but are
not limited to the following: uncertainties related to the Companys having
filed a Chapter 11 petition and the reorganization proceedings resulting
therefrom; product margins may vary from those projected; raw material prices
may vary from those assumed; additional reserves may be required for bad debts,
returns, allowances, governmental compliance costs, or litigation; there may be
changes in the performance of financial markets or fluctuations in foreign
currency exchange rates; unanticipated natural disasters could have a material
impact upon results of operations; there may be changes in the general economic
conditions which affect customer payment practices or consumer spending;
competition for retail and wholesale customers, pricing and transportation of
products may vary from time to time due to seasonal variations or otherwise;
customer preferences for our products can be affected by competition, or
general market demand for domestic or imported goods or the quantity, quality,
price or delivery time of such goods; there could be an unanticipated loss of a
material customer or a material license; the availability and price of raw
materials could be affected by weather, disease, energy costs or other factors.
In addition, consideration should be given to any other risks and
uncertainties discussed in other documents filed by the Company with the
Securities and Exchange Commission. The Company assumes no obligation to
update publicly any forward-looking statements, whether as the result of new
information, future events, or otherwise.




Item 2. Properties

The Companys properties are owned or leased directly and indirectly through
its subsidiaries. Management believes that the Companys facilities and
equipment are in good condition and sufficient for current operations. The
Company owns office space in West Point, Georgia, and Lanett and Valley,

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Alabama, and leases various additional office space, including approximately
140,000 square feet in New York City, of which approximately 36,000 square feet
is subleased to other tenants. The Company also leases approximately 26,000
square feet elsewhere for other administrative, storage and office space.

The Company and its subsidiaries own and utilize 22 manufacturing facilities
located in Alabama, Florida, Georgia, Indiana, Maine, North Carolina, South
Carolina and Virginia which contain in the aggregate approximately 8,728,000
square feet of floor space and lease 5 manufacturing facilities in Alabama,
Georgia, Louisiana, Nevada and North Carolina which contain in the aggregate
approximately 591,000 square feet of floor space.

The Company owns a chemical plant containing approximately 43,000 square feet
of floor space from which Grifftex Chemicals operates. In addition, the
Company owns a printing facility consisting of 38,000 square feet in which
Graphics prints product packaging and labeling.

The Company and its subsidiaries also own 13 distribution centers and
warehouses for their operations which contain approximately 3,805,000 square
feet of floor space. In addition, the Company and its subsidiaries lease 7
distribution outlets and warehouses containing approximately 730,000 square
feet of floor space.

WestPoint Stores owns 2 retail stores and leases its 50 other retail stores,
all of which are dispersed throughout the United States and Canada.

The owned properties of the Company are subject to liens held by the Companys
secured lenders. See Item 8. Financial Statements and Supplemental Data 
Notes to Consolidated Financial Statements  2 Indebtedness and Financial
Arrangements.




Item 3. Legal Proceedings

On October 5, 2001, a purported stockholder class action suit, entitled Norman
Geller v. WestPoint Stevens Inc., et al.(the Gelleraction),was filed
against the Company and certain of its current and former officers and
directors in the United States District Court for the Northern District of
Georgia. (A subsequent and functionally identical complaint was also filed.)
The actions were consolidated by Order dated January 25, 2002. Plaintiffs
served a Consolidated Amended Complaint (the Amended Complaint) on March 29,
2002. The Amended Complaint asserts claims against all Defendants under §
10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and
against the Company and Defendant Holcombe T. Green, Jr. as controlling
persons under § 20(a) of the Exchange Act. The Amended Complaint alleges
that, during the putative class period (i.e., February 10, 1999 to October 10,
2000), WestPoint Stevens and certain of its officers and directors caused
false and misleading statements to be issued regarding, inter alia, alleged
overcapacity and excessive inventories of the Companys towel-related products
and customer demand for such products and that certain Individual Defendants
wrongfully sold or pledged Company stock at inflated prices for their benefit.
The Amended Complaint refers to WestPoint Stevens press releases and quarterly
and annual reports on Securities Exchange Commission Forms 10-Q and 10-K, which
discuss the Companys results and forecasts for the fiscal years 1999 and 2000.
Plaintiffs allege that these press releases and public filings were false and
misleading because they failed to disclose that the Company allegedly knew
sales would be adversely affected in future quarters and years. Plaintiffs
also allege in general terms that the Company materially overstated revenues by
making premature shipments of products.

On June, 6, 2002, Defendants filed Motions to Dismiss Plaintiffs Amended
Complaint. On February 3, 2003, the Court denied Defendants Motions to
Dismiss. The action will proceed to class certification and discovery.

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark v.
Holcombe T. Green, Jr., et al.(theClarkaction), was filed against certain of
the Companys directors and officers in the Superior Court of Fulton County,
Georgia. The Complaint alleges that the named individuals breached their
fiduciary duties by acting in bad faith and wasting corporate assets. The
Complaint also asserts claims under Georgia Code Ann. §§ 14-2-740 to 14-2-747,
and 14-2-831. The claims are based on the same or similar facts as are alleged
in the Gelleraction.

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al.(the Hemmeraction),was filed against Mr.
Green and certain of the Companys other directors including Messrs. Hugh M.
Chapman, John F. Sorte and Ms. M. Katherine Dwyer in the Court of Chancery in
the State of Delaware in and for New Castle County. The Complaint alleges that
the named individuals breached their fiduciary duties and knowingly or
recklessly failed to exercise oversight responsibilities to ensure the
integrity of the Companys financial reporting. The Complaint also asserts
that certain of the named individuals used proprietary Company information in
selling or pledging Company stock at inflated prices for their benefit. The
claims are based on the same or similar facts as are alleged in the Geller
action.

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By agreements between the parties, the Clarkand Hemmeractions were both
stayed pending the Courts decision on Defendants Motions to Dismiss in the
Gelleraction. The Company has negotiated an extension of the stay agreement
in the Hemmeraction and is currently negotiating for an extension of the stay
agreement in the Clarkaction.

The Company believes that the allegations in all of the actions are without
merit and intends to contest the actions vigorously on behalf of its officers
and directors.

On March 21, 2002, an Adversary Complaint of Debtors and Debtors in Possession
Against WestPoint Stevens Inc. was filed by
Pillowtex, Inc., a Delaware corporation, et al.,and Pillowtex Corporation, et
al.,against the Company in the United States Bankruptcy Court for the District
of Delaware. Pillowtex Corporation and its related and affiliated companies
(Pillowtex) as Debtors and Debtors in Possession allege breach of a
postpetition contract (the Sale Agreement) dated January 31, 2001, among
Pillowtex, Ralph Lauren Home Collection, Inc. (RLH) and Polo Ralph Lauren
Corporation (PRLC) collectively referred to as Ralph Lauren and the
Company. Pillowtex alleges that the Company refused to perform its purchase
obligation under the Sales Agreement and is liable to it for $4,800,000 plus
potentially significant other consequential damages. The Company believes that
the complaint is without merit and intends to contest the action vigorously.

The Company has been named as a defendant in three separate purported class
action suits seeking reparation for the historic enslavement of African
Americans in the United States. Eddlee Bankhead v. Lloyds of London, et al.
(the Bankheadaction) was filed on September 3, 2002, in the United States
District Court for the Southern District of New York. Timothy Hurdle and
Chester Hurdle v. FleetBoston Financial Corporation, et al. was initially
filed in the California Superior Court for San Francisco County on September
10, 2002, but has since been removed to the United States District Court
California Northern District (San Francisco). Julie Mae Wyatt-Kerwin v. J.P.
Morgan Chasewas filed January 21, 2003, in the United States District Court
for the Southern District of Texas. All three cases have been consolidated
with related cases in the U.S. District Court for the Northern District of
Illinois. The factual basis for all three suits is the claim that the
defendants profited from the slave labor of the plaintiff classes ancestors
prior to 1865 and, specifically, that Pepperell Manufacturing, predecessor to
WestPoint Stevens Inc., utilized cotton from southern planters who in turn
purchased finished product to clothe their slaves. The California suit alleges
that such practices amount to an unfair business practice in violation of the
California Business and Professional Code.

The purported class includes all descendants of African American slaves. The
relief sought includes an accounting, the appointment of an independent
historical commission, imposition of a constructive trust, restitution of the
value of slave labor and defendants unjust enrichment, disgorgement of illicit
profits and compensatory and punitive damages. The Company believes that the
Complaints are without merit and intends to contest the actions vigorously.

On June 1, 2003, the Company and the other Debtors filed the petition under
Chapter 11 of the Bankruptcy Code which is discussed elsewhere in this Annual
Report on Form 10-K.

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Companys facilities (including certain facilities
no longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company is cooperating fully with relevant parties and authorities in all
such matters. The Company believes that it has adequately provided in its
financial statements for any expenses and liabilities that may result from such
matters. The Company also is insured with respect to certain of such matters.
The Companys operations are governed by laws and regulations relating to
employee safety and health which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.

Although the Company does not expect that compliance with any of such laws and
regulations will adversely affect the Companys operations, there can be no
assurance such regulatory requirements will not become more stringent in the
future or that the Company will not incur significant costs in the future to
comply with such requirements.

The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business. It is the opinion of management that the aforementioned actions and
claims, if determined adversely to the Company, will not have a material
adverse effect on the financial condition or operations of the Company taken as
a whole.

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Item 4. Submission of Matters to a Vote of Security Holders

During the fourth quarter of fiscal year 2002, no matters were submitted by the
Company to a vote of its security holders.




Part II




Item 5. Market for Registrants Equity and Related Stockholder Matters

The Common Stock of the Company is listed on the Over the Counter Bulletin
Board (OTCBB) under the ticker symbol WSPT. Such listing became effective on January 30, 2003. Prior thereto, the
Companys Common Stock was listed on the New York Stock Exchange (NYSE) under
the ticker symbol WXS from October 15, 1999.

The following table presents the high and low sales prices of the Companys
Common Stock, as reported by the NYSE for each full quarterly period within
the two most recent fiscal years:

|              |  |             |      |      |  |      |      |     |  |   |       |  |  |   |      | 
|------------- |  | ----------- | ---- | ---- |  | ---- | ---- | --- |  | - | ----- |  |  | - | ---- | 
|Quarter Ended |  | Share Price
|              |  |            
|              |  | 2002        |      | 2001
|              |  |             |      |     
|              |  | High        |      | Low  |  | High |      | Low
|              |  |             |      |      |  |      |      |    
|March 31      |  | $           | 2.69 |      |  | $    | 1.35 |     |  | $ | 10.15 |  |  | $ | 7.37 | 
|June 30       |  | $           | 6.05 |      |  | $    | 2.05 |     |  | $ | 10.00 |  |  | $ | 0.96 | 
|September 30  |  | $           | 3.96 |      |  | $    | 0.57 |     |  | $ | 2.70  |  |  | $ | 1.50 | 
|December 31   |  | $           | 1.27 |      |  | $    | 0.39 |     |  | $ | 3.50  |  |  | $ | 1.55 | 

The Company paid dividends of $.02 per share on March 1 and June 1, 2001.
Under its existing credit facilities, as amended June 29, 2001, the Company is
not permitted to pay dividends. For an additional discussion of these
restrictions on the payment of dividends see Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources.

As of March 14, 2003, there were approximately 5,196 holders of the Companys
Common Stock. Of that total, approximately 303 were stockholders of record and
approximately 4,893 held their stock in nominee name through the Depository
Trust Company.

The Company currently anticipates that all of the currently outstanding shares
of its Common Stock will be cancelled pursuant to the plan of reorganization
which it will propose under Chapter 11 of the Bankruptcy Code.

Website Access

Our website address is www.westpointstevens.com. You may obtain free
electronic copies of our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and all amendments to those reports at our
investor relations website, www.investorwestpoint.com/performance/index.html,
under the heading SEC Filings. These reports are available on our investor
relations website as soon as reasonably practicable after we electronically
file them with the SEC. The information on our website is not part of or
incorporated by reference in this Annual Report on Form 10-K.

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Equity Compensation Plan Information

The following table sets forth information as of December 31, 2002 (except as
otherwise specified in the footnotes).

|                                                           |  |                                                                                                     |  |                                                                                     |  |                                                                                                                                                
|---------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Plan category                                              |  | Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
 
 
(a) |  | Weighted-average
exercise price of
outstanding
options, warrants
and rights
 
 
(b) |  | Number of
securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities
reflected in column
(a))
(c)
|                                                          
|Equity compensation
plans approved bysecurity holders      |  | 5,827,617                                                                                           |  | $16.39                                                                              |  | 1,347,307(1)(2)                                                                                                                                
|                                                          
|Equity compensation
plans not approved
by security holders |  | 20,000                                                                                              |  | $14.50                                                                              |  | -0-                                                                                                                                            
|                                                          
|Total                                                      |  | 5,847,617                                                                                           |  | $16.38                                                                              |  | 1,347,307(1)(2)                                                                                                                                



---

|(1) |  | Includes 1,170,581 shares available for grant under the Omnibus Stock
Incentive Plan (the OSIP), 35,500 restricted shares granted but not vested
under the OSIP and 141,226 shares earned but not vested under the Key Employee
Stock Bonus Plan (the KESB Plan).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The KESB Plan was first approved by equity holders at the Companys
annual meeting on May 15, 1996, and re-approved in amended form at the
Companys annual meeting on May 9, 2001. Under the terms of the KESB Plan the
number of shares available for issuance is not limited but is established by a
formula in the KESB Plan which is subject to administration by the Compensation
Committee (the Committee) of the Board of Directors in its discretion. Under
the KESB Plan, each year participants, if any, are selected by the Committee to
receive an award entitling each participant to receive shares of common stock
of the Company in a number equal to the quotient obtained by dividing 80% of
the participants base salary by the fair market value of one share of common
stock on the first day of the year; provided that such award is earned by the
Company achieving a pre-determined earnings per share established by the
Committee within the first ninety (90) days of the year. In February 2003, the
Committee suspended participation in the KESB Plan for 2003.

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Item 6. Selected Financial Data

The selected historical financial data presented below for 2002, 2001 and 2000
were derived from the Audited Consolidated Financial Statements of the Company
and its subsidiaries as of and for the years ended December 31, 2002, 2001 and
2000 (the Consolidated Financial Statements), and should be read in
conjunction therewith, including the notes thereto and the other financial
information included elsewhere in this report.

|                                                                                              |                                                               |   |                         |      |      |   |         |      |      |   |         |       |   |   |         |      |  |   |         |      |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | - | ----------------------- | ---- | ---- | - | ------- | ---- | ---- | - | ------- | ----- | - | - | ------- | ---- |  | - | ------- | ---- | -
|                                                                                              |                                                               |   | Year Ended December 31,
|                                                                                              |                                                               |   |                        
|                                                                                              |                                                               |   | 2002                    |      | 2001 |   | 2000    |      | 1999 |   | 1998   
|                                                                                              |                                                               |   |                         |      |      |   |         |      |      |   |        
|(In millions, except per share data)                                                         
|Statement of
Operations Data:                                                                 |                                                               |   |                         |      |      |   |         |      |      |   |         |       |   |   |         |      |  |   |         |     
|Net sales                                                                                     |                                                               | $ | 1,811.4                 |      |      | $ | 1,765.1 |      |      | $ | 1,815.9 |       |   | $ | 1,883.3 |      |  | $ | 1,779.0 |     
|Gross earnings (1)                                                                            |                                                               |   | 393.6                   |      |      |   | 378.3   |      |      |   | 388.4   |       |   |   | 505.3   |      |  |   | 474.7   |     
|Operating earnings (2)                                                                        |                                                               |   | 122.3                   |      |      |   | 115.3   |      |      |   | 34.9    |       |   |   | 268.1   |      |  |   | 248.3   |     
|Interest expense                                                                              |                                                               |   | 135.5                   |      |      |   | 141.6   |      |      |   | 122.3   |       |   |   | 102.4   |      |  |   | 105.7   |     
|Income (loss) from operations before income tax expense
(benefit) and extraordinary items (3) |                                                               |   | (19.8                   | )    |      |   | (42.6   | )    |      |   | (98.8   | )     |   |   | 162.9   |      |  |   | 141.7   |     
|Income (loss) from operations before extraordinary items (4)                                  |                                                               |   | (12.7                   | )    |      |   | (27.3   | )    |      |   | (63.3   | )     |   |   | 104.1   |      |  |   | 90.6    |     
|                                                                                             
|Net income (loss) (4)                                                                         |                                                               |   | (12.7                   | )    |      |   | (27.3   | )    |      |   | (63.3   | )     |   |   | 104.1   |      |  |   | 40.0    |     
|                                                                                             
|Diluted net income (loss) per common share:                                                   |                                                               |   |                         |      |      |   |         |      |      |   |         |       |   |   |         |      |  |   |         |     
|                                                                                              | Income (loss) before extraordinary item                       |   |                         | (.25 | )    |   |         | (.55 | )    |   |         | (1.28 | ) |   |         | 1.84 |  |   |         | 1.51 |  
|                                                                                              | Extraordinary item  loss on early extinguishment of debt (5) |   |                         |     |      |   |         |     |      |   |         |      |   |   |         |     |  |   |         | (.84 | )
|                                                                                              |                                                               |   |                         |      |      |   |         |      |      |   |         |       |   |   |         |      |  |   |         |     
|                                                                                              | Net income (loss) per common share                            |   |                         | (.25 | )    |   |         | (.55 | )    |   |         | (1.28 | ) |   |         | 1.84 |  |   |         | .67  |  
|                                                                                             
|Diluted average common shares outstanding                                                     |                                                               |   | 49.7                    |      |      |   | 49.6    |      |      |   | 49.6    |       |   |   | 56.6    |      |  |   | 59.9    |     
|                                                                                             
|Cash dividends declared per share                                                             |                                                               |   |                        |      |      |   | .04     |      |      |   | 2.08    |       |   |   | .06     |      |  |   |        |     

|                               |  |              |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|------------------------------ |  | ------------ | -------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                               |  | December 31,
|                               |  |             
|                               |  | 2002         |          | 2001 |  | 2000 |         | 1999 |  | 1998
|                               |  |              |          |      |  |      |         |      |  |     
|(In millions)                 
|Balance Sheet Data:            |  |              |          |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|Total assets                   |  | $            | 1,297.2  |      |  | $    | 1,368.8 |      |  | $    | 1,458.4 |   |  | $ | 1,540.7 |   |  | $ | 1,391.2 |  
|Working capital (6)            |  |              | (1,276.9 | )    |  |      | 242.1   |      |  |      | 180.1   |   |  |   | 233.1   |   |  |   | 178.2   |  
|Total debt                     |  |              | 1,612.8  |      |  |      | 1,672.5 |      |  |      | 1,627.8 |   |  |   | 1,464.8 |   |  |   | 1,335.4 |  
|Stockholders equity (deficit) |  |              | (805.6   | )    |  |      | (778.4  | )    |  |      | (712.8  | ) |  |   | (498.0  | ) |  |   | (487.5  | )

|                              |  |                         |      |      |  |      |      |      |  |      |      |  |  |   |       |  |  |   |       | 
|----------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | - | ----- |  |  | - | ----- | 
|                              |  | Year Ended December 31,
|                              |  |                         |     
|                              |  | 2002                    |      | 2001 |  | 2000 |      | 1999 |  | 1998
|                              |  |                         |      |      |  |      |      |      |  |     
|(In millions)                
|Other Data:                   |  |                         |      |      |  |      |      |      |  |      |      |  |  |   |       |  |  |   |       | 
|Depreciation and amortization |  | $                       | 79.2 |      |  | $    | 83.9 |      |  | $    | 80.8 |  |  | $ | 84.1  |  |  | $ | 80.6  | 
|Capital expenditures          |  |                         | 46.2 |      |  |      | 60.5 |      |  |      | 76.7 |  |  |   | 148.6 |  |  |   | 147.5 | 

See footnotes on following page.

14



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##### Table of Contents





---

|(1) |  | Gross earnings for the years ended December 31, 2002, 2001 and 2000 include
costs related to restructuring initiatives of $11.6 million, $13.7 million and
$85.3 million, respectively, as discussed in Note 12 and Managements
Discussion and Analysis.                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Operating earnings for the years ended December 31, 2002, 2001 and 2000
include restructuring and impairment charges of $6.6 million, $5.0 million and
$109.2 million, respectively, and other costs related to restructuring
initiatives of $11.6 million, $13.7 million and $85.3 million, respectively,
totaling $18.2 million, $18.7 million and $194.5 million, respectively, as
discussed in Note 12 and Managements Discussion and Analysis.                                                                                                                                                                                                             
|   
|(3) |  | Loss from operations before income tax benefit for the years ended December
31, 2002, 2001 and 2000 include restructuring and impairment charges of $6.6
million, $5.0 million and $109.2 million, respectively, and other costs related
to restructuring initiatives and other charges of $11.6 million, $13.7 million
and $94.0 million, respectively, totaling $18.2 million, $18.7 million and
$203.2 million, respectively, as discussed in Note 12 and Managements
Discussion and Analysis.                                                                                                                                                               
|   
|(4) |  | Loss from operations and net loss for the years ended December 31, 2002,
2001 and 2000 include restructuring and impairment charges of $6.6 million,
$5.0 million and $109.2 million, respectively, and other costs related to
restructuring initiatives and other charges of $11.6 million, $13.7 million and
$94.0 million, respectively, totaling $18.2 million, $18.7 million and $203.2
million, respectively, before income tax benefit of $6.6 million, $6.7 million
and $73.1 million, respectively, for a net amount of $11.7 million, $11.9
million and $130.1 million, respectively, as discussed in Note 12 and
Managements Discussion and Analysis.
|   
|(5) |  | In 1998, the Company recorded an extraordinary item of $50.6 million, net of
income taxes of $28.5 million, for the early extinguishment of debt. The
extraordinary charge consisted primarily of tender premiums and the write-off
of deferred debt costs.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(6) |  | Working capital at December 31, 2002, 2001, 2000, 1999 and 1998 includes the
current portion of bank indebtedness of $447.8 million, $107.5 million, $152.8
million, $89.8 million and $60.4 million, respectively. Working capital at
December 31, 2002 also includes long-term debt of $1,165.0 million classified
as current (see Note 3).                                                                                                                                                                                                                                                                                                                    

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##### Table of Contents






Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations

As more fully disclosed above (see Item 1. Business  Chapter 11 Filing),
the Company and several of its subsidiaries filed a petition under Chapter 11
of the Bankruptcy Code on June 1, 2003. By reason thereof, the Companys
creditors were automatically stayed from taking certain enforcement actions
under their respective agreements with the Company unless the stay is lifted by
the Bankruptcy Court. In addition, the Company has entered into the DIP Credit
Agreement, which is more fully described below.

The Companys consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
applicable to a going concern. Except as otherwise disclosed, these principles
assume that assets will be realized and liabilities will be discharged in the
ordinary course of business. The Company is currently operating as a
debtor-in-possession under Chapter 11 of the Bankruptcy Code, and its
continuation as a going concern is contingent upon, among other things, its
ability to gain approval of the plan of reorganization by the
requisite parties under the Bankruptcy Code and be confirmed by the Bankruptcy
Court, comply with the DIP Credit Agreement, return to profitability, generate
sufficient cash flows from operations and obtain financing sources to meet
future obligations. There is no assurance that the Company will be able to
achieve any of these results. The Companys consolidated financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might result from the outcome of these uncertainties.

Whether as a result of its proceeding under Chapter 11 or otherwise, the
Company may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the financial
statements. Additionally, the amounts reported on the consolidated balance
sheet could materially change because of changes in business strategies and the
effects of any proposed plan or reorganization.

Senior Credit Facility and Second-Lien Facility Amendments

In the third quarter of 2002, the Companys Senior Credit Facility and
Second-Lien Facility were amended primarily to permit certain restructuring,
impairment and other charges, and to modify certain financial ratios and the
minimum EBITDA covenant.

Effective March 31, 2003, the Companys Senior Credit Facility was amended
primarily to provide for an interim facility limitation and to add an unused
commitment fee. Under the interim facility limitation, the Companys
outstanding borrowings and letters of credit under the Senior Credit Facility
were limited to the following amounts for the periods indicated: $546.0 million
for the period April 1, 2003 through April 26, 2003; $530.0 million for the
period April 27, 2003 through May 17, 2003; $525.0 million for the period May
18, 2003 through June 10, 2003.

At the option of the Company and effective with the last amendment to the
Senior Credit Facility, interest under the Senior Credit Facility is payable
monthly, either at the prime rate plus 5.25% or at LIBOR plus 7.00%, compared
to prime rate plus 2.75% or LIBOR plus 4.50% in effect at December 31, 2002.
The Company is also obligated to pay a facility fee in an amount equal to 0.50%
of each Banks commitment under the Revolver, and an unused commitment fee in
an amount equal to 1.00% of the difference between the revolver commitment and
the daily outstanding loans and letters of credit.

At March 31, 2003, the Company was not in compliance with certain of its
covenants under the Senior Credit Facility and Second-Lien Facility. Effective
March 31, 2003, the Companys lenders under the Senior Credit Facility and
Second-Lien Facility temporarily waived the defaults for the period March 31,
2003 through and including June 10, 2003. At December 31, 2002, the Company
classified all of its outstanding debt under all of its various credit
agreements as current as a result of the Companys inability to obtain
temporary waivers discussed above through the end of 2003 and the potential for
the acceleration of the loans outstanding under all of its various credit
agreements.

Second-Lien Facility

On June 29, 2001, the Company announced the closing of a $165.0 million
Second-Lien Facility with a maturity date of February 28, 2005. Net proceeds
from the transaction, after payment of approximately $16.3 million of related
transaction fees and expenses, were used to reduce outstanding borrowings under
the Senior Credit Facility as well as provide additional liquidity for working
capital and general corporate purposes. Effective with the closing of the
Second-Lien Facility, the revolving commitment under the Senior Credit Facility
was reduced to $717.5 million from $800.0 million. Interest under the
Second-Lien Facility is payable quarterly at an interest rate of prime plus 8% increasing each quarter
after June 30, 2002 by .375% but in no event less

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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Second-Lien FacilityContinued

than 15%. Loans under the Second-Lien Facility are secured by a second
priority lien on the assets securing the existing Senior Credit Facility. The
approximately $16.3 million of related transaction fees and expenses were
capitalized as deferred financing fees and are being amortized over the
remaining term of the facility.

DIP Credit Agreement

The Company is a party to the DIP Credit Agreement which provides a facility
consisting of revolving credit loans of up to $300 million (with a sublimit of
$75 million for letters of credit) with a term of one year. At its option, the
Company may extend the term for up to two successive periods of six months
each.

Advances under the DIP Credit Agreement bear interest at a fluctuating rate per
annum equal to LIBOR plus a margin of 2.75% or, at the Companys option, prime
plus a margin of 0.625%. Each margin is subject to quarterly adjustments,
commencing November 1, 2003, pursuant to a pricing matrix, based on average
availability, having a range of 2.25% to 3.00% for LIBOR based loans and 0.25%
to 1.00% for prime based loans. The DIP Credit Agreement also has an unused
line fee of 0.5% per annum, subject to quarterly adjustments as above having a
range of 0.375% to 0.75%.

The DIP Credit Agreement contains a number of covenants, including among
others, affirmative and negative covenants with respect to certain financial
tests and other indebtedness, as well as restrictions against the declaration
or payment of dividends, the making of certain intercompany advances and the
disposition of assets without consent. The DIP Credit Agreement also contains
Events of Default (as defined in the DIP Credit Agreement) including among
others, a failure to pay the principal and interest of the obligations when
due, default with respect to any Debt (as defined in the DIP Credit Agreement)
and a failure by the Company to comply with any provisions of the Financing
Orders (as defined in the DIP Credit Agreement). A copy of the DIP Credit
Agreement constitutes Exhibit No. 99.2 to the Current Report on Form 8-K, which
the Company filed with the Securities and Exchange Commission on June 5, 2003.

Restructuring, Impairment, and Other Charges

As a result of a strategic review of the Companys businesses, manufacturing
and other facilities, and products in the second quarter of 2000, the Companys
Board of Directors approved a $222.0 million pretax charge to cover the cost of
implementing an Eight-Point Plan that was designed to streamline operations and
improve profitability. The Eight-Point Plan addressed the following points:
1) expansion of brands; 2) exploration of new licensing opportunities; 3)
rationalization of manufacturing operations; 4) reduction in overhead expense;
5) increase in global sourcing; 6) improvement of inventory utilization; 7)
enhancement of supply chain and logistics functions; and 8) improvement in
capital structure.

During 2000, the Company conducted an intense evaluation of its manufacturing
process flow and capacity and how they relate to market demand. The Company
adopted a plan to close certain manufacturing plants and consolidate
manufacturing operations in an arrangement that will reduce costs and enable
more efficient production. The Company also evaluated its internal support and
administrative functions and adopted a plan to consolidate as well as outsource
certain internal support and administrative functions.

Four plant closings have been announced under the Eight-Point Plan. On October
2, 2000, the Rosemary greige plant, a towel plant located in Roanoke Rapids,
North Carolina, and the Liebhardt basic bedding plant in Union, South
Carolina, were scheduled for closing. On January 29, 2001, the Seneca plant, a
sheeting plant in Seneca, South Carolina, was scheduled for closing. On March
1, 2001, the Whitmire yarn plant in Whitmire, South Carolina, was scheduled for
closing. In addition to these closings, a reduction in the workforce of the
remaining finishing and fabricating facilities at the Rosemary complex was
announced on February 5, 2001. These plant closings will enable the Company to
consolidate its manufacturing in locations that allow the most efficient work
flow.

The cost of the manufacturing rationalization and certain overhead reduction
costs were reflected in a restructuring and impairment charge of $109.2
million, before taxes, in 2000 and a restructuring and impairment charge of
$5.0 million, before taxes, in 2001. The components of the restructuring and
impairment charge in 2000 included $66.8 million for the impairment of fixed
assets, $23.7 million for the impairment of goodwill and other assets and $18.7
million in reserves to cover cash expenses related to

17



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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Restructuring, Impairment, and Other ChargesContinued

severance benefits of $14.7 million and other exit costs, including lease
terminations, of $4.0 million. The components of the restructuring and
impairment charge in 2001 included $7.0 million in reserves to cover cash
expenses related to severance benefits and a reduction in reserves for other
exit costs of $2.0 million.

Since the adoption of the Eight-Point Plan, the Company terminated and agreed
to pay severance (including continuing termination benefits) to approximately
1,700 employees. The restructuring charge approved in 2000 was completed in
the fourth quarter of 2001. Given the disruptive nature of the restructuring
activity that included significant machinery relocation and realignment in 2000
and 2001, the Company did not see any significant benefit from the
restructuring plan until 2002. During 2002 the Company experienced lower cost
of sales in part due to increased manufacturing efficiencies as a result of the
restructuring plan.

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | ---- | ----------- | - | -------- | --- | ------ | - | ---- | ---- | - | - | ----- | ---- | 
|                                          |                |   |           |      |             |   | Employee |     | Other  |   |      |      |  
|                                          |                |   | Writedown |      | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |      | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |      |             |   |          |     |       
|2000 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | Second Quarter |   | $         | 87.9 |             |   | $        | 4.6 |        |   | $    | 3.4  |   |   | $     | 95.9 | 
|                                          | Third Quarter  |   |           |     |             |   |          | 5.8 |        |   |      | 0.3  |   |   |       | 6.1  | 
|                                          | Fourth Quarter |   |           | 2.6  |             |   |          | 4.3 |        |   |      | 0.3  |   |   |       | 7.2  | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|Total 2000 Charge                         |                |   | 90.5      |      |             |   | 14.7     |     |        |   | 4.0  |      |   |   | 109.2 |     
|                                         
|2001 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | First Quarter  |   |           |     |             |   |          | 5.0 |        |   |      |     |   |   |       | 5.0  | 
|                                          | Fourth Quarter |   |           |     |             |   |          | 2.0 |        |   |      | (2.0 | ) |   |       |     | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|Total 2001 Charge                         |                |   |          |      |             |   | 7.0      |     |        |   | (2.0 | )    |   |   | 5.0   |     
|                                         
|Writedown Assets to Net Recoverable Value |                |   | (90.5     | )    |             |   |         |     |        |   |     |      |   |   | (90.5 | )   
|2000 Cash Payments                        |                |   |          |      |             |   | (4.7     | )   |        |   | (0.3 | )    |   |   | (5.0  | )   
|2001 Cash Payments                        |                |   |          |      |             |   | (15.0    | )   |        |   | (0.1 | )    |   |   | (15.1 | )   
|2002 Cash Payments                        |                |   |          |      |             |   | (1.7     | )   |        |   |     |      |   |   | (1.7  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|Balance at December 31, 2002              |                | $ |          |      |             | $ | 0.3      |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 

During 2000, other costs of the Eight-Point Plan and other charges of $94.0
million, before taxes, were recognized including inventory writedowns of $74.2
million; claims of $5.0 million; other expenses of $6.1 million consisting
primarily of $2.2 million for the relocation of machinery, $2.4 million of
related unabsorbed overhead and other expenses of $1.5 million, all reflected
in cost of goods sold; and other costs of $8.7 million consisting primarily of
$5.7 million of unusual contractual severance and other expenses of $3.0
million reflected in Other expense-net. During 2001, other costs of the
Eight-Point Plan of $13.7 million, before taxes, were recognized consisting
primarily of $10.0 million for the relocation of machinery, $3.0 million of
related unabsorbed overhead and other expenses of $0.7 million all reflected in
cost of goods sold.

---

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of its retail stores division. The Company expects
the restructuring initiatives to result in a $36.5 million pretax charge for
restructuring, impairment and other charges. Approximately $20 million of the
pretax charge is expected to be non-cash items with annual pretax savings
estimated at $10 million once the restructuring initiatives are fully
implemented. All charges have been recorded in accordance with Statement of
Financial Accounting Standard No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. The charges for the restructuring initiatives
began in the third quarter of 2002 and will continue throughout 2003.

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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Restructuring, Impairment, and Other ChargesContinued

As a result of the restructuring initiatives in 2002, the Company announced the
closure of its Rosemary (NC) towel finishing facility and the conversion of its
Rosemary (NC) towel fabrication and distribution facilities to basic bedding
facilities. The Company announced on April 25, 2003 that the Rosemary (NC)
towel fabrication and distribution facilities that were previously
disclosed as being converted to basic bedding facilities will now be closed.
The Company also announced the closure of three retail stores. Closure of
other retail stores and other facilities may be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002. The components of the
restructuring and impairment charge included $4.4 million for the impairment of
fixed assets and $2.2 million in reserves to cover cash expenses related
primarily to severance benefits.

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|----------------------------------------- | -------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ | - | --- | --- |  | - | ---- | --- | 
|                                          |                |   |           |     |             |   | Employee |     | Other  |   |     |     | 
|                                          |                |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |    
|                                          | Third Quarter  |   | $         | 4.3 |             |   | $        | 1.6 |        |   | $   |    |  |   | $    | 5.9 | 
|                                          | Fourth Quarter |   |           | 0.1 |             |   |          | 0.5 |        |   |     | 0.1 |  |   |      | 0.7 | 
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|Total 2002 Charge                         |                |   | 4.4       |     |             |   | 2.1      |     |        |   | 0.1 |     |  |   | 6.6  |    
|                                         
|Writedown Assets to Net Recoverable Value |                |   | (4.4      | )   |             |   |         |     |        |   |    |     |  |   | (4.4 | )  
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |    |     |  |   | (1.5 | )  
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|Balance at December 31, 2002              |                | $ |          |     |             | $ | 0.6      |     |        | $ | 0.1 |     |  | $ | 0.7  |    
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 

During 2002, other costs of the restructuring initiatives of $11.6 million,
before taxes, were recognized consisting of inventory writedowns of $10.5
million primarily related to the rationalization of its retail store division
and other expense of $1.1 million, consisting primarily of related unabsorbed
overhead, all reflected in cost of goods sold.

19



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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Results of Operations

The table below is a summary of the Companys operating results for the years
ended December 31, 2002, 2001 and 2000. The following discussion is limited to
an analysis of the results of continuing operations (in millions of dollars and
as percentages of net sales).

|                                    |  |                         |         |      |  |      |         |   |  |   |         |  
|----------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                    |  | Year Ended December 31,
|                                    |  |                        
|                                    |  | 2002                    |         | 2001 |  | 2000
|                                    |  |                         |         |      |  |     
|Net sales                           |  | $                       | 1,811.4 |      |  | $    | 1,765.1 |   |  | $ | 1,815.9 |  
|                                   
|Gross earnings                      |  | $                       | 393.6   |      |  | $    | 378.3   |   |  | $ | 388.4   |  
|                                   
|Restructuring and impairment charge |  | $                       | 6.6     |      |  | $    | 5.0     |   |  | $ | 109.2   |  
|                                   
|Operating earnings                  |  | $                       | 122.3   |      |  | $    | 115.3   |   |  | $ | 34.9    |  
|                                   
|Interest expense                    |  | $                       | 135.5   |      |  | $    | 141.6   |   |  | $ | 122.3   |  
|                                   
|Other expense-net                   |  | $                       | 6.6     |      |  | $    | 16.3    |   |  | $ | 11.4    |  
|                                   
|Loss from operations before taxes   |  | $                       | (19.8   | )    |  | $    | (42.6   | ) |  | $ | (98.8   | )
|                                   
|Net loss                            |  | $                       | (12.7   | )    |  | $    | (27.3   | ) |  | $ | (63.3   | )
|                                   
|Gross margin                        |  |                         | 21.7    | %    |  |      | 21.4    | % |  |   | 21.4    | %
|                                   
|Operating margin                    |  |                         | 6.8     | %    |  |      | 6.5     | % |  |   | 1.9     | %

2002 Compared with 2001

Net Sales.Net sales for the year ended December 31, 2002 increased $46.3
million, or 2.6%, to $1,811.4 million compared with net sales of $1,765.1
million for the year ended December 31, 2001. The increase was due to
managements focus on expanding sales with key retailers that resulted in
growth in all major product categories except sheets.

For the year ended December 31, 2002, bed products sales were $1,053.0 million
compared with $1,024.3 million in 2001, bath products sales were $549.0 million
compared with $524.0 million in 2001 and other sales (consisting primarily of
sales from the Companys mill stores and foreign operations) were $209.3
million compared with $216.9 million in 2001.

Gross Earnings/Margins.Gross earnings for the year ended December 31, 2002 of
$393.6 million increased $15.3 million, or 4.0%, compared with $378.3 million
for 2001 and reflect gross margins of 21.7% in 2002 and 21.4% in 2001.
Included in gross earnings for the years ended December 31, 2002 and 2001 were
costs related to restructuring initiatives of $11.6 million and $13.7 million,
respectively, as previously discussed. Gross earnings and margins improved in
2002 due to increased sales and lower raw material costs, primarily cotton, and
lower costs related to restructuring initiatives, that more than offset
increased promotional activity, increased royalties, increased pension expense
and under-absorbed overhead due to production curtailment.

Operating Earnings/Margins. Selling, general and administrative expenses
increased $6.6 million, or 2.6%, in 2002 compared with 2001, and as a
percentage of net sales represent 14.6% in 2002 and 2001. The increase in
selling, general and administrative expenses in 2002 was primarily due to
increased sales levels. Selling, general and administrative expenses included
additional bad debt expense for Kmart Corporation accounts receivable of $10.4
million and $11.0 million in 2002 and 2001, respectively. Restructuring and
impairment charges of $6.6 million and $5.0 million were incurred in 2002 and
2001, respectively, related to the Companys Eight-Point Plan, as previously
discussed.

Operating earnings for the year ended December 31, 2002 were $122.3 million, or
6.8% of sales, and increased $7.0 million, or 6.1%, compared with operating
earnings of $115.3 million, or 6.5% of sales, for 2001. Included in operating
earnings for the years ended December 31, 2002 and 2001 were costs related to
restructuring initiatives of $18.2 million and $18.7 million, respectively, as
previously discussed. The increase in operating earnings in 2002 resulted from
higher sales levels and reduced raw material costs that more than offset
increased promotional activity, increased royalties, increased pension expense
and under-absorbed overhead due to production curtailment, as well as increased
selling, general and administrative expenses.

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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Results of OperationsContinued

2002 Compared with 2001Continued

Interest Expense.Interest expense for the year ended December 31, 2002 of
$135.5 million decreased $6.1 million compared with interest expense for the
year ended December 31, 2001. The decrease in interest expense was due
primarily to lower average debt levels and lower average interest rates on the
Companys variable rate bank debt.

Other Expense-Net.Other expense-net decreased $9.7 million for the year ended
December 31, 2002 to $6.6 million from $16.3 million for the year ended
December 31, 2001. Charges in 2002 included amortization of deferred financing
fees of $9.6 million that were offset by miscellaneous income items including
$1.8 million from an unconsolidated subsidiary, and $1.2 million from gain on
sale of assets. The decline in 2002 reflects the absence of charges from 2001
including a $7.5 million non-cash charge to adjust to market value its basis in
an unconsolidated limited liability corporation, $2.3 million in charges for
cotton derivatives in accordance with Statement of Financial Accounting
Standard No. 133, Accounting for Derivative Instruments and Hedging Activities,
and also included the amortization of deferred financing fees of $6.9 million,
less certain miscellaneous items.

Income Tax Expense (Benefit).The Companys effective tax rate differed from
the federal statutory rate primarily due to state income taxes and
non-deductible items.

Net Loss.Net loss for fiscal year 2002 was $12.7 million, or a loss of $0.25
per share diluted, and net loss for 2001 was $27.3 million, or a loss of $0.55
per share diluted. Included in net loss for the years ended December 31, 2002
and 2001 were costs related to restructuring initiatives, net of taxes, of
$11.7 million and $11.9 million, respectively, as previously discussed.

Diluted per share amounts are based on 49.7 million and 49.6 million average
shares outstanding for 2002 and 2001, respectively.

2001 Compared with 2000

Net Sales.Net sales for the year ended December 31, 2001 decreased $50.8
million, or 2.8%, to $1,765.1 million compared with net sales of $1,815.9
million for the year ended December 31, 2000. The decrease resulted from
difficult conditions at retail for all of 2001 that caused a decline in sales
across all product categories with the exception of basic bedding accessories.
Sales were also negatively impacted by increased promotional pricing activity
due to the weak retail sales environment.

For the year ended December 31, 2001, bed products sales were $1,024.3 million
compared with $1,054.0 million in 2000, bath products sales were $524.0 million
compared with $551.8 million in 2000 and other sales (consisting primarily of
sales from the Companys mill stores and foreign operations) were $216.9
million compared with $210.1 million in 2000.

Gross Earnings/Margins.Gross earnings for the year ended December 31, 2001 of
$378.3 million decreased $10.1 million, or 2.6%, compared with $388.4 million
for 2000 and reflect gross margins of 21.4% in both 2001 and 2000. Included in
gross earnings for the years ended December 31, 2001 and 2000 were costs
related to restructuring initiatives of $13.7 million and $85.3 million,
respectively, as previously discussed. Gross earnings deteriorated in 2001
due to increased raw material costs, primarily cotton, and a weakness in retail
markets that resulted in increased promotional activity and lower sales that
necessitated selected production downtime and resulted in under absorption of
fixed costs, partially offset by lower costs related to restructuring
initiatives in 2001 compared to 2000.

Operating Earnings/Margins. Selling, general and administrative expenses
increased $13.7 million, or 5.6%, in 2001 compared with 2000, and as a
percentage of net sales represent 14.6% in 2001 and 13.5% in 2000. The
increase in selling, general and administrative expenses in 2001 was primarily
due to increased bad debt expense and expenses associated with the acquired
Chatham blanket unit that were partially offset by reduced litigation reserves.
Restructuring and impairment charges of $5.0 million and $109.2 million were
incurred in 2001 and 2000, respectively, related to the Companys Eight-Point
Plan, as previously discussed.

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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Results of OperationsContinued

2001 Compared with 2000Continued

Operating earnings for the year ended December 31, 2001 were $115.3 million, or
6.5% of sales, and increased $80.4 million, compared with operating earnings of
$34.9 million, or 1.9% of sales, for 2000. Included in operating earnings for
the years ended December 31, 2001 and 2000 were costs related to restructuring
initiatives of $18.7 million and $194.5 million, respectively, as previously
discussed. The increase in operating earnings in 2001 resulted from lower
costs related to restructuring initiatives, partially offset by increased raw
material costs and a weakness in retail markets that resulted in increased
promotional activity and lower sales that necessitated selected production
downtime and resulted in under absorption of fixed costs, as well as increased
selling, general and administrative expenses.

Interest Expense.Interest expense for the year ended December 31, 2001 of
$141.6 million increased $19.3 million compared with interest expense for the
year ended December 31, 2000. The increase in interest expense was due
primarily to higher average debt levels and higher average interest rates on
the Companys variable rate bank debt and Second-Lien Facility.

Other Expense-Net.Other expense-net increased $4.9 million for the year ended
December 31, 2001 to $16.3 million from $11.4 million for the year ended
December 31, 2000. Included in other expense-net for the year ended December
31, 2000 were costs related to restructuring initiatives of $8.7 million, as
previously discussed. Other expense-net in 2001 was comprised of a $7.5
million non-cash charge to adjust to market value its basis in an
unconsolidated limited liability corporation, $2.3 million in charges for
cotton derivatives in accordance with Statement of Financial Accounting
Standard No. 133, Accounting for Derivative Instruments and Hedging Activities,
and also included the amortization of deferred financing fees of $6.9 million,
less certain miscellaneous items. Other expense-net in 2000 included the
amortization of deferred financing fees of $3.2 million, less certain
miscellaneous items, plus costs associated with the Companys Eight-Point Plan
of $8.7 million. The primary asset of the limited liability corporation was an
airplane that was sold during the year for less than its book value and
generated $3.3 million in cash.

Income Tax Expense (Benefit).The Companys effective tax rate differed from
the federal statutory rate primarily due to state income taxes and
non-deductible items.

Net Loss.Net loss for fiscal year 2001 was $27.3 million, or a loss of $0.55
per share diluted, and net loss for 2000 was $63.3 million or a loss of $1.28
per share diluted. Included in net loss for the years ended December 31, 2001
and 2000 were costs related to restructuring initiatives, net of taxes, of
$11.9 million and $130.1 million, respectively, as previously discussed.

Diluted per share amounts are based on 49.6 million average shares outstanding
for both the 2001 and 2000 periods, respectively.

Critical Accounting Policies and Estimates

These policies are considered critical because they have the potential to
have a material impact on the Companys financial statements, and because they
require judgments and estimation due to the uncertainty involved in measuring,
at a specific point in time, events which are continuous in nature.

The Companys Consolidated Financial Statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
the Company to make estimates and assumptions. See Note 1  Summary of
Significant Accounting Policies in the Notes to Consolidated Financial
Statements. Management believes that the following are some of the more
critical judgment areas in the application of the Companys accounting policies
that currently affect financial condition and results of operations.

Basis of Presentation. The Companys consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
applicable to a going concern. Except as otherwise disclosed, these principles
assume that assets will be realized and liabilities will be discharged in the
ordinary course of business. The Company is currently operating as a
debtor-in-possession under Chapter 11 of the Bankruptcy Code, and its
continuation as a going concern is contingent upon, among other things, its
ability to gain approval of the plan of reorganization by the
requisite parties under the Bankruptcy Code and be confirmed by the Bankruptcy
Court, comply with the DIP Credit Agreement, return to profitability, generate

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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Critical Accounting Policies and EstimatesContinued

sufficient cash flows from operations and obtain financing sources to meet
future obligations. There is no assurance that the Company will be able to
achieve any of these results. The Companys consolidated financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might result from the outcome of these uncertainties.

The Companys consolidated financial statements do not reflect adjustments that
may be made in accordance with AICPA Statement of Position 90-7 (Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code) (SOP
90-7), which the Company will adopt for its financial reporting in periods
ending after June 1, 2003 assuming that the Company will continue as a going
concern. In the Chapter 11 proceedings, substantially all unsecured
liabilities as of the Petition Date are subject to compromise or other
treatment under a plan of reorganization which must be confirmed by the
Bankruptcy Court after submission to any required vote by affected parties. For
financial reporting purposes, liabilities and obligations whose treatment and
satisfaction is dependent on the outcome of the Chapter 11 proceedings are
segregated and classified as Liabilities Subject to Compromise in the
consolidated balance sheet under SOP 90-7. The ultimate amount of and
settlement terms for such liabilities are subject to an approved plan of
reorganization and, accordingly, are not presently determinable. Pursuant to
SOP 90-7, professional fees associated with the Chapter 11 proceedings will be
expensed as incurred and reported as reorganization costs. Also, interest
expense will be reported only to the extent that it will be paid during the
pendency of the Chapter 11 proceedings or if or when it is probable that it
will be an allowed claim.

Accounts Receivable. The Company maintains returns and allowances reserves as
well as reserves for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The estimation process
requires management to make assumptions based on historical results, future
expectations, the economic and competitive environment, changes in credit
worthiness of customers, and other relevant factors. Changes in these key
assumptions can have a significant impact on ultimate cash collections.

The Company believes that the accounting estimate related to the establishment
of the allowance for doubtful accounts and the associated provisions in the
results of operations is a critical accounting estimate because: (1) it
requires Company management to make assumptions about the future collectibility
of current balances due, as well as the future economic viability of the
Companys customer base; and (2) the impact of changes in actual collections
versus these estimates could have a material impact
on the Companys financial statements. In selecting these assumptions, the
Company uses historical trending of write-offs, returns and allowances, overdue
status and credit ratings of its customers, estimates of ultimate
recoverability from customers in bankruptcy, and other current market
indicators about general economic conditions that might impact the
collectibility of accounts.

During 2001, the Company recorded $11.0 million of bad debt expense to increase
its allowance for doubtful accounts as a result of the January 22, 2002
bankruptcy filing of Kmart. As a result of the further deterioration of
Kmarts financial condition during 2002, the Company recorded additional bad
debt expense of $10.4 million related to its Kmart pre-petition receivables.
Management believes that its estimates are conservative; however, if the
financial condition of the Companys customers (including, but not limited to
Kmart) were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

Inventories.The Company maintains market reserves for estimated obsolete,
excess, aged or off-quality inventories in order to properly state inventories
at lower of cost or market (net realizable value). Differences between the
cost of inventory and the estimated market value are based upon assumptions
about future demand, channels of distribution, and market conditions. Changes
in these market assumptions can have a significant impact on the estimated net
realizable value of inventories.

The Company believes that the accounting estimates related to the establishment
of inventory market reserves and the associated provisions in the results of
operations is a critical accounting estimate because: (1) it requires
Company management to make assumptions about future product demand and overall
sales prices; and (2) the impact of changes in realized sales prices versus
these estimates could have a material impact on the Companys financial
statements. In selecting these assumptions, the Company uses historical
trending of write-downs, and other current market indicators about general
economic conditions that might impact
the realizability of inventories. As a result of our consideration of these
factors, during 2002, the Company recorded $10.5 million of inventory
write-downs primarily related to its retail stores as a result of restructuring
initiatives and poor economic conditions.

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Item 7. Managements Discussion and Analysis of Financial Condition and
Results of OperationsContinued

Critical Accounting Policies and EstimatesContinued

Additional inventory write-downs of $74.2 million were recorded in 2000 under
the Eight-Point Plan as a result of decreased market demand and overall
rationalization efforts. Management believes that its estimates are
conservative; however, if market conditions were to deteriorate, resulting in a
markdown of sales prices, additional reserves may be required.

Long-lived Asset Recovery. A significant portion of the Companys total assets
consists of long-lived assets, consisting primarily of property, plant and
equipment (PP&E) and goodwill. Changes in the Companys intended use of
these assets, as well as changes in broad economic or industry factors, may
cause the estimated period of use or the value of these assets to change.

PP&E are evaluated for impairment whenever indicators of impairment exist.
Accounting standards require that if an impairment indicator is present, the
Company must assess whether the carrying amount of the asset is unrecoverable
by estimating the sum of the future cash flows expected to result from the
asset, undiscounted and without interest charges. If the carrying amount is
less than the recoverable amount, an impairment charge must be recognized,
based on the fair value of the asset.

The Company believes that the accounting estimate related to asset impairment
is a critical accounting estimate because: (1) it requires Company management
to make assumptions about future revenues and costs of sales over the life of
the asset; and (2) the impact of recognizing an impairment could be material to
the Companys financial statements. Managements assumptions about future
revenues and cost of sales require significant judgment and could differ from
actual results due to changing market conditions and overall product demand.

During 2002 and 2000, the Company identified certain PP&E that became impaired
as a result of restructuring initiatives and related plant closures. The
writedown of PP&E during 2002 and 2000 resulted in a total of $4.4 million and
$66.8 million of PP&E being impaired, respectively. These impairments
represent less than 1% and 9% of consolidated net PP&E as of December 31, 2002
and December 31, 2000, respectively.

Goodwill. Goodwill is reviewed at least annually for impairment, or more
frequently if indicators of impairment exist. Goodwill impairment is tested by
comparing the net book value of the reporting unit to fair value. The Company
believes that the accounting estimate related to goodwill is a critical
accounting estimate because: (1) it requires Company management to make
assumptions about fair values, and (2) the impact of recognizing an impairment
could be material to the financial statements.

Management completed an impairment analysis of goodwill in the fourth quarter
of 2002. This test was performed internally, and entity fair value was
estimated using quoted market prices of the Companys equity and debt
securities. As of December 31, 2002, no impairment existed.

Legal Reserves. We are a party to legal proceedings with respect to a variety
of matters in the ordinary course of business. Except as described in Note 10
to the consolidated financial statements included herein, the Company does not
believe that any legal proceedings to which it is a party would have a material
adverse impact on its business or prospects.

In accordance with Statement of Financial Accounting Standards No. 5,
Accounting for Contingencies, the Company accrues legal costs that are expected
to be incurred to defend against certain litigation. Estimates of legal
reserves are determined in consultation with outside counsel. The Company
believes that the accounting estimate related to legal reserves is a critical
accounting estimate because: (1) it requires management to make estimates of
the ultimate legal liability to defend a case, and (2) changes in the estimated
amount or timing of legal costs can significantly impact results of operations.
Outside of foreseeable legal costs, if it is not currently possible to
estimate the impact, if any, that the ultimate resolution of legal proceedings
will have on our financial statements, no accrual is made, consistent with
Statement 5.

Employee Benefit Plan Assumptions. Retirement benefits are a significant cost
of doing business for the Company and represent obligations that will be
settled far in the future. Retirement benefit accounting is intended to
reflect the recognition of the future benefit costs over the employees
approximate service period based on the terms of the plans and the investment
and funding decisions made by the Company. The accounting requires that
management make assumptions regarding such variables as the return on assets,
the discount rate and future health care costs. Changes in these key
assumptions can have a significant impact on the projected benefit obligation
and periodic benefit cost incurred by the Company.

The Company believes that the accounting estimate related to retirement benefit
accounting is a critical accounting estimate because: (1) it requires
Company management to make assumptions about discount rates, future health care
costs, and future

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsContinued

Critical Accounting Policies and EstimatesContinued

return on assets funding the obligation; and (2) the impact of changes in
actual performance versus these estimates would have on the projected benefit
obligation reported on our balance sheet and the benefit cost could be
material. The method of determining pension obligations requires assumptions
concerning market performance. Market performance has fluctuated in the recent
past and could have continued volatility in the future. In selecting these
assumptions, the Company uses historical experience as well as
objective indices as benchmarks, and tests the benchmarks against historical
industry data on these assumptions provided by an independent actuary.

An increase in the discount rate and in the expected return on assets would
reduce the reported benefit obligations and benefit costs. In contrast, if the
discount rate in 2002 were 25 basis points lower, it would generate an $8.0

million increase in the benefit obligations reported on the balance sheet, and
a $1.5 million increase in the benefit costs. Similarly, if the expected
return on assets assumption were 25 basis points lower, it would generate a
$0.7 million increase in the benefit costs. Reasonable changes in the estimate
of health care cost assumptions would not materially affect the benefit
obligations or related benefit costs for a single year.

Effects of Inflation

The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.

Liquidity and Capital Resources

So long as the Company remains under the protection of Chapter 11 of the U.S.
Bankruptcy Code, its principal sources of liquidity are expected to be cash
generated from its operations and funds available under the DIP Credit
Agreement. The maximum commitment under the DIP Credit Agreement is $300
million, of which as of June 3, 2003, the Company has access to $175 million
under an interim order of the Bankruptcy Court. For additional information
about the DIP Credit Agreement, see -DIP Credit Agreement above.

During the pendency of its Chapter 11 proceedings, the Companys principal uses
of cash will be administrative expenses of the proceedings, operating expenses
and debt service (including both interest payments under the DIP Credit
Agreement and whatever payments may be made in respect of pre-petition debt).

Adequacy of Capital Resources

As a result of the uncertainty surrounding the Companys current circumstances,
it is difficult to predict the Companys actual liquidity needs and sources at
this time. However, based on current and anticipated levels of operations, and
efforts to effectively manage working capital, the Company anticipates that its
cash flows from operations, together with cash on hand, cash generated from
asset sales, and amounts available under the DIP Credit Agreement, will be
adequate to meet its anticipated cash requirements during the pendency of the
Chapter 11 proceedings.

In the event that cash flows and available borrowings under the DIP Credit
Agreement are not sufficient to meet future cash requirements, the Company may
be required to reduce planned capital expenditures, sell assets or seek
additional financing. The Company can provide no assurances that reductions in
planned capital expenditures or proceeds from asset sales would be sufficient
to cover shortfalls in available cash or that additional financing would be
available or, if available, offered on acceptable terms.

As a result of the Chapter 11 proceedings, the Companys access to additional
financing is, and for the foreseeable future will likely continue to be, very
limited. The Companys long-term liquidity requirements and the adequacy of
the Companys capital resources are difficult to predict at this time, and
ultimately cannot be determined until a plan of reorganization has been
developed and confirmed by the Bankruptcy Court in connection with the Chapter 11
proceedings.

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Item 7A. Qualitative and Quantitative Disclosures About Market Risk

The Company is exposed to various market risks, including changes in certain
commodity prices and interest rates. These exposures primarily relate to the
acquisition of raw materials and changes in interest rates.

Commodities Risk.The Company selectively uses commodity futures contracts,
forward purchase commodity contracts and option contracts primarily to manage
its exposure to cotton commodity price risk. The Company does not hold or
issue derivative instruments for trading purposes.

At December 31, 2002 and 2001, the Company, in its normal course of business,
had entered into various commodity futures contracts and forward purchase
commodity contracts. Based on year-end forward cotton prices, the Companys
futures contracts and forward purchase contracts at December 31, 2002 (which
covered a portion of its 2003 needs) had a net deferred gain of approximately
$4.0 million. At December 31, 2001, the net deferred loss was approximately
$3.8 million. During the first and second quarters of 2001, the fair value of
certain cotton options then outstanding which did not qualify for hedge
accounting in the amount of $2.3 million was classified as Other expense-net.

Based on a sensitivity analysis for commodities that assumes a decrease of 10%
in such commodity prices, the hypothetical net deferred loss for the combined
commodity positions at December 31, 2002 is estimated to be approximately $3.7
million ($8.1 million at December 31, 2001). Actual commodity price volatility
is dependent on many varied factors impacting supply and demand that are
impossible to forecast. Therefore, actual changes in fair value over time
could differ substantially from the hypothetical change disclosed above.

Interest Rate Risk.At December 31, 2002 and 2001, the Companys floating
interest rate debt outstanding was $612.8 million (of which $165.0 million was
the Second-Lien Facility) and $672.5 million (of which $165.0 million was the
Second-Lien Facility), respectively. A 100 basis point increase in market
rates would increase interest expense and decrease income before income taxes
by approximately $4.5 million and $5.1 million for the years ended December 31,
2002 and 2001, respectively. The amount was determined by calculating the
effect of the hypothetical interest rate change on the Companys floating
interest rate debt excluding the Second-Lien Facility. Based on market rates
at December 31, 2002 and 2001, a 100 basis point increase in market rates would
not increase the minimum interest rate under the Second-Lien Facility.

The fair market value of long-term fixed interest rate debt is also subject to
interest rate risk. Generally, the fair market value of fixed interest rate
debt will increase as interest rates fall and decrease as interest rates rise.
The estimated fair market value of the
Companys total long-term fixed interest rate debt at December 31, 2002 was
approximately $300.5 million, which was below its carrying value by
approximately $699.5 million. At December 31, 2001, the estimated fair market
value of the Companys long-term fixed interest rate debt was approximately
$312.3 million, which was below its carrying value by approximately $687.7
million. A hypothetical 100 basis point decrease in the prevailing interest
rates at December 31, 2002 would result in an increase in the fair market value
of total long-term fixed interest rate debt by approximately $2.6 million ($8.6
million at December 31, 2001). Fair market values are determined from quoted
market prices where available or based on estimates.

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Item 8. Financial Statements and Supplementary Data

Consolidated Financial Statements for the years ended December 31, 2002, 2001
and 2000

|                                                          |  |  |         | 
|--------------------------------------------------------- |  |  | ------- | 
|Report of Ernst & Young LLP, Independent Auditors         |  |  | 28      | 
|Consolidated Balance Sheets                               |  |  | 29 - 30 | 
|Consolidated Statements of Operations                     |  |  | 31      | 
|Consolidated Statements of Stockholders Equity (Deficit) |  |  | 32      | 
|Consolidated Statements of Cash Flows                     |  |  | 33      | 
|Notes to Consolidated Financial Statements                |  |  | 34 - 60 | 

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Report of Ernst & Young LLP, Independent Auditors

Board of Directors and Stockholders
WestPoint Stevens Inc.

We have audited the accompanying consolidated balance sheets of WestPoint
Stevens Inc. and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, stockholders equity (deficit), and cash
flows for each of the three years in the period ended December 31, 2002. Our
audits also included the financial statement schedule listed in the index at
Item 15. These financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
WestPoint Stevens Inc. and subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

The accompanying financial statements have been prepared assuming that
WestPoint Stevens Inc. will continue as a going concern. As discussed in Note
2 to the financial statements, on June 1, 2003, the Company filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code
(Chapter 11). The Company is currently operating its business under the
jurisdiction of Chapter 11 and the United States Bankruptcy Court in the
Southern District of New York (the Bankruptcy Court), and continuation of the
Company is contingent upon, among other things, the ability to formulate a plan
of reorganization which will be approved by the requisite parties under the
United States Bankruptcy Code and be confirmed by the Bankruptcy Court, the
ability to comply with its debtor-in-possession financing facility, obtain
adequate financing sources, and the Companys ability to generate sufficient
cash flows from operations to meet its future obligations. In addition, the
Company has experienced recurring net losses and has maintained a net capital
deficiency in 2002, 2001, and 2000. These matters raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 2. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that may result from the outcome of this
uncertainty.

As discussed in Note 1 to the financial statements, in 2002 the Company changed
its method of accounting for goodwill to conform to Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Also, as
discussed in Notes 1 and 8 to the financial statements, in 2001 the Company
changed its method of accounting for derivative instruments and hedging
activities to conform to Statement of Financial Accounting Standards No. 133,
Derivative Instruments and Hedging Activities.





/s/Ernst & Young LLP

Atlanta, Georgia
February 3, 2003, except for
Note 2 and paragraphs 1, 4, 5,
9 and 11 in Note 3, as to which
the date is June 2, 2003

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WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

|                              |                                                                                              |                                   |           |              |         |      |           |           |         | 
|----------------------------- | -------------------------------------------------------------------------------------------- | --------------------------------- | --------- | ------------ | ------- | ---- | --------- | --------- | ------- | 
|                              |                                                                                              |                                   |           | December 31,
|                              |                                                                                              |                                   |           |             
|                              |                                                                                              |                                   |           | 2002         |         | 2001
|                              |                                                                                              |                                   |           |              |         |     
|Assets                        |                                                                                              |                                   |           |              |         |      |           |          
|Current Assets                |                                                                                              |                                   |           |              |         |      |           |          
|                              | Cash and cash equivalents                                                                    |                                   | $         | 1,096        |         |      | $         | 3,170     |        
|                              | Accounts receivable (less allowances of $40,847
and $33,573, respectively)                   |                                   |           | 107,751      |         |      |           | 105,136   |        
|                              | Inventories                                                                                  |                                   |           | 368,743      |         |      |           | 397,192   |        
|                              | Prepaid expenses and other current assets                                                    |                                   |           | 33,111       |         |      |           | 29,613    |        
|                              |                                                                                              |                                   |           |              |         |      |           |           |        
|                              |                                                                                              | Total current assets              |           |              | 510,701 |      |           |           | 535,111 | 
|Property, Plant and Equipment |                                                                                              |                                   |           |              |         |      |           |          
|                              | Land                                                                                         |                                   |           | 6,754        |         |      |           | 6,765     |        
|                              | Buildings and improvements                                                                   |                                   |           | 359,395      |         |      |           | 359,014   |        
|                              | Machinery and equipment                                                                      |                                   |           | 1,032,299    |         |      |           | 1,008,713 |        
|                              | Leasehold improvements                                                                       |                                   |           | 12,777       |         |      |           | 12,320    |        
|                              |                                                                                              |                                   |           |              |         |      |           |           |        
|                              |                                                                                              |                                   | 1,411,225 |              |         |      | 1,386,812 |          
|                              | Less accumulated depreciation and amortization                                               |                                   |           | (700,036     | )       |      |           | (637,486  | )      
|                              |                                                                                              |                                   |           |              |         |      |           |           |        
|                              |                                                                                              | Net property, plant and equipment |           |              | 711,189 |      |           |           | 749,326 | 
|Other Assets                  |                                                                                              |                                   |           |              |         |      |           |          
|                              | Deferred financing fees (less accumulated amortization
of $24,237 and $14,680, respectively) |                                   |           | 25,883       |         |      |           | 32,879    |        
|                              | Other assets                                                                                 |                                   |           | 3,134        |         |      |           | 4,243     |        
|                              | Goodwill (less accumulated amortization of $4,488)                                           |                                   |           | 46,298       |         |      |           | 47,288    |        
|                              |                                                                                              |                                   |           |              |         |      |           |           |        
|                              |                                                                                              | Total other assets                |           |              | 75,315  |      |           |           | 84,410  | 
|                              |                                                                                              |                                   |           |              |         |      |           |           |        
|                              |                                                                                              | $                                 | 1,297,205 |              |         | $    | 1,368,847 |          
|                              |                                                                                              |                                   |           |              |         |      |           |           |        

See accompanying notes.

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WESTPOINT STEVENS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |          |  
|---------------------------------------------- | ---------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | --------- | ------------ | --------- | ---- | --------- | -------- | -------- | -
|                                               |                                                                        |                                                                                       |           | December 31,
|                                               |                                                                        |                                                                                       |           |             
|                                               |                                                                        |                                                                                       |           | 2002         |           | 2001
|                                               |                                                                        |                                                                                       |           |              |           |     
|Liabilities and Stockholders Equity (Deficit) |                                                                        |                                                                                       |           |              |           |      |           |         
|Current Liabilities                            |                                                                        |                                                                                       |           |              |           |      |           |         
|                                               | Senior Credit Facility (Note 3)                                        |                                                                                       | $         | 447,795      |           |      | $         | 107,501  |         
|                                               | Long-Term Debt (Note 3)                                                |                                                                                       |           | 1,165,000    |           |      |           |         |         
|                                               | Accrued interest payable                                               |                                                                                       |           | 3,949        |           |      |           | 3,856    |         
|                                               | Accounts payable                                                       |                                                                                       |           | 57,357       |           |      |           | 67,218   |         
|                                               | Accrued employee compensation                                          |                                                                                       |           | 22,623       |           |      |           | 21,166   |         
|                                               | Accrued customer incentives                                            |                                                                                       |           | 31,774       |           |      |           | 31,577   |         
|                                               | Other accrued liabilities                                              |                                                                                       |           | 59,121       |           |      |           | 61,723   |         
|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |         
|                                               |                                                                        | Total current liabilities                                                             |           |              | 1,787,619 |      |           |          | 293,041  |  
|                                              
|Long-Term Debt                                 |                                                                        |                                                                                       |          |              |           |      | 1,565,000 |         
|                                              
|Noncurrent Liabilities                         |                                                                        |                                                                                       |           |              |           |      |           |         
|                                               | Deferred income taxes                                                  |                                                                                       |           | 158,244      |           |      |           | 182,822  |         
|                                               | Pension and other liabilities                                          |                                                                                       |           | 156,989      |           |      |           | 106,351  |         
|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |         
|                                               |                                                                        | Total noncurrent liabilities                                                          |           |              | 315,233   |      |           |          | 289,173  |  
|Stockholders Equity (Deficit)                 |                                                                        |                                                                                       |           |              |           |      |           |         
|                                               | Common Stock and capital in excess of par value:                       |                                                                                       |           |              |           |      |           |          |         
|                                               |                                                                        | Common Stock, $.01 par value; 200,000,000 shares authorized;
71,099,649 shares issued |           |              | 408,991   |      |           |          | 395,903  |  
|                                               | Accumulated deficit                                                    |                                                                                       |           | (693,652     | )         |      |           | (680,789 | )       
|                                               | Treasury stock; 21,448,992 and 21,528,567 shares at cost,
respectively |                                                                                       |           | (417,964     | )         |      |           | (418,781 | )       
|                                               | Accumulated other comprehensive income (loss)                          |                                                                                       |           | (99,581      | )         |      |           | (69,386  | )       
|                                               | Unearned compensation                                                  |                                                                                       |           | (3,441       | )         |      |           | (5,314   | )       
|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |         
|                                               |                                                                        | Total stockholders equity (deficit)                                                  |           |              | (805,647  | )    |           |          | (778,367 | )
|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |         
|                                               |                                                                        | $                                                                                     | 1,297,205 |              |           | $    | 1,368,847 |         
|                                               |                                                                        |                                                                                       |           |              |           |      |           |          |         

See accompanying notes.

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WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |         |         |  
|-------------------------------------------- | ------------------ | ---------------------------------------------- | --------- | ----------------------- | ------- | ---- | --------- | ------- | ------- | - | --------- | ------- | ------- | -
|                                             |                    |                                                |           | Year Ended December 31,
|                                             |                    |                                                |           |                        
|                                             |                    |                                                |           | 2002                    |         | 2001 |           | 2000   
|                                             |                    |                                                |           |                         |         |      |           |        
|Net sales                                    |                    | $                                              | 1,811,357 |                         |         | $    | 1,765,146 |         |         | $ | 1,815,870 |        
|Cost of goods sold                           |                    |                                                | 1,417,784 |                         |         |      | 1,386,804 |         |         |   | 1,427,447 |        
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|                                             | Gross earnings     |                                                |           | 393,573                 |         |      |           | 378,342 |         |   |           | 388,423 |        
|Selling, general and administrative expenses |                    |                                                | 264,650   |                         |         |      | 258,007   |         |         |   | 244,278   |        
|Restructuring and impairment charge          |                    |                                                | 6,634     |                         |         |      | 5,008     |         |         |   | 109,199   |        
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|                                             | Operating earnings |                                                |           | 122,289                 |         |      |           | 115,327 |         |   |           | 34,946  |        
|Interest expense                             |                    |                                                | 135,476   |                         |         |      | 141,606   |         |         |   | 122,287   |        
|Other expense-net                            |                    |                                                | 6,592     |                         |         |      | 16,294    |         |         |   | 11,419    |        
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|                                             |                    | Loss from operations before income tax benefit |           |                         | (19,779 | )    |           |         | (42,573 | ) |           |         | (98,760 | )
|Income tax benefit                           |                    |                                                | (7,120    | )                       |         |      | (15,225   | )       |         |   | (35,450   | )      
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|                                             | Net loss           |                                                | $         | (12,659                 | )       |      | $         | (27,348 | )       |   | $         | (63,310 | )      
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|                                            
|Basic net loss per common share              |                    | $                                              | (.25      | )                       |         | $    | (.55      | )       |         | $ | (1.28     | )      
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|Diluted net loss per common share            |                    | $                                              | ( .25     | )                       |         | $    | ( .55     | )       |         | $ | (1.28     | )      
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|Basic average common shares outstanding      |                    |                                                | 49,667    |                         |         |      | 49,606    |         |         |   | 49,635    |        
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        
|Diluted average common shares outstanding    |                    |                                                | 49,667    |                         |         |      | 49,606    |         |         |   | 49,635    |        
|                                             |                    |                                                |           |                         |         |      |           |         |         |   |           |        

See accompanying notes.

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WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(In thousands)

|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |         |       |  
|-------------------------- | -------------------------------------------------------------------- | ----------------------------------------------------------- | ------------------------------------------------------------- | - | ------ | - | ------- | ------ | ----------- | - | -------------- | ------ | ------------- | - | ------------- | ------- | ------------ | - | -------- | -------- | ------- | - | ----------- | - | ------- | ----- | ------ | ----- | - | - | -------- | -------- | ------- | ----- | -
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        | Common      |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        | Stock       |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        | and Capital |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        | in          |   |                |        |               |   |               |         |              |   |          |          |         |   | Accumulated |   |         |       |        |       |   |   |         
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        | Excess of   |   | Treasury Stock |        |               |   |               |         | Other        |   |          |          |         |   |             |   |        
|                           |                                                                      |                                                             |                                                               |   | Common |   | Par     |        |             |   | Accumulated    |        | Comprehensive |   | Unearned      |         |              |   |         
|                           |                                                                      |                                                             |                                                               |   | Shares |   | Value   |        | Shares      |   | Amount         |        | Deficit       |   | Income (Loss) |         | Compensation |   | Total   
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |         
|Balance, January 1, 2000   |                                                                      |                                                             | 71,100                                                        |   |        | $ | 361,504 |        |             |   | (18,859        | )      |               | $ | (363,972      | )       |              | $ | (484,378 | )        |         | $ | (2,112      | ) |         | $     | (9,062 | )     |   | $ | (498,020 | )       
|                          
|                           | Comprehensive income (loss):                                         |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      | Net loss                                                    |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          | (63,310 | ) |             |   |        |       |        |       |  |   |          |          | (63,310 | )    
|                           |                                                                      | Foreign currency translation adjustment                     |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          |        |   |             |   | 338     |       |        |       |  |   |          |          | 338     |      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Comprehensive income (loss)                                          |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          | (62,972  | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Exercise of management stock options
including tax benefit           |                                                             |                                                               |  |        |   |         | 4,148  |             |   |                | 754    |               |   |               | 5,251   |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 9,399    |        
|                           | Issuance of stock pursuant to Stock Bonus
Plan including tax benefit |                                                             |                                                               |  |        |   |         | 1,858  |             |   |                | 248    |               |   |               | 2,602   |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 4,460    |        
|                           | Issuance of restricted stock                                         |                                                             |                                                               |  |        |   |         | 5      |             |   |                | 2      |               |   |               | 14      |              |   |          |         |         |   |             |  |         |       |        | (19   | ) |   |          |         |        
|                           | Amortization of compensation                                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          |         |         |   |             |  |         |       |        | 1,883 |   |   |          | 1,883    |        
|                           | Purchase of treasury shares                                          |                                                             |                                                               |  |        |   |         |       |             |   |                | (3,831 | )             |   |               | (64,316 | )            |   |          |         |         |   |             |  |         |       |        |      |   |   |          | (64,316  | )      
|                           | Cash dividends                                                       |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          | (103,253 | )       |   |             |  |         |       |        |      |   |   |          | (103,253 | )      
|                           | Stock dividends pursuant to Stock Bonus Plan                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          | (2       | )       |   |             |  |         |       |        |      |   |   |          | (2       | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|Balance, December 31, 2000 |                                                                      |                                                             | 71,100                                                        |   |        |   | 367,515 |        |             |   | (21,686        | )      |               |   | (420,421      | )       |              |   | (650,943 | )        |         |   | (1,774      | ) |         |       | (7,198 | )     |   |   | (712,821 | )       
|                          
|                           | Comprehensive income (loss):                                         |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      | Net loss                                                    |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          | (27,348 | ) |             |   |        |       |        |       |  |   |          |          | (27,348 | )    
|                           |                                                                      | Minimum pension liability adjustment,
net of tax of $37,494 |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          |        |   |             |   | (66,655 | )     |        |       |  |   |          |          | (66,655 | )    
|                           |                                                                      | Foreign currency translation adjustment                     |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          |        |   |             |   | (60     | )     |        |       |  |   |          |          | (60     | )    
|                           |                                                                      | Cash flow hedges:                                           |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |         |      
|                           |                                                                      |                                                             | Cumulative effect of change in accounting,
net of tax of $544 |   |        |  |         |        |             |  |                |        |               |  |               |         |              |  |          |          |         |  |             |   |         | (968  | )      |       |   |  |          |          |         | (968  | )
|                           |                                                                      |                                                             | Net derivative gains, net of tax of $38                       |   |        |  |         |        |             |  |                |        |               |  |               |         |              |  |          |          |         |  |             |   |         | 71    |        |       |   |  |          |          |         | 71    |  
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Comprehensive income (loss)                                          |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          | (94,960  | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Issuance of stock pursuant to Stock Bonus
Plan including tax expense |                                                             |                                                               |  |        |   |         | 1,589  |             |   |                | 146    |               |   |               | 1,565   |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 3,154    |        
|                           | Issuance of Restricted Stock                                         |                                                             |                                                               |  |        |   |         | (19    | )           |   |                | 11     |               |   |               | 75      |              |   |          |         |         |   |             |  |         |       |        | (76   | ) |   |          | (20      | )      
|                           | Amortization of compensation                                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          |         |         |   |             |  |         |       |        | 1,960 |   |   |          | 1,960    |        
|                           | Net operating loss benefit                                           |                                                             |                                                               |  |        |   |         | 26,818 |             |   |                |       |               |   |               |        |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 26,818   |        
|                           | Cash dividends                                                       |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          | (2,015   | )       |   |             |  |         |       |        |      |   |   |          | (2,015   | )      
|                           | Stock dividends pursuant to Stock Bonus Plan                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          | (483     | )       |   |             |  |         |       |        |      |   |   |          | (483     | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|Balance, December 31, 2001 |                                                                      |                                                             | 71,100                                                        |   |        |   | 395,903 |        |             |   | (21,529        | )      |               |   | (418,781      | )       |              |   | (680,789 | )        |         |   | (69,386     | ) |         |       | (5,314 | )     |   |   | (778,367 | )       
|                          
|                           | Comprehensive income (loss):                                         |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |        
|                           |                                                                      | Net loss                                                    |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          | (12,659 | ) |             |   |        |       |        |       |  |   |          |          | (12,659 | )    
|                           |                                                                      | Minimum pension liability adjustment
net of tax of $16,773  |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          |        |   |             |   | (29,820 | )     |        |       |  |   |          |          | (29,820 | )    
|                           |                                                                      | Foreign currency translation adjustment                     |                                                               |   |       |   |         |        |            |   |                |        |              |   |               |         |             |   |          |          |        |   |             |   | (2,765  | )     |        |       |  |   |          |          | (2,765  | )    
|                           |                                                                      | Cash flow hedges:                                           |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |          |         |      
|                           |                                                                      |                                                             | Net derivative gains, net of tax of $1,346                    |   |        |  |         |        |             |  |                |        |               |  |               |         |              |  |          |          |         |  |             |   |         | 2,390 |        |       |   |  |          |          |         | 2,390 |  
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Comprehensive income (loss)                                          |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          | (42,854  | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|                           | Issuance of stock pursuant to Stock Bonus
Plan including tax expense |                                                             |                                                               |  |        |   |         | 822    |             |   |                | 72     |               |   |               | 765     |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 1,587    |        
|                           | Issuance of Restricted Stock                                         |                                                             |                                                               |  |        |   |         | (34    | )           |   |                | 8      |               |   |               | 52      |              |   |          |         |         |   |             |  |         |       |        | (18   | ) |   |          |         |        
|                           | Amortization of compensation                                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          |         |         |   |             |  |         |       |        | 1,891 |   |   |          | 1,891    |        
|                           | Net operating loss benefit                                           |                                                             |                                                               |  |        |   |         | 12,300 |             |   |                |       |               |   |               |        |              |   |          |         |         |   |             |  |         |       |        |      |   |   |          | 12,300   |        
|                           | Stock dividends pursuant to Stock Bonus Plan                         |                                                             |                                                               |  |        |   |         |       |             |   |                |       |               |   |               |        |              |   |          | (204     | )       |   |             |  |         |       |        |      |   |   |          | (204     | )      
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         
|Balance, December 31, 2002 |                                                                      |                                                             | 71,100                                                        |   |        | $ | 408,991 |        |             |   | (21,449        | )      |               | $ | (417,964      | )       |              | $ | (693,652 | )        |         | $ | (99,581     | ) |         | $     | (3,441 | )     |   | $ | (805,647 | )       
|                           |                                                                      |                                                             |                                                               |   |        |   |         |        |             |   |                |        |               |   |               |         |              |   |          |          |         |   |             |   |         |       |        |       |   |   |          |         

See accompanying notes.

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WESTPOINT STEVENS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |            |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ------- | ----------------------- | ------ | ------- | ------- | ---------- | ------- | ------- | -------- | ---------- | ------ | -
|                                                     |                                                                                            |                                                                                                                         |                                                |         | Year Ended December 31,
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                        
|                                                     |                                                                                            |                                                                                                                         |                                                |         | 2002                    |        | 2001    |         | 2000      
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |           
|Cash flows from operating activities:                |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |         
|                                                     | Net loss                                                                                   |                                                                                                                         | $                                              | (12,659 | )                       |        | $       | (27,348 | )          |         | $       | (63,310  | )         
|                                                     | Adjustments to reconcile net loss to net
cash provided by (used for) operating activities: |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|                                                     |                                                                                            | Depreciation and other amortization                                                                                     |                                                |         | 79,225                  |        |         |         | 83,920     |         |         |          | 80,775     |       
|                                                     |                                                                                            | Deferred income taxes                                                                                                   |                                                |         | (979                    | )      |         |         | (10,441    | )       |         |          | (41,735    | )     
|                                                     |                                                                                            | Changes in assets and liabilities excluding the effect of
acquisitions, dispositions and the Trade Receivables Program: |                                                |         |                         |        |         |         |            |         |         |          |            |       
|                                                     |                                                                                            |                                                                                                                         | Accounts receivable                            |         |                         | (4,815 | )       |         |            | (14,453 | )       |          |            | 228    |  
|                                                     |                                                                                            |                                                                                                                         | Inventories                                    |         |                         | 28,449 |         |         |            | 14,640  |         |          |            | 39,785 |  
|                                                     |                                                                                            |                                                                                                                         | Prepaid expenses and other current assets      |         |                         | 2,886  |         |         |            | 3,606   |         |          |            | (6,697 | )
|                                                     |                                                                                            |                                                                                                                         | Accrued interest payable                       |         |                         | 93     |         |         |            | (878    | )       |          |            | 398    |  
|                                                     |                                                                                            |                                                                                                                         | Accounts payable and other accrued liabilities |         |                         | (7,946 | )       |         |            | (29,754 | )       |          |            | (4,605 | )
|                                                     |                                                                                            |                                                                                                                         | Other-net                                      |         |                         | 10,940 |         |         |            | 12,377  |         |          |            | (9,562 | )
|                                                     |                                                                                            | Non-cash component of restructuring and impairment charge                                                               |                                                |         | 4,445                   |        |         |         |           |         |         |          | 90,478     |       
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|                                                     |                                                                                            | Total adjustments                                                                                                       |                                                |         | 112,298                 |        |         |         | 59,017     |         |         |          | 149,065    |       
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Net cash provided by operating activities            |                                                                                            |                                                                                                                         | 99,639                                         |         |                         |        | 31,669  |         |            |         | 85,755  |         
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Cash flows from investing activities:                |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |         
|                                                     | Capital expenditures                                                                       |                                                                                                                         |                                                | (46,231 | )                       |        |         | (60,524 | )          |         |         | (76,742  | )         
|                                                     | Net proceeds from sale of assets                                                           |                                                                                                                         |                                                | 2,024   |                         |        |         | 1,253   |            |         |         | 624      |           
|                                                     | Purchase of business                                                                       |                                                                                                                         |                                                |        |                         |        |         | (8,363  | )          |         |         |         |           
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Net cash used for investing activities               |                                                                                            |                                                                                                                         | (44,207                                        | )       |                         |        | (67,634 | )       |            |         | (76,118 | )       
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Cash flows from financing activities:                |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |         
|                                                     | Senior Credit Facility:                                                                    |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|                                                     |                                                                                            | Borrowings                                                                                                              |                                                |         | 794,581                 |        |         |         | 1,231,132  |         |         |          | 1,337,785  |       
|                                                     |                                                                                            | Repayments                                                                                                              |                                                |         | (854,287                | )      |         |         | (1,351,480 | )       |         |          | (1,174,739 | )     
|                                                     | Trade Receivables Program                                                                  |                                                                                                                         |                                                | 2,200   |                         |        |         | 12,600  |            |         |         | (14,000  | )         
|                                                     | Proceeds from issuance of Common Stock                                                     |                                                                                                                         |                                                |        |                         |        |         |        |            |         |         | 8,891    |           
|                                                     | Purchase of Common Stock for treasury                                                      |                                                                                                                         |                                                |        |                         |        |         |        |            |         |         | (64,316  | )         
|                                                     | Cash dividends paid                                                                        |                                                                                                                         |                                                |        |                         |        |         | (2,015  | )          |         |         | (103,253 | )         
|                                                     | Proceeds from Second-Lien Facility                                                         |                                                                                                                         |                                                |        |                         |        |         | 165,000 |            |         |         |         |           
|                                                     | Fees associated with refinancing                                                           |                                                                                                                         |                                                |        |                         |        |         | (16,269 | )          |         |         |         |           
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Net cash provided by (used for) financing activities |                                                                                            |                                                                                                                         | (57,506                                        | )       |                         |        | 38,968  |         |            |         | (9,632  | )       
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Net increase (decrease) in cash and cash equivalents |                                                                                            |                                                                                                                         | (2,074                                         | )       |                         |        | 3,003   |         |            |         | 5       |         
|Cash and cash equivalents at beginning of period     |                                                                                            |                                                                                                                         | 3,170                                          |         |                         |        | 167     |         |            |         | 162     |         
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           
|Cash and cash equivalents at end of period           |                                                                                            | $                                                                                                                       | 1,096                                          |         |                         | $      | 3,170   |         |            | $       | 167     |         
|                                                     |                                                                                            |                                                                                                                         |                                                |         |                         |        |         |         |            |         |         |          |           

See accompanying notes.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business.WestPoint Stevens Inc. (the Company) is a manufacturer and
marketer of bed and bath products, including sheets, pillowcases, comforters,
blankets, bedspreads, pillows, mattress pads, towels and related products. The
Company conducts its operations in the consumer home fashions (bed and bath
products) industry.

Basis of Presentation.The Companys consolidated financial statements are
prepared on a going concern basis. See Note 2  Chapter 11 Filing  for a
further discussion.

Principles of Consolidation.The consolidated financial statements of the
Company include the accounts of the Company and all of its subsidiaries. All
material intercompany accounts and transactions have been eliminated.

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

During the fourth quarter of 2001, the Company recorded bad debt expense of
$7.0 million, net of taxes, related to the write-down of receivables as a
result of Kmart Corporations bankruptcy filing in January 2002. The Company
also reviewed its litigation exposures and other contingency issues, and as a
result of favorable litigation settlements in 2001 and other evaluations
reduced its reserves for related exposures by approximately $5.0 million, net
of taxes, during the fourth quarter of 2001.

During 2002, the Company recorded additional bad debt expense related to Kmart
Corporations bankruptcy filing of $6.6 million net of taxes resulting from
January shipments to Kmart before the bankruptcy filing date and lower
estimates of recoverable amounts.

Concentrations of Credit Risk.Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist principally of
cash investments and trade accounts receivable.

The Company maintains cash and cash equivalents and certain other financial
instruments with various financial institutions. The Company performs periodic
evaluations of the relative credit standing of those financial institutions
that are considered in the Companys investment strategy.

Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Companys customer
base; however, as of December 31, 2002, substantially all of the Companys
receivables were from companies in the retail industry. The Company performs
periodic credit evaluations of its customers financial condition and generally
does not require collateral.

Cash and Cash Equivalents.The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Short-term investments (consisting primarily of commercial paper and
certificates of deposit) totaling approximately $1.1 million and $3.2 million
are included in cash and cash equivalents at December 31, 2002 and 2001,
respectively. These investments are carried at cost, which approximates market
value.

Inventories.Inventory costs include material, labor and factory overhead.
Inventories are stated at the lower of cost or market (net realizable value).
At December 31, 2002 and 2001, approximately 87.4% and 77.8%, respectively, of
the Companys inventories are valued at the lower of cost or market using the
dollar value last-in, first-out (LIFO) method. The remaining inventories
(approximately $46.3 million and $88.3 million at December 31, 2002 and 2001,
respectively) are valued at the lower of cost or market using substantially the
first-in, first-out method.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. Summary of Significant Accounting PoliciesContinued

Inventories consisted of the following (in thousands of dollars):

|                           |  |              |         |      |  |   |         | 
|-------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                           |  | December 31,
|                           |  |             
|                           |  | 2002         |         | 2001
|                           |  |              |         |     
|Finished goods             |  | $            | 142,484 |      |  | $ | 176,043 | 
|Work in process            |  |              | 174,460 |      |  |   | 170,854 | 
|Raw materials and supplies |  |              | 51,799  |      |  |   | 50,295  | 
|LIFO reserve               |  |              |        |      |  |   |        | 
|                           |  |              |         |      |  |   |         | 
|                           |  | $            | 368,743 |      |  | $ | 397,192 | 
|                           |  |              |         |      |  |   |         | 

Property, Plant and Equipment.As a result of the adoption of Fresh Start
reporting, as of September 30, 1992, property, plant and equipment were
adjusted to their estimated fair values and historical accumulated depreciation
was eliminated. Additions since September 30, 1992 are stated at cost.

Depreciation is computed over estimated useful lives using the straight-line
method for financial reporting purposes and accelerated methods for income tax
reporting. Depreciation expense was approximately $79.2 million, $82.6 million
and $79.2 million in the years ended December 31, 2002, 2001 and 2000,
respectively.

Estimated useful lives for property, plant and equipment are as follows:

|                           |  |                |  | 
|-------------------------- |  | -------------- |  | 
|Buildings and improvements |  | 10 to 40 Years
|Machinery and equipment    |  | 3 to 18 Years 
|Leasehold improvements     |  | Lease Terms   

Derivatives.Effective January 1, 2001, the Company adopted Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended by Statement 137 and Statement 138. As
discussed further in Note 8, the 2002 and 2001 Consolidated Financial
Statements were prepared in accordance with the provisions of Statement 133.
Prior years financial statements have not been restated. As required by
Statement 133, the 2000 Consolidated Financial Statements were prepared in
accordance with the applicable professional literature for derivatives and
hedging instruments in effect at that time. See Note 8  Derivatives.

Income Taxes.The Company accounts for income taxes under Statement No. 109,
Accounting for Income Taxes. Under Statement 109, deferred income taxes are
provided at the enacted marginal rates on the differences between the financial
statement and income tax bases of assets and liabilities. See Note 6  Income
Taxes.

Pension Plans.The Company has defined benefit pension plans covering
essentially all employees. The benefits are based on years of service and
compensation. The Companys practice is to fund amounts that are required by
the Employee Retirement Income Security Act of 1974. See Note 4  Employee
Benefit Plans.

The Company also sponsors an employee savings plan covering eligible employees
who elect to participate. Participants in this plan make contributions as a
percent of earnings. The Company matches certain amounts of employee
contributions. See Note 4  Employee Benefit Plans  Retirement Savings Plan.

Other Employee Benefits.The Company accounts for post-retirement and
post-employment benefits in accordance with Statement No. 106, Employers
Accounting for Post Retirement Benefits Other Than Pensionsand Statement No.
112, Employers Accounting for Postemployment Benefits. See Note 4  Employee
Benefit Plans  Other Post-Retirement Benefit Plans.

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##### Table of Contents



WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. Summary of Significant Accounting PoliciesContinued

Stock-Based Compensation.The Company grants stock options for a fixed number
of shares in accordance with certain of its benefit plans. The Company
accounts for stock option grants in accordance with APB Opinion No. 25,
Accounting for Stock Issued to Employees, and, accordingly, recognizes no
compensation expense for the stock option grants if the exercise price is equal
to or more than the fair value of the shares at the date of grant. Pro forma
information regarding net income and earnings per share, as calculated under
the provisions of Statement No. 123, Accounting for Stock-Based Compensation,
are disclosed in Note 7  Stockholders Equity (Deficit).

Fair Value Disclosures.Cash and cash equivalents:The carrying amounts
reported in the balance sheets for cash and cash equivalents approximate its
fair value.

Accounts receivable and accounts payable:The carrying amounts reported in the
balance sheets for accounts receivable and accounts payable approximate their
fair value.

Long-term and short-term debt: The fair value of the Companys outstanding
debt is estimated based on the quoted market prices for the same issues where
available or based on estimates. The fair value of the $1,612.8 million and
$1,672.5 million of outstanding debt at December 31, 2002 and 2001 was
approximately $848.0 million and $908.7 million, respectively.

Goodwill and Other Intangible Assets.Effective January 1, 2002, the Company
adopted the requirements of Statement of Financial Accounting Standards No.
141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets,
effective for fiscal years beginning after December 15, 2001. Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. Statement 141 also includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets arising from business combinations completed after June 30,
2001. Statement 142 prohibits the amortization of goodwill and intangible
assets with indefinite useful lives. Under the new rules, goodwill (and
intangible assets deemed to have indefinite lives) will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statement. Other intangible assets will continue to be amortized over their
remaining useful lives.

The Company applied Statement 142 beginning in the first quarter of 2002. The
Company is required to test goodwill for impairment using the two-step process
prescribed in Statement 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if
any. In accordance with Statement 142, the Company was required to perform the
first step of the required January 1, 2002 impairment test of goodwill by June
30, 2002. The Company has completed the transitional goodwill impairment test
required and determined that there currently is no impairment of its recorded
goodwill balances. The Company performed the required annual goodwill
impairment test during the fourth quarter of 2002 and further determined that
there currently is no impairment to its recorded goodwill balances.

The changes in the carrying amount of goodwill for the years ended 2002, 2001
and 2000 are summarized as follows (in thousands):

|                                                        |  |   |         |  
|------------------------------------------------------- |  | - | ------- | -
|Balance at December 31, 1999                            |  | $ | 69,433  |  
|Restructuring and impairment charge                     |  |   | (21,738 | )
|Amortization expense                                    |  |   | (1,529  | )
|                                                        |  |   |         |  
|Balance at December 31, 2000                            |  |   | 46,166  |  
|Business acquired                                       |  |   | 2,417   |  
|Amortization expense                                    |  |   | (1,295  | )
|                                                        |  |   |         |  
|Balance at December 31, 2001                            |  |   | 47,288  |  
|Contingent consideration received for business acquired |  |   | (990    | )
|                                                        |  |   |         |  
|Balance at December 31, 2002                            |  | $ | 46,298  |  
|                                                        |  |   |         |  

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##### Table of Contents



WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. Summary of Significant Accounting PoliciesContinued

A reconciliation of net loss and loss per common share, adjusted to exclude
goodwill amortization expense, net of tax, for the periods prior to adoption is
as follows (in thousands, except per share data):

|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |       |       |  
|------------------------------------ | ------------------------------------ | ------------------------ | ------- | ----------------------- | ---- | ---- | ------- | ---- | ---- | - | ------- | ----- | ----- | -
|                                     |                                      |                          |         | Year Ended December 31,
|                                     |                                      |                          |         |                        
|                                     |                                      |                          |         | 2002                    |      | 2001 |         | 2000
|                                     |                                      |                          |         |                         |      |      |         |     
|Net loss                             |                                      | $                        | (12,659 | )                       |      | $    | (27,348 | )    |      | $ | (63,310 | )    
|Amortization of goodwill, net of tax |                                      |                          |        |                         |      |      | 932     |      |      |   | 1,082   |      
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|Adjusted net loss                    |                                      | $                        | (12,659 | )                       |      | $    | (26,416 | )    |      | $ | (62,228 | )    
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|Earnings (loss) per common share:    |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|Basic:                               |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|                                     | Net loss                             |                          | $       | (.25                    | )    |      | $       | (.55 | )    |   | $       | (1.28 | )    
|                                     | Amortization of goodwill, net of tax |                          |         |                        |      |      |         | .02  |      |   |         | .02   |      
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|                                     |                                      | Adjusted earnings (loss) |         | $                       | (.25 | )    |         | $    | (.53 | ) |         | $     | (1.26 | )
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|Diluted:                             |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|                                     | Net loss                             |                          | $       | (.25                    | )    |      | $       | (.55 | )    |   | $       | (1.28 | )    
|                                     | Amortization of goodwill, net of tax |                          |         |                        |      |      |         | .02  |      |   |         | .02   |      
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      
|                                     |                                      | Adjusted earnings (loss) |         | $                       | (.25 | )    |         | $    | (.53 | ) |         | $     | (1.26 | )
|                                     |                                      |                          |         |                         |      |      |         |      |      |   |         |      

Impairment of Long-Lived Assets.Long-lived assets, including related
goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. The
Company evaluates the recoverability of its long-lived assets and related
goodwill by comparing estimated future undiscounted cash flows with the assets
carrying amount to determine if impairment exists. Impairment, if any, is then
measured by comparing carrying value to market value or discounted cash flow.

Revenue Recognition.The Company recognizes revenue when title to the goods
sold passes to the buyer, which is generally at the time of shipment. The
Company does recognize certain sales on a bill and hold basis consistent with
industry practice, and such sales at the end of each period presented were not
material.

Customer Incentives.Incentives are provided to customers primarily for new
sales programs. These incentives begin to accrue when a commitment has been
made to the customer and are recorded as a reduction to sales.

Earnings Per Common Share.Basic and diluted earnings per share are calculated
in accordance with Statement No. 128, Earnings per Share. Basic earnings per
share is based on the weighted average number of common shares outstanding, and
diluted earnings per share includes any dilutive effects of stock options and
the Companys stock bonus plan.

Segment Information.The Company is in one business segment, the consumer home
fashions business, and follows the requirements of Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information.

New Accounting Pronouncements.Effective January 1, 2002, the Company adopted
Statement of Financial Accounting Standards No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Statement 142 requires that entities discontinue
amortization of goodwill and assess the fair value of the net assets underlying
all acquisition-related goodwill on a reporting unit basis (see Acquisitions
and Goodwill above).

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for Impairment of Long-Lived Assets or Disposal of Long-Lived
Assets, which addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and supersedes Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations, for a disposal of a segment of a business. The Company adopted
Statement 144 on January 1, 2002 and there was no significant impact on the
Companys financial position and results of operations as a result of its
adoption.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. Summary of Significant Accounting PoliciesContinued

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities, which
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). Statement 146 requires
that a liability for costs associated with an exit or disposal activity be
recognized when the liability is incurred as opposed to the date of an entitys
commitment to an exit plan. Statement 146 also establishes fair value as the
objective for initial measurement of the liability. The Company adopted the
provisions of Statement 146 during the third quarter of 2002 (see Note 12 where
restructuring initiatives during 2002 are discussed further), and there was no
significant impact on the Companys financial statements as a result of its
adoption.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure.
Statement 148 amends Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition to Statement 123s
fair value method of accounting for stock-based employee compensation.
Statement 148 also amends the disclosure provisions of Statement 123 and
Accounting Principles Board (APB) Opinion No. 28, Interim Financial
Reporting, to require disclosure in the summary of significant accounting
policies of the effects of an entitys accounting policy with respect to
stock-based employee compensation, regardless of whether they account for that
compensation using the fair value method of Statement 123 or the intrinsic
value method of APB Opinion No. 25, Accounting for Stock Issued to Employees.
Statement 148s amendment of the transition and annual disclosure requirements
of Statement 123 are effective for fiscal years ending after December 15, 2002.
The additional disclosures required under Statement 148 have been included in
Note 7. The Company accounts for stock-based compensation using the intrinsic
value method prescribed in APB 25 and related interpretations.

In November 2002, the FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others(FIN 45). FIN 45 requires that upon the issuance of a
guarantee, the guarantor must recognize a liability for the fair value of the
obligation it assumes under the guarantee. FIN 45s provisions for initial
recognition and measurement should be applied on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. The disclosure requirements are effective for
financial statements of both interim and annual periods that end after December
15, 2002. The Company has complied with the disclosure requirements and is in
the process of determining the impact, if any, of adopting the provisions for
initial recognition and measurement for guarantees issued or modified after
December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities(FIN 46). FIN 46 clarifies that companies may
need to consolidate certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 applies immediately
to variable interest entities created or in which an enterprise obtains an
interest after January 31, 2003. FIN 46 does not apply to qualifying special
purpose entities subject to the reporting requirements of SFAS 140. For
variable interest entities created before February 1, 2003, FIN 46 is
applicable in the first fiscal year or interim period beginning after June 15,
2003.

2. Chapter 11 Filing

Subsequent to the end of the Companys fiscal year, on June 1, 2003 (the
Petition Date), the Company and several of its subsidiaries (together with
the Company, the Debtors) filed petitions for reorganization under Chapter 11
of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern
District of New York (the Bankruptcy Court). Since that date, the Debtors
have been operating as debtors-in-possession under Chapter 11. A brief
chronology of the circumstances that led to such filing is set forth below.

Despite the restructuring initiatives which the Company undertook in 2000 and
2002, during 2003 the Company continued to experience financial difficulty
related primarily to restrictive covenants under its Senior Credit Facility and
its debt structure. The Company therefore entered into negotiations with its
Senior Credit Facility lenders to amend the Senior Credit Facility to permit

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. Chapter 11 FilingContinued

certain restructuring, impairment and other charges and to revise certain
financial ratios and minimum EBITDA covenants in its Senior Credit Facility.
The Company and such lenders were unable to agree to amend the Senior Credit
Facility and the
Company continued to experience financial difficulties which led to a default
under its Senior Credit Facility and Second-Lien Facility. Effective March 31,
2003, the Senior Credit Facility lenders and Second-Lien Facility lenders
agreed to refrain from exercising any rights or remedies in respect of the
Companys failure to comply with financial and other covenants until June 10,
2003. As the June 10 deadline approached, the Companys board of directors
determined that, in order to be able to operate successfully in todays market
environment and compete with increasing foreign competition, it would be
necessary for the Company to reduce its debt burden and de-lever its balance
sheet. Thus, on May 16, 2003, the board of directors approved the retention of
Rothschild Inc., an independent financial advisor, to evaluate alternatives
aimed at reducing the existing debt structure and strengthening the balance
sheet. After negotiations with its Senior Lenders regarding various
alternatives, the Company concluded it would be in the best interests of its
creditors and shareholders to effect a consensual restructuring under Chapter
11 of the Bankruptcy Code and filed its Chapter 11 petition on June 1, 2003.

The Company has reached an agreement in principle with the holders of
approximately 52% of the aggregate principal amount of its Senior Notes on the
terms of a financial restructuring to be implemented through the Chapter 11
process. The agreement-in-principle is subject to numerous conditions and
further agreements, including the entry of an order confirming the plan of
reorganization contemplated by the proposal as required by Chapter 11.
Consequently, there can be no assurance that any of the transactions described
in the Restructuring Proposal will be undertaken or consummated.

On June 2, 2003, the Bankruptcy Court approved a series of the Companys first
day motions that will enable the Company to continue regular operations
throughout the reorganization proceeding. These motions authorized, among
other things, normal payment of employee salaries, wages and benefits;
continued participation in workers compensation insurance programs; payment to
vendors for post-petition delivery of goods and services; payment of certain
pre-petition obligations to customers; and continued payment of utilities. The
Bankruptcy Court also approved, under interim order, access to $175 million in
debtor-in-possession financing for use by the Company, pursuant to a
Post-Petition Credit Agreement, dated as of June 2, 2003, among WestPoint
Stevens Inc. and certain of its subsidiaries, the financial institutions named
therein and Bank of America, N.A. and Wachovia Bank, National Association (the
DIP Credit Agreement).

The Company is a party to the DIP Credit Agreement that provides a facility
consisting of revolving credit loans of up to $300 million (with a sublimit of
$75 million for letters of credit) with a term of one year. At its option, the
company may extend the term for up to two successive periods of six months
each.

Advances under the DIP Credit Agreement bear interest at a fluctuating rate per
annum equal to LIBOR plus a margin of 2.75% or, at the Companys option, prime
plus a margin of 0.625%. Each margin is subject to quarterly adjustments,
commencing November 1, 2003, pursuant to a pricing matrix, based on average
availability, having a range of 2.25% to 3.00% for LIBOR based loans and 0.25%
to 1.00% for prime-based loans. The DIP Credit Agreement also has an unused
line fee of 0.5% per annum, subject to quarterly adjustments as above having a
range of 0.375% to 0.75%.

The DIP Credit Agreement contains a number of covenants, including among
others, affirmative and negative covenants with respect to certain financial
tests and other indebtedness, as well as restrictions against the declaration
or payment of dividends, the making of certain intercompany advances and the
disposition of assets without consent. The DIP Credit Agreement also contains
Events of Default (as defined in the DIP Credit Agreement) including among
others, a failure to pay the principal and interest of the obligations when
due, default with respect to any Debt (as defined in the DIP Credit Agreement)
and a failure by the Company to comply with any provisions of the Financing
Orders (as defined in the DIP Credit Agreement).

The Debtors are currently operating their businesses as debtors-in-possession
pursuant to the Bankruptcy Code. Pursuant to the Bankruptcy Code, prepetition
obligations of the Debtors, including obligations under debt instruments,
generally may not be enforced against the Debtors, and any actions to collect
prepetition indebtedness are automatically stayed, unless the stay is lifted by
the Bankruptcy Court. The rights of and ultimate payments by the Company under
prepetition obligations may be substantially altered. This could result in
claims being liquidated in the Chapter 11 proceedings at less (and possibly
substantially less) than

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. Chapter 11 FilingContinued

100% of their face value. The Debtors cannot presently determine or reasonably
estimate the ultimate liability that may result from rejecting contracts or
leases or from the filing of claims for any rejected contracts or leases, and
no provisions have yet been made for these items. The amount of the claims to
be filed by the creditors could be significantly different than the amount of
the liabilities recorded by the Company.

Since the Petition Date, the Debtors have conducted business in the ordinary
course. Management is in the process of stabilizing the business of the Debtors
and evaluating their operations as part of the development of a plan of
reorganization. The Debtors
may seek the requisite acceptance of the plan of reorganization by impaired creditors and equity
holders and confirmation of the plan by the Bankruptcy Court, all in accordance
with the applicable provisions of the Bankruptcy Code. During the pendency of
the Chapter 11 proceedings, the Debtors may, with Bankruptcy Court approval,
sell assets and settle liabilities, including for amounts other than those
reflected in the financial statements. The administrative and reorganization
expenses resulting from the Chapter 11 proceedings will unfavorably affect the
Debtors results of operations. Future results of operations may also be
adversely affected by other factors related to the Chapter 11 proceedings.

Basis of Presentation

The Companys consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
applicable to a going concern. Except as otherwise disclosed, these
principles assume that assets will be realized and liabilities will be
discharged in the ordinary course of business. The Company is currently
operating as a debtor-in-possession under Chapter 11 of the Bankruptcy Code,
and its continuation as a going concern is contingent upon, among other
things, its ability to gain
approval of the plan of reorganization by the requisite parties under the Bankruptcy Code and be confirmed
by the Bankruptcy Court, comply with the DIP Credit Agreement, return to
profitability, generate sufficient cash flows from operations and obtain
financing sources to meet future obligations. There is no assurance that the
Company will be able to achieve any of these results. The Companys
consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might result from the outcome of these
uncertainties.

The Companys consolidated financial statements included elsewhere in this
Annual Report do not reflect adjustments that may occur in accordance with
AICPA Statement of Position 90-7 (Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code) (SOP 90-7), which the Company will
adopt for its financial reporting in periods ending after June 1, 2003 assuming
that the Company will continue as a going concern. In the Chapter 11
proceedings, substantially all unsecured liabilities as of the Petition Date
are subject to compromise or other treatment under a plan of reorganization
which must be confirmed by the Bankruptcy Court after submission to any
required vote by affected parties. For financial reporting purposes, those
liabilities and obligations whose treatment and satisfaction is dependent on
the outcome of the Chapter 11 proceedings will be segregated and classified as
Liabilities Subject to Compromise in the consolidated balance sheet under SOP
90-7.

The ultimate amount of and settlement terms for the Companys pre-bankruptcy
liabilities are subject to the ultimate outcome of its Chapter 11 proceedings
and, accordingly, are not presently determinable. Pursuant to SOP 90-7,
professional fees associated with the Chapter 11 proceedings will be expensed
as incurred and reported as reorganization costs. Also, interest expense will
be reported only to the extent that it will be paid during the pendency of the
Chapter 11 proceedings or that it is probable that it will be an allowed claim.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. Indebtedness and Financial Arrangements

Indebtedness is as follows (in thousands of dollars):

|                        |                              |   |              |         |      |   |           |         | 
|----------------------- | ---------------------------- | - | ------------ | ------- | ---- | - | --------- | ------- | 
|                        |                              |   | December 31,
|                        |                              |   |             
|                        |                              |   | 2002         |         | 2001
|                        |                              |   |              |         |     
|Short-term indebtedness |                              |   |              |         |      |   |           |        
|                        | Senior Credit Facility       |   | $            | 447,795 |      |   | $         | 107,501 | 
|                        | Second-Lien Facility         |   |              | 165,000 |      |   |           |        | 
|                        | 7-7/8% Senior Notes due 2005 |   |              | 525,000 |      |   |           |        | 
|                        | 7-7/8% Senior Notes due 2008 |   |              | 475,000 |      |   |           |        | 
|                        |                              |   |              |         |      |   |           |        
|                        |                              | $ | 1,612,795    |         |      | $ | 107,501   |        
|                        |                              |   |              |         |      |   |           |        
|Long-term indebtedness  |                              |   |              |         |      |   |           |        
|                        | Senior Credit Facility       |   | $            |        |      |   | $         | 400,000 | 
|                        | Second-Lien Facility         |   |              |        |      |   |           | 165,000 | 
|                        | 7-7/8% Senior Notes due 2005 |   |              |        |      |   |           | 525,000 | 
|                        | 7-7/8% Senior Notes due 2008 |   |              |        |      |   |           | 475,000 | 
|                        |                              |   |              |         |      |   |           |        
|                        |                              | $ |             |         |      | $ | 1,565,000 |        
|                        |                              |   |              |         |      |   |           |        

The Company is a party to the DIP Credit Agreement dated June 2, 2003, among
the Debtors, the financial institutions from time to time parties thereto as
Lenders, Bank of America, N.A., as Administrative Agent for the Lenders and
Wachovia Bank, National Association as Syndication Agent for the Lenders. The
facility consists of revolving credit loans of up to $300 million (with a
sublimit of $75 million for letters of credit) with a term of one year. (See
Note 2 where DIP Credit Agreement is discussed further.)

At December 31, 2002, the Companys Senior Credit Facility with certain lenders
(collectively, the Banks) consists of a $692.1 million revolving credit
facility (Revolver) subject to future scheduled commitment reductions and
interim facility limitations, with a Revolver expiration date of November 30,
2004. During 2002 the Revolver commitment decreased $25.4 million as a result
of a $25 million scheduled commitment reduction and a $0.4 million reduction
related to asset dispositions. The Senior Credit Facility provides for a $25.0
million future reduction in the revolver commitment on each of the following
dates: February 1, 2003, August 1, 2003 and November 1, 2003 and further
provides for a $17.5 million reduction in the revolver commitment on February
1, 2004 at which time the revolver commitment will be $599.6 million, subject
to adjustments related to the Trade Receivables Program and asset dispositions.
Borrowing availability under the Senior Credit Facility was reduced by
approximately $30.0 million of outstanding letters of credit at December 31,
2002.

During the first and second quarters of 2001, the Companys Senior Credit
Facility was amended primarily to modify certain financial ratios, add a
minimum EBITDA covenant, limit restricted debt and equity payments including
dividends and stock repurchases, limit capital expenditures, permit the
Second-Lien Facility transaction and provide for scheduled reductions of the
revolving commitment. Effective with the closing of the Second-Lien Facility,
the revolving commitment was reduced to $717.5
million from $800.0 million. The 2001 amendments further provide that any
increase in the Trade Receivables Program above the current $160.0 million
limit, up to a $200.0 million limit, would reduce the revolving commitment
under the Senior Credit Facility by a similar amount. In the third quarter of
2002, the Companys Senior Credit Facility and Second-Lien Facility were
amended primarily to permit certain restructuring, impairment and other
charges, and to modify certain financial ratios and the minimum EBITDA
covenant.

Effective March 31, 2003, the Senior Credit Facility was amended primarily to
provide for an interim facility limitation and to add an unused commitment fee.
Under the interim facility limitation, the Companys outstanding borrowings
and letters of credit under the Senior Credit Facility were limited to the
following amounts for the periods indicated: $546.0 million for the period
April 1, 2003 through April 26, 2003; $530.0 million for the period April 27,
2003 through May 17, 2003; and $525.0 million for the period May 18, 2003
through June 10, 2003.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. Indebtedness and Financial ArrangementsContinued

At the option of the Company and effective with the last amendment to the
Senior Credit Facility, interest under the Senior Credit Facility will be
payable monthly, either at the prime rate plus 5.25% or LIBOR plus 7.00%,
compared to prime rate plus 2.75%, or LIBOR plus 4.50% in effect at December
31, 2002. The Company is obligated to pay a facility fee in an amount equal to
0.50% of each Banks commitment under the Revolver, and an unused commitment
fee in an amount equal to 1.00% of the difference between the revolver
commitment and the daily outstanding loans and letters of credit. The loans
under the Senior Credit Facility are secured by the pledge of all the stock of
the Companys material subsidiaries and a first priority lien on substantially
all of the assets of the Company, other than the Companys accounts receivables
in the Trade Receivables Program.

On June 29, 2001, the Company announced the closing of a $165.0 million
Second-Lien Senior Credit Facility (Second-Lien Facility) with a maturity
date of February 28, 2005. Net proceeds from the transaction, after payment of
approximately $16.3 million of related transaction fees and expenses, were used
to reduce outstanding borrowings under the Senior Credit Facility as well as
provide additional liquidity for working capital and general corporate
purposes. Interest under the Second-Lien Facility is payable quarterly at an
interest rate of prime plus 8% increasing each quarter after June 30, 2002 by .375% but in no event less than 15%. Loans under the Second-Lien Facility are
secured by a second priority lien on the assets securing the existing Senior
Credit Facility. The $16.3 million of related transaction fees and expenses
were capitalized as deferred financing fees and are being amortized over the
remaining term of the facility.

The 7-7/8% Senior Notes due 2005 and 7-7/8% Senior Notes due 2008 (together,
the Senior Notes) are general unsecured obligations of the Company and rank
pari passu in right of payment with all existing or future unsecured and
unsubordinated indebtedness of the Company and senior in right of payment to
all subordinated indebtedness of the Company. The Senior Notes bear interest
at the rate of 7-7/8% per annum, payable semi-annually on June 15 and December
15 of each year. The Senior Notes are redeemable, in whole or in part, at any
time at the option of the Company at 100% of the principal amount thereof plus
the Make-Whole Premium (as defined) plus accrued and unpaid interest, if any,
to the date of purchase. In addition, in the event of a Change of Control (as
defined), the Company will be required to make an offer to purchase the notes
at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase.

The Companys credit agreements contain a number of customary covenants
including, among others, restrictions on the incurrence of indebtedness,
transactions with affiliates, and certain asset dispositions as well as
limitations on restricted debt and equity payments and capital expenditures.
Certain provisions restrict debt and equity payments and require the Company to
maintain certain financial ratios, a minimum interest coverage ratio, a minimum
debt to EBITDA ratio, a minimum EBITDA and a minimum consolidated net worth (as
defined). At December 31, 2002, the Company was in compliance with its
covenants under the credit agreements.

At March 31, 2003 and prior to the petition date, the Company was not in
compliance with certain of its covenants under the Senior Credit Facility and
Second-Lien Facility during which time the Company engaged in active
discussions with its senior lenders to obtain an amendment or waiver of such
non-compliance (See Note 2 where the chronology of the circumstances causing
the Company to file voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code is discussed). At December 31, 2002, the Company
classified all of its outstanding debt under all of its various credit
agreements as current as a result of the Companys inability to obtain
temporary waivers discussed above through the end of 2003 and the potential for
the acceleration of the loans outstanding under all of its various credit
agreements.

Effective April 1, 2001, the Company adopted the requirements of Statement of
Financial Accounting Standards No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities, that replaces, in its
entirety, Statement 125. Accordingly, the Company has modified several
agreements to meet the new requirements to enable it to continue recognizing
transfers of certain receivables to special-purpose entities as sales of
receivables. As a result, the impact of adoption on net income in 2001 was
immaterial.

The Company, through a wholly-owned bankruptcy remote receivables subsidiary,
has a Trade Receivables Program that provides for the sale of accounts
receivable on a revolving basis. The receivables subsidiary, WPS Receivables
Corporation (WPSRC) (which is not a Debtor in the Companys current Chapter
11 proceeding), is a qualified special purpose entity and

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. Indebtedness and Financial ArrangementsContinued

meets the requirements of SFAS 140. In January 2002, the Company amended and
extended the maturity date of its existing Trade
Receivables Program with an independent issuer of receivables backed commercial
paper until January 2003. The independent issuer of receivables backed
commercial paper under the Companys Trade Receivables Program at December 31,
2002 indicated that it would not extend the maturity date of its current
agreement with the Company for another year but indicated a willingness to work
with the Company to effect an orderly transition to another securitization
provider. On January 15, and February 10, 2003, the company announced
amendments to the maturity dates of its Trade Receivables Program, extending it
to February 17 and March 31, 2003, respectively. On March 28, 2003, WPSRC and
the Company entered into a loan and security agreement (the Receivables Loan
Agreement) with Congress Financial Corporation
(Southern), as Agent (Congress), pursuant to which the lenders thereunder
agreed to provide receivables backed loans as part of the Companys Trade
Receivables Program. Under the terms of the Trade Receivables Program, the
Company agreed to sell on an ongoing basis, and without recourse for credit
loss on the receivables, its accounts receivable portfolio to WPSRC. WPSRC
used the receivables as collateral for loans pursuant to the Receivables Loan
Agreement. Proceeds from the loans and collections on receivables were used by
WPSRC to purchase receivables from the Company. The Company maintained the
balance in the designated pool of accounts receivable sold by selling its new
receivables on a revolving basis as they were created. The Receivables Loan
Agreement permitted outstanding loans of up to $160.0 million against the
accounts receivable portfolio. The interest payable by WPSRC on the loans
under the Receivables Loan Agreement is a 2-month LIBOR rate plus 2.50%. The
cost of the Trade Receivables Program is charged to selling expense in the
accompanying Consolidated Statements of Operations. At December 31, 2002 and
2001, $154.8 million and $152.6 million, respectively, of accounts receivable
had been sold pursuant to the Trade Receivables Program and the sale is
reflected as a reduction of accounts receivable in the accompanying
Consolidated Balance Sheets. On June 4, 2003, Congress notified WPRSC that, as
a result of the Companys Chapter 11 filing, Congress was terminating the
Receivables Loan Agreement and that no further loans would be made thereunder.
Congress will continue to apply proceeds of receivables previously pledged to
it to reduce the obligations of WPRSC to Congress under the Receivables Loan
Agreement. The Company currently believes that all outstanding loans under the
Receivables Loan Agreement will be repaid in full from such proceeds. The
Company is currently financing its accounts receivable through borrowings under
the DIP Credit Agreement and expects to continue to do so during the pendency
of its Chapter 11 proceedings.

As of December 31, 2002, the maturity of long-term debt was as follows: zero
in 2003, $447.8 million in 2004, $690.0 million in 2005, zero in 2006 and 2007,
and $475.0 million thereafter.

4. Employee Benefit Plans

Pension Plans

The following table sets forth data for the Companys pension plans and amounts
recognized in the accompanying Consolidated Balance Sheets at December 31, 2002
and 2001 (in thousands of dollars):

|                                            |                                                   |   |                         |         |      |   |         |         |  
|------------------------------------------- | ------------------------------------------------- | - | ----------------------- | ------- | ---- | - | ------- | ------- | -
|                                            |                                                   |   | Year Ended December 31,
|                                            |                                                   |   |                        
|                                            |                                                   |   | 2002                    |         | 2001
|                                            |                                                   |   |                         |         |     
|Change in benefit obligation:               |                                                   |   |                         |         |      |   |         |        
|                                            | Projected benefit obligation at beginning of year |   | $                       | 341,209 |      |   | $       | 323,956 |  
|                                            | Service cost                                      |   |                         | 8,039   |      |   |         | 8,490   |  
|                                            | Interest cost                                     |   |                         | 24,370  |      |   |         | 24,529  |  
|                                            | Plan amendments                                   |   |                         | 625     |      |   |         |        |  
|                                            | Actuarial losses                                  |   |                         | 13,352  |      |   |         | 12,619  |  
|                                            | Benefit payments                                  |   |                         | (26,607 | )    |   |         | (28,123 | )
|                                            | Settlements                                       |   |                         | (655    | )    |   |         |        |  
|                                            | Curtailments                                      |   |                         |        |      |   |         | (262    | )
|                                            |                                                   |   |                         |         |      |   |         |        
|Projected benefit obligation at end of year |                                                   | $ | 360,333                 |         |      | $ | 341,209 |        
|                                            |                                                   |   |                         |         |      |   |         |         |  

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. Employee Benefit PlansContinued

Pension PlansContinued

|                                         |                                                |   |                         |         |      |   |         |         |  
|---------------------------------------- | ---------------------------------------------- | - | ----------------------- | ------- | ---- | - | ------- | ------- | -
|                                         |                                                |   | Year Ended December 31,
|                                         |                                                |   |                        
|                                         |                                                |   | 2002                    |         | 2001
|                                         |                                                |   |                         |         |     
|Change in plan assets:                   |                                                |   |                         |         |      |   |         |        
|                                         | Fair value of plan assets at beginning of year |   | $                       | 272,627 |      |   | $       | 305,171 |  
|                                         | Actual return on plan assets                   |   |                         | (10,222 | )    |   |         | (4,914  | )
|                                         | Employer contributions                         |   |                         | 10,635  |      |   |         | 493     |  
|                                         | Benefit payments                               |   |                         | (26,607 | )    |   |         | (28,123 | )
|                                         |                                                |   |                         |         |      |   |         |        
|Fair value of plan assets at end of year |                                                | $ | 246,433                 |         |      | $ | 272,627 |        
|                                         |                                                |   |                         |         |      |   |         |        

|                                                       |                              |                                        |        |              |          |      |        |          |         |  
|------------------------------------------------------ | ---------------------------- | -------------------------------------- | ------ | ------------ | -------- | ---- | ------ | -------- | ------- | -
|                                                       |                              |                                        |        | December 31,
|                                                       |                              |                                        |        |             
|                                                       |                              |                                        |        | 2002         |          | 2001
|                                                       |                              |                                        |        |              |          |     
|Funded status:                                         |                              |                                        |        |              |          |      |        |         
|                                                       | Projected benefit obligation |                                        | $      | (360,333     | )        |      | $      | (341,209 | )      
|                                                       | Fair value of assets         |                                        |        | 246,433      |          |      |        | 272,627  |        
|                                                       |                              |                                        |        |              |          |      |        |         
|                                                       | Funded status                |                                        |        | (113,900     | )        |      |        | (68,582  | )      
|                                                       |                              |                                        |        |              |          |      |        |          |        
|                                                       | Unrecognized amounts:        |                                        |        |              |          |      |        |          |        
|                                                       |                              | Prior service cost                     |        |              | 554      |      |        |          | (20     | )
|                                                       |                              | Net actuarial losses                   |        |              | 162,751  |      |        |          | 122,452 |  
|                                                       |                              |                                        |        |              |          |      |        |         
|                                                       |                              | Total unrecognized                     |        |              | 163,305  |      |        |          | 122,432 |  
|                                                       |                              |                                        |        |              |          |      |        |         
|Prepaid pension cost at year-end                       |                              | $                                      | 49,405 |              |          | $    | 53,850 |         
|                                                       |                              |                                        |        |              |          |      |        |          |        
|Amounts recognized in the Consolidated Balance Sheets: |                              |                                        |        |              |          |      |        |         
|                                                       |                              | Accrued liability                      |        | $            | (101,432 | )    |        | $        | (50,420 | )
|                                                       |                              | Intangible asset                       |        |              | 95       |      |        |          | 121     |  
|                                                       |                              | Accumulated other comprehensive income |        |              | 150,742  |      |        |          | 104,149 |  
|                                                       |                              |                                        |        |              |          |      |        |         
|Net amount recognized                                  |                              | $                                      | 49,405 |              |          | $    | 53,850 |         
|                                                       |                              |                                        |        |              |          |      |        |          |        

The accumulated benefit obligation and the fair value of assets for pension
plans with accumulated benefit obligations in excess of plan assets were $347.8
million and $246.4 million, respectively, as of December 31, 2002, and $323.0
million and $272.6 million, respectively, as of December 31, 2001.

|                                                |                                |  |              |     |      |  |  |      |  
|----------------------------------------------- | ------------------------------ |  | ------------ | --- | ---- |  |  | ---- | -
|                                                |                                |  | December 31,
|                                                |                                |  |             
|                                                |                                |  | 2002         |     | 2001
|                                                |                                |  |              |     |     
|Weighted average assumptions as of December 31: |                                |  |              |     |      |  |  |     
|                                                | Discount rate                  |  |              | 7.0 | %    |  |  | 7.5  | %
|                                                | Expected return on plan assets |  |              | 9.0 | %    |  |  | 10.0 | %
|                                                | Rate of compensation increase  |  |              | 3.5 | %    |  |  | 3.5  | %

44



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WESTPOINT STEVENS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

4. Employee Benefit PlansContinued

Pension PlansContinued

|                                                   |                                               |   |                         |         |      |   |       |         |   |   |       |         |  
|-------------------------------------------------- | --------------------------------------------- | - | ----------------------- | ------- | ---- | - | ----- | ------- | - | - | ----- | ------- | -
|                                                   |                                               |   | Year Ended December 31,
|                                                   |                                               |   |                        
|                                                   |                                               |   | 2002                    |         | 2001 |   | 2000 
|                                                   |                                               |   |                         |         |      |   |      
|Components of net periodic pension cost (benefit): |                                               |   |                         |         |      |   |       |         |   |   |       |        
|                                                   | Service cost                                  |   | $                       | 8,039   |      |   | $     | 8,490   |   |   | $     | 8,077   |  
|                                                   | Interest cost                                 |   |                         | 24,370  |      |   |       | 24,529  |   |   |       | 24,224  |  
|                                                   | Expected return on plan assets                |   |                         | (23,877 | )    |   |       | (29,482 | ) |   |       | (30,326 | )
|                                                   | Net amortization                              |   |                         | 7,277   |      |   |       | 4,551   |   |   |       | 1,891   |  
|                                                   |                                               |   |                         |         |      |   |       |         |   |   |       |        
|Net periodic pension expense                       |                                               |   | 15,809                  |         |      |   | 8,088 |         |   |   | 3,866 |        
|                                                   | One-time credit due to settlement             |   |                         | (74     | )    |   |       |        |   |   |       |        |  
|                                                   | Additional pension expense due to curtailment |   |                         |        |      |   |       | 73      |   |   |       |        |  
|                                                   |                                               |   |                         |         |      |   |       |         |   |   |       |        
|Total periodic pension expense                     |                                               | $ | 15,735                  |         |      | $ | 8,161 |         |   | $ | 3,866 |        
|                                                   |                                               |   |                         |         |      |   |       |         |   |   |       |         |  

Plan assets are primarily invested in United States Government and corporate
debt securities and equity securities. At December 31, 2002 and 2001, the
Companys pension plans held 705,558 shares of the Companys common stock with
an aggregate cost of $20.0 million and market values of $0.4 million and $1.7
million, respectively.

Retirement Savings Plan

The Company matches 50% of each employees before-tax contributions up to 2% of
the employees compensation. Company contributions may be made either in cash
or in shares of Common Stock of the Company. During 2002, 2001 and 2000, the
Company charged $2.0 million, $2.1 million and $2.5 million, respectively, to
expense in connection with the Retirement Savings Plan.

Other Post-Retirement Benefit Plans

In addition to sponsoring defined benefit pension plans, the Company sponsors
various defined benefit post-retirement plans that provide health care and life
insurance benefits to certain current and future retirees. All such
post-retirement benefit plans are unfunded. The following table presents the
status of post-retirement plans (in thousands of dollars):

|                                                                    |                  |   |              |        |      |   |        |        |  
|------------------------------------------------------------------- | ---------------- | - | ------------ | ------ | ---- | - | ------ | ------ | -
|                                                                    |                  |   | December 31,
|                                                                    |                  |   |             
|                                                                    |                  |   | 2002         |        | 2001
|                                                                    |                  |   |              |        |     
|Accumulated post-retirement benefit obligation at beginning of year |                  | $ | 15,702       |        |      | $ | 14,260 |       
|                                                                    | Interest cost    |   |              | 1,111  |      |   |        | 1,134  |  
|                                                                    | Actuarial losses |   |              | 1,210  |      |   |        | 1,896  |  
|                                                                    | Benefit payments |   |              | (1,614 | )    |   |        | (1,588 | )
|                                                                    |                  |   |              |        |      |   |        |       
|Accumulated post-retirement benefit obligation at end of year       |                  | $ | 16,409       |        |      | $ | 15,702 |       
|                                                                    |                  |   |              |        |      |   |        |       

Net periodic post-retirement benefit plans expense is not material during the
three-year period ended December 31, 2002.

As of December 31, 2002, the actuarial assumptions include a discount rate of
7.0% and a medical care trend rate of 10.5% for 2002, grading down to 6.0% by
2012. These trend rates reflect the Companys prior experience and
managements expectation of future rates. Increasing the assumed health care
cost trend rates by one percentage point in each year would increase the
accumulated post-retirement benefit plans obligations as of December 31, 2002
by approximately $0.6 million, and the aggregate service and interest cost
components of net periodic post-retirement benefit cost for the year ended
December 31, 2002 by an immaterial amount.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

5. Deferred Financing Fees

Included in Other expense-net in the accompanying Consolidated Statements of
Operations for each of the years ended December 31, 2002, 2001 and 2000, is the
amortization of deferred financing fees of $9.6 million, $6.9 million and $3.2
million, respectively. Amendment fees related to the Senior Credit Facility
and amendment fees, transaction fees and expenses related to the Second-Lien
Facility are capitalized in the period incurred and amortized over the
remaining term of the facilities.

6. Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109; accordingly deferred income taxes are provided at
the enacted marginal rates on the difference between the financial statement
and income tax bases of assets and liabilities. Deferred income tax provisions
or benefits are based on the change in the deferred tax assets and liabilities
from period to period.

The total provision (benefit) for income taxes consisted of the following (in
thousands of dollars):

|         |         |   |                         |        |      |   |         |         |   |   |         |         |  
|-------- | ------- | - | ----------------------- | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|         |         |   | Year Ended December 31,
|         |         |   |                        
|         |         |   | 2002                    |        | 2001 |   | 2000   
|         |         |   |                         |        |      |   |        
|Current  |         |   |                         |        |      |   |         |         |   |   |         |        
|         | Federal |   | $                       |       |      |   | $       |        |   |   | $       | 5,041   |  
|         | State   |   |                         | 91     |      |   |         | 133     |   |   |         | 1,184   |  
|         | Foreign |   |                         |       |      |   |         | (21     | ) |   |         | (122    | )
|Deferred |         |   |                         |        |      |   |         |         |   |   |         |        
|         | Federal |   |                         | (7,082 | )    |   |         | (13,520 | ) |   |         | (34,814 | )
|         | State   |   |                         | (390   | )    |   |         |        |   |   |         | (6,467  | )
|         | Foreign |   |                         | 261    |      |   |         | (1,817  | ) |   |         | (272    | )
|         |         |   |                         |        |      |   |         |         |   |   |         |        
|         |         | $ | (7,120                  | )      |      | $ | (15,225 | )       |   | $ | (35,450 | )      
|         |         |   |                         |        |      |   |         |         |   |   |         |        

Income tax expense (benefit) differs from the statutory federal income tax rate
of 35% for the following reasons (in thousands of dollars):

|                                                         |  |                         |        |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                         |  | Year Ended December 31,
|                                                         |  |                        
|                                                         |  | 2002                    |        | 2001 |  | 2000
|                                                         |  |                         |        |      |  |     
|Income tax benefit at federal statutory income tax rate  |  | $                       | (6,923 | )    |  | $    | (14,901 | ) |  | $ | (34,566 | )
|State income taxes (net of effect of federal income tax) |  |                         | (194   | )    |  |      | 86      |   |  |   | (3,434  | )
|Other-net                                                |  |                         | (3     | )    |  |      | (410    | ) |  |   | 2,550   |  
|                                                         |  |                         |        |      |  |      |         |   |  |   |         |  
|Income tax benefit                                       |  | $                       | (7,120 | )    |  | $    | (15,225 | ) |  | $ | (35,450 | )
|                                                         |  |                         |        |      |  |      |         |   |  |   |         |  

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

6. Income TaxesContinued

Components of the net deferred income tax liability are as follows (in
thousands of dollars):

|                                                   |                                                                     |   |              |          |      |   |          |          |  
|-------------------------------------------------- | ------------------------------------------------------------------- | - | ------------ | -------- | ---- | - | -------- | -------- | -
|                                                   |                                                                     |   | December 31,
|                                                   |                                                                     |   |             
|                                                   |                                                                     |   | 2002         |          | 2001
|                                                   |                                                                     |   |              |          |     
|Deferred tax liabilities:                          |                                                                     |   |              |          |      |   |          |         
|                                                   | Basis differences resulting from reorganization                     |   | $            | (112,125 | )    |   | $        | (126,526 | )
|                                                   | Basis differences resulting from fixed assets                       |   |              | (82,530  | )    |   |          | (79,855  | )
|                                                   | Income taxes related to prior years, including interest             |   |              | (17,283  | )    |   |          | (17,283  | )
|                                                   | Nondeductible expenses                                              |   |              | (28,191  | )    |   |          | (30,780  | )
|                                                  
|Deferred tax assets:                               |                                                                     |   |              |          |      |   |          |         
|                                                   | Reserves for litigation, environmental, employee benefits and other |   |              | 71,936   |      |   |          | 55,506   |  
|                                                   | Other                                                               |   |              | 26,216   |      |   |          | 29,053   |  
|                                                   |                                                                     |   |              |          |      |   |          |          |  
|                                                   |                                                                     | $ | (141,977     | )        |      | $ | (169,885 | )       
|                                                   |                                                                     |   |              |          |      |   |          |          |  
|Deferred taxes as classified in the balance sheet: |                                                                     |   |              |          |      |   |          |         
|                                                   | Current deferred tax asset (included in other current assets)       |   | $            | 16,267   |      |   | $        | 12,937   |  
|                                                   | Long-term deferred tax liability                                    |   |              | (158,244 | )    |   |          | (182,822 | )
|                                                   |                                                                     |   |              |          |      |   |          |          |  
|                                                   | Net deferred income tax liability                                   |   | $            | (141,977 | )    |   | $        | (169,885 | )
|                                                   |                                                                     |   |              |          |      |   |          |          |  

At December 31, 2002, the Company has estimated net operating loss
carryforwards (NOLs) of approximately $258.4 million available to reduce
future federal taxable income, of which approximately $168.3 million expires in
2003-2008 and approximately $90.1 million expires in 2020-2022. The
utilization of these NOLs is subject to the ownership change limitations of
Internal Revenue Code Section 382. Based on these rules, the Company had an
ownership change on September 16, 1992, as a result of a reorganization. It is
also likely that a number of transactions occurring during the three year
period ended December 11, 2002, resulted in another ownership change as of that
date. Because of the complex tax rules related to these carryforwards and the
uncertainty of ultimately realizing benefit from the losses, the Company has
not recorded full benefit for these NOLs.

During the second quarters of 2002 and 2001, certain federal and state
contingencies related to the NOLs were resolved and the Company reevaluated
its position on the tax benefits associated with these items. As a result, the
Company recorded a $12.3 million benefit and a $26.8 million benefit in the
second quarters of 2002 and 2001, respectively. Because the NOLs involved were
generated prior to emergence from bankruptcy, the accounting rules of Statement
of Position 90-7, Financial Reporting by Entities in Reorganization under the
Bankruptcy Code, require that the benefit be recorded in equity rather than in
the income statement.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. Stockholders Equity (Deficit)

Comprehensive Income

Statement No. 130, Reporting Comprehensive Income, requires presentation of
comprehensive income (loss) that consisted of the following (in thousands of
dollars):

|                                                   |                                                                       |   |                         |       |      |   |         |         |   |   |         |   | 
|-------------------------------------------------- | --------------------------------------------------------------------- | - | ----------------------- | ----- | ---- | - | ------- | ------- | - | - | ------- | - | 
|                                                   |                                                                       |   | Year Ended December 31,
|                                                   |                                                                       |   |                        
|                                                   |                                                                       |   | 2002                    |       | 2001 |   | 2000   
|                                                   |                                                                       |   |                         |       |      |   |        
|Net loss                                           |                                                                       | $ | (12,659                 | )     |      | $ | (27,348 | )       |   | $ | (63,310 | )
|Minimum pension liability adjustment, net of tax   |                                                                       |   | (29,820                 | )     |      |   | (66,655 | )       |   |   |        |  
|Foreign currency translation adjustment            |                                                                       |   | (2,765                  | )     |      |   | (60     | )       |   |   | 338     |  
|Gain (loss) on derivative instruments, net of tax: |                                                                       |   |                         |       |      |   |         |         |   |   |         |  
|                                                   | Cumulative effect of adopting Statement 133                           |   |                         |      |      |   |         | (968    | ) |   |         |  | 
|                                                   | Net changes in fair value of derivatives                              |   |                         | 1,881 |      |   |         | (19,051 | ) |   |         |  | 
|                                                   | Net losses reclassified from other comprehensive
income into earnings |   |                         | 509   |      |   |         | 19,122  |   |   |         |  | 
|                                                   |                                                                       |   |                         |       |      |   |         |         |   |   |         |  
|Comprehensive income (loss)                        |                                                                       | $ | (42,854                 | )     |      | $ | (94,960 | )       |   | $ | (62,972 | )
|                                                   |                                                                       |   |                         |       |      |   |         |         |   |   |         |  

Components of accumulated other comprehensive income (loss) consisted of the
following (in thousands of dollars):

|                                                  |  |              |         |      |  |      |         |   |  |   |        |  
|------------------------------------------------- |  | ------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                  |  | December 31,
|                                                  |  |             
|                                                  |  | 2002         |         | 2001 |  | 2000
|                                                  |  |              |         |      |  |     
|Foreign currency translation adjustment           |  | $            | (4,599  | )    |  | $    | (1,834  | ) |  | $ | (1,774 | )
|Minimum pension liability adjustment, net of tax  |  |              | (96,475 | )    |  |      | (66,655 | ) |  |   |       |  
|Gain (loss) on derivative instruments, net of tax |  |              | 1,493   |      |  |      | (897    | ) |  |   |       |  
|                                                  |  |              |         |      |  |      |         |   |  |   |        |  
|Accumulated other comprehensive income (loss)     |  | $            | (99,581 | )    |  | $    | (69,386 | ) |  | $ | (1,774 | )
|                                                  |  |              |         |      |  |      |         |   |  |   |        |  

Stock Options and Restricted Stock

The Company has granted stock options under various stock plans to key
employees and to non-employee directors. Also the Company granted certain
contractual stock options that were not granted pursuant to any plan. The
Omnibus Stock Incentive Plan (the Omnibus Stock Plan), an amendment and
restatement of the 1993 Management Stock Option Plan, covers approximately 7.3
million shares of Common Stock, and also replaced the 1994 Non-Employee
Directors Stock Option Plan after the 300,000 shares of Common Stock authorized
under that plan had been granted. The Omnibus Stock Plan allows for six
categories of incentive awards: options, stock appreciation rights, restricted
shares, deferred shares, performance shares and performance units. Key
employees are granted options under the various plans at terms (purchase price,
expiration date and vesting schedule) established by a committee of the Board
of Directors. Options granted either in accordance with contractual
arrangements or pursuant to the various plans have been at a price which is
equal to fair market value on the date of grant as determined by the closing
price of the shares on the date the options were issued. No option may be
exercised more than ten years from the date of grant. The Company has elected
to follow Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees(APB 25) and related Interpretations in accounting for
its employee stock options because, as discussed below, the alternative fair
value accounting provided for under Statement No. 123, Accounting for
Stock-Based Compensation, as amended by Statement 148, requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Companys employee
stock options equals or exceeds the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. Stockholders Equity (Deficit)Continued

Stock Options and Restricted StockContinued

Had compensation cost for the Companys stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method established in Statement of Financial
Accounting Standards No. 148 and described in Note 1, the Companys net loss
and loss per common share would have been increased to the pro forma amounts
indicated below (in thousands, except per share data):

|                                                                                                                   |             |   |         |      |      |   |         |      |   |   |         |       |  
|------------------------------------------------------------------------------------------------------------------ | ----------- | - | ------- | ---- | ---- | - | ------- | ---- | - | - | ------- | ----- | -
|                                                                                                                   |             |   | 2002    |      | 2001 |   | 2000   
|                                                                                                                   |             |   |         |      |      |   |        
|Net loss as reported                                                                                               |             | $ | (12,659 | )    |      | $ | (27,348 | )    |   | $ | (63,310 | )    
|Deduct: Total stock-based compensation expense
determined under fair-value based method for
all awards, net of tax |             |   | 4,923   |      |      |   | 3,132   |      |   |   | 6,536   |      
|                                                                                                                   |             |   |         |      |      |   |         |      |   |   |         |      
|Pro forma net loss                                                                                                 |             | $ | (17,582 | )    |      | $ | (30,480 | )    |   | $ | (69,846 | )    
|Earnings (loss) per common share:                                                                                  |             |   |         |      |      |   |         |      |   |   |         |      
|Basic:                                                                                                             |             |   |         |      |      |   |         |      |   |   |         |      
|                                                                                                                   | As reported |   | $       | (.25 | )    |   | $       | (.55 | ) |   | $       | (1.28 | )
|                                                                                                                   | Pro forma   |   | $       | (.35 | )    |   | $       | (.61 | ) |   | $       | (1.41 | )
|Diluted:                                                                                                           |             |   |         |      |      |   |         |      |   |   |         |      
|                                                                                                                   | As reported |   | $       | (.25 | )    |   | $       | (.55 | ) |   | $       | (1.28 | )
|                                                                                                                   | Pro forma   |   | $       | (.35 | )    |   | $       | (.61 | ) |   | $       | (1.41 | )

The total value of options granted in 2002, 2001 and 2000 was $181,000,
$6,771,760 and $19,137,533, respectively. The weighted average value of the
options on the date of grant in 2002, 2001 and 2000 was $2.19, $4.70 and $5.11,
respectively. The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:

|                                |  |      |     |      |  |      |      |   |  |  |      |  
|------------------------------- |  | ---- | --- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                |  | 2002 |     | 2001 |  | 2000
|                                |  |      |     |      |  |     
|Expected life (years)           |  |      | 8   |      |  |      | 8    |   |  |  | 8    |  
|Dividend yield                  |  |      | 0   | %    |  |      | 1.07 | % |  |  | 1.01 | %
|Expected stock price volatility |  |      | 115 | %    |  |      | 58   | % |  |  | 54   | %
|Risk-free interest rate         |  |      | 4.2 | %    |  |      | 5.2  | % |  |  | 5.9  | %

Stock Options and Restricted Stock

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Companys employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

49



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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. Stockholders Equity (Deficit)Continued

Stock Options and Restricted StockContinued

Changes in outstanding options were as follows:

|                                         |            |  |                  |        |                  |  |       |   |           |  |       |        |   |   |       |       | 
|---------------------------------------- | ---------- |  | ---------------- | ------ | ---------------- |  | ----- | - | --------- |  | ----- | ------ | - | - | ----- | ----- | 
|                                         |            |  | Number of Shares |        |                  |  |      
|                                         |            |  | (in thousands)   |        | Weighted Average
|                                         |            |  |                  |        | Option Price    
|                                         |            |  | Qualified Plans  |        | Contractual      |  | Total |   | Per Share
|                                         |            |  |                  |        |                  |  |       |   |          
|Options outstanding at January 1, 2000   |            |  | 5,851            |        |                  |  | 20    |   |           |  | 5,871 |        |   | $ | 21.42 |      
|                                         | Granted    |  |                  | 2,171  |                  |  |       |  |           |  |       | 2,171  |   |   | $     | 8.82  | 
|                                         | Exercised  |  |                  | (756   | )                |  |       |  |           |  |       | (756   | ) |   | $     | 11.79 | 
|                                         | Terminated |  |                  | (597   | )                |  |       |  |           |  |       | (597   | ) |   | $     | 26.67 | 
|                                         |            |  |                  |        |                  |  |       |   |           |  |       |        |   |   |       |      
|Options outstanding at December 31, 2000 |            |  | 6,669            |        |                  |  | 20    |   |           |  | 6,689 |        |   | $ | 18.16 |      
|                                         | Granted    |  |                  | 864    |                  |  |       |  |           |  |       | 864    |   |   | $     | 7.84  | 
|                                         | Exercised  |  |                  |       |                  |  |       |  |           |  |       |       |   |   |       |      | 
|                                         | Terminated |  |                  | (1,499 | )                |  |       |  |           |  |       | (1,499 | ) |   | $     | 18.84 | 
|                                         |            |  |                  |        |                  |  |       |   |           |  |       |        |   |   |       |      
|Options outstanding at December 31, 2001 |            |  | 6,034            |        |                  |  | 20    |   |           |  | 6,054 |        |   | $ | 16.64 |      
|                                         | Granted    |  |                  | 75     |                  |  |       |  |           |  |       | 75     |   |   | $     | 2.41  | 
|                                         | Exercised  |  |                  |       |                  |  |       |  |           |  |       |       |   |   |       |      | 
|                                         | Terminated |  |                  | (281   | )                |  |       |  |           |  |       | (281   | ) |   | $     | 18.47 | 
|                                         |            |  |                  |        |                  |  |       |   |           |  |       |        |   |   |       |      
|Options outstanding at December 31, 2002 |            |  | 5,828            |        |                  |  | 20    |   |           |  | 5,848 |        |   | $ | 16.38 |      
|                                         |            |  |                  |        |                  |  |       |   |           |  |       |        |   |   |       |      

At December 31, 2002, options for 4,095,717 shares were exercisable at prices
ranging from $1.13 to $36.81 per share.

The following table summarizes information about stock options at December 31,
2002 (shares in thousands):

|                         |  |                           |       |                           |  |                  |  |                  |       |                |  |  |       |                  |  |   |       |  |  | 
|------------------------ |  | ------------------------- | ----- | ------------------------- |  | ---------------- |  | ---------------- | ----- | -------------- |  |  | ----- | ---------------- |  | - | ----- |  |  | 
|                         |  | Outstanding Stock Options |       |                           |  |                  |  |                  |       |               
|                         |  |                           |       | Exercisable Stock Options
|                         |  |                           |       |                           |  | Weighted-Average |  |                  |       |                |  | 
|                         |  |                           |       |                           |  | Remaining        |  | Weighted-Average |       |                |  |  |       | Weighted-Average
|Range of Exercise Prices |  | Shares                    |       | Contractual Life          |  | Exercise Price   |  | Shares           |       | Exercise Price
|                         |  |                           |       |                           |  |                  |  |                  |       |               
|$1.13 to $10.00          |  |                           | 2,578 |                           |  | 7.67 years       |  | $                | 7.28  |                |  |  | 1,473 |                  |  | $ | 7.22  | 
|$10.01 to $20.00         |  |                           | 1,663 |                           |  | 6.24 years       |  | $                | 17.58 |                |  |  | 1,155 |                  |  | $ | 17.11 | 
|$20.01 to $30.00         |  |                           | 685   |                           |  | 5.01 years       |  | $                | 21.53 |                |  |  | 672   |                  |  | $ | 21.42 | 
|$30.01 to $36.81         |  |                           | 922   |                           |  | 6.12 years       |  | $                | 35.84 |                |  |  | 796   |                  |  | $ | 35.72 | 
|                         |  |                           |       |                           |  |                  |  |                  |       |                |  |  |       |                  |  |   |       | 
|$1.13 to $36.81          |  |                           | 5,848 |                           |  | 6.71 years       |  | $                | 16.38 |                |  |  | 4,096 |                  |  | $ | 17.88 | 
|                         |  |                           |       |                           |  |                  |  |                  |       |                |  |  |       |                  |  |   |       | 

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. Stockholders Equity (Deficit)Continued

Stockholder Rights Plan

During 2000, 2001 and 2002 the Company awarded 10,000, 25,000 and 15,000
restricted shares, respectively, to certain key employees. The awards are
subject to certain vesting requirements and 20,229 restricted shares were
actually issued. The value of such stock was established by the market price on
the date of grant and was recorded as unearned compensation. The unearned
compensation is shown as a reduction of stockholders equity in the
accompanying Consolidated Balance Sheets and is being amortized ratably over
the applicable restricted stock vesting period. During 2002, 2001 and 2000,
$1.9 million, $2.0 million and $1.9 million, respectively, was charged to
expense related to restricted shares.

On May 9, 2001 the Companys Board of Directors adopted a Stockholder Rights
Plan (Rights Plan) designed to protect Company stockholders interests in the
event of a takeover attempt. The Board of Directors did not adopt the Rights
Plan in response to any specific takeover threat.

In adopting the Rights Plan, the Board declared a dividend distribution of one
common stock purchase right for each outstanding share of common stock of the
Company, payable to stockholders of record at the close of business on May 21,
2001. The rights will become exercisable only in the event, with certain
exceptions, a person or group of affiliated or associated persons acquires 15%
or more of the Companys voting stock, or a person or group of affiliated or
associated persons commences a tender or exchange offer that, if successfully
consummated, would result in such person or group owning 15% or more of the
Companys voting stock. A stockholder who owns 15% or more of the Companys
voting stock as of May 9, 2001, will not trigger this provision unless the
stockholder thereafter acquires an additional one percent or more of the
outstanding stock. The rights will expire on May 9, 2011.

Upon the occurrence of certain events, holders of the rights (other than rights
owned by an acquiring person or group) would be entitled to purchase either the
Companys common stock or shares in an acquiring entity at approximately half
of market value. Further, at any time after a person or group acquires 15% or
more (but less than 50%) of the Companys outstanding voting stock, subject to
certain exceptions, the Board of Directors may, at its option, exchange part or
all of the rights (other than rights held by an acquiring person or group) for
shares of the Companys common stock having a fair market value on the date of
such acquisition equal to the excess of (i) the fair market value of common
stock issuable upon exercise of the rights over (ii) the exercise price of the
rights.

The Company generally will be entitled to redeem the rights at $0.001 per right
at any time prior to the close of business on the tenth day after there has
been a public announcement of the beneficial ownership by any person or group
of 15% or more of the Companys voting stock, subject to certain exceptions.

Stock Bonus Plan

The Company sponsors an employee benefit plan, the WestPoint Stevens Inc. Key
Employee Stock Bonus Plan, as amended, (the Stock Bonus Plan), covering
2,000,000 shares of the Companys Common Stock. Under the Stock Bonus Plan,
the Company may grant bonus awards of shares of Common Stock to key employees
based on the Companys achievement of targeted earnings levels during the
Companys fiscal year. For 2002, 2001 and 2000, bonus awards were not earned.
For performance years 1999 and later the Stock Bonus Plan provided for vesting
of the bonus awards, if earned, of 10% on January 1 of the year following the
year of award and 10% in each of the next nine years if the employee continues
employment with the Company, and for performance years prior to 1999 the Stock
Bonus Plan provided for the vesting of the bonus awards of 20% on January 1 of
the year following the year of award and 20% in each of the next four years if
the employee continues employment with the Company. The Company recognized
$1.2 million, $2.7 million and $4.2 million of expense in 2002, 2001, and 2000,
respectively, in connection with the Stock Bonus Plan.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

8. Derivatives

As discussed in Note 1, effective January 1, 2001, the Company adopted the
Statement of Financial Accounting Standard No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by Statement 137 and Statement
138. These statements require the Company to recognize all derivative
instruments on the balance sheet at fair value. These statements also
establish new accounting rules for hedging instruments, which depend on the
nature of the hedge relationship. A fair value hedge requires that the
effective portion of the change in the fair value of a derivative instrument be
offset against the change in the fair
value of the underlying asset, liability, or firm commitment being hedged
through earnings. A cash flow hedge requires that the effective portion of the
change in the fair value of a derivative instrument be recognized in Other
Comprehensive Income (OCI), a
component of Stockholders Equity (Deficit), and reclassified into earnings in
the same period or periods during which the hedged transaction affects
earnings. The ineffective portion of a derivative instruments change in fair
value is immediately recognized in earnings.

The adoption of Statement 133 resulted in the Company recording transition
adjustments in 2001 to recognize its derivative instruments at fair value and
to recognize the ineffective portion of the change in fair value of its
derivatives. The cumulative effect of these transition adjustments was an
after-tax net decrease to OCI approximating $968,000. There was no cumulative
effect of transition adjustments on the Companys Consolidated Statement of
Operations due to the adoption of Statement 133.

The Company uses derivative financial instruments primarily to reduce exposure
to adverse fluctuations in interest rates and cotton prices. When entered
into, the Company formally designates and documents the financial instrument as
a hedge of a specific underlying exposure, as well as the risk management
objectives and strategies for undertaking the hedge transaction. Because of
the high degree of effectiveness between the hedging instrument and the
underlying exposure being hedged, fluctuations in the value of the derivative
instruments are generally offset by changes in the value or cash flows of the
underlying exposures being hedged. Derivatives are recorded in the
Consolidated Balance Sheet at fair value in either Prepaid expenses and other
current assets or Other accrued liabilities, depending on whether the amount is
an asset or liability. The fair values of derivatives used to hedge or modify
the Companys risks fluctuate over time. These fair value amounts should not
be viewed in isolation, but rather in relation to the fair values or cash flows
of the underlying hedged transactions and other exposures and to the overall
reduction in Company risk relating to adverse fluctuations in interest rates,
commodity prices and other market factors. In addition, the earnings impact
resulting from the effective portion of the Companys derivative instruments is
recorded in the same line item within the Consolidated Statement of Operations
as the underlying exposure being hedged. The Company also formally assesses,
both at the inception and at least quarterly thereafter, whether the financial
instruments that are used in hedging transactions are effective at offsetting
changes in either the fair value or cash flows of the related underlying
exposures. Any material ineffective portion of a financial instruments change
in fair value is immediately recognized in earnings.

At December 31, 2002 and 2001, the Company had only entered into cash flow
hedges.

Cash Flow Hedging Strategy

Management has been authorized to manage the Companys exposure to adverse
changes in interest rates. During January 2001, the Company entered into an
interest rate swap agreement that effectively converted a portion of its
floating-rate bank debt to a fixed-rate basis, thus reducing the impact of
interest-rate changes on future interest expense. At December 31, 2001, $250.0
million of the Companys Senior Credit Facility was designated as the hedged
item to an interest rate swap agreement through January 2002. Management has
also been authorized to manage exposure to price fluctuations relevant to the
forecasted purchase of cotton through the use of a variety of derivative
nonfinancial instruments. At December 31, 2002 and 2001, these instruments
covered a portion of the Companys 2003 and 2002 cotton needs and include
exchange traded cotton futures contracts and options.

The fair value of the Companys interest rate swap agreement is estimated by
obtaining quotes from a bank and is the estimated amount that the Company would
receive or pay to terminate the agreement at the reporting date. At December
31, 2001, the fair value of this instrument was a $0.7 million liability. The
Companys interest rate swap agreement expired in January 2002. The

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

8. DerivativesContinued

Cash Flow Hedging StrategyContinued

fair values of exchange traded cotton futures contracts and options are
estimated by obtaining quotes from brokers. At December 31, 2002 and 2001, the
Companys cotton futures and options contracts, except for certain collars that
were in a net put position at the date of purchase, qualified for hedge
accounting. The fair value related to cotton futures contracts at December 31,
2002 and 2001, was an asset of $2.3 million and a liability of $0.7 million,
respectively, for which the Company has received or provided cash margins. The
fair value of the cotton option contracts was an asset of $1.1 million at
December 31, 2001. During the first and second quarters of 2001, the fair
value of certain cotton options then outstanding which did not qualify for
hedge accounting in the amount of $2.3 million was classified as Other
expense-net in the accompanying Consolidated Statement of Operations. The fair
values of the Companys interest rate swap and cotton futures contracts have
been recorded as a component of OCI, net of tax. At December 31, 2002, the
Company expects to reclassify all net gains or losses on derivative instruments
from OCI to earnings during the next twelve months, and during 2002, the
Company reclassified all December 31, 2001 net gains or losses on derivative
instruments from OCI to earnings.

The Company did not discontinue any cash flow hedge relationships during the
years ended December 31, 2002 and 2001.

9. Lease Commitments

The Companys operating leases consist of land, sales offices, manufacturing
equipment, warehouses and data processing equipment with expiration dates at
various times during the next eleven years. Some of the operating leases
stipulate that the Company can (a) purchase the properties at their then fair
market values or (b) renew the leases at their then fair rental values.

The following is a schedule, by year, of future minimum lease payments as of
December 31, 2002 under operating leases that have initial or remaining
noncancelable lease terms in excess of one year (in thousands of dollars):

|                             |  |   |        | 
|---------------------------- |  | - | ------ | 
|Year Ending December 31,     |  |   |        | 
|                             |  |   |        | 
|2003                         |  | $ | 16,387 | 
|2004                         |  |   | 15,019 | 
|2005                         |  |   | 13,074 | 
|2006                         |  |   | 10,565 | 
|2007                         |  |   | 6,069  | 
|Years subsequent to 2007     |  |   | 8,500  | 
|                             |  |   |        | 
|Total minimum lease payments |  | $ | 69,614 | 
|                             |  |   |        | 

The following schedule shows the composition of total rental expense for all
operating leases, except those with terms of one month or less that were not
renewed (in thousands of dollars):

|                       |  |                         |        |      |  |      |        |   |  |   |        |  
|---------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                       |  | Year Ended December 31,
|                       |  |                        
|                       |  | 2002                    |        | 2001 |  | 2000
|                       |  |                         |        |      |  |     
|Minimum lease payments |  | $                       | 33,248 |      |  | $    | 37,602 |   |  | $ | 39,164 |  
|Less sublease rentals  |  |                         | (933   | )    |  |      | (886   | ) |  |   | (796   | )
|                       |  |                         |        |      |  |      |        |   |  |   |        |  
|Rent expense           |  | $                       | 32,315 |      |  | $    | 36,716 |   |  | $ | 38,368 |  
|                       |  |                         |        |      |  |      |        |   |  |   |        |  

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

10. Litigation and Contingent Liabilities

On October 5, 2001, a purported stockholder class action suit, entitled Norman
Geller v. WestPoint Stevens Inc., et al.(the Gelleraction),was filed
against the Company and certain of its current and former officers and
directors in the United States District Court for the Northern District of
Georgia. (A subsequent and functionally identical complaint was also filed.)
The actions were consolidated by Order dated January 25, 2002. Plaintiffs
served a Consolidated Amended Complaint (the Amended Complaint) on March 29,
2002. The Amended Complaint asserts claims against all Defendants under §
10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and
against the Company and Defendant Holcombe T. Green, Jr. as controlling
persons under § 20(a) of the Exchange Act. The Amended Complaint alleges
that, during the putative class period (i.e., February 10, 1999 to October 10,
2000), WestPoint Stevens and certain of its officers and directors caused
false and misleading statements to be issued regarding, inter alia, alleged
overcapacity and excessive inventories of the Companys towel-related products
and customer demand for such products and that certain Individual Defendants
wrongfully sold or pledged Company stock at inflated prices for their benefit.
The Amended Complaint refers to WestPoint Stevens press releases and quarterly
and annual reports on Securities Exchange Commission Forms 10-Q and 10-K, which
discuss the Companys results and forecasts for the fiscal years 1999 and 2000.
Plaintiffs allege that these press releases and public filings were false and
misleading because they failed to disclose that the Company allegedly knew
sales would be adversely affected in future quarters and years. Plaintiffs
also allege in general terms that the Company materially overstated revenues by
making premature shipments of products.

On June 6, 2002, Defendants filed Motions to Dismiss Plaintiffs Amended
Complaint. On February 3, 2003, the Court denied Defendants Motions to
Dismiss. The action has proceeded to class certification and discovery.

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark v.
Holcombe T. Green, Jr., et al. (theClarkaction), was filed against certain of
the Companys directors and officers in the Superior Court of Fulton County,
Georgia. The Complaint alleges that the named individuals breached their
fiduciary duties by acting in bad faith and wasting corporate assets. The
Complaint also asserts claims under Georgia Code Ann. §§ 14-2-740 to 14-2-747,
and 14-2-831. The claims are based on the same or similar facts as are alleged
in the Gelleraction.

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al. (the Hemmeraction),was filed against Mr.
Green and certain of the Companys other directors including Messrs. Hugh M.
Chapman, John F. Sorte and Ms. M. Katherine Dwyer in the Court of Chancery in
the State of Delaware in and for New Castle County. The Complaint alleges that
the named individuals breached their fiduciary duties and knowingly or
recklessly failed to exercise oversight responsibilities to ensure the
integrity of the Companys financial reporting. The Complaint also asserts
that certain of the named individuals used proprietary Company information in
selling or pledging Company stock at inflated prices for their benefit. The
claims are based on the same or similar facts as are alleged in the Geller
action.

By agreements between the parties, the Clarkand Hemmeractions were both
stayed pending the Courts decision on Defendants Motions to Dismiss in the
Gelleraction. The Company has negotiated an extension of the stay agreement
in the Hemmeraction and is currently negotiating for an extension of the stay
agreement in the Clarkaction.

The Company believes that the allegations in all of the actions are without
merit and intends to contest the actions vigorously on behalf of its officers
and directors.

On March 21, 2002, an Adversary Complaint of Debtors and Debtors in Possession
Against WestPoint Stevens Inc. was filed by Pillowtex, Inc., a Delaware
corporation, et al.,and Pillowtex Corporation, et al.,against the Company in
the United States Bankruptcy Court for the District of Delaware. Pillowtex
Corporation and its related and affiliated companies (Pillowtex) as Debtors
and Debtors in Possession allege breach of a postpetition contract (the Sale
Agreement) dated January 31, 2001, among Pillowtex, Ralph Lauren Home
Collection, Inc. (RLH) and Polo Ralph Lauren Corporation (PRLC)
collectively referred to as Ralph Lauren and the Company. Pillowtex alleges
that the Company refused to perform its purchase obligation under the Sales
Agreement and is liable to it for $4,800,000 plus potentially significant other
consequential damages. The Company believes that the complaint is without
merit and intends to contest the action vigorously.

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\

WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

10. Litigation and Contingent LiabilitiesContinued

The Company has been named as a defendant in three separate purported class
action suits seeking reparation for the historic enslavement of African
Americans in the United States. Eddlee Bankhead v. Lloyds of London, et al.
(the Bankheadaction)
was filed on September 3, 2002, in the United States District Court for the
Southern District of New York. Timothy Hurdle and Chester Hurdle v.
FleetBoston Financial Corporation, et al. was initially filed in the California
Superior Court for San Francisco County on September 10, 2002, but has since
been removed to the United States District Court California Northern District
(San Francisco). Julie Mae Wyatt-Kerwin v. J.P. Morgan Chasewas filed January
21, 2003, in the United States District Court for the Southern District of
Texas. All three cases have been consolidated with related cases in the U.S.
District Court for the Northern District of Illinois. The factual basis for
all three suits is the claim that the defendants profited from the slave labor
of the plaintiff classes ancestors prior to 1865 and, specifically, that
Pepperell Manufacturing, predecessor to WestPoint Stevens Inc., utilized cotton
from southern planters who in turn purchased finished product to clothe their
slaves. The California suit alleges that such practices amount to an unfair
business practice in violation of the California Business and Professional
Code.

The purported class includes all descendants of African American slaves. The
relief sought includes an accounting, the appointment of an independent
historical commission, imposition of a constructive trust, restitution of the
value of slave labor and defendants unjust enrichment, disgorgement of illicit
profits and compensatory and punitive damages. The Company believes that the
Complaints are without merit and intends to contest the actions vigorously.

On June 1, 2003, the Company and several of its subsidiaries filed the petition
under Chapter 11 of the Bankruptcy Code which is discussed elsewhere in this
Annual Report on Form 10-K.

The Company is subject to various federal, state and local environmental laws
and regulations governing, among other things, the discharge, storage, handling
and disposal of a variety of hazardous and nonhazardous substances and wastes
used in or resulting from its operations and potential remediation obligations
thereunder. Certain of the Companys facilities (including certain facilities
no longer owned or utilized by the Company) have been cited or are being
investigated with respect to alleged violations of such laws and regulations.
The Company is cooperating fully with relevant parties and authorities in all
such matters. The Company believes that it has adequately provided in its
financial statements for any expenses and liabilities that may result from such
matters. The Company also is insured with respect to certain of such matters.
The Companys operations are governed by laws and regulations relating to
employee safety and health which, among other things, establish exposure
limitations for cotton dust, formaldehyde, asbestos and noise, and regulate
chemical and ergonomic hazards in the workplace.

Although the Company does not expect that compliance with any of such laws and
regulations will adversely affect the Companys operations, there can be no
assurance such regulatory requirements will not become more stringent in the
future
or that the Company will not incur significant costs in the future to comply
with such requirements.

The Company and its subsidiaries are involved in various other legal
proceedings, both as plaintiff and as defendant, which are normal to its
business. It is the opinion of management that the aforementioned actions and
claims, if determined adversely to the Company, will not have a material
adverse effect on the financial condition or operations of the Company taken as
a whole.

11. Cash Flow Information

|                                                   |                              |              |  |                         |         |      |  |   |         |  |  |   |         | 
|-------------------------------------------------- | ---------------------------- | ------------ |  | ----------------------- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                   |                              |              |  | Year Ended December 31,
|                                                   |                              |              |  |                        
|(In thousands of dollars)                          |                              | 2002         |  | 2001                    |         | 2000
|                                                   |                              |              |  |                         |         |     
|Supplemental disclosures of cash flow information: |                              |              |  |                         |         |      |  |   |         |  |  |  
|                                                   | Cash paid during the period: |              |  |                         |         |      |  |   |         |  |  |   |        
|                                                   |                              | Interest     |  | $                       | 135,566 |      |  | $ | 143,042 |  |  | $ | 122,903 | 
|                                                   |                              |              |  |                         |         |      |  |   |         |  |  |   |         | 
|                                                   |                              | Income taxes |  | $                       |        |      |  | $ |        |  |  | $ | 6,587   | 
|                                                   |                              |              |  |                         |         |      |  |   |         |  |  |   |         | 

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

11. Cash Flow InformationContinued

Included in the above 2002, 2001 and 2000 interest paid is $0.2 million, $0.6
million and $1.0 million, respectively, of capitalized interest related to
capital expenditure projects.

12. Restructuring, Impairment and Other Charges

In 2000, the Company announced that its Board of Directors had approved the new
Eight-Point Plan, which was created to be the guiding discipline for the
Company in a global economy. The Board also approved a $222.0 million pretax
charge for restructuring, impairment and other charges to cover the cost of
implementing the Eight-Point Plan that is designed to streamline operations and
improve profitability. The Eight-Point Plan addresses the following points: 1)
expand brands; 2) explore new licensing opportunities; 3) rationalize
manufacturing; 4) reduce overhead; 5) increase global sourcing; 6) improve
inventory utilization; 7) enhance supply chain and logistics; and 8) improve
capital structure.

During 2000, the Company conducted an intense evaluation of its manufacturing
process flow and capacity and how they relate to market demand. The Company
adopted a plan to close certain manufacturing plants and consolidate
manufacturing operations in an arrangement that will reduce costs and enable
more efficient production. The Company also evaluated its internal support and
administrative functions and adopted a plan to consolidate as well as outsource
certain internal support and administrative functions.

As a result of the manufacturing rationalization, the Company announced the
closure of its Rosemary (NC) terry greige facility, its Union (SC) pillow and
mattress pad facility, its Seneca (SC) sheeting facility and its Whitmire (SC)
yarn facility. The manufacturing rationalization also included capacity
reductions at its Rosemary (NC) terry finishing and fabrication facilities and
the conversion of its Carter (AL) sheeting facility to a terry facility. These
plant closings enable the Company to consolidate its manufacturing in locations
that allow the most efficient work flow.

The cost of the manufacturing rationalization and certain overhead reduction
costs were reflected in a restructuring and impairment charge of $109.2
million, before taxes, in 2000 and a restructuring and impairment charge of
$5.0 million, before taxes, in 2001. The components of the restructuring and
impairment charge in 2000 included $66.8 million for the impairment of fixed
assets, $23.7 million for the impairment of goodwill and other assets and $18.7
million in reserves to cover cash expenses related to severance benefits of
$14.7 million and other exit costs, including lease terminations, of $4.0
million. The components of the restructuring and impairment charge in 2001
included $7.0 million in reserves to cover cash expenses related to severance
benefits and a reduction in reserves for other exit costs of $2.0 million.

The recorded charge of $66.8 million for the impairment of fixed assets and
$23.7 million for the impairment of goodwill and other assets discussed in the
preceding paragraph are associated with the Companys closure and capacity
reduction of certain
facilities as discussed in the second preceding paragraph. None of the
impairment charges related to enterprise goodwill. The Company did not record
any impairment charges related to assets transferred to other facilities. The
Company decided to abandon all remaining assets. Accordingly, an indication of
impairment exists, as these assets will not generate future cash flow.
Furthermore, the Company believes that there is no acceptable market for these
assets as it is unwilling to sell the assets to a competitor. Accordingly, the
fair value of these assets was determined by the Company to be minimal.

Since the adoption of the Eight-Point Plan, the Company has terminated and
agreed to pay severance (including continuing termination benefits) to
approximately 1,700 employees. The restructuring charge approved in 2000 was
completed in the fourth quarter of 2001.

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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

12. Restructuring, Impairment and Other ChargesContinued

The following is a summary of the restructuring and impairment activity in
the related reserves (in millions):

|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | ---- | ----------- | - | ----- | --- | ------ | - | ---- | ---- | - | - | ----- | ---- | 
|                                          |                |   |           |      | Employee    |   | Other |     |        |   |     
|                                          |                |   | Writedown |      | Termination |   | Exit  |     | Total 
|                                          |                |   | Assets    |      | Benefits    |   | Costs |     | Charge
|                                          |                |   |           |      |             |   |       |     |       
|2000 Restructuring and Impairment Charge: |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |     
|                                          | Second Quarter |   | $         | 87.9 |             |   | $     | 4.6 |        |   | $    | 3.4  |   |   | $     | 95.9 | 
|                                          | Third Quarter  |   |           |     |             |   |       | 5.8 |        |   |      | 0.3  |   |   |       | 6.1  | 
|                                          | Fourth Quarter |   |           | 2.6  |             |   |       | 4.3 |        |   |      | 0.3  |   |   |       | 7.2  | 
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|Total 2000 Charge                         |                |   | 90.5      |      |             |   | 14.7  |     |        |   | 4.0  |      |   |   | 109.2 |     
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|2001 Restructuring and Impairment Charge: |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |     
|                                          | First Quarter  |   |           |     |             |   |       | 5.0 |        |   |      |     |   |   |       | 5.0  | 
|                                          | Fourth Quarter |   |           |     |             |   |       | 2.0 |        |   |      | (2.0 | ) |   |       |     | 
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|Total 2001 Charge                         |                |   |          |      |             |   | 7.0   |     |        |   | (2.0 | )    |   |   | 5.0   |     
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|Writedown Assets to Net Recoverable Value |                |   | (90.5     | )    |             |   |      |     |        |   |     |      |   |   | (90.5 | )   
|2000 Cash Payments                        |                |   |          |      |             |   | (4.7  | )   |        |   | (0.3 | )    |   |   | (5.0  | )   
|2001 Cash Payments                        |                |   |          |      |             |   | (15.0 | )   |        |   | (0.1 | )    |   |   | (15.1 | )   
|2002 Cash Payments                        |                |   |          |      |             |   | (1.7  | )   |        |   |     |      |   |   | (1.7  | )   
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 
|Balance at December 31, 2002              |                | $ |          |      |             | $ | 0.3   |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |       |     |        |   |      |      |   |   |       |      | 

During 2000, other costs of the Eight-Point Plan and other charges of $94.0
million, before taxes, were recognized including inventory writedowns of $74.2
million; claims of $5.0 million; other expenses of $6.1 million, consisting
primarily of $2.2 million for the relocation of machinery, $2.4 million of
related unabsorbed overhead and other expenses of $1.5 million, all reflected
in cost of goods sold; and other costs of $8.7 million consisting primarily of
$5.7 million of unusual contractual severance and other expenses of $3.0
million reflected in Other expense-net. During 2001, other costs of the
Eight-Point Plan of $13.7 million, before taxes, were recognized consisting
primarily of $10.0 million for the relocation of machinery, $3.0 million of
related unabsorbed overhead and other expenses of $0.7 million, all reflected
in cost of goods sold.



---

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of its retail stores division. The Company expects
the restructuring initiatives to result in a $36.5 million pretax charge for
restructuring, impairment and
other charges. Approximately $20 million of the pretax charge is expected to
be non-cash items. The charges for the restructuring initiatives began in the
third quarter of 2002 and will continue throughout 2003.

As a result of the restructuring initiatives in 2002, the Company announced the
closure of its Rosemary (NC) towel finishing facility and the conversion of its
Rosemary (NC) towel fabrication and distribution facilities to basic bedding
facilities. The Company announced on April 25, 2003 that the Rosemary (NC)
towel fabrication and distribution facilities that were previously disclosed as
being converted to basic bedding facilities will now be closed. The Company
also announced the closure of three retail stores. Closure of other retail
stores and other facilities will be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002. The components of the
restructuring and impairment charge included $4.4 million for the impairment of
fixed assets and $2.2 million in reserves to cover cash expenses related
primarily to severance benefits.

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WESTPOINT STEVENS INC.

Notes to Condensed Consolidated Financial Statements (continued)

12. Restructuring, Impairment and Other ChargesContinued

The following is a summary of the restructuring and impairment activity in the
related reserves (in millions):

|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|----------------------------------------- | -------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ | - | --- | --- |  | - | ---- | --- | 
|                                          |                |   |           |     |             |   | Employee |     | Other  |   |     |     | 
|                                          |                |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |    
|                                          | Third Quarter  |   | $         | 4.3 |             |   | $        | 1.6 |        |   | $   |    |  |   | $    | 5.9 | 
|                                          | Fourth Quarter |   |           | 0.1 |             |   |          | 0.5 |        |   |     | 0.1 |  |   |      | 0.7 | 
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|Total 2002 Charge                         |                |   | 4.4       |     |             |   | 2.1      |     |        |   | 0.1 |     |  |   | 6.6  |    
|
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |    
|Writedown Assets to Net Recoverable Value |                |   | (4.4      | )   |             |   |         |     |        |   |    |     |  |   | (4.4 | )  
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |    |     |  |   | (1.5 | )  
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 
|Balance at December 31, 2002              |                | $ |          |     |             | $ | 0.6      |     |        | $ | 0.1 |     |  | $ | 0.7  |    
|                                          |                |   |           |     |             |   |          |     |        |   |     |     |  |   |      |     | 

During 2002, other costs of the restructuring initiatives of $11.6 million,
before taxes, were recognized consisting of inventory writedowns of $10.5
million primarily related to the rationalization of its retail store division
and other expenses of $1.1 million, consisting primarily of related unabsorbed
overhead, all reflected in cost of goods sold.

13. Major Customer and Product Line Information

The Companys consumer home fashions products are sold primarily to domestic
catalogs, chain stores, mass merchants, department stores, specialty stores,
warehouse clubs and its own retail stores. Sales to two customers, as a
percent of net sales, amounted to approximately 14% and 12% each for the year
ended December 31, 2002. Sales to two customers, as a percent of net sales,
amounted to approximately 15% and 14% each for the year ended December 31,
2001. Sales to two customers, as a percent of net sales, amounted to
approximately 14% each for the year ended December 31, 2000. During 2002, 2001
and 2000, the Companys six largest customers accounted for approximately 51%,
54% and 53%, respectively, of the Companys net sales.

Net sales of bed products, bath products and other sales (consisting primarily
of sales from the Companys retail stores and foreign operations) consisted of
the following (in thousands of dollars):

|                |  |                         |           |      |  |      |           |  |  |   |           | 
|--------------- |  | ----------------------- | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                |  | Year Ended December 31,
|                |  |                        
|                |  | 2002                    |           | 2001 |  | 2000
|                |  |                         |           |      |  |     
|Bed products    |  | $                       | 1,053,003 |      |  | $    | 1,024,320 |  |  | $ | 1,053,978 | 
|Bath products   |  |                         | 549,021   |      |  |      | 523,960   |  |  |   | 551,778   | 
|Other sales     |  |                         | 209,333   |      |  |      | 216,866   |  |  |   | 210,114   | 
|                |  |                         |           |      |  |      |           |  |  |   |           | 
|Total net sales |  | $                       | 1,811,357 |      |  | $    | 1,765,146 |  |  | $ | 1,815,870 | 
|                |  |                         |           |      |  |      |           |  |  |   |           | 

58



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WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

14. Quarterly Financial Summary (Unaudited)

|                                                |  |         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|----------------------------------------------- |  | ------- | ----- | ------ |  | ----- | ----- | ------ |  | - | ----- | - |  | - | ----- | -
|                                                |  | Quarter
|                                                |  |        
|(In millions of dollars, except per share data) |  | First   |       | Second |  | Third |       | Fourth
|                                                |  |         |       |        |  |       |       |       
|Year
ended December 31, 2002                    |  |         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|Net sales                                       |  | $       | 435.1 |        |  | $     | 449.6 |        |  | $ | 460.5 |   |  | $ | 466.2 |  
|Gross earnings (1)                              |  |         | 107.8 |        |  |       | 103.8 |        |  |   | 85.8  |   |  |   | 96.2  |  
|Operating earnings (2)                          |  |         | 38.9  |        |  |       | 38.2  |        |  |   | 9.3   |   |  |   | 35.9  |  
|                                               
|Net income (loss) (3)                           |  |         | 2.0   |        |  |       | 2.0   |        |  |   | (16.6 | ) |  |   | (0.1  | )
|                                               
|Basic net income (loss) per common share (4)    |  |         | .04   |        |  |       | .04   |        |  |   | (.33  | ) |  |   |      |  
|                                               
|Diluted net income (loss) per common share (4)  |  |         | .04   |        |  |       | .04   |        |  |   | (.33  | ) |  |   |      |  
|                                               
|                                               
|Year
ended December 31, 2001                    |  |         |       |        |  |       |       |        |  |   |       |   |  |   |       |  
|Net sales                                       |  | $       | 418.6 |        |  | $     | 401.7 |        |  | $ | 513.1 |   |  | $ | 431.8 |  
|Gross earnings (1)                              |  |         | 89.7  |        |  |       | 71.7  |        |  |   | 118.0 |   |  |   | 99.0  |  
|Operating earnings (2)                          |  |         | 20.6  |        |  |       | 7.9   |        |  |   | 53.0  |   |  |   | 33.8  |  
|                                               
|Net income (loss) (3)                           |  |         | (10.9 | )      |  |       | (17.5 | )      |  |   | 3.6   |   |  |   | (2.6  | )
|                                               
|Basic net income (loss) per common share (4)    |  |         | (.22  | )      |  |       | (.35  | )      |  |   | .07   |   |  |   | (.05  | )
|                                               
|Diluted net income (loss) per common share (4)  |  |         | (.22  | )      |  |       | (.35  | )      |  |   | .07   |   |  |   | (.05  | )



|(1) |  | Gross earnings for the third and fourth quarter of 2002 include costs
related to restructuring initiatives of $10.2 million and $1.4 million,
respectively. Gross earnings for the first, second, third and fourth quarter
of 2001 include costs related to restructuring initiatives of $4.0 million,
$5.7 million, $2.7 million and $1.2 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Operating earnings for the third and fourth quarter of 2002 include
restructuring and impairment charges of $5.9 million and $0.8 million,
respectively, and other costs related to restructuring initiatives of $10.2
million and $1.4 million, respectively, totaling $16.1 million and $2.2
million, respectively. Operating earnings for the first quarter of 2001
include restructuring and impairment charges of $5.0 million, and for the
first, second, third and fourth quarter of 2001 include other costs related to
restructuring initiatives of $4.0 million, $5.7 million, $2.7 million and $1.2
million, respectively, totaling $9.0 million, $5.7 million, $2.7 million and
$1.2 million, respectively.                                                                                                                                                                                             
|   
|(3) |  | Net loss for the third and fourth quarter of 2002 includes restructuring and
impairment charges of $5.9 million and $0.8 million, respectively, and other
costs related to restructuring initiatives of $10.2 million and $1.4 million,
respectively, before income tax benefit of $5.8 million and $0.8 million,
respectively, for a net amount of $10.3 million and $1.4 million, respectively.
Net income (loss) for the first quarter of 2001 includes restructuring and
impairment charges of $5.0 million, and for the first, second, third and fourth
quarter of 2001 include other costs related to restructuring initiatives of
$4.0 million, $5.7 million, $2.7 million and $1.2 million, respectively, before
income tax benefit of $3.2 million, $2.1 million, $1.0 million and $0.4
million, respectively, for a net amount of $5.8 million, $3.7 million, $1.7
million and $0.8 million, respectively.
|   
|(4) |  | Net income (loss) per common share calculations for each of the quarters is
based on the average common shares outstanding for each period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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##### Table of Contents



WESTPOINT STEVENS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

15. Related Party Transactions

During 2000, the Company acquired an investment in a limited liability
corporation (LLC) that is accounted for under the equity method. The other
member of the LLC is HTG Corp., which is a company controlled by WestPoint
Stevens Inc.s Chairman and Chief Executive Officer. Each member of the LLC
owns an equal amount of voting common interests, plus non-voting preferred
interests reflecting capital contributions made by each member in excess of the
amounts paid for the common interest less distributions and other allocations
to each member. The LLC owned and operated a jet aircraft, which was used by
the Company for business travel. During both 2001 and 2000, the Company
recorded approximately $3.0 million in cash expenses related to its ownership
of the aircraft.

During September 2001, the LLC sold the jet aircraft, which was its primary
asset, for less than its book value and generated $3.3 million in cash. After
analyzing the fair market value of the LLCs remaining assets, the Company
concluded that its investment was impaired and recorded a non-cash charge
approximating $7.5 million, including the Companys share of the loss on the
sale of the aircraft in the third quarter of 2001. This charge is classified
as Other expense-net in the accompanying December 31, 2001 Consolidated
Statement of Operations. Following the sale, HTG Corp. had a negative capital
account balance in the LLC of approximately $4.5 million.

On November 29, 2001, the Company entered into an agreement (the Letter
Agreement) with HTG Corp., the other member of the LLC, pursuant to which HTG
Corp. agreed to restore the negative balance in its capital account in the LLC.
Under the Letter Agreement, HTG Corp. has agreed to restore approximately $4.5
million (the Amount Due) in installments, with $1.0 million due on November
29, 2002, $2.0 million due on November 29, 2003, and the balance due on
November 29, 2004. The Amount Due will be increased or decreased by one-half
of the loss or gain, respectively, upon the sale or disposition of the
remaining assets of the LLC. On March 8, 2002, the Amount Due increased by
$750,000 to approximately $5.25 million due to the distribution of hangar
property to HTG Corp. and the loss to the LLC related to such distribution.
The only remaining asset of the LLC was a contract for the purchase of a new
Falcon 2000EX jet aircraft. The LLC sold its interest in this contract for
$500,000. Pursuant to the Letter Agreement, the proceeds from the sale of the
contract were paid to the Company and the Amount Due was decreased by the
amount of the proceeds paid to the Company. HTG Corp. has agreed to pay
interest on the Amount Due at the prime rate of interest in effect from time to
time plus three and one-half percent per annum. The Letter Agreement provides
that any and all payments made by HTG Corp. to reduce the Amount Due will
immediately be distributed to the Company. A company related to HTG Corp. by
common ownership guarantees the Amount Due. Neither the obligation of HTG
Corp. nor the guarantee is collateralized or secured by any assets.
Accordingly, no amounts have been recorded in the accompanying Consolidated
Financial Statements for the potential recovery of the Amount Due.

On November 29, 2002, HTG Corp. paid the first installment due under the Letter
Agreement of approximately $1.3 million including accrued interest and the
Company recognized a recovery in Other expense-net in the accompanying December
31, 2002 Consolidated Statement of Operations. After the payment on November
29, 2002, the remaining Amount Due under the Letter Agreement was approximately
$3.9 million.

During 2000, the Company approved a plan of recapitalization, which was later
terminated, and subsequently paid approximately $850,000 in legal and advisory
fees incurred by Mr. Greens affiliate and the other potential equity investors
in connection with the recapitalization plan.

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##### Table of Contents






Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.




PART III




Item 10. Directors and Executive Officers of the Registrant

Board of Directors

The Board of Directors of the Company (the Board of Directors) currently
consists of seven members and is divided into three classes. The terms of
office of the members of each class of directors are staggered so that the term
of office of no more than one class expires in any one year.

The following table lists the name, age (as of March 31, 2003) and
positions with the Company of each of the directors, the year in which their
term of office will expire and the month and year in which each director was
first elected.

|                        |  |     |  |              |  |                                                   |  |               
|----------------------- |  | --- |  | ------------ |  | ------------------------------------------------- |  | --------------
|                        |  |     |  |              |  | Positions with                                    |  | Served as     
|Name                    |  | Age |  | Term Expires |  | the Company                                       |  | Director Since
|                        |  |     |  |              |  |                                                   |  |               
|Class II                |  |     |  |              |  |                                                   |  |               
|M. Katherine Dwyer      |  | 54  |  | 2003         |  | Director                                          |  | October 1996  
|Holcombe T. Green, Jr.  |  | 63  |  | 2003         |  | Chairman of the Board and Chief
Executive Officer |  | September 1992
|John F. Sorte           |  | 55  |  | 2003         |  | Director                                          |  | January 1993  
|                        |  |     |  |              |  |                                                   |  |               
|Class III               |  |     |  |              |  |                                                   |  |               
|Hugh M. Chapman         |  | 70  |  | 2004         |  | Director                                          |  | August 1997   
|J. Hicks Lanier         |  | 62  |  | 2004         |  | Director                                          |  | May 2001      
|                        |  |     |  |              |  |                                                   |  |               
|Class I                 |  |     |  |              |  |                                                   |  |               
|M. L. (Chip) Fontenot |  | 59  |  | 2005         |  | Director; President and Chief
Operating Officer   |  | February 2002 
|Joseph R. Gladden, Jr.  |  | 60  |  | 2005         |  | Director                                          |  | May 2001      

M. Katherine Dwyerhas been Chairperson and Chief Executive Officer of
Skinklinic, Inc. a skin care/cosmetic dermatology company, since April 2000.
Until January 2000, she was Senior Vice President of Revlon, Inc. a mass
cosmetic company, and President of Revlon Consumer Products USA.

Holcombe T. Green, Jr.has been Chairman and Chief Executive Officer of
the Company since October 22, 1992. On June 1, 2003, the Company filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Southern District of New York. Mr.
Green was founder and principal of Green Capital Investors, L.P., a private
investment partnership, and certain other affiliated partnerships. He is the
retired Chairman of HBO & Company, a supplier of hospital information systems.
He is also a director of Cumulus Media, Inc.

John F. Sortehas been President and Chief Executive Officer of Morgan
Joseph & Co. Inc., an investment banking firm serving middle market companies,
since June 2001. He was previously President of New Street Advisors L.P. Mr.
Sorte is also a director of Vail Resorts, Inc.

Hugh M. Chapmanserved as Chairman of NationsBank, National Association
(South) from January 1992 until his retirement in June 1997. He is also a
director of The Williams Companies Inc., an energy services company, (and
chairman of its audit committee and a member of its executive committee).

M. L. (Chip) Fontenothas been President and Chief Operating Officer of
the Company since January 2001. On June 1, 2003, the Company filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code in the United
States

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##### Table of Contents



Bankruptcy Court for the Southern District of New York. Prior to
joining the Company, Mr. Fontenot was employed as President and Chief Operating
Officer of Dyersburg Corporation, a manufacturer of knit apparel fabrics, from
July 1999 until December 2000, President of Marketing and a director of that
company from January 1998 until July 1999 (Dyersburg Corporation filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code on
September 25, 2000, in the United States Bankruptcy Court for the District of
Delaware.). He served as President and Chief Executive Officer of Decorative
Home Accents, Inc., a manufacturer of home fashions products, from February
1996 until December 1997. Mr. Fontenot served as President and Chief Executive
Officer of Perfect Fit Industries Inc., a manufacturer of home fashions
products, from 1989 until 1996. He also served in various capacities at
Springs Industries, Inc. during a 20-plus-year tenure that included President
of its Consumer Products Division and corporate Executive Vice President until
1989.

Joseph R. Gladden, Jr.served as Executive Vice President and General
Counsel of The Coca-Cola Company from January 2000 until his retirement in
November 2001. He had been Senior Vice President and General Counsel of The
Coca-Cola Company since April 1991.

J. Hicks Lanierhas been President of Oxford Industries, Inc., a consumer
apparel products company, since 1977 and became Chairman and Chief Executive
Officer of that company in 1981. He is also a director of Crawford & Company,
a diversified insurance services company, (and chairman of its compensation
committee and member of its audit committee), and a director of Genuine Parts
Company, a distributor of automotive and industrial replacement parts and
office products, (and chairman of its compensation committee).

Executive Officers

The following individuals are the executive officers of the Company
(ages and titles are as of March 31, 2003):

|                        |  |     |    |       |  |                                                               
|----------------------- |  | --- | -- | ----- |  | --------------------------------------------------------------
|Name of Officer         |  | Age |    | Title
|                        |  |     |    |      
|Holcombe T. Green, Jr.  |  |     | 63 |       |  | Chairman of the Board of Directors and Chief
Executive Officer
|                        |  |     |    |       |  |                                                               
|M. L. (Chip) Fontenot |  |     | 59 |       |  | Director, President and Chief Operating Officer               
|                        |  |     |    |       |  |                                                               
|Lester D. Sears         |  |     | 54 |       |  | Senior Vice
President-Finance and Chief
Financial Officer     
|                        |  |     |    |       |  |                                                               
|Arthur Birkins          |  |     | 46 |       |  | President-Basic Bedding                                       
|                        |  |     |    |       |  |                                                               
|Robert B. Dale          |  |     | 56 |       |  | President-Bed and Bath                                        
|                        |  |     |    |       |  |                                                               
|John W. Hurston         |  |     | 57 |       |  | Vice President-Bath Products Manufacturing                    
|                        |  |     |    |       |  |                                                               
|Robert R. Lanier        |  |     | 46 |       |  | Vice President-Bed Products Manufacturing                     

For a discussion of the business experience of Messrs. Green and
Fontenot, see PROPOSAL 1 - ELECTION OF DIRECTORS-Board of
Directors.

Lester D. Searsjoined the Company on April 16, 2001, as Senior Vice
President-Finance and Chief Financial Officer. Prior to joining the Company
Mr. Sears was employed as Executive Vice President and Chief Financial Officer
for Glenoit Corporation, a textile manufacturing company, from 1996 (Glenoit
Corporation filed a petition for relief under Chapter 11 of the Bankruptcy Code
on August 8, 2000, in the United States Bankruptcy Court for the District of
Delaware). Mr. Sears was Executive Vice President and Chief Financial Officer
for Perfect Fit Industries, Inc. where he was an Equity Partner from 1989 until
1996. Mr. Sears served as Controller of the Consumer Products Division of
Springs Industries, Inc. from 1984 until 1989. Previously he served as a
Certified Public Accountant with the independent accounting firm of Haskins &
Sells (now Deloitte & Touche) for approximately three years.

Arthur Birkinshas been President-Basic Bedding Division since October 20,
2001. Upon joining the Company on May 7, 2001, he was Senior Vice
President-Basic Bedding. Prior to joining the Company Mr. Birkins was Vice
President-Waverly Home Fashions, a division of F. Schumacher and Company. He
began with Waverly as Vice President-Sales, National Accounts for Waverly
Lifestyle Group in 1999. From 1997 he served as President of The Rug Barn,
Inc., while simultaneously heading the Window Fashions Division of Home
Innovations, Inc. from 1996. Both are divisions of Decorative Home Accents,
Inc.

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##### Table of Contents



Robert B. Dalehas been President-Bed and Bath Division since October 10,
2001. He joined the Company on April 16, 2001, as Senior Vice President-Sales
and Marketing. Prior to joining the Company Mr. Dale was Vice
President-Marketing and Sales of the Home Products Division of Thomaston Mills,
Inc., a manufacturer and marketer of home fashions products, from 1999 and was
President and Chief Operating Officer-Consumer Products with Glenoit
Corporation from 1996 until 1999.

John
W. Hurstonhas been Vice President-Bath Products Manufacturing since
March 2002. He was General Manager-Bed Products Manufacturing South from 1998
until March 2002. Mr. Hurston joined the Company in 1975.

Robert R. Lanierhas been Vice President-Bed Products Manufacturing since
March 2002. He was General Manager of Bed Products Manufacturing North from
1998 until March 2002. Mr. Lanier joined the Company in 1977.

Pending or Threatened Legal Proceedings Involving Officers and Directors

On October 5, 2001, a purported stockholder class action suit entitled
Norman Geller v. WestPoint Stevens Inc., et al.,was filed against the Company
and certain of its current and former officers and directors, including
Holcombe T. Green, Jr., in the United States District Court for the Northern
District of Georgia. (A subsequent and functionally identical complaint was
also filed.) The actions were consolidated by Order dated January 25, 2002.
Plaintiffs served a Consolidated Amended Complaint (the Amended Complaint) on
March 29, 2002. The Amended Complaint asserts claims against all Defendants
under § 10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder
and against the Company and Defendant Green as controlling persons under §
20(a) of the Exchange Act. The Amended Complaint alleges that, during the
putative class period (i.e., February 10, 1999 to October 10, 2000), WestPoint
Stevens and certain of its officers and directors caused false and misleading
statements to be issued regarding, inter alia, alleged overcapacity and
excessive inventories of the Companys towel-related products and customer
demand for such products and that certain Individual Defendants wrongfully sold
or pledged Company stock at inflated prices for their benefit. The Amended
Complaint refers to WestPoint Stevens press releases and quarterly and annual
reports on Securities Exchange Commission Forms 10-Q and 10-K, which discuss
the Companys results and forecasts for the fiscal years 1999 and 2000.
Plaintiffs allege that these press releases and public filings were false and
misleading because they failed to disclose that the Company allegedly knew
sales would be adversely affected in future quarters and years. Plaintiffs
also allege in general terms that the Company materially overstated revenues by
making premature shipments of products.

On June 6, 2002, Defendants filed Motions to Dismiss Plaintiffs Amended
Complaint. On February 3, 2003, the Court denied Defendants Motions to
Dismiss. The action will proceed to class certification and discovery.

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark
v. Holcombe T. Green, Jr., et al., was filed against certain of the Companys
current and former directors and officers, including Holcombe T. Green, Jr., in
the Superior Court of Fulton County, Georgia. The Complaint alleges that the
named individuals breached their fiduciary duties by acting in bad faith and
wasting corporate assets. The Complaint also asserts claims under Georgia Code
Ann. §§ 14-2-740 to 14-2-747 and 14-2-831. The claims are based on the same or
similar facts as are alleged in the Gelleraction.

On July 1, 2002, a shareholder derivative action entitled John Hemmer v.
Holcombe T. Green, Jr., et al., was filed against Mr. Green and certain of the
Companys other directors including Messrs. Hugh M. Chapman, John F. Sorte and
Ms. M. Katherine Dwyer in the Court of Chancery in the State of Delaware in and
for New Castle County. The Complaint alleges that the named individuals
breached their fiduciary duties and knowingly or recklessly failed to exercise
oversight responsibilities to ensure the integrity of the Companys financial
reporting. The Complaint also asserts that certain of the named individuals
used proprietary Company information in selling or pledging Company stock at
inflated prices for their benefit. The claims are based on the same or similar
facts as are alleged in the Gelleraction.

By agreements between the parties, the Clarkand Hemmeractions were both
stayed pending the Courts decision on Defendants Motions to Dismiss in the
Gelleraction. The Company has negotiated an extension of the stay agreement
in the Hemmeraction and is currently negotiating an extension of the stay
agreement in the Clarkaction.

The Company believes that the allegations in all of the actions are
without merit and intends to contest the actions vigorously on behalf of its
officers and directors.

63



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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon its review of the copies of Forms 3, 4 and 5 and
amendments thereto or written representation received from reporting persons,
the Company believes that during 2002 all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners under Section 16(a)
of the Exchange Act were met.




Item 11. Executive Compensation



| |  | Summary Compensation Table
| |  | --------------------------

The following table sets forth information concerning total compensation earned
by or paid to the Chief Executive Officer and the four other highest-paid
executive officers of the Company employed as executive officers as of December
31, 2002, (the Named Executive Officers) during the fiscal years indicated
for services rendered to the Company and its subsidiaries.

|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      |        |         |        |         |            |   |                        |      |  |   |         |         |   |       |       |       |     
|----------------------- | ---------------------- | ---------------------------------- | ---- | ------------------- | ---- | -------- | ------- | -------------------------- | ------- | --------- | ------ | ---------- | ---- | ------ | ------- | ------ | ------- | ---------- | - | ---------------------- | ---- |  | - | ------- | ------- | - | ----- | ----- | ----- | ----
|                        |                        |                                    |      |                     |      |          |         | Summary Compensation Table |         |           |        |           
|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |           
|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      |        |         |        |         |            |   | Long-Term Compensation |      |  |   |        
|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      |        |         |        |         |            |   |                        |      |  |   |        
|                        |                        |                                    |      | Annual Compensation |      | Awards   |         |                            |         |          
|                        |                        |                                    |      |                     |      |          |         |                            |         |          
|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      |        |         | Other  |         | Restricted |   | Stock                  |      |  |   |        
|Name and Principal      |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      | Annual |         | Stock  |         | Options (# |   | All Other             
|Position                |                        | Year                               |      | Salary              |      | Bonus(1) |         | Comp.                      |         | Awards($) |        | of Shares) |      | Comp. 
|                        |                        |                                    |      |                     |      |          |         |                            |         |           |        |            |      |       
|Holcombe T. Green, Jr.  |                        |                                    | 2002 |                     |      | $        | 825,000 |                            |         |           |       |            |      | $      | 718,618 | (2)    |         |            |  | (3)                    |      |  |  |         |         | $ | 1,584 | (4)  
|                        | Chairman and Chief     |                                    |      | 2001                |      |          | $       | 899,444                    |         |           |        |           |      |        | $       | 93,957 | (5)     |            |   |                       |      |  |   |        |         |   | $     | 1,584 | (4)  
|                        |                        | Executive Officer                  |      |                     | 2000 |          |         | $                          | 830,000 |           |        |            |     |        |         | $      | 235,543 | (6)        |   |                        |     |  |   |         | 750,000 |   |       | $     | 1,584 | (4) 
|                       
|M. L. (Chip) Fontenot |                        |                                    | 2002 |                     |      | $        | 465,000 |                            |         |           |       |            |      | $      | 195,665 | (7)    |         |            |  |                        |      |  |  |         |         | $ | 4,312 | (8)  
|                        | President and Chief    |                                    |      | 2001                |      |          | $       | 443,365                    |         |           |        |           |      |        |         |       |         |            |   |                       |      |  |   | 500,000 |         |   | $     | 2,260 | (8)  
|                        |                        | Operating Officer                  |      |                     |      |          |         |                            |         |           |        |            |      |        |         |        |         |            |   |                        |      |  |   |         |         |   |       |       |       |     
|                       
|Lester D. Sears         |                        |                                    | 2002 |                     |      | $        | 330,000 |                            |         |           |       |            |      | $      | 584,155 | (9)    |         |            |  |                        |      |  |  |         |         | $ | 2,551 | (10) 
|                        | Senior Vice President- |                                    |      | 2001                |      |          | $       | 226,666                    | (11)    |           | $      | 80,000     | (12) |        | $       | 21,062 | (9)     |            |   | 105,000                | (13) |  |   | 100,000 |         |   | $     | 251   | (10) 
|                        |                        | Finance and ChiefFinancial Officer |      |                     |      |          |         |                            |         |           |        |            |      |        |         |        |         |            |   |                        |      |  |   |         |         |   |       |       |       |     
|                       
|Michael J. Velsmid, Jr. |                        |                                    | 2002 |                     |      | $        | 309,000 |                            |         |           |       |            |      |        |        |        |         |            |  | (14)                   |      |  |  |         |         | $ | 4,312 | (15) 
|                        | Senior Vice President- |                                    |      | 2001                |      |          | $       | 300,000                    |         |           |        |           |      |        |         |       |         |            |   |                       |      |  |   |        |         |   | $     | 4,136 | (15) 
|                        |                        | Retail Stores                      |      |                     | 2000 |          |         | $                          | 270,000 |           |        |            |     |        |         |        |        |            |   |                        |     |  |   |         | 60,000  |   |       | $     | 4,012 | (15)
|                       
|Robert B. Dale          |                        |                                    | 2002 |                     |      | $        | 300,000 |                            |         | $         | 27,390 |            |      |        |        |        |         |            |  |                        |      |  |  |         |         | $ | 3,032 | (16) 
|                        | President-Bed & Bath   |                                    |      | 2001                |      |          | $       | 177,083                    | (17)    |           |        |           |      |        |         |       |         |            |   |                       |      |  |   |        |         |   | $     | 771   | (16) 



---

|(1) |  | Bonus earned in fiscal year 2002 was paid in the first quarter of fiscal
year 2003.                                                                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes $655,121 in value realized by Mr. Green upon the surrender of
his right to receive 818,902 shares of Common Stock under the Companys
Supplemental Retirement Plan, $46,647 for personal use of Company airplane
and $16,850 for automobile allowance.                                                                                                                                                                             
|   
|(3) |  | As of December 31, 2002, the number of the aggregate Stock Bonus Awards
earned but not vested for Mr. Green was 17,558 having a value of $10,359
based upon the closing price of the Companys Common Stock at the end of
Fiscal 2002.                                                                                                                                                                                                      
|   
|(4) |  | Includes $1,584 for excess value of life insurance over premiums paid by
Mr. Green for 2000, 2001 and 2002.                                                                                                                                                                                                                                                                                                                                 
|   
|(5) |  | Includes $77,057 for personal use of Company airplane.                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(6) |  | Includes $223,808 paid to Mr. Green as reimbursement for part of his
expense in maintaining an apartment in New York. After July 1, 2000, the
Company discontinued making reimbursement for such expenses when it
entered into a new employment agreement with Mr. Green, which included an
increase in base salary to compensate for such expense. See Employment
Agreements, Termination Provisions and Change in Control Arrangements.
|   
|(7) |  | Includes amounts paid to Mr. Fontenot as reimbursement for expenses
incurred for travel between New York, New York, and Charlotte, North
Carolina, amounts for expenses incurred for meals in New York and
automobile allowance and $79,320 for lodging in New York, New York. Also
includes $87,535 added to Mr. Fontenots income to provide him                                                                                          

64



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##### Table of Contents



|     |  | with funds to discharge any federal, state or local income
taxes imposed
on such housing and travel reimbursements. See Employment
Agreements, Termination Provisions and Change in Control Arrangements.                                                                                                                                                                                                                                                                                                                           
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(8)  |  | Includes $2,260 and $2,312 for excess value of life insurance over
premiums paid by Mr. Fontenot for 2001 and 2002, respectively, and $2,000
in the Companys matching contributions under the Savings Plan for 2002.                                                                                                                                                                                                                                                                                                                  
|    
|(9)  |  | Includes $15,627 and $573,636 for relocation expenses (including
reimbursement for loss on sale of personal residence and $264,159 added to
Mr. Sears income to provide him with funds to
discharge any federal, state or local income taxes imposed on such
relocation and reimbursements) for 2001 and 2002, respectively; $5,435 for
personal use of Company airplane for 2001 and $10,519 automobile allowance
for 2002.                                                                                                          
|    
|(10) |  | Includes $251 and $551 for excess value of life insurance over premiums
paid by Mr. Sears for 2001 and 2002, respectively, and $2,000 in the
Companys matching contributions under the Savings Plan for 2002.                                                                                                                                                                                                                                                                                                                         
|    
|(11) |  | The amount shown is compensation from April 16, 2001, date of hire, until
December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(12) |  | Mr. Sears was paid an $80,000 guaranteed minimum bonus for 2001 pursuant
to his employment agreement. See Employment Agreements, Termination
Provisions and Change in Control Arrangements.                                                                                                                                                                                                                                                                                                                                         
|    
|(13) |  | On May 9, 2001, the Compensation Committee of the Board of Directors
awarded 25,000 shares of restricted stock under the WestPoint Stevens
Omnibus Stock Incentive Plan, which award vests equally over a five-year
period. The dollar value is based upon the share price on the date of
grant of the award. As of December 31, 2002, the aggregate unvested
portion of the restricted stock consisted of 15,000 shares having a value
of $8,850 based upon the closing price of the Companys Common Stock at
the end of Fiscal 2002.
|    
|(14) |  | As of December 31, 2002, the number of the aggregate Stock Bonus Awards
earned but not vested for Mr. Velsmid was 6,182 having a value of $3,647
based upon the closing price of the Companys Common Stock at the end of
Fiscal 2002.                                                                                                                                                                                                                                                                                                 
|    
|(15) |  | Includes $2,312, $2,311 and $2,312 for excess value of life insurance
over premiums paid by Mr. Velsmid for 2000, 2001 and 2002, respectively,
and $1,700, $1,825 and $2,000 in the Companys matching contributions
under the Savings Plan for 2000, 2001 and 2002, respectively.                                                                                                                                                                                                                                                     
|    
|(16) |  | Includes $251 and $1,032 for excess value of life insurance over premiums
paid by Mr. Dale for 2001 and 2002, respectively; and $520 and $2,000 in
the Companys matching contributions under the Savings Plan for 2001 and
2002, respectively.                                                                                                                                                                                                                                                                                        
|    
|(17) |  | The amount shown is compensation from April 16, 2001, date of hire, until
December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                           

Senior Management Incentive Plan

The purpose of the WestPoint Stevens Inc. Senior Management Incentive Plan
(the MIP) is to provide additional compensation above base salary to key
employees if the Company meets or exceeds certain performance goals established
by the Compensation Committee. For the fiscal years included in the Summary
Compensation Table, incentive payments under the MIP for certain participants
were based solely upon predetermined annual operating profit goals of the
Company. Other participants payments were based on the operating profit (as
defined in the MIP) of the Company and certain business units and/or divisions.
Until fiscal year 2002, the MIP provided that no participant would receive
payments under the plan unless the Companys actual annual operating profit
equaled or exceeded 90% of the predetermined operating profit goal.

On February 14, 2002, performance awards payable to the senior management
with respect to 2002 were determined based on the terms and provisions of a
revised MIP with new predetermined goals established by the Compensation
Committee. The new MIP goals are based solely upon predetermined rates of
return on the invested capital of the Company and its business units or
divisions. The return on invested capital is calculated as the quotient
derived by dividing the corporate or divisional operating income by the sum of
a) net fixed assets at year-end; b) average inventories; and c) average
accounts receivable.

Pursuant to the MIP, performance awards for Fiscal 2002 were earned by,
and paid to, Mr. Robert B. Dale and certain other employees of the Company who
met their unit or divisional operating profit goals for Fiscal 2002. See
Compensation Committee Report on Executive Compensation.

Key Employee Stock Bonus Plan

Pursuant to the Key Employee Stock Bonus Plan, the Company may grant bonus
awards of shares of Common Stock to those key employees of the Company who are
deemed eligible to participate in the Key Employee Stock Bonus Plan, based on
the Companys achievement of certain pre-established earnings levels during the
Companys fiscal year. On February 14,
2002, and

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##### Table of Contents



April 3, 2002, the Company granted Bonus Awards (as such term is
defined in the Key Employee Stock Bonus Plan) for Fiscal 2002 covering an
aggregate of 2,745,639 and 42,077 shares of Common Stock, respectively, to
certain key employees based upon the terms of the Key Employee Stock Bonus Plan
with predetermined earnings levels established by the Compensation Committee.
On February 13, 2003, the Compensation Committee determined that Bonus Awards
for Fiscal 2002 had not been earned and such Bonus Awards were forfeited. On
February 13, 2003, the Compensation Committee suspended the granting of Bonus
Awards for Fiscal 2003 under the Key Employee Stock Bonus Plan.

Option/SAR Grants in Last Fiscal Year

Stock options exercisable for shares of Common Stock are granted to
certain key employees of the Company pursuant to the WestPoint Stevens Inc.
Omnibus Stock Incentive Plan (the Omnibus Stock Incentive Plan) in order to
secure and retain the services of persons capable of filling key positions with
the Company, to encourage their continued employment and to increase their
interest in the growth and performance of the Company by providing them with an
ownership stake. The following table provides information on stock options
granted to the Named Executive Officers during the last fiscal year pursuant to
the Omnibus Stock Incentive Plan.

The table also shows, among other data, hypothetical potential gains from
stock options granted in Fiscal 2002. These hypothetical gains are based
entirely on assumed annual growth rates of 5% and 10% in the value of the price
of Common Stock over the ten-year life of the stock options granted in Fiscal
2002 (which would equal a total increase in the Companys stock price of 62.9%
and 159.4%, respectively, from the date of the grant). The assumed rates of
growth were selected by the Securities and Exchange Commission for illustrative
purposes only and are not intended to predict future stock prices, which will
depend upon market conditions and the Companys future performance and
prospects.

Option/SAR Grants in Last Fiscal Year

|     |  |                   |  |                 |  |             |  |            |  |       |  |         |  |  |  |  |  |                                     |  |  |  |  |  | 
|---- |  | ----------------- |  | --------------- |  | ----------- |  | ---------- |  | ----- |  | ------- |  |  |  |  |  | ----------------------------------- |  |  |  |  |  | 
|     |  |                   |  |                 |  |             |  |            |  |       |  |         |  |  |  |  |  | Potential Realizable Value at      
|     |  |                   |  |                 |  |             |  |            |  |       |  |         |  |  |  |  |  | Assumed Annual Rates of Stock Price
|     |  |                   |  |                 |  |             |  |            |  |       |  |         |  |  |  |  |  | Appreciation                       
|     |  | Individual Grants |  | For Option Term
|     |  |                   |  |                
|     |  | Number of         |  | % of Total      |  |             |  |            |  |       |  |         |  |  |  |  |  |                                     |  | 
|     |  | Securities        |  | Options/SARs    |  |             |  |            |  |       |  |         |  |  |  |  |  |                                     |  | 
|     |  | Underlying        |  | Granted to      |  | Exercise or |  |            |  |       |  |         |  |  |  |  |  |                                    
|     |  | Options/SARs      |  | Employees in    |  | Base Price  |  | Expiration |  |       |  |         |  |  |  | 
|Name |  | Granted           |  | Fiscal Year     |  | ($/Sh)      |  | Date       |  | 5%($) |  | 10% ($)
|     |  |                   |  |                 |  |             |  |            |  |       |  |        
|NONE

Fiscal Year-End Option Holdings

The following table summarizes for each of the Named Executive Officers
option exercises during Fiscal 2002, including the aggregate value of gains on
the date of exercise, the total number of unexercised options for Common Stock,
if any, held at December 31, 2002, and the aggregate dollar value of
unexercised in-the-money options for Common Stock, if any, held at December 31,
2002. Value of unexercised in-the-money options at fiscal year-end is the
difference between the exercise or base price of such options and the fair
market value of the underlying Common Stock on December 31, 2002, which was
$.59 per share. These values have not been, and may never be, realized, as
these options have not been, and may never be, exercised. Actual gains, if any,
upon exercise will depend on the value of Common Stock on the date of any
exercise of options.

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##### Table of Contents



Aggregated Option/SAR Exercises in the
Last Fiscal Year and FY-End Option/SAR Values

|                        |  |                    |   |          |  |             |   |                       |  |                        |           |                      |  |  |         |  |  |  |   |  |  |  |   | 
|----------------------- |  | ------------------ | - | -------- |  | ----------- | - | --------------------- |  | ---------------------- | --------- | -------------------- |  |  | ------- |  |  |  | - |  |  |  | - | 
|                        |  |                    |   |          |  |             |   |                       |  | Number of Securities   |           | Value of Unexercised
|                        |  |                    |   |          |  |             |   |                       |  | Underlying Unexercised |           | in-the-Money        
|                        |  |                    |   |          |  | Value       |   | Options at FY-End (#) |  | Options at FY-End ($) 
|                        |  | Shares Acquired on |   | Realized |  |             |   |                      
|Name                    |  | Exercise (#)       |   | ($)      |  | Exercisable |   | Unexercisable         |  | Exercisable            |           | Unexercisable       
|                        |  |                    |   |          |  |             |   |                       |  |                        |           |                     
|Holcombe T. Green, Jr.  |  |                    |  |          |  |             |  |                       |  |                        | 1,350,000 |                      |  |  | 550,000 |  |  |  |  |  |  |  |  | 
|M. L. (Chip) Fontenot |  |                    |  |          |  |             |  |                       |  |                        | 300,000   |                      |  |  | 200,000 |  |  |  |  |  |  |  |  | 
|Lester D. Sears         |  |                    |  |          |  |             |  |                       |  |                        | 60,000    |                      |  |  | 40,000  |  |  |  |  |  |  |  |  | 
|Michael J. Velsmid, Jr. |  |                    |  |          |  |             |  |                       |  |                        | 112,944   |                      |  |  | 13,000  |  |  |  |  |  |  |  |  | 
|Robert B. Dale          |  |                    |  |          |  |             |  |                       |  |                        | 60,000    |                      |  |  | 40,000  |  |  |  |  |  |  |  |  | 

Pension Plan and Retirement Plans

WestPoint Pension Plan

Executive officers of the Company and certain of its subsidiaries are
covered by the WestPoint Stevens Inc. Retirement Plan (the WestPoint Pension
Plan), a defined benefit pension plan. The WestPoint Pension Plan covers all
salaried employees of the Company and certain subsidiaries and affiliates who
have met eligibility requirements and may include certain hourly employees if
designated for coverage.

Benefits under the plan are based on compensation and years of service,
and individual employee payments cannot be calculated until retirement.
Compensation covered by the pension plan consists of all payments made to a
participant for personal services rendered as an employee of the Company that
are subject to federal income tax withholding, including before tax
contributions to certain employee benefit plans and excluding income
attributable to stock based awards and imputed income attributable to certain
fringe benefit programs. Plan compensation covers up to a maximum of $200,000
per individual for Fiscal 2002. The plan provides that participants benefits
fully vest after five years of service or the attainment of age 65.

Retirement benefits for the WestPoint Pension Plan for service performed
through December 31, 2002, are computed as the sum of 1% of a participants
average compensation (the annual average of five consecutive, complete plan
years of highest compensation during the last 10 years of service) multiplied
by the participants years of benefit service, plus 0.6% of a participants
average compensation which exceeds the Social Security Integration Level
($39,444 in Fiscal 2002), multiplied by the participants years of benefit
service, not to exceed 35 years.

On November 7, 2002, the Board of Directors amended the WestPoint Pension
Plan to provide that annual retirement benefits for service completed after
December 31, 2002, will be computed as 1% of the average of the participants
compensation for each year multiplied by the years of service completed after
December 31, 2002.

The following table indicates the approximate amounts of annual retirement
income that would be payable under the WestPoint Pension Plan calculated on a
straight-life annuity basis and based on various assumptions as to compensation
and years of service for certain employees. There is no social security or
other offset deducted from the amounts shown.

Pension Plan Table (1)
Years of Service

|             |  |    |        |    |  |    |        |    |  |    |        |  |  |   |        |  |  |   |        | 
|------------ |  | -- | ------ | -- |  | -- | ------ | -- |  | -- | ------ |  |  | - | ------ |  |  | - | ------ | 
|Average (2)  |  |    |        |    |  |    |        |    |  |    |        |  |  |   |        |  |  |   |        | 
|Compensation |  | 15 |        | 20 |  | 25 |        | 30 |  | 35
|             |  |    |        |    |  |    |        |    |  |   
|$172,000     |  | $  | 37,730 |    |  | $  | 50,307 |    |  | $  | 62,883 |  |  | $ | 75,460 |  |  | $ | 88,037 | 



---

|(1) |  | Assumes individual retires at age 65 with indicated years of service but
further assumes the Social Security Integration Level as in effect in
Fiscal 2002, which was $39,444.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the average of the annual covered compensation for the five
consecutive, complete plan years of highest compensation during the last
10 years of service.          

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##### Table of Contents



The following table indicates the credited years of service as of the date
hereof for each of the Named Executive Officers
who are participants in the Plan and the annual average covered compensation
for each of their five consecutive plan years of highest compensation during
their last 10 years of service:

|                        |  |          |      |                 |  |   |         | 
|----------------------- |  | -------- | ---- | --------------- |  | - | ------- | 
|                        |  | Credited |      | Average Covered
|                        |  | Years    |      | Compensation   
|                        |  |          |      |                
|Holcombe T. Green, Jr.  |  |          | 10.5 |                 |  | $ | 172,000 | 
|Michael J. Velsmid, Jr. |  |          | 10.5 |                 |  | $ | 172,000 | 

Supplemental Retirement Plan

The Companys Supplemental Retirement Plan (Supplemental Retirement
Plan) provides for payment of amounts that would have been paid under the
WestPoint Pension Plan but for the limitations on covered compensation and
benefits applicable to qualified retirement plans imposed by the Internal
Revenue Code of 1986, as amended (the Code). For certain participants, the
compensation taken into account under the Supplemental Retirement Plan is
limited to the lesser of (i) $300,000 or (ii) 120% of the participants base
salary. The Supplemental Retirement Plan is not qualified under Section 401(a)
of the Code and benefits are paid from the general assets of the Company.

During Fiscal 2001, the Supplemental Retirement Plan was amended to
provide that no participant would accrue any additional benefit on or after
February 13, 2001. In addition, the plan was amended to provide all active
participants with a one-time, irrevocable election to receive an alternative
benefit valued by and paid in the form of shares of Common Stock. The number
of shares of Common Stock to be issued under the alternative benefit was
determined by dividing the present value of each participants accrued benefit
by the fair market value of one share of Common Stock on the date the
participant elected to receive the alternative benefit. Of the Named Executive
Officers, only Messrs. Green and Velsmid had accrued benefits under the
Supplemental Retirement Plan and each elected to receive the alternative
benefit.

On November 29, 2002, Mr. Green surrendered the right to receive 818,902
shares of Common Stock under the Supplemental Retirement Plan as part of a
payment due in accordance with an agreement with the Company dated November 29,
2001. See Item 13. Certain Relationships and Related Transactions. Mr.
Velsmid resigned from the Company effective January 15, 2003. Pursuant to the
release and confidentiality agreement between Mr. Velsmid and the Company, Mr.
Velsmid received 96,577 shares of Common Stock under the Supplemental
Retirement Plan. See Employment Agreements, Termination Provisions and
Change in Control Arrangements.

Employment Agreements, Termination Provisions and Change in Control
Arrangements

The Company entered into employment agreements with Mr. Green effective
July 1, 2000, and Mr. Fontenot effective January 5, 2001, for three-year terms,
which automatically extend on a daily basis until notice is given by either
party to the agreements to cease any further extension. The employment
agreements for each of these executive officers provide an annual base salary,
subject to annual review as follows: Mr. Green  $1,030,000 and Mr. Fontenot
 $450,000. Mr. Greens base salary included an amount deemed appropriate to
compensate him for expenses he incurred in maintaining a residence in New York
City where the Company maintains a corporate office. In 2001, Mr. Green sold
his residence in New York and his employment agreement was modified to reflect
a corresponding reduction in base salary. In 2002, Messrs. Green and Fontenot
received an annual base salary in the amount of $825,000 and $465,000,
respectively. Effective January 1, 2003, Mr. Greens annual base salary
increased to $849,750 and Mr. Fontenots annual base salary increased to
$478,950. Mr. Green also has been provided fringe benefits, including (i) an
automobile allowance, (ii) reasonable personal use of the Company aircraft and
(iii) reasonable cost of membership in a private club. Mr. Fontenot is
provided reasonable personal use of the Company aircraft and a choice of an
automobile allowance or club membership. Mr. Fontenot is provided reasonable
expenses for lodging in New York, New York, and for travel between New York,
New York, and Charlotte, North Carolina, with additional amounts, if any, as
may be necessary to provide him, on an after-tax basis, with sufficient funds
to discharge any federal, state or local income taxes imposed on such housing
and travel reimbursements. The agreements provide that each executive officer
will participate in the top bonus category of 120% of his annual base salary
under the Companys Senior Management Incentive Plan based upon the Companys
achievement of certain performance goals in existence from time to time. The
agreements also provide that these executive officers will participate in the
Companys Key Employee Stock Bonus Plan and Omnibus Stock Incentive Plan as
well as any medical, dental, disability, insurance, retirement, savings,
vacation or other welfare or fringe benefit plans or programs made available to
the Companys other senior executive officers. See Senior Management
Incentive Plan and Key Employee Stock Bonus Plan.

Upon a termination of employment by the Company without Cause or by the
executive for Good Reason (which includes, among other things, a change in
control of the Company in certain circumstances), each of the following
executives would receive the following payments after such termination becomes
effective (in addition to all compensation owed to the

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executive at the time of
such termination): the sum of (i) the executives annual base salary times the
number of whole and fractional years remaining in the term of the employment
agreement; (ii) the target bonus amount payable to such executive under the
management incentive plan applicable to the year in which such termination
becomes effective, times the number of
years remaining in the term of the employment agreement (with any
fractional years treated as whole years) whether or not the requirements
otherwise applicable to the payment of such bonus amount under such plan have
been met; and (iii) all outstanding unvested awards under the Key Employee
Stock Bonus Plan and the Omnibus Stock Incentive Plan which shall become
immediately vested and exercisable as applicable. To receive amounts described
in (i), (ii) and (iii) above, the executive would be required to execute a
release of all employment-related claims. The amounts payable under (i) and
(ii) are to be paid on dates they would have been paid if the executives
employment had not been terminated, provided, however, payment will cease and
be forfeited if the executive becomes employed by a competitor as defined in
the non-compete provisions of the agreement. Accordingly, if such a
termination were to occur in 2003, Mr. Green and Mr. Fontenot would be entitled
to cash payments of $4,078,800 and $2,298,960, respectively. In addition, the
Company has agreed to make an indemnity payment to each executive with respect
to any of the aforementioned lump-sum cash payments and any payments under any
plan or other compensatory arrangement in connection therewith in an amount
equal to the sum of (i) the excise tax, if any, imposed on each executive under
Section 4999 of the Code in respect of any such payments and (ii) any federal,
state or local income tax imposed on any such indemnity payment. In addition,
each executive shall be entitled to receive continued medical and dental
benefits for the remaining term of the employment agreement. See Option/SAR
Grants in Last Fiscal Year and Fiscal Year-End Option Holdings.

The Company entered into an employment agreement with Mr. Sears effective
April 17, 2001, providing a starting annual base salary of $320,000,
participation in the MIP at the top bonus category and participation in the
Companys Key Employee Stock Bonus Plan and Pension Plan. Under the agreement,
Mr. Sears was awarded stock options to purchase 100,000 shares of Company
Common Stock and a guaranteed minimum cash bonus of $80,000 for calendar year
2001. Upon termination of employment by the Company for any reason or by the
executive for good reason, Mr. Sears would receive a payment equal to his
annual cash compensation, all outstanding unvested awards under the Companys
Key Employee Stock Bonus Plan would immediately vest and become nonforfeitable,
and any outstanding stock options would immediately become vested and
exercisable. Effective January 1, 2003, Mr. Sears annual base salary was
increased to $339,900. Accordingly, if such a termination were to occur in
2003, Mr. Sears would be entitled to a cash payment of $339,900.

On August 11, 1992, the Company sent an employment letter to Mr. Velsmid
outlining his employment arrangement and providing for payment of an amount
equal to his annual salary upon termination of his employment for any reason
(including a change in control) other than disability or good cause as defined
in the letter. Mr. Velsmid resigned from the Company effective January 15,
2003. Under the release and confidentiality agreement Mr. Velsmid will be paid
the amount of $309,000, an automobile allowance for one year and will receive
life and group medical and dental benefits for up to 12 months subject to his
payment of required premiums. In addition Mr. Velsmid received 96,577 shares
of Common Stock held for him in the Companys Supplemental Retirement Plan.

On April 5, 2001, the Company sent an employment letter to Mr. Dale
outlining his employment arrangement, providing a starting annual base salary
of $250,000 and providing for payment of an amount equal to his annual salary
upon termination by the Company during the first two years of employment and
thereafter equal to six-months salary. Mr. Dale was awarded stock options to
purchase 100,000 shares of Common Stock at an exercise price of $8.00 per share
to vest equally over a five-year period.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

The following table sets forth certain information as of May 15, 2003
(except as otherwise specified in the footnotes) about beneficial ownership of
Common Stock by (i) each person who is the beneficial owner of more than 5% of
the outstanding Common Stock, (ii) all directors of the Company and the
nominees for director, (iii) the three most highly compensated executive
officers who are not directors, and (iv) all directors and executive officers
as a group, based in each case on information furnished to the Company by each
such person.

|                                                                                       |                                                                     |                                                                    |           |                      |  |         |       |   |  | 
|-------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------------------------ | --------- | -------------------- |  | ------- | ----- | - |  | 
|                                                                                       |                                                                     |                                                                    |           | Amount and Nature of |  | Percent
|Name and Address of Beneficial Owner(1)                                                |                                                                     | Beneficial Ownership                                               |           | Of Class            
|                                                                                       |                                                                     |                                                                    |           |                     
|Greenwich Street Capital Partners II, L.P.                                             |                                                                     |                                                                    | 5,636,260 | (2)                  |  |         | 11.13 | %
|Greenwich Fund, L.P.                                                                   |                                                                     |                                                                    | 190,921   | (2)                  |  |         | .38   | %
|Greenwich Street Employees Fund, L.P.                                                  |                                                                     |                                                                    | 336,468   | (2)                  |  |         | .66   | %
|TRV Executive Fund, L.P.                                                               |                                                                     |                                                                    | 27,778    | (2)                  |  |         | .05   | %
|500 Campus Drive, Suite 220
     Florham Park NJ 07932                                 |                                                                     |                                                                    |           |                      |  |         |       |  
|                                                                                      
|GSCP Offshore Fund, L.P.                                                               |                                                                     |                                                                    | 117,504   | (2)                  |  |         | .23   | %
|                                                                                       |                                                                     | c/o GSC Partners
500 Campus Drive, Suite 220
Florham Park NJ 07932 |           |                      |  |         |       |   |  | 
|                                                                                      
|State Street Bank and Trust Company                                                    |                                                                     |                                                                    | 5,626,545 | (3)                  |  |         | 11.11 | %
|225 Franklin Street
     Boston MA 02110                                               |                                                                     |                                                                    |           |                      |  |         |       |  
|                                                                                      
|S.A.C. Capital Advisors, LLC                                                           |                                                                     |                                                                    | 3,345,000 | (4)                  |  |         | 6.60  | %
|Steven A. Cohen                                                                        |                                                                     |                                                                    | 3,345,000 | (4)                  |  |         | 6.60  | %
|72 Cummings Point Road
     Stamford CT 06902                                          |                                                                     |                                                                    |           |                      |  |         |       |  
|S.A.C. Capital Associates, LLC                                                         |                                                                     |                                                                    | 3,345,000 | (4)                  |  |         | 6.60  | %
|                                                                                       | P.O. Box 58
Victoria House
The Valley
Anguilla, British West Indies |                                                                    |           |                      |  |         |       |   | 
|S.A.C. Capital Management, LLC                                                         |                                                                     |                                                                    | 3,345,000 | (4)                  |  |         | 6.60  | %
|540 Madison Avenue
     New York NY 10022                                              |                                                                     |                                                                    |           |                      |  |         |       |  
|                                                                                      
|The Bank of Nova Scotia                                                                |                                                                     |                                                                    | 3,174,019 |                      |  |         | 6.27  | %
|44 King Street West
     Scotia Plaza, 8th Floor
     Toronto, Ontario, Canada M5H 1H1 |                                                                     |                                                                    |           |                      |  |         |       |  
|                                                                                      
|Wachovia Bank, National Association                                                    |                                                                     |                                                                    | 3,096,661 |                      |  |         | 6.11  | %
|301 South College Street
     Charlotte NC 28270                                       |                                                                     |                                                                    |           |                      |  |         |       |  
|                                                                                      
|Holcombe T. Green, Jr.                                                                 |                                                                     |                                                                    | 1,759,835 | (5)                  |  |         | 3.33  | %
|Hugh M. Chapman                                                                        |                                                                     |                                                                    | 59,000    | (6)                  |  |         | *     |  
|M. Katherine Dwyer                                                                     |                                                                     |                                                                    | 60,000    | (7)                  |  |         | *     |  
|Joseph R. Gladden, Jr.                                                                 |                                                                     |                                                                    | 25,000    | (8)                  |  |         | *     |  
|J. Hicks Lanier                                                                        |                                                                     |                                                                    | 55,000    | (9)                  |  |         | *     |  
|John F. Sorte                                                                          |                                                                     |                                                                    | 160,000   | (10)                 |  |         | *     |  
|M. L. (Chip) Fontenot                                                                |                                                                     |                                                                    | 310,000   | (11)                 |  |         | *     |  
|Lester D. Sears                                                                        |                                                                     |                                                                    | 80,000    | (12)                 |  |         | *     |  
|Michael J. Velsmid, Jr.                                                                |                                                                     |                                                                    | 294,463   | (13)                 |  |         | *     |  
|Robert B. Dale                                                                         |                                                                     |                                                                    | 75,166    | (14)                 |  |         |       |  

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|                                                             |  |                      |           |                      |  |         |      |   |  | 
|------------------------------------------------------------ |  | -------------------- | --------- | -------------------- |  | ------- | ---- | - |  | 
|                                                             |  |                      |           | Amount and Nature of |  | Percent
|Name and Address of Beneficial Owner(1)                      |  | Beneficial Ownership |           | Of Class            
|                                                             |  |                      |           |                     
|All Directors and Executive Officers as a group (13 persons) |  |                      | 3,092,536 | (15)                 |  |         | 5.86 | %
|                                                             |  |                      |           |                      |  |         |      |  



|*    |  | Represents less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  |  | The address of each person who is an officer or director of the Company is
c/o WestPoint Stevens Inc., 507 West Tenth Street, West Point, Georgia 31833.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(2)  |  | Greenwich Street Capital Partners II, L.P. (GSCP II) is the direct
beneficial owner of 5,636,260 shares, Greenwich Fund, L.P. is the direct
beneficial owner of 190,921 shares, Greenwich Street Employees Fund, L.P. is
the direct beneficial owner of 336,468 shares, TRV Executive Fund, L.P. is the
direct beneficial owner of 27,778 shares and GSCP Offshore Fund, L.P. is the
direct beneficial owner of 117,504 shares. By virtue of its position as
general partner of each of the Greenwich Street funds, Greenwich Street
Investments II, L.L.C. (GSI) may be deemed to be the indirect beneficial
owner of the same shares (i.e., an aggregate of 6,308,931 shares, or 12.47%).
By virtue of its position as manager of each of the Greenwich Street Funds,
GSCP (NJ), L.P. may be deemed to be the indirect beneficial owner of the same
shares (i.e., an aggregate of 6,308,931 shares, or 12.47% of the Common Stock).
By virtue of its position as general partner of GSCP (NJ) L.P., GSCP (NJ) Inc.
may be deemed to be the indirect owner of the same shares (i.e., an aggregate
of 6,308,931 shares, or 12.47% of the Common Stock). By virtue of their
positions as managing members of GSI, executive officers of GSCP (NJ) Inc. and
senior limited partners of GSCP (NJ) LP, each of Messrs. Alfred C. Eckert III,
Keith W. Abell, Sanjay H. Patel, Richard M. Hayden, Robert A. Hamwee, Thomas V.
Inglesby, Matthew C. Kaufman, Andrew J. Wagner and Ms. Christine K. Vanden
Beukel may be deemed to be indirect beneficial owners of the same shares (i.e.,
an aggregate of 6,308,931 shares, or 12.47% of the Common Stock).
|    
|(3)  |  | As of December 31, 2002, State Street Bank and Trust Company acting in
various fiduciary capacities for WestPoint Stevens Inc. Retirement Savings
Value Plan held 5,235,650 shares with shared voting and dispositive power over
5,235,650 shares. State Street Bank and Trust Company in other fiduciary
capacities held 390,895 shares with sole voting power over 390,075 shares and
sole dispositive power over 390,895 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    
|(4)  |  | S.A.C. Capital Advisors, S.A.C. Capital Management and Mr. Cohen own
directly no shares of common stock. Pursuant to investment agreements, each of
S.A.C. Capital Advisors and S.A.C. Capital Management share all investment and
voting power with respect to the securities held by S.A.C. Capital Associates.
Mr. Cohen controls both S.A.C. Capital Advisors and S.A.C. Capital Management.
Pursuant to provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the Exchange Act), each of S.A.C. Advisors, S.A.C. Management and
Mr. Cohen may be deemed to own beneficially 3,345,000 shares. Each of S.A.C.
Capital Advisors, S.A.C. Capital Management and Mr. Cohen disclaim beneficial
ownership of any of the securities covered by this statement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(5)  |  | Mr. Green possessed shared voting and investment power with respect to
(i) 24,152 shares held by Mr. Greens wife and (ii) 703 shares held in a
non-employee compensation plan of which Mr. Green is trustee. In addition, the
total amount for Mr. Green includes (i) 384,980 shares owned directly by Mr.
Green and (ii) 1,350,000 shares as to which Mr. Green holds options exercisable
within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(6)  |  | Includes 4,000 shares held directly and 55,000 shares as to which Mr.
Chapman holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(7)  |  | Includes 60,000 shares as to which Ms. Dwyer holds options exercisable
within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    
|(8)  |  | Includes 5,000 shares held directly and 20,000 shares as to which Mr.
Gladden holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(9)  |  | Includes 35,000 shares held directly and 20,000 shares as to which Mr.
Lanier holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(10) |  | Includes 115,000 shares held directly and 45,000 shares as to which Mr.
Sorte holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    
|(11) |  | Includes 10,000 shares held directly and 300,000 shares as to which Mr.
Fontenot holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(12) |  | Includes 20,000 shares held indirectly and 60,000 shares as to which Mr.
Sears holds options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    
|(13) |  | Includes 67,679 shares held directly, 112,944 shares as to which Mr.
Velsmid holds options exercisable within 60 days, 96,577 shares to which Mr.
Velsmid is entitled under his release and confidentiality agreement effective
January 15, 2003, and 17,263 shares held through the Savings Plan. See
EXECUTIVE COMPENSATIONEmployment Agreements, Termination Provisions and
Change in Control Arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|(14) |  | Includes 1,500 shares held directly, 3,500 shares held indirectly, 60,000
shares as to which Mr. Dale holds options exercisable within 60 days and 10,166
shares held through the Savings Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    
|(15) |  | Includes 727,900 shares held directly, 2,364,636 shares held indirectly,
of which 54,440 shares are held through the Savings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |  | Plan, 1,965,264 shares as
to which certain members of management hold options exercisable within 60 days,
and 200,000 shares as to which non-employee directors hold options exercisable
within 60 days. See footnotes (5)-(14).
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 13. Certain Relationships and Related Transactions

During Fiscal 2000, the Company acquired an interest in a limited
liability company, HTG Falcon, LLC (HTGF). The only other member of the
company is HTG Corp., a corporation wholly owned by Holcombe T. Green, Jr., the
Companys Chairman and Chief Executive Officer. When the Company acquired its
interest in HTGF, HTGF was the beneficial owner of a Falcon 2000 jet aircraft
used by Company employees, including Mr. Green, for business travel and by HTG
Corp. HTGF later received a contribution from HTG Corp. of an indirect
leasehold interest in property for hangar construction (the Hangar Property).

During Fiscal 2001, HTGF disposed of the Falcon 2000 jet aircraft by a
sale to an unrelated third party. The sales price was less than the book value
of the aircraft. After analyzing the fair market value of HTGFs assets
remaining after its primary asset, the aircraft, was sold and the net proceeds
distributed to the Company, in consultation with its auditors, the Company
concluded that it was appropriate to record a non-cash charge of $7.5 million
representing the Companys entire investment in HTGF. This charge was
announced in the Companys Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001. Following the sale, HTG Corp. had a deficit capital
account balance in HTGF of approximately $4.5 million.

On November 29, 2001, the Company entered into an agreement (the Letter
Agreement) with HTG Corp. pursuant to which HTG Corp. agreed to restore the
negative balance in its capital account in HTGF. The Letter Agreement was
subsequently amended on March 22, 2002. Under the Letter Agreement, HTG Corp.
has agreed to restore approximately $4.5 million (the Amount Due) in
installments, with $1.0 million due on November 29, 2002, $2.0 million due on
November 29, 2003, and the balance due on November 29, 2004. The Amount Due
was subject to increase or decrease by one-half of the loss or gain,
respectively, upon the sale or disposition of certain assets of HTGF. HTG
Corp. has agreed to pay interest on the Amount Due at the prime rate of
interest in effect from time to time plus three and one-half percent (31/2%)
per annum. HTG Corp. may satisfy its obligations under the Letter Agreement
through the surrender by Mr. Green of shares of Company Common Stock, Company
stock options or his vested interests in the Company retirement plans, subject
to certain limitations contained in the Letter Agreement. On March 8, 2002,
the Amount Due increased by $750,000 to approximately $5.25 million due to the
distribution of the Hangar Property to HTG Corp. and the loss to HTGF related
to such distribution. The Letter Agreement requires HTG Corp. to pay any
proceeds from its disposition of the interest in the Hangar Property to the
Company as partial payment of the Amount Due. Neither the obligation of HTG
Corp. nor the Guaranty Agreement (as defined below) is secured or
collateralized by any assets. Accordingly, as of December 31, 2002 and 2001,
no amounts have been recorded in the Companys consolidated financial
statements for the potential recovery of the Amount Due.

The only remaining asset of HTGF was a contract for the purchase of a new
Falcon 2000EX jet aircraft. HTGF sold its interest in this contract for
$500,000. Pursuant to Letter Agreement, the proceeds from the sale of the
contract were paid to the Company and the Amount Due was decreased by the
amount of the proceeds paid to the Company. Mr. Green has caused another of
his affiliated companies, which is wholly-owned by him (the Guarantor), to
enter into a Guaranty Agreement dated November 29, 2001 (the Guaranty
Agreement), in favor of the Company under which it has guaranteed the payment
of the Amount Due and performance by HTG Corp. under the Letter Agreement.
Under the Letter Agreement, until the entire Amount Due has been paid, HTG
Corp. has agreed to provide the Company, within 15 days after the end of each
of the Companys fiscal quarters, an updated business appraisal reflecting the
value of the Guarantor. Mr. Green has agreed to provide support to the extent
necessary, including contributions to the capital of the Guarantor, to permit
the Guarantor to maintain a value of at least two times the outstanding Amount
Due from time to time.

On November 29, 2002, HTG Corp. paid the first installment with
accumulated interest due under the Letter Agreement. The payment amount
consisted of a cash payment of $651,616 and the surrender by Mr. Green of his
right to receive 818,902 shares of Common Stock under the Companys
Supplemental Retirement Plan in accordance with the terms of the Letter
Agreement. The shares surrendered under the Supplemental Retirement Plan were
valued based on the closing price of the Common Stock on November 29, 2002.
The total amount tendered by Mr. Green included the amount necessary to satisfy
the payroll taxes due as a result of his surrender of his Supplemental
Retirement Plan benefit. After the payment on November 29, 2002, the Amount
Due under the Letter Agreement was $3,886,180.

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Item 14. Controls and Procedures

(a)  The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in its filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and reported within the periods specified in the rules and forms of the
Securities and Exchange Commission. Such information is accumulated and
communicated to the Companys management, including its principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure. The Companys management, including
its principal executive officer and principal financial officer, recognizes
that any set of controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Annual Report on Form 10-K, we
have carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective in assuring that all material information
relating to the Company is made known to them.

(b)  There have been no significant changes in our internal controls or in
other factors, which could significantly affect the internal controls
subsequent to the date of their evaluation in connection with the preparation
of this Annual Report on Form 10-K.




PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|(a) |  | Financial Statements and Schedules
|--- |  | ----------------------------------
|   
|    |  | Financial Statements.             

Consolidated Financial Statements for the three years ended December 31,
2002.

|                                                          |  |      |         | 
|--------------------------------------------------------- |  | ---- | ------- | 
|                                                          |  | Page
|                                                          |  |     
|Report of Ernst & Young LLP, Independent Auditors         |  |      | 28      | 
|Consolidated Balance Sheets                               |  |      | 29 - 30 | 
|Consolidated Statements of Operations                     |  |      | 31      | 
|Consolidated Statements of Stockholders Equity (Deficit) |  |      | 32      | 
|Consolidated Statements of Cash Flows                     |  |      | 33      | 
|Notes to Consolidated Financial Statements                |  |      | 34 - 60 | 

All financial statements required to be filed as part of this Annual Report on
Form 10-K are filed under Item 8. Financial Statements and Supplementary
Data.

Financial Statement Schedules

|                                                |  |      |    | 
|----------------------------------------------- |  | ---- | -- | 
|                                                |  | Page
|Schedule II  Valuation and Qualifying Accounts |  |      | 80 | 

Note: All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore,
have been omitted.



|(b) |  | Reports on Form 8-K
|--- |  | -------------------

The Company did not file any reports on Form 8-K during the quarter ended
December 31, 2002.

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Exhibits

|        |  |                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                   
|3.1     |  | Restated Certificate of Incorporation of WestPoint Stevens Inc., as
currently in effect, incorporated by reference to Exhibit 3(a) to the
Registration Statement on Form S-4 (Commission File No. 333-59817) filed
by the Company with the Securities and Exchange Commission on August 4,
1998.                                                  
|       
|3.2     |  | Amended and Restated By-laws of WestPoint Stevens Inc., as currently in
effect, incorporated by reference to the Post-Effective Amendment No. 1 to
Registration Statement on Form S-1 (Commission File No. 33-77726) filed by
the Company with the Securities and Exchange Commission on May 19, 1994.                                            
|       
|4.1     |  | Indenture dated as of June 9, 1998, between the Company and The Bank of
New York, as trustee, for the 7-7/8% Senior Notes due 2005, incorporated
by reference to Exhibit 4(a) to Registration Statement on Form S-4
(Commission File No. 333-59817) filed by the Company with the Commission
on July 24, 1998.                                    
|       
|4.2     |  | Form of Old 7-7/8% Senior Notes due 2005 (included in the Indenture
incorporated by reference as Exhibit 10.34), incorporated by reference to
Exhibit 4(b) to Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission on July 24, 1998.                                                       
|       
|4.3     |  | Form of Exchange 7-7/8% Senior Notes due 2005 (included in the Indenture
incorporated by reference as Exhibit 10.34), incorporated by reference to
Exhibit 4(c) to Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission on July 24, 1998.                                                  
|       
|4.4     |  | Registration Rights Agreement dated as of June 9, 1998, among the Company
and the Initial Purchasers with respect to the Senior Notes due 2005,
incorporated by reference to Exhibit 4(d) to Registration Statement on
Form S-4 (Commission File No. 333-59817) filed by the Company with the
Commission on July 24, 1998.                        
|       
|4.5     |  | Indenture for the 7-7/8% Senior Notes due 2008 dated as of June 9, 1998,
between the Company and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4(e) to Registration Statement on Form S-4
(Commission File No. 333-59817) filed by the Company with the Commission
on July 24, 1998.                                     
|       
|4.6     |  | Form of Old 7-7/8% Senior Notes due 2008 (included in the Indenture
incorporated by reference as Exhibit 10.38), incorporated by reference to
Exhibit 4(f) to Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission on July 24, 1998.                                                       
|       
|4.7     |  | Form of Exchange 7-7/8% Senior Notes due 2008 (included in the Indenture
incorporated by reference as Exhibit 10.38), incorporated by reference to
Exhibit 4(g) to Registration Statement on Form S-4 (Commission File No.
333-59817) filed by the Company with the Commission on July 24, 1998.                                                  
|       
|4.8     |  | Registration Rights Agreement dated June 9, 1998, among the Company and
the Initial Purchasers with respect to the Senior Notes due 2008,
incorporated by reference to Exhibit 4(h) to Registration Statement on
Form S-4 (Commission File No. 333-59817) filed by the Company with the
Commission on July 24, 1998.                              
|       
|4.9     |  | Rights Agreement dated as of May 9, 2001, by and between WestPoint
Stevens Inc. and SunTrust Bank, as Rights Agent including Exhibit A the
form of Summary of Rights and Exhibit B the form of Right Certificate,
incorporated by reference to the Form 8-K (Commission File No. 0-21496)
filed by the Company with the Commission on May 9, 2001.
|       
|10.1    |  | 1993 Management Stock Option Plan, incorporated by reference to the
Registration Statement on Form 10 (Commission File No. 0-21496) filed by
the Company with the Commission on July 1, 1993.                                                                                                                                                     
|       
|10.2    |  | WestPoint Stevens Inc. 1994 Non-Employee Directors Stock Option Plan,
incorporated by reference to the Annual Report on Form 10-K/A for the
fiscal year ended December 31, 1994 (Commission File No. 0-21496) filed by
the Company with the Commission.                                                                                           

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3  |  | WestPoint Stevens Inc. Amended and Restated 1994 Non-Employee Directors
Stock Option Plan, incorporated by reference to the Form 10-Q for the
quarterly period ended June 30, 1995 (Commission File
No. 0-21496) filed by the Company with the Commission on August 9,
1995.                                                                                                                                                                                                                                                          
|     
|10.4  |  | Form of directors and officers Indemnification Agreement with the
Company, incorporated by reference to the Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 (Commission File No. 0-21496)
filed by the Company with the Commission.                                                                                                                                                                                                                                                                            
|     
|10.5  |  | WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan (As Amended),
incorporated by reference to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1995 (Commission File No. 0-21496) filed by the
Company with the Commission.                                                                                                                                                                                                                                                                               
|     
|10.6  |  | WestPoint Stevens Inc. Omnibus Stock Incentive Plan, incorporated by
reference to the Companys 1997 Proxy Statement (Commission File No.
0-21496) filed by the Company with the Commission.                                                                                                                                                                                                                                                                                                                                          
|     
|10.7  |  | Second Amended and Restated Credit Agreement, dated as of June 9, 1998,
among the Company, WestPoint Stevens (UK) Limited, WestPoint Stevens
(Europe) Limited, NationsBank, N.A., as agent, and the other financial
institutions party thereto, incorporated by reference to Exhibit 10.59 to
Registration Statement on Form S-4 (Commission File No. 333-59817) filed
by the Company with the Commission on July 24, 1998.                                                                                                           
|     
|10.8  |  | Second Amended and Restated Collateral Trust Agreement dated as of June
9, 1998, among WestPoint Stevens Inc., certain of its Subsidiaries,
NationsBank, N.A. (formerly NationsBank of North Carolina, N.A.), as
Trustee, IBJ Schroder Bank & Trust Company as the Stevens Indenture
Trustee (as defined therein) and the other financial institutions party
thereto, incorporated by reference to the Form 10-Q for the quarterly
period ended June 30, 2001, (Commission File No. 0-21496) filed by the
Company with the Commission.
|     
|10.9  |  | Letter Amendment Agreement, dated as of June 30, 1998, among the Company,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited,
NationsBank, N.A., as agent and the other financial institutions party
thereto, incorporated by reference to Exhibit 10.60 to Registration
Statement on Form S-4 (Commission File No. 333-59817) filed by the Company
with the Commission on July 24, 1998.                                                                                                                             
|     
|10.10 |  | Letter Amendment Agreement, dated as of July 31, 1998, among the
Company, WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank., N.A., as agent and other financial institutions
party thereto, incorporated by reference to the Form 10-Q for the
quarterly period ended September 30, 1998 (Commission File No. 0-21496)
filed by the Company with the Commission.                                                                                                                                       
|     
|10.11 |  | Letter Amendment Agreement, dated as of October 7, 1998, among the
Company, WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank, N.A., as agent and other financial institutions
party thereto, incorporated by reference to the Annual Report on Form 10-K
for fiscal year ended December 31, 1998 (Commission File No. 0-21496)
filed by the Company with the Commission.                                                                                                                               
|     
|10.12 |  | Amendment dated October 29, 1998, to the WestPoint Stevens Inc. 1995 Key
Employee Stock Bonus Plan (As Amended), incorporated by reference to the
Annual Report on Form 10-K for fiscal year ended December 31, 1998
(Commission File No. 0-21496) filed by the Company with the Commission.                                                                                                                                                                                                                                          
|     
|10.13 |  | Amendment dated February 1, 1999, to the WestPoint Stevens 1995 Key
Employee Stock Bonus Plan (as amended), incorporated by reference to the
Form 10-Q for the quarterly period ended March 31, 1999 (Commission File
No. 0-21496) filed by the Company with the Commission.                                                                                                                                                                                                                                                          
|     
|10.14 |  | Letter Amendment Agreement, dated as of March 16, 1999, among the
Company, WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank, N.A., as agent and other financial institutions
party thereto, incorporated by reference to the Form 10-Q for the
quarterly period ended March 31, 1999 (Commission File No. 0-21496) filed
by the Company with the Commission.                                                                                                                                           
|     
|10.15 |  | WestPoint Stevens Inc. Omnibus Stock Incentive Plan (As Amended),
incorporated by reference to the Companys 1999 Proxy Statement
(Commission File No. 0-21496) filed by the Company with the Commission.                                                                                                                                                                                                                                                                                                                             

75



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.16 |  | Second Amendment Agreement dated May 20, 1999, among the Company,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited,
NationsBank, N.A., as agent and the other financial institutions party
thereto, incorporated by reference to the Form 10-Q for the quarterly
period ended June 30,
1999 (Commission File No. 0-21496) filed by the Company with the
Commission.                                 
|     
|10.17 |  | Letter Amendment Agreement, dated as of August 31, 1999, among the
Company, WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank, N.A., as agent and other financial institutions
party thereto, incorporated by reference to the Form 10-Q for the
quarterly period ended September 30, 1999 (Commission File No. 0-21496)
filed by the Company with the Commission.                      
|     
|10.18 |  | Letter Amendment Agreement, dated as of November 15, 1999, among the
Company, WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, NationsBank, N.A., as agent and the other financial institutions,
party thereto, incorporated by reference to the Annual Report on Form
10-K for fiscal year ended December 31, 1999 (Commission File No. 0-21496)
filed by the Company with the Commission.        
|     
|10.19 |  | WestPoint Stevens Inc. Stock Award Agreement dated November 18, 1999,
between the Company and Holcombe T. Green, Jr., incorporated by reference
to the Annual Report on Form 10-K for fiscal year ended December 31, 1999
(Commission File No. 0-21496) filed by the Company with the Commission.                                                                                                                     
|     
|10.20 |  | Third Amendment Agreement dated as of May 30, 2000, among the Company,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited,
NationsBank, N.A. as agent and the other financial institutions party
thereto, incorporated by reference to the Form 10-Q for the quarterly
period ended June 30, 2000 (Commission File No. 0-21496) filed by the
Company with the Commission.                             
|     
|10.21 |  | Employment Agreement, dated as of July 1, 2000, between WestPoint
Stevens Inc. and Holcombe T. Green, Jr., incorporated by reference to the
Form 10-Q for the quarterly period ended September 30, 2000 (Commission
File No. 0-21496) filed by the Company with the Commission.                                                                                                                                       
|     
|10.22 |  | Fourth Amendment Agreement dated December 31, 2000, among the Company,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited, Bank
of America (formerly NationsBank, N.A.), as agent and the other financial
institutions, party thereto, incorporated by reference to Form 10-K for
the fiscal year ended December 31, 2000 (Commission File No. 0-21496)
filed with the Commission.                    
|     
|10.23 |  | Membership Interest Purchase Agreement effective as of February 4, 2000,
by and among HTG Falcon LLC, HTG Corp. and the Company, incorporated by
reference to Form 10-K for the fiscal year ended December 31, 2000
(Commission File No. 0-21496) filed with the Commission.                                                                                                                                          
|     
|10.24 |  | Sublease Agreement made by and between WestPoint Stevens Inc. and HTG
Corporation, as of August 15, 2000, incorporated by reference to Form 10-K
for the fiscal year ended December 31, 2000 (Commission File No. 0-21496)
filed with the Commission.                                                                                                                                                                 
|     
|10.25 |  | Landlord Consent to Sublease entered into as of the 14th day of February
2001, by and among EOP-Buckhead, LLC, WestPoint Stevens Inc. and HTG
Corporation, incorporated by reference to Form 10-K for the fiscal year
ended December 31, 2000 (Commission File No. 0-21496) filed with the
Commission.                                                                                                                
|     
|10.26 |  | Employment Agreement, dated as of January 5, 2001, between WestPoint
Stevens Inc. and M. L. Fontenot, incorporated by reference to the Form
10-Q for the quarterly period ended March 31, 2001, (Commission File No.
0-21496) filed by the Company with the Commission.                                                                                                                                               
|     
|10.27 |  | Fifth Amendment, dated as of March 26, 2001, among the Company,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited, Bank
of America, N.A. (formerly NationsBank, N.A.), as agent and the other
financial institutions party thereto, incorporated by reference to the
Form 10-Q for the quarterly period ended March 31, 2001, (Commission File
No. 0-21496) filed by the Company with the Commission.
|     
|10.28 |  | Employment Agreement dated April 17, 2001, between WestPoint Stevens
Inc. and Lester Dupuy Sears, incorporated by reference to the Form 10-Q
for the quarterly period ended June 30, 2001, (Commission File No.
0-21496) filed by the Company with the Commission.                                                                                                                                                    

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29 |  | WestPoint Stevens Inc. Key Employee Stock Bonus Plan, incorporated by
reference to the Companys 2001 Proxy Statement (Commission File No.
0-21496) filed by the Company with the Commission.                                                                                                                                                                                                                                         
|     
|10.30 |  | Credit Agreement dated as of June 29, 2001, among WestPoint Stevens
Inc., certain of its Subsidiaries, Bankers Trust Company, as
Administrative Agent and the Lenders party thereto, incorporated by
reference
to the Form 10-Q for the quarterly period ended June 30, 2001,
(Commission File No. 0-21496) filed by the Company with the
Commission.                                                                                 
|     
|10.31 |  | Amendment Agreement dated June 29, 2001, among WestPoint Stevens Inc.,
WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe) Limited, Bank
of America, N.A. (formerly NationsBank, N.A.), as Agent and the other
financial institutions party thereto, incorporated by reference to the
Form 10-Q for the quarterly period ended June 30, 2001, (Commission File
No. 0-21496) filed by the Company with the Commission.          
|     
|10.32 |  | Intercreditor and Lien Subordination Agreement dated as of June 29,
2001, among WestPoint Stevens Inc., certain of its Subsidiaries, Bank of
America, N.A. (formerly NationsBank, N.A.) as the collateral trustee and
Bankers Trust Company, as administrative agent, incorporated by reference
to the Form 10-Q for the quarterly period ended June 30, 2001, (Commission
File No. 0-21496) filed by the Company with the Commission.
|     
|10.33 |  | Collateral Security Agreement dated as of June 29, 2001, among WestPoint
Stevens Inc., certain of its Subsidiaries and Bankers Trust Company, as
administrative agent, incorporated by reference to the Form 10-Q for the
quarterly period ended June 30, 2001, (Commission File No. 0-21496) filed
by the Company with the Commission.                                                                                               
|     
|10.34 |  | Amendment dated August 9, 2001, to the WestPoint Stevens Inc. 1993
Management Stock Option Plan, incorporated by reference to the Form 10-Q
for the quarterly period ended September 30, 2001, (Commission File No.
0-21496) filed by the Company with the Commission.                                                                                                                                                                
|     
|10.35 |  | Amendment dated August 9, 2001, to the WestPoint Stevens Inc. 1994
Non-Employee Directors Stock Option Plan, incorporated by reference to the
Form 10-Q for the quarterly period ended September 30, 2001, (Commission
File No. 0-21496) filed by the Company with the Commission.                                                                                                                                                    
|     
|10.36 |  | Letter dated April 5, 2001, from the Company to Mr. Bob Dale,
incorporated by reference to Form 10-K for the fiscal year ended December
31, 2002, (Commission File No. 0-21496) filed by the Company with the
Commission.                                                                                                                                                                                                             
|     
|10.37 |  | Letter dated April 9, 2001, from the Company to Mr. Arthur Birkins,
incorporated by reference to Form 10-K for the fiscal year ended December
31, 2002, (Commission File No. 0-21496) filed by the Company with the
Commission.                                                                                                                                                                                                       
|     
|10.38 |  | First Amended and Restated Receivables Purchase Agreement dated as of
October 31, 2001, by and between the Company and WPS Receivables
Corporation, incorporated by reference to Form 10-K for the fiscal year
ended December 31, 2002, (Commission File No. 0-21496) filed by the
Company with the Commission.                                                                                                                       
|     
|10.39 |  | First Amended and Restated Asset Interest Transfer Agreement dated as of
October 31, 2001, among WPS Receivables Corporation, the Company, Blue
Ridge Asset Funding Corporation, North American Capacity Insurance Company
and Wachovia Bank, N.A, incorporated by reference to Form 10-K for the
fiscal year ended December 31, 2002, (Commission File No. 0-21496) filed
by the Company with the Commission.                        
|     
|10.40 |  | Agreement dated November 29, 2001, among the Company, HTG Corp., Vytech
Holdings, Inc., Vytech Midco, Inc., Vytech Industries, Inc. and Holcombe
T. Green, Jr., incorporated by reference to Form 10-K for the fiscal year
ended December 31, 2002, (Commission File No. 0-21496) filed by the
Company with the Commission.                                                                                                           
|     
|10.41 |  | Guaranty Agreement dated as of November 29, 2001, made by Vytech
Holdings, Inc. and Holcombe T. Green, Jr., in favor of the Company,
incorporated by reference to Form 10-K for the fiscal year ended December
31, 2002, (Commission File No. 0-21496) filed by the Company with the
Commission.                                                                                                                                      

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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.42 |  | Amendment Letter dated March 22, 2002, between the Company, Holcombe T.
Green, Jr. and HTG Corp., incorporated by reference to Form 10-K for the
fiscal year ended December 31, 2002, (Commission File No. 0-21496) filed
by the Company with the Commission.                                                                                                                                                                    
|     
|10.43 |  | First Amendment dated as of January 14, 2002, among WPS Receivables
Corporation, the company, Blue Ridge Asset Funding Corporation, North
American Capacity Insurance Company and Wachovia Bank, N.A., incorporated
by reference to the Form 10-Q for the quarterly period ended March 31,
2002 (Commission File No. 0-21496) filed by the Company with the
Commission.                                                          
|     
|10.44 |  | Amendment Letter dated February 18, 2002, between the Company and
Holcombe T. Green, Jr., incorporated by reference to Form 10-Q for the
quarterly period ended March 31, 2002, (Commission File No. 0-21496) filed
by the Company with the Commission.                                                                                                                                                                          
|     
|10.45 |  | Separation Agreement and General Release dated as of March 20, 2002,
between WestPoint Stevens Inc. and Lanny Bledsoe as ratified and approved
by the Compensation Committee and the Board of Directors of WestPoint
Stevens Inc. on April 3, 2002, incorporated by reference to the Form 10-Q
for the quarterly period ended June 30, 2002 (Commission File No. 0-21496)
filed by the Company with the Commission.              
|     
|10.46 |  | Seventh Amendment Agreement dated September 19, 2002, among WestPoint
Stevens Inc., WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, Bank of America, N.A. (formerly NationsBank N.A.) as agent and
the other financial institutions party thereto, incorporated by reference
to the Form 8-K (Commission File No. 0-21496) filed by the Company with
the Commission on September 20, 2002.                   
|     
|10.47 |  | Second Amendment to First Amended and Restated Asset Interest Transfer
Agreement dated January 10, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding Corporation, North
American Capacity Insurance Company and Wachovia Bank National
Association, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on January 15, 2003.
|     
|10.48 |  | Third Amendment to First Amended and Restated Asset Interest Transfer
Agreement dated February 7, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding Corporation, North
American Capacity Insurance Company and Wachovia Bank National
Association, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on February 11,
2003.
|     
|10.49 |  | Loan and Security Agreement, dated March 28, 2003, by and among WPS
Receivables Corporation, WestPoint Stevens Inc., Congress Financial
Corporation (Southern), The CIT Group/Commercial Services, Inc. and the
Lenders from Time to Time Parties Hereto, incorporated by reference to the
Form 8-K (Commission File No. 0-21496) filed by the Company with the
Commission on April 1, 2003.                                     
|     
|10.50 |  | Second Amended and Restated Receivables Purchase Agreement, dated as of
March 28, 2003, by and between WestPoint Stevens Inc. and WPS Receivables
Corporation, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on April 1, 2003.                                                                                                                                
|     
|10.51 |  | Release and Confidentiality Agreement dated February 4, 2003, between
WestPoint Stevens Inc. and Michael J. Velsmid, Jr.                                                                                                                                                                                                                                                                                                         
|     
|10.52 |  | Amendment Letter dated March 20, 2003, between WestPoint Stevens Inc.
and M. L. Fontenot.                                                                                                                                                                                                                                                                                                                                        
|     
|10.53 |  | The First Amendment Agreement, dated as of March 31, 2003, among the
Company, certain of its subsidiaries, Deutsche Bank Trust Company Americas
(f/k/a Bankers Trust Company), as Administrative Agent and the Lenders
party thereto.                                                                                                                                                                                            
|     
|10.54 |  | Waiver Agreement dated as of March 31, 2003, among the Company, certain
of its subsidiaries, Deutsche Bank Trust Company Americas (f/k/a Bankers
Trust Company), as Administrative Agent and the Lenders party thereto.                                                                                                                                                                                                          
|     
|10.55 |  | Eight Amendment and Temporary Waiver Agreement, dated as of March 31,
2003, among the Company, WestPoint Stevens (UK) Limited, WestPoint Stevens
(Europe) Limited, Bank of America, N.A., as Agent and the other financial
institutions party there.                                                                                                                                                                             

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|      |  |                                                                                                                                                                                                                                                                                                                                                                      
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.56 |  | Post-Petition Credit Agreement, dated as of June 2, 2003, among
WestPoint Stevens Inc. and certain of its subsidiaries, the financial
institutions named therein and Bank of America, N.A. and Wachovia Bank,
National Association, incorporated by reference to the Form 8-K
(Commission File No. 0-21496) filed by the Company with the Commission on
June 5, 2003.
|     
|21    |  | List of Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                              
|     
|23.1  |  | Consent of Ernst & Young LLP, independent auditors.                                                                                                                                                                                                                                                                                                                  
|     
|99.1  |  | Certification of the Chief Executive Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                  
|     
|99.2  |  | Certification of the Chief Financial Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                  

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WESTPOINT STEVENS INC.
SCHEDULE IIValuation and Qualifying Accounts
(In thousands)

|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|------------------------------------------------------------ | ------------------------------------------------------------ | ----------------------- | ------------------------------------------------------ | - | ------------ | ------ | ---------- | - | ---------- | ------ | ---------- | - | ---------- | ------ | ------ | - | ------ | ------ | 
|                                                             |                                                              |                         |                                                        |   |              |        |            |   | Additions  |        |            |   |            |        |        |   |       
|                                                             |                                                              |                         |                                                        |   | Balance at   |        | Charged to |   |            |        |            |   | Balance at
|                                                             |                                                              |                         |                                                        |   | Beginning of |        | Cost and   |   |            |        |            |   | End of    
|                                                             |                                                              |                         |                                                        |   | Period       |        | Expenses   |   | Deductions |        | Period (3)
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |           
|                                                             | Year Ended December 31, 2002
Accounts receivable allowances: |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |       
|                                                             |                                                              |                         | Doubtful accounts                                      |   | $            | 22,333 |            |   | $          | 11,534 |            |   | $          | 2,139  | (1)    |   | $      | 31,728 | 
|                                                             |                                                              |                         | Cash and/or trade discounts
and returns and allowances |   |              | 11,240 |            |   |            | 19,554 |            |   |            | 21,675 |        |   |        | 9,119  | 
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|                                                             |                                                              | $                       | 33,573                                                 |   |              | $      | 31,088     |   |            | $      | 23,814     |   |            | $      | 40,847 |  
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|Inventory reserves:                                          |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |  
|                                                             |                                                              | Market and obsolescence |                                                        | $ | 73,097       |        |            | $ | 4,660      | (2)    |            | $ |           |        |        | $ | 77,757 |       
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|Year Ended December 31, 2001
Accounts receivable allowances: |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |  
|                                                             |                                                              |                         | Doubtful accounts                                      |   | $            | 11,490 |            |   | $          | 14,043 |            |   | $          | 3,200  | (1)    |   | $      | 22,333 | 
|                                                             |                                                              |                         | Cash and/or trade discounts
and returns and allowances |   |              | 10,573 |            |   |            | 23,813 |            |   |            | 23,146 |        |   |        | 11,240 | 
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|                                                             |                                                              | $                       | 22,063                                                 |   |              | $      | 37,856     |   |            | $      | 26,346     |   |            | $      | 33,573 |  
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|Inventory reserves:                                          |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |  
|                                                             |                                                              | Market and obsolescence |                                                        | $ | 63,439       |        |            | $ | 9,658      | (2)    |            | $ |           |        |        | $ | 73,097 |       
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|Year Ended December 31, 2000
Accounts receivable allowances: |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |  
|                                                             |                                                              |                         | Doubtful accounts                                      |   | $            | 13,133 |            |   | $          | (1,369 | )          |   | $          | 274    | (1)    |   | $      | 11,490 | 
|                                                             |                                                              |                         | Cash and/or trade discounts
and returns and allowances |   |              | 5,817  |            |   |            | 24,874 |            |   |            | 20,118 |        |   |        | 10,573 | 
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|                                                             |                                                              | $                       | 18,950                                                 |   |              | $      | 23,505     |   |            | $      | 20,392     |   |            | $      | 22,063 |  
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 
|Inventory reserves:                                          |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |  
|                                                             |                                                              |                         | Market and obsolescence                                |   | $            | 31,450 |            |   | $          | 31,989 | (2)        |   | $          |       |        |   | $      | 63,439 | 
|                                                             |                                                              |                         |                                                        |   |              |        |            |   |            |        |            |   |            |        |        |   |        |        | 



---

|(1) |  | Accounts written off, less recoveries of accounts previously written off.
|--- |  | -------------------------------------------------------------------------
|(2) |  | Net change.                                                              
|(3) |  | Reserves are deducted from assets to which they apply.                   

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SIGNATURES

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

| |  |  |  |                                     |  |                                                                         
| |  |  |  | ----------------------------------- |  | ------------------------------------------------------------------------
| |  |  |  | WESTPOINT STEVENS
INC.
(Registrant)
| |  |  |  |                                    
| |  |  |  | By                                  |  | /s/ Holcombe T. Green, Jr.                                              
| |  |  |  |                                     |  |                                                                         
| |  |  |  |                                     |  | Holcombe T. Green, Jr.
Chairman of the Board and Chief
Executive Officer
| |  |  |  |                                    
| |  |  |  |                                     |  | June 19, 2003                                                           

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

|   |  |                                                                                                        |  |    |  |                                                                                                        
|-- |  | ------------------------------------------------------------------------------------------------------ |  | -- |  | -------------------------------------------------------------------------------------------------------
|By |  | /s/ Holcombe T. Green, Jr.                                                                             |  | By |  | /s/ Lester D. Sears                                                                                    
|   |  |                                                                                                        |  |    |  |                                                                                                        
|   |  | Holcombe T. Green, Jr.
Chairman of the Board and Chief Executive
Officer (principal executive officer) |  |    |  | Lester D. Sears
Senior Vice President-Finance
and Chief Financial Officer
(principal financial officer)
|  
|   |  | June 19, 2003                                                                                          |  |    |  | June 19, 2003                                                                                          
|  
|By |  | /s/ M. L. Fontenot                                                                                     |  | By |  | /s/ J. Nelson Griffith                                                                                 
|   |  |                                                                                                        |  |    |  |                                                                                                        
|   |  | M. L. (Chip) Fontenot, Director,
President and Chief Operating Officer                                 |  |    |  | J. Nelson Griffith
Senior Vice President and Controller
(principal accounting officer)                 
|  
|   |  | June 19, 2003                                                                                          |  |    |  | June 19, 2003                                                                                          
|  
|By |  | /s/ Hugh M. Chapman                                                                                    |  | By |  | /s/ M. Katherine Dwyer                                                                                 
|   |  |                                                                                                        |  |    |  |                                                                                                        
|   |  | Hugh M. Chapman
Director                                                                               |  |    |  | M. Katherine Dwyer
Director                                                                            
|  
|   |  | June 19, 2003                                                                                          |  |    |  | June 19, 2003                                                                                          

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|   |  |                            |  |    |  |                         
|-- |  | -------------------------- |  | -- |  | ------------------------
|By |  | /s/ Joseph R. Gladden      |  | By |  | /s/ J. Hicks Lanier     
|   |  |                            |  |    |  |                         
|   |  | Joseph R. Gladden
Director |  |    |  | J. Hicks Lanier
Director
|  
|   |  | June 19, 2003              |  |    |  | June 19, 2003           
|  
|By |  | /s/ John F. Sorte          |  |    |  |                         
|   |  |                            |  |    |  |                         
|   |  | John F. Sorte
Director     |  |    |  |                         
|  
|   |  | June 19, 2003              |  |    |  |                         

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CERTIFICATIONS

CHIEF EXECUTIVE OFFICERS SECTION 302 CERTIFICATION

I, Holcombe T. Green, Jr., Chief Executive Officer of WestPoint Stevens Inc.,
certify that:

1.     I have reviewed this Annual Report on Form 10-K of WestPoint Stevens Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)  designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b)  evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c)  presented in this annual report our conclusions based upon the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

(a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                    |  |                                               
|------------------- |  | ----------------------------------------------
|Date: June 19, 2003 |  | /s/ Holcombe T. Green, Jr.                    
|                    |  |                                               
|                    |  | Holcombe T. Green, Jr.
Chief Executive Officer

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CHIEF FINANCIAL OFFICERS SECTION 302 CERTIFICATION

I, Lester D. Sears, Chief Financial Officer of WestPoint Stevens Inc., certify
that:

1.     I have reviewed this Annual Report on Form 10-K of WestPoint Stevens Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)  designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b)  evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c)  presented in this annual report our conclusions based upon the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

(a)  All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b)  Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                    |  |                                        
|------------------- |  | ---------------------------------------
|Date: June 19, 2003 |  | /s/ Lester D. Sears                    
|                    |  |                                        
|                    |  | Lester D. Sears
Chief Financial Officer

84