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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 [NO FEE REQUIRED]

         For the fiscal year ended December 31, 1999

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the transition period for ____________ to ____________

                           COMMISSION FILE NO. 0-21496

                             WESTPOINT STEVENS INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE                                                              36-3498354
(State or other jurisdiction of                                  (I.R.S.Employer
incorporation or organization)                               Identification No.)

507 WEST TENTH STREET, WEST POINT, GEORGIA                                 31833
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                          (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE  (706) 645-4000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE.

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:


      Title of each Class              Name of each exchange on which registered
      -------------------              -----------------------------------------
  Common Stock, $.01 par value                          NYSE


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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the 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]

         The aggregate market value of voting stock held by nonaffiliates of the
registrant was approximately $512,368,891 at March 17, 2000. The number of
shares of Common Stock outstanding at March 17, 2000, was 49,307,398.


                   (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.
49,307,398 at March 17, 2000
----------------------------



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                                TABLE OF CONTENTS


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                                                                                                          Page No.

<S>                                                                                                       <C>
Item 1.  Business..................................................................................            2

Item 2.  Properties................................................................................            8

Item 3.  Legal Proceedings.........................................................................            8

Item 4.  Submission of Matters to a Vote of Security Holders.......................................            9

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters......................            9

Item 6.  Selected Financial Data...................................................................           10

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.....           12

Item 8.  Financial Statements and Supplementary Data...............................................           17

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......           39

Item 10. Directors and Executive Officers of the Registrant........................................           39

Item 11. Executive Compensation....................................................................           42

Item 12. Security Ownership of Certain Beneficial Owners and Management............................           50

Item 13. Certain Relationships and Related Transactions............................................           51

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................           52
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ITEM 1. BUSINESS

WestPoint Stevens Inc., a Delaware corporation organized in 1987 (the
"Company"), is the successor corporation to West Point-Pepperell, Inc. through
a series of mergers occurring in December 1993. The Company is engaged directly
and indirectly through its subsidiaries in the manufacture, marketing and
distribution of bed and bath home fashions ("Home Fashions") products.

The Company manufactures and markets Home Fashions consumer products for
distribution to chain and department stores, mass merchants and specialty
stores. Home Fashions products are manufactured and distributed under owned
trademarks and pursuant to various licensing agreements. See "- Trademarks and
Licenses."

The Company's management estimates that it has the largest market share
(approximately 36%) in the domestic sheet and pillowcase market and the largest
market share (approximately 44%) in the domestic bath towel market. Such
estimates are calculated by the Company for the most recently published quarter
based on United States government data (source: United States Census Bureau
Current Industrial Report as available in February 2000), publicly available
information about the Company's competitors and information in trade
publications. In addition, according to such United States government data, each
of these markets had over $1 billion in annual sales during each of the past
five years.

         See "Recent Developments" included elsewhere for information regarding
the Company's stock repurchase program, efforts by the Company to explore
strategic and financial alternatives to enhance stockholder value and plan of
recapitalization.

For a 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 manufactures and markets a broad range of bed and bath products,
including:

         - decorative sheets, accessories and towels;

         - designer sheets, accessories and towels;

         - sheets, accessories and towels for the hospitality industry;

         - blankets;

         - private label sheets, accessories and towels;

         - bedskirts;

         - bedspreads;

         - comforters;

         - duvet covers;

         - drapes;

         - valances;

         - throw pillows;

         - bed pillows;

         - mattress pads;

         - shower curtains; and

         - table covers.

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.

         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. Home Fashions trademarks include GRAND PATRICIAN(R),
MARTEX(R), PATRICIAN(R), UTICA(R), STEVENS(R), LADY PEPPERELL(R), LUXOR(R) and
VELLUX(R). In


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addition, certain Home Fashions products are manufactured and sold pursuant to
licensing agreements under designer names that include, among others, Ralph
Lauren Home Collection, Sanderson, Esprit, Joe Boxer, Glynda Turley and Serta
Perfect Sleeper.

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 11% 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 following are the
expiration dates for the licensing agreements discussed above: Ralph Lauren,
December 31, 2000; Joe Boxer, December 31, 2002; Glynda Turley, December 31,
2001; Esprit, December 31, 2001; and Serta Perfect Sleeper, October 8, 2004.

         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 a recently enhanced organizational
format consisting of divisions for domestic sales, marketing and merchandising
and international sales and marketing. Distribution specific teams are linked
with product management, operations, customer service and distribution to
service each segment of retail.

The Domestic Sales Division focuses on the following channels of distribution:

         - mass merchants;

         - department and specialty stores;

         - custom brands;

         - Ralph Lauren;

         - health and hospitality institutions; and

         - specialized areas, including freestanding window treatments and
           blankets.

The Domestic Marketing Division is comprised of the following functions which
create products and services in direct response to recognized consumer trends:

         - design;

         - operating;

         - marketing;

         - advertising;

         - licensing;

         - consumer research;

         - product innovation; and

         - corporate communications.

The Domestic Merchandising Division is comprised of the following functions:

         - product management;

         - business management;

         - productivity analysis;

         - SKU (stock keeping unit) control;

         - design technology; and

         - Vellux(R) management.

The International Division is organized to tailor its products and operations to
the unique needs of the consumers and retailers in the world's leading markets.
Operating units include:


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         -   Europe - which has manufacturing facilities and sales offices
             located in England supplying European department stores for private
             label, company brands, and licensed programs such as Ralph Lauren
             Home Collection.

         -   Americas - which markets to all major stores in Canada, Mexico, and
             Latin America with US-made and foreign sourced products.

The Company works closely with its major customers to assist them in
merchandising and promoting its products to the consumer. 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 web site 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 sales are made to retail establishments in
the United States, including chain and department stores, mass merchants, and
specialty bed and bath stores. Finished products are distributed to retailers
directly from the Company's plants. Distribution to hospitals and other
healthcare establishments accounts for most of the remaining portion of the
Company's sales of Home Fashions products. Certain institutional products also
are sold directly and through distributors to major hotel and motel chains, and
to laundry supply businesses. In addition to domestic sales, the Company
distributes its Home Fashions products for eventual sale to certain foreign
markets, principally Canada, Mexico, the United Kingdom, continental Europe, the
Middle East and the Far East. International operations accounted for less than
5% of the total revenues of the Company in 1999.

In addition, certain products of the Company are sold through WestPoint Stevens
Stores Inc., a wholly-owned subsidiary of the Company ("WestPoint Stores").
WestPoint Stores currently consists of 48 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.

         INVENTORY MANAGEMENT, ELECTRONIC COMMUNICATION AND DELIVERY

The Company uses EDI, Quick Response and Vendor Managed Inventory replenishment
programs, point-of-sale data and the latest available technology in retail
warehouse and shelf space management to minimize inventory and maximize floor
stock turnover for its customers. The Company's EDI system allows customers to
place orders, and allows the Company to fill, track and bill orders, all by
computer. This system enables the Company to ship products on a Quick Response
basis so that customers can maintain lower inventories and react rapidly to
changes in product demand. In addition, the Company is using Vendor Managed
Inventory and dedicating certain manufacturing facilities to servicing key
strategic customers. The Company anticipates that these programs will result in
lower transportation expense and reduced distribution complexities for its
customers. Through the use of the Nielsen Spaceman III category management
program, the Company supports its customers' efforts to improve operating
results through efficient inventory and shelf space management. The Company's
objective is to provide its customers with 100% delivery reliability in terms of
order quantities and delivery schedules. The Company believes that the use of
in-house transportation has enabled the Company to maintain a high level of
on-time delivery. The Company has placed a strong emphasis on the supply chain
and logistics function. The Company believes that continued investment in
planning, sourcing, distribution and transportation capabilities will enhance
its ability to provide its customers with superior service and has recently
invested in an i2 Technologies, Inc. demand management system for greater
accuracy in managing product units.

         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 such as the value added through the Company's focus
on supply chain and logistics and Vendor Managed Inventory.

The Company's Home Fashions products are sold to chain stores, including, among
others, J.C. Penney Company, Inc. ("J.C. Penney"), and Sears Roebuck & Co., Inc.
("Sears"); mass merchants such as Wal-Mart Stores, Inc. ("Wal-Mart"), Kmart
Corporation ("Kmart") and Target Stores (a division of Target Corporation); and
department and specialty stores, including Federated Department Stores and
Mervyn's (also a division of Target Corporation). The above named customers,
which are the Company's six largest customers, accounted for approximately 56%
of the net sales of the Company during the fiscal year ended


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December 31, 1999. In 1999 sales to Target Corporation, Kmart and Wal-Mart were
14%, 13% and 11%, 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.

         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 $645 million to modernize
its manufacturing and distribution systems and has spent approximately $149
million of that amount during 1999. The capital expenditures have been used to,
among other things, replace projectile looms with faster, more efficient air jet
looms, replace ring spinning with open-end and air jet spinning, 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's new open-end and air
jet spinning machines use computerized monitors and sensors which track and
analyze the work, streamline information gathering and detect defects
immediately to improve yarn quality. The Company intends to invest $90 million
in capital improvements in the aggregate in 2000 which includes the purchase of
air jet spinning equipment and blanket manufacturing facilities and equipment,
completion of new and expanded distribution centers and installation of dyeing
and finishing equipment, and automated fabricating and material handling
equipment and distribution management systems which will further eliminate
labor-intensive and costly manufacturing steps and improve distribution
efficiency. These capital programs have resulted, and are expected to continue
to result, in improved product quality, increased efficiency and capacity, lower
costs and quicker response time to customer orders. The Company (including its
subsidiaries) owns and utilizes 24 manufacturing facilities located primarily in
the Southeastern United States and leases 5 manufacturing facilities, including
one in England. See "Item 2 Properties."

         RAW MATERIALS

The principal raw materials used in the manufacture of Home Fashions products
are cotton of various grades and staple lengths, nylon and polyester in staple
and filament form. Cotton, nylon and polyester 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 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 nylon and
polyester 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
seasons in the summer and 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 summer and fall peak
seasons. 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 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 mitigated by the Company's large market shares and broad
distribution base.


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         BACKLOG ORDERS

The backlog of the Company's unfilled customer orders believed by management to
be firm was approximately $117.4 million at February 5, 2000, as compared with
approximately $104.5 million at February 27, 1999. The Company does not believe
that its backlogs are a meaningful indicator of its future business.

         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 Fieldcrest
Cannon, Inc., a wholly-owned subsidiary of Pillowtex Corporation (collectively
"Pillowtex/Fieldcrest"), and Springs Industries, Inc. ("Springs"). 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 Fashions 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 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 represent 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 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 discharge, storage, handling
and disposal of a variety of hazardous and non-hazardous substances and wastes
used in or 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 (known as "CERCLA"), as amended.

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 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 16,286 active
employees as of February 18, 2000. 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.


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The Company has developed an efficient 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 personnel policies and expansive safety
programs.

         RECENT DEVELOPMENTS

During 1999 the Company purchased approximately 5.5 million shares under various
stock repurchase programs, at an average price of $23.13 per share. On January
18, 2000, the Board of Directors approved the purchase of up to four million
additional shares of the Company's common stock, subject to the Company's debt
limitations, which brings the total shares that have been approved for purchase
to 27 million shares. At December 31, 1999, approximately 3.5 million shares,
excluding the four million share increase announced in January 2000, remained to
be purchased under these programs. The repurchased shares include open market
purchases and private transactions. The repurchased shares are held in the
Company's treasury for general corporate purposes.

On November 24, 1999, the Company announced that it had engaged Merrill Lynch &
Co. to assist its Board of Directors in the exploration of strategic and
financial alternatives (which could include a management buyout) for the purpose
of enhancing stockholder value.

On February 11, 2000, the Company announced that it received a proposal from
Holcombe T. Green, Jr., Chairman and Chief Executive Officer of the Company, to
acquire the Company in a leveraged buyout transaction. Mr. Green proposed that
all of the outstanding shares of the Company's common stock, other than shares
held by Mr. Green and his affiliates and certain other shareholders to be
identified in the future (which might include certain members of the Company's
management), be acquired for a cash purchase price of $21.00 per share through a
merger of an entity owned by Mr. Green's affiliates with the Company. The
Company's Board of Directors asked Merrill Lynch to assist it in evaluating the
buyout proposal, while continuing to assist the Board in the exploration of
strategic and financial alternatives.

On March 24, 2000, the Company released a press release announcing that its
Board of Directors had approved and adopted a plan of recapitalization (the
"Plan of Recapitalization"), pursuant to which outstanding shares of the
Company's Common Stock, par value $0.01 per share (the "Shares"), held by all
stockholders, other than the Company's Chief Executive Officer, President,
Chief Financial Officer, other senior managers and their affiliates and certain
other stockholders (collectively, the "Exchanging Stockholders"), will be
reclassified as and converted into one share of Series B Participating
Preferred Stock, par value $0.01 per share, of the Company (the "Series B
Preferred Stock"). Promptly following the reclassification, the Company will
redeem all outstanding shares of Series B Preferred Stock on the basis of one
share of Series B Preferred Stock for $22.00 cash.

In addition, prior to the reclassification of the Company's capital stock, the
Shares held by the Exchanging Stockholders will be exchanged for shares of
Series A Participating Preferred Stock, par value $0.01 per share, of the
Company (the "Series A Preferred Stock"). Pursuant to the Plan of
Recapitalization, each outstanding share of Series A Preferred Stock will be
reclassified as and converted into one share of Common Stock, par value $0.01
per share, of the Company. Following the consummation of the Plan of
Recapitalization, Holcombe T. Green, Jr., the Company's Chief Executive
Officer, and his affiliates are expected to continue to beneficially own
approximately 38% of the voting stock of the Company.

Consummation of the Plan of Recapitalization is subject to, among other things,
stockholders' approval (including, in addition to the approval required by law,
the approval of 60% of the "disinterested stockholders" voting in person or by
proxy) and the negotiation of agreements relating to the equity and debt
financing necessary to pay the redemption price, refinance outstanding bank
indebtedness, provide for sufficient working capital and pay all related fees
and expenses. The Company's senior notes due 2005 and 2008 will remain
outstanding. The Company is in the process of evaluating commitment letters
received from various prospective equity and debt financing sources.

         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: 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.


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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,
Alabama, and leases various additional office space, including approximately
148,000 square feet in New York City, of which approximately 36,000 square feet
is subleased to other tenants. The Company also owns or leases various
administrative, storage and office 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 own 24 manufacturing facilities located in
Alabama, Florida, Georgia, Indiana, Maine, North Carolina, South Carolina and
Virginia which contain in the aggregate approximately 9,663,000 square feet of
floor space and lease 5 manufacturing facilities in Georgia, Louisiana, Nevada,
South Carolina and England which contain in the aggregate approximately 439,000
square feet of floor space.

The Company and its subsidiaries also own 12 distribution centers and warehouses
for their operations which contain approximately 3,717,000 square feet of floor
space. In addition, the Company and its subsidiaries lease 9 distribution
outlets and warehouses containing approximately 717,000 square feet of floor
space.

WestPoint Stores owns 2 retail stores and leases its 46 other retail stores, all
of which are dispersed throughout the United States and Canada.


ITEM 3.  LEGAL PROCEEDINGS

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 non-hazardous 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 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 their
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.

On February 14, 2000, seven individual suits, entitled Matthew Lubrano v.
WestPoint Stevens Inc., et al., Crandon Capital Partners v. Holcombe T. Green,
et al., John McMullen v. WestPoint Stevens Inc., et al., David Frankel v. M.
Katherine Dwyer, et. al., Norman Geller v. WestPoint Stevens Inc., et al., Paul
Green v. WestPoint Stevens Inc., et al., and Whitney Smith v. WestPoint Stevens
Inc., et al. were filed against the Company and certain of its directors in the
Court of Chancery of the State of Delaware in and for New Castle County. The
plaintiffs in these cases allege, among other things, that the $21 offer is
unfair and inadequate; was not negotiated at arms length; that members of the
Company's management including certain defendants violated their duty of fair
dealing by timing the Transaction to cap the market price for the Company's
stock


                                       8
<PAGE>   10

ITEM 3.  LEGAL PROCEEDINGS (CONTINUED)

before the market reacted to the announcement of the Company's excellent results
in 1999; and the management group with the acquiescence of the Company's Board
of Directors will continue to breach their fiduciary duties owed to the
plaintiffs unless injunctive relief is granted. The Complainants seek class
action status, preliminary and permanent injunctive relief against the
consummation of the Transaction, to rescind the Transaction if consummated or
the award of an unspecified amount of class rescissory damages, an order for the
defendants to account to the plaintiffs and other class members for all damages
suffered as the result of alleged wrongdoing, costs, disbursements and
attorneys' and experts' fees in an unspecified amount. The Company believes that
the allegations contained in the complaints are without merit and intends to
contest the action vigorously on behalf of itself and its directors. See "Item
1. Business - Recent Developments" for information regarding the Transaction.


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

During the fourth quarter of fiscal 1999, no matters were submitted by the
Company to a vote of its stockholders.


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

The Common Stock of the Company is listed on the New York Stock Exchange
("NYSE") under the symbol WXS. Such listing became effective on October 15,
1999. Prior thereto, the Company's Common Stock was listed on the National
Association of Securities Dealers Automated Quotation System - National Market
System ("NASDAQ") under the symbol WPSN from August 2, 1993.

High (ask) and low (bid) quotations, as reported (on a split basis), each
quarterly period within the two most recent fiscal years were:

<TABLE>
<CAPTION>

                  Quarter Ended                                         Quotations
                                                   ------------------------------------------------
                                                            1999                        1998
                                                   ----------------------       -------------------
                                                   High/Ask       Low/Bid       High/Ask    Low/Bid
                                                   --------       -------       --------    -------
                  <S>                              <C>            <C>           <C>         <C>
                  March 31                          32             23 1/4         29 1/4    21 3/4
                  June 30                           37 9/16        26 1/2         34 3/4    28 1/4
                  September 30                      33             22 1/4         37 7/8    25 15/16
                  December 31                       24 1/2         15 3/16        32 1/2    24 5/8
</TABLE>

The Company paid dividends of $.02 per share on June 1, September 1 and December
1, 1999, and on March 1, 2000. Under its existing credit facility the Company is
permitted to pay dividends from excess cash flow as defined in the credit
facility.

As of March 17, 2000, there were approximately 17,421 holders of the Company's
Common Stock. Of that total, approximately 278 were stockholders of record and
approximately 17,143 held their stock in nominee name.


                                        9

<PAGE>   11



ITEM 6.  SELECTED FINANCIAL DATA

The selected historical financial data presented below for 1999, 1998 and 1997
were derived from the Audited Consolidated Financial Statements of the Company
and its subsidiaries for the years ended December 31, 1999, 1998 and 1997 (the
"Consolidated Financial Statements"), and should be read in conjunction
therewith, including the notes thereto and the other financial information
included elsewhere herein. The statement of operations data reflect the
discontinuance of the Alamac Knit Fabrics subsidiary and accordingly only
reflect the operations of Home Fashions.

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED DECEMBER 31,
                                                                     ------------------------------------------------------------
                                                                       1999         1998         1997         1996        1995
                                                                     ---------    ---------    ---------    ---------   ---------
<S>                                                                  <C>          <C>          <C>          <C>         <C>
(IN MILLIONS, EXCEPT PER SHARE DATA)

STATEMENT OF
   OPERATIONS DATA:
Net sales                                                            $ 1,883.3    $ 1,779.0    $ 1,657.5    $ 1,501.8   $ 1,418.2
Gross earnings                                                           505.3        474.7        419.8        372.4       359.1
Operating earnings (1)                                                   268.1        248.3        214.9        188.5        26.3
Interest expense                                                         102.4        105.7        102.2         94.5        93.5
Income (loss) from continuing operations
    before income tax expense
    (benefit) and  extraordinary items                                   162.9        141.7        110.2         91.0       (70.4)
Income (loss) from continuing operations
    before extraordinary items                                           104.1         90.6         69.3         58.0      (102.3)

Net income (loss)                                                        104.1         40.0         78.0         57.7      (129.8)

Diluted net income (loss) per common share:
     Continuing operations                                                1.84         1.51         1.11         0.91       (1.57)
     Discontinued operations                                                --           --          .14           --        (.42)
     Extraordinary item - loss on extinguishment of debt(2)                 --         (.84)          --           --          --
                                                                     ---------    ---------    ---------    ---------   ---------
     Net income (loss) per common share                                   1.84          .67         1.25         0.91       (1.99)

Diluted average common shares outstanding                                 56.6         59.9         62.7         63.7        65.4
</TABLE>


<TABLE>
<CAPTION>

                                                                                              DECEMBER 31,
                                                                     ------------------------------------------------------------
                                                                        1999         1998         1997         1996        1995
                                                                     ---------    ---------    ---------    ---------   ---------
    (IN MILLIONS)

<S>                                                                  <C>          <C>          <C>          <C>         <C>
BALANCE SHEET DATA:
Total assets                                                         $ 1,540.7    $ 1,391.2    $ 1,291.1    $ 1,157.0   $ 1,143.0
Working capital(3)                                                       233.1        178.2        212.2        140.9       115.7
Total debt                                                             1,464.8      1,335.4      1,187.7      1,099.0     1,148.0
Stockholders' equity (deficit)                                          (498.0)      (487.5)      (425.0)      (451.9)     (507.5)
</TABLE>


<TABLE>
<CAPTION>

                                                                                          YEAR ENDED DECEMBER 31,
                                                                     ------------------------------------------------------------
    (IN MILLIONS, EXCEPT RATIOS)                                        1999        1998         1997         1996        1995
                                                                     ---------    ---------    ---------    ---------   ---------

<S>                                                                  <C>          <C>          <C>          <C>         <C>
OTHER DATA:
Depreciation and amortization:(4)
     Continuing operations                                           $    84.1    $    80.6    $    71.7    $    68.9   $    69.3
     Discontinued operations                                                --           --          5.5          8.1        11.1
Amortization of excess reorganization value:
     Continuing operations                                                  --           --           --           --       152.4
     Discontinued operations                                                --           --           --           --        25.3
Capital expenditures:
     Continuing operations                                               148.6        147.5        148.9         94.9        92.4
     Discontinued operations                                                --           --          3.2          5.0         9.8
Operating earnings from continuing
    operations before amortization
    of excess reorganization value(5)                                    268.1        248.3        214.9        188.5       178.7



Continuing operations adjusted
    net income(6)                                                        104.1         90.6         69.3         58.0        50.1
Operating margin from continuing
    operations before amortization
    of excess reorganization value(7)                                     14.2%        14.0%        13.0%        12.6%       12.6%
</TABLE>

                        See footnotes on following page.


                                       10
<PAGE>   12

(1)Operating earnings for the year ended December 31, 1995 includes amortization
of excess reorganization value of $152.4 million.



(2)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.


(3)Working capital at December 31, 1999, 1998, 1997, 1996 and 1995 includes the
current portion of bank indebtedness and other long-term debt of $89.8 million,
$60.4 million, $41.4 million, $24.0 million and $73.0 million, respectively.


(4)Excludes amortization of excess reorganization value.


(5)Such amounts are presented to facilitate comparisons between periods since
there were no charges for the years ended December 31, 1999, 1998, 1997 and 1996
for amortization of excess reorganization value.


(6)Continuing operations adjusted net income represents net income from
continuing operations, adjusted to remove the impact of the amortization of
excess reorganization value and before extraordinary item and discontinued
operations. Adjusted continuing operations EPS for the years ended December 31,
1999, 1998, 1997, 1996 and 1995 was $1.84, $1.51, $1.11, $.91 and $.77,
respectively.


(7)Operating margin before amortization of excess reorganization value
represents operating earnings before amortization of excess reorganization value
as a percentage of net sales for the periods presented.


                                       11

<PAGE>   13


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


GENERAL

On February 11, 2000, the Company announced that it received a proposal from
Holcombe T. Green, Jr., Chairman and Chief Executive Officer of the Company, to
acquire the Company in a leveraged buyout transaction. Mr. Green proposed that
all of the outstanding shares of the Company's common stock, other than shares
held by Mr. Green and his affiliates and certain other shareholders to be
identified in the future (which might include certain members of the Company's
management), be acquired for a cash purchase price of $21.00 per share through a
merger of an entity owned by Mr. Green's affiliates with the Company.
Consummation of the proposed transaction would be subject to, among other
things, the negotiation of a definitive merger agreement, the approval of the
Company's Board of Directors and stockholders, and receipt of necessary
financing.

The following discussion under Liquidity and Capital Resources does not reflect
the impact of the above transaction.


YEAR 2000

In prior years, the Company discussed the nature of progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expended approximately $525,000 in connection with remediating its systems. The
Company is not aware of any material problems resulting from Year 2000 issues,
either with its products, its internal systems, or the products and services of
third parties. The Company will continue to monitor its mission critical
computer applications and those of its suppliers and vendors throughout the year
2000 to ensure that any latent Year 2000 matters that may arise are addressed
promptly.


RESULTS OF OPERATIONS

The table below is a summary of the Company's operating results for the years
ended December 31, 1999, 1998 and 1997. See Note 10 in the Notes to Consolidated
Financial Statements for information concerning the Company's discontinued
operations. The following discussion is limited to an analysis of the results of
continuing operations (in millions of dollars and as percentages of net sales).

<TABLE>
<CAPTION>

                                                                                YEAR ENDED DECEMBER 31,
                                                                   -------------------------------------------------
                                                                      1999               1998                1997
                                                                   ----------         ----------          ----------
<S>                                                                <C>                <C>                 <C>
Net sales ...............................................          $  1,883.3         $  1,779.0          $  1,657.5
Gross earnings ..........................................          $    505.3         $    474.7          $    419.8
Operating earnings ......................................          $    268.1         $    248.3          $    214.9
Interest expense ........................................          $    102.4         $    105.7          $    102.2
Income from continuing operations .......................          $    104.1         $     90.6          $     69.3
Income from discontinued operations .....................                  --                 --                 2.6
Gain on sale of discontinued operations .................                  --                 --                 6.1
Extraordinary item - loss on early extinguishment of debt                  --              (50.6)                 --
                                                                   ----------         ----------          ----------
Net income ..............................................          $    104.1         $     40.0          $     78.0
Gross margins ...........................................                26.8%              26.7%               25.3%
Operating margins........................................                14.2%              14.0%               13.0%
</TABLE>


                                       12

<PAGE>   14


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


RESULTS OF OPERATIONS-CONTINUED

                             1999 COMPARED WITH 1998

NET SALES. Net sales for the year ended December 31, 1999 increased $104.3
million, or 5.9%, to $1,883.3 million compared with net sales of $1,779.0
million for the year ended December 31, 1998. The increase was driven by the
Company's increases in sales from accessories, including its Vellux blankets;
top of the bed accessories; and the acquisition of basic bedding products from
Liebhardt Mills, Inc. ("LMI"). Approximately $46.0 million of the 1999 sales
growth was associated with the acquisition of LMI. Exclusive of this
acquisition, sales growth would have been 3.3%. The Company had excellent
results from its major discount customers, Ralph Lauren line, its Canadian
international accounts and its retail store business.

GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1999 of
$505.3 million increased $30.6 million, or 6.4%, compared with $474.7 million
for 1998 and reflect gross margins of 26.8% in 1999 and 26.7% in 1998. Gross
earnings and margins improved in 1999 due to continued growth of the Company's
accessory business and the overall positive mix of the Company's business as a
whole. The Company's designer lines, particularly Ralph Lauren and Martha
Stewart, as well as the Company's retail stores, also contributed to the
improved margins.

OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased $10.8 million, or 4.8%, in 1999 compared with 1998, and as a
percentage of net sales represent 12.6% in 1999 and 12.7% in 1998. The increase
in selling, general and administrative expenses in 1999 was due primarily to the
acquisition of LMI in 1998, which represented only two months of selling,
general and administrative expense versus a full year in 1999, and increased
shipping and warehousing expenses associated with the higher unit volume.

Operating earnings for the year ended December 31, 1999 were $268.1 million, or
14.2% of sales, and increased $19.8 million, or 8.0%, compared with operating
earnings of $248.3 million, or 14.0% of sales, for 1998. Operating earnings
improvement resulted from strong sales increases, improved gross margins, and
excellent control of selling, general and administrative expenses.

INTEREST EXPENSE. Interest expense for the year ended December 31, 1999 of
$102.4 million decreased $3.3 million compared with interest expense for the
year ended December 31, 1998. The decrease in interest expense was due primarily
to lower interest rates as a result of the refinancing transactions in the
second quarter of 1998 offset somewhat by higher working capital, the LMI
acquisition and an accelerated stock repurchase program.

OTHER EXPENSE-NET. Other expense-net was comprised of amortization of deferred
financing fees of $2.9 million in 1999 and $3.3 million in 1998, and
miscellaneous income and expense items. Other expense-net totaled $2.8 million
in 1999 as compared with $1.0 million in 1998.

INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes and non-deductible items.

NET INCOME. Net income from continuing operations for fiscal year 1999 was
$104.1 million, or $1.84 per share diluted, compared with net income of $90.6
million (before extraordinary item), or $1.51 per share diluted, for last year.

Diluted per share amounts are based on 56.6 million and 59.9 million average
shares outstanding for the 1999 and 1998 periods, respectively. The decrease in
the average shares outstanding was primarily the result of the purchase by the
Company of shares under the stock repurchase programs.


                                       13

<PAGE>   15


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


RESULTS OF OPERATIONS--CONTINUED

                             1998 COMPARED WITH 1997

NET SALES. Net sales for the year ended December 31, 1998 increased $121.5
million, or 7.3%, to $1,779 million compared with net sales of $1,657.5 million
for the year ended December 31, 1997. The increase in net sales resulted
primarily from higher unit volume in 1998 compared with 1997.

GROSS EARNINGS/MARGINS. Gross earnings for the year ended December 31, 1998 of
$474.7 million increased $54.9 million, or 13.1%, compared with $419.8 million
for 1997, and reflect gross margins of 26.7% in 1998 compared with 25.3% in
1997. Gross earnings and margins increased in 1998, primarily as a result of the
increase in unit volume, a better mix of products sold and lower raw material
costs offsetting cost increases related to depreciation expense and wages.

OPERATING EARNINGS/MARGINS. Selling, general and administrative expenses
increased by $21.5 million, or 10.5%, for the year ended December 31, 1998,
compared with the same period of 1997, and as a percentage of net sales
represent 12.7% in 1998 and 12.4% in 1997. The increase in selling, general and
administrative expenses for 1998 was due primarily to higher selling,
administrative and warehousing/shipping expenses related to increased unit
volume.

Operating earnings for the year ended December 31, 1998 were $248.3 million, or
14.0% of sales, and increased $33.4 million, or 15.6%, compared with operating
earnings of $214.9 million, or 13.0% of sales, for the year ended December 31,
1997. The increase resulted from the increase in gross earnings offset somewhat
by the increase in selling, general and administrative expenses discussed above.

INTEREST EXPENSE. Interest expense for the year ended December 31, 1998 of
$105.7 million increased $3.5 million compared with interest expense for the
year ended December 31, 1997. The increase was due primarily to higher average
debt levels in the 1998 period compared with the corresponding 1997 average debt
levels offset somewhat by lower interest rates as a result of the refinancing
transactions in the second quarter of 1998.

OTHER EXPENSE-NET. Other expense-net for the year ended December 31, 1998
decreased $1.5 million compared with 1997 and consists primarily of the
amortization of deferred financing fees of $3.3 million in 1998 compared with
$3.9 million in 1997 less certain miscellaneous income items in both years.

INCOME TAX EXPENSE. The Company's effective tax rate differed from the federal
statutory rate primarily due to state income taxes and nondeductible items.

INCOME FROM CONTINUING OPERATIONS. Income from continuing operations for the
year ended December 31, 1998 was $90.6 million, or $1.51 per share diluted,
compared with income from continuing operations of $69.3 million, or $1.11 per
share diluted, for the year ended December 31, 1997.

EXTRAORDINARY ITEM - LOSS ON EARLY EXTINGUISHMENT OF DEBT. The Company recorded
an extraordinary charge of $50.6 million, net of income taxes of $28.5 million,
in the second quarter of 1998 related to the early extinguishment of debt. The
extraordinary charge consisted primarily of tender premiums and the write-off of
deferred debt fees.

NET INCOME. Net income for the year ended December 31, 1998 was $40 million, or
$.67 per share diluted, compared with net income of $78 million, or $1.25 per
share diluted, for the year ended December 31, 1997.

Diluted per share amounts are based on 59.9 million and 62.7 million average
shares outstanding for the 1998 and 1997 periods, respectively. The decrease in
the average shares outstanding was primarily the result of the purchase by the
Company of shares under the stock repurchase programs.


                                       14

<PAGE>   16


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


IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Effective January 1, 1999, the Company adopted Statement of Position 98-1 ("SOP
98-1"), Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, which provides guidance as to when certain costs incurred during
an internal-use software development project should be capitalized. Adoption of
SOP 98-1 did not have a material effect on the Company's financial statements.


RISK MANAGEMENT AND MARKET SENSITIVE INSTRUMENTS

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 to manage certain of
its commodities exposures. Such contracts are used principally to manage the
Company's exposure to cotton commodity price risk. The Company does not hold or
issue derivative instruments for trading purposes.

At December 31, 1999 and 1998, 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, 1999 (which
covered a portion of its 2000 needs) had a net deferred loss of approximately
$3.4 million. At December 31, 1998, the net deferred loss was approximately
$16.8 million. Management believes that the Company's cost of cotton for 2000
will be at least as favorable as the cost of cotton in 1999.

Based on a sensitivity analysis for commodities, the hypothetical net deferred
loss for the combined commodity positions at December 31, 1999 is estimated to
be approximately $13.1 million ($35.6 million at December 31, 1998), assuming a
decrease of 10% in such commodity prices. 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, 1999 and 1998, the Company's floating
interest rate debt outstanding was $464.8 million and $335.4 million,
respectively. A 100 basis point increase in market rates would increase interest
expense and decrease income before income taxes by approximately $4.6 million
and $3.4 million at December 31, 1999 and 1998, respectively. The amount was
determined by calculating the effect of the hypothetical interest rate on the
Company's floating interest rate debt.

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, 1999 was approximately $907.9 million, which was below its
carrying value by approximately $92.1 million. At December 31, 1998, the
estimated fair market value of the Company's long-term fixed interest rate debt
was $1,013.8 million, which exceeded its carrying value by approximately $13.8
million. A hypothetical 100 basis point decrease in the prevailing interest
rates at December 31, 1999 would result in an increase in the fair market value
of total long-term fixed interest rate debt by approximately $47.3 million
($60.6 million at December 31, 1998). Fair market values are determined from
quoted market prices where available or based on estimates.

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.


                                       15

<PAGE>   17

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


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of liquidity are expected to be cash from its
operations and funds available under the Senior Credit Facility. At February 24,
2000, the maximum commitment under the Senior Credit Facility was $800 million
and the Company had unused borrowing availability under the Senior Credit
Facility totaling $220.8 million. The Senior Credit Facility contains covenants
which, among other things, limit indebtedness and require the maintenance of
certain financial ratios and minimum net worth (as defined). During the second
quarter of 1999, the Company increased the maximum commitment under the Senior
Credit Facility from $575 million to $800 million. The conditions of the
increased revolver continue as previously stated, including the revolver
expiration date of November 30, 2004. The increased borrowing availability is to
support the Company's growth plans and strategy in the future, if required.

The Company's principal uses of cash for the next several years will be
operating expenses, capital expenditures, stock repurchases and debt service
requirements related primarily to interest payments. The Company spent
approximately $148.6 million in 1999 on capital expenditures and intends to
invest approximately $90 million in 2000. The Board of Directors approved the
payment of quarterly cash dividends of $.02 per share, which were paid on June
1, 1999, September 1, 1999 and December 1, 1999 totaling approximately $3.4
million, and has approved the payment of a quarterly cash dividend of $.02 per
share payable on March 1, 2000 to shareholders of record as of February 24,
2000.

During 1999, the Company purchased approximately 5.5 million shares under its
various stock repurchase programs, at an average price of $23.13 per share. On
January 18, 2000, the Board of Directors approved the purchase of up to four
million additional shares of the Company's common stock, subject to the
Company's debt limitations, which brings the total shares that have been
approved for purchase to twenty-seven million shares. At January 18, 2000,
approximately 4.6 million shares remained to be purchased under these programs
representing approximately 9.2% of the outstanding shares.

The Company, through a "bankruptcy remote" receivables subsidiary, has a Trade
Receivables Program which provides for the sale of accounts receivable, on a
revolving basis. At December 31, 1999 and December 31, 1998, $154 million and
$145 million, respectively, had been sold under this program and the sale is
reflected as a reduction of accounts receivable in the Company's Consolidated
Balance Sheets. The cost of the Trade Receivables Program in 2000 is estimated
to total approximately $8.6 million, compared with $8.8 million in 1999, and
will be charged to selling, general and administrative expenses.

Debt service requirements for interest payments in 2000 are estimated to total
approximately $115.3 million (excluding amounts related to the Trade Receivables
Program) compared with interest payments of $104.1 million in 1999. The
Company's long-term indebtedness has no scheduled principal requirements during
2000.

Management believes that cash from the Company's operations and borrowings under
its credit agreements will provide the funding necessary to meet the Company's
anticipated requirements for capital expenditures, operating expenses and stock
repurchases and to enable it to meet its anticipated debt service requirements.


                                       16

<PAGE>   18


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



Consolidated Financial Statements for the years ended December 31, 1999, 1998
and 1997


<TABLE>
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors .......          18
Consolidated Balance Sheets .............................     19 - 20
Consolidated Statements of Income .......................          21
Consolidated Statements of Stockholders' Equity (Deficit)          22
Consolidated Statements of Cash Flows ...................          23
Notes to Consolidated Financial Statements ..............     24 - 38
</TABLE>


                                       17

<PAGE>   19


                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. as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity (deficit), and cash flows for each of
the three years in the period ended December 31, 1999. Our audits also included
the financial statement schedule listed in the index at Item 14 (a). 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. at December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.





                                                 /s/Ernst & Young LLP


Columbus, Georgia
February 2, 2000
except for Note 13, as to which
the date is March 24, 2000


                                       18

<PAGE>   20

                             WESTPOINT STEVENS INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)



<TABLE>
<CAPTION>

                                                                            DECEMBER 31,
                                                                  ---------------------------------
                                                                      1999                  1998
                                                                  -----------           -----------

<S>                                                               <C>                   <C>
ASSETS
Current Assets
         Cash and cash equivalents ........................       $       162           $       527
         Accounts receivable (less allowances of $18,950
              and $19,251, respectively) ..................            85,419                70,086
         Inventories ......................................           448,887               381,022
         Prepaid expenses and other current assets ........            13,842                18,051
                                                                  -----------           -----------
                   Total current assets ...................           548,310               469,686



Property, Plant and Equipment
         Land .............................................             6,781                 6,593
         Buildings and improvements .......................           346,141               305,959
         Machinery and equipment ..........................           983,209               888,540
         Leasehold improvements ...........................            10,918                 9,939
                                                                  -----------           -----------
                                                                    1,347,049             1,211,031
         Less accumulated depreciation and amortization ...          (506,337)             (434,092)
                                                                  -----------           -----------
                   Net property, plant and equipment ......           840,712               776,939



Other Assets
         Deferred financing fees ..........................            19,362                21,102
         Prepaid pension and other assets .................            62,857                52,257
         Goodwill .........................................            69,433                71,227
                                                                  -----------           -----------
                   Total other assets .....................           151,652               144,586
                                                                  -----------           -----------
                                                                  $ 1,540,674           $ 1,391,211
                                                                  ===========           ===========
</TABLE>


                             See accompanying notes.


                                       19

<PAGE>   21


                             WESTPOINT STEVENS INC.

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)



<TABLE>
<CAPTION>

                                                                                 DECEMBER 31,
                                                                       ---------------------------------
                                                                           1999                  1998
                                                                       -----------           -----------

<S>                                                                    <C>                   <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
         Senior Credit Facility .............................          $    89,803           $    60,400
         Accrued interest payable ...........................                4,336                 4,777
         Accounts payable ...................................               94,036                85,908
         Other accrued liabilities ..........................              127,059               140,423
                                                                       -----------           -----------
                         Total current liabilities ..........              315,234               291,508


Long-Term Debt ..............................................            1,375,000             1,275,000


Noncurrent Liabilities
         Deferred income taxes ..............................              284,003               236,328
         Other liabilities ..................................               64,457                75,827
                                                                       -----------           -----------
                         Total noncurrent liabilities .......              348,460               312,155


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 and 70,862,029 shares
                   issued, respectively .....................              361,504               343,437
         Accumulated deficit ................................             (484,378)             (585,115)
         Treasury stock; 18,858,823 and 14,576,744 shares
                   at cost, respectively ....................             (363,972)             (242,844)
         Accumulated other comprehensive income (loss) ......               (2,112)               (2,930)
         Unearned compensation ..............................               (9,062)                   --
                                                                       -----------           -----------
                         Total stockholders' equity (deficit)             (498,020)             (487,452)
                                                                       -----------           -----------
                                                                       $ 1,540,674           $ 1,391,211
                                                                       ===========           ===========
</TABLE>


                             See accompanying notes.


                                       20

<PAGE>   22

                             WESTPOINT STEVENS INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>

                                                                                        YEAR ENDED DECEMBER 31,
                                                                         ----------------------------------------------------
                                                                            1999                 1998                 1997
                                                                         ----------          -----------           ----------

<S>                                                                      <C>                 <C>                   <C>
Net sales .........................................................      $1,883,263          $ 1,778,991           $1,657,511
Cost of goods sold ................................................       1,377,917            1,304,231            1,237,657
                                                                         ----------          -----------           ----------
      Gross earnings ..............................................         505,346              474,760              419,854
Selling, general and administrative expenses ......................         237,246              226,437              204,981
                                                                         ----------          -----------           ----------
      Operating earnings ..........................................         268,100              248,323              214,873
Interest expense ..................................................         102,395              105,677              102,172
Other expense-net .................................................           2,843                  968                2,461
                                                                         ----------          -----------           ----------
      Income from continuing operations before income tax
         expense and extraordinary item ...........................         162,862              141,678              110,240
Income tax expense ................................................          58,750               51,125               40,982
                                                                         ----------          -----------           ----------
Income from continuing operations before extraordinary item .......         104,112               90,553               69,258
Income from discontinued operations ...............................              --                   --                2,625
Gain on sale of discontinued operations ...........................              --                   --                6,138
Extraordinary item - loss on early extinguishment of debt
     (net of income tax benefit of $28,474) .......................              --              (50,621)                  --
                                                                         ----------          -----------           ----------
      Net income ..................................................      $  104,112          $    39,932           $   78,021
                                                                         ==========          ===========           ==========


Basic net income (loss) per common share:
      Continuing operations .......................................      $     1.89          $      1.57           $     1.14
      Discontinued operations .....................................              --                   --                  .04
      Gain on sale of discontinued operations .....................              --                   --                  .10
      Extraordinary item - loss on early extinguishment of debt ...              --                 (.88)                  --
                                                                         ----------          -----------           ----------
      Net income per common share .................................      $     1.89          $       .69           $     1.28
                                                                         ==========          ===========           ==========

Diluted net income (loss) per common share:
      Continuing operations .......................................      $     1.84          $      1.51           $     1.11
      Discontinued operations .....................................              --                   --                  .04
      Gain on sale of discontinued operations .....................              --                   --                  .10
      Extraordinary item - loss on early extinguishment of debt ...              --                 (.84)                  --
                                                                         ----------          -----------           ----------
      Net income per common share .................................      $     1.84          $       .67           $     1.25
                                                                         ==========          ===========           ==========


Basic average common shares outstanding ...........................          55,119               57,791               61,078
      Dilutive effect of stock options and stock bonus plan .......           1,479                2,158                1,576
                                                                         ----------          -----------           ----------
Diluted average common shares outstanding .........................          56,598               59,949               62,654
                                                                         ==========          ===========           ==========
</TABLE>


                             See accompanying notes.


                                       21
<PAGE>   23

                             WESTPOINT STEVENS INC.

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               COMMON
                                                               STOCK
                                                             AND CAPITAL
                                                                 IN                                               ACCUMULATED
                                                               EXCESS OF        TREASURY STOCK                       OTHER
                                                     COMMON      PAR         --------------------   ACCUMULATED   COMPREHENSIVE
                                                     SHARES     VALUE        SHARES       AMOUNT      DEFICIT     INCOME (LOSS)
                                                     ------  ------------    ------     ---------   -----------   -------------
<S>                                                  <C>     <C>             <C>        <C>         <C>           <C>

Balance, January 1, 1997 ........................    69,414    $329,394      (7,711)    $ (70,316)    $(703,068)    $ (7,953)
     Comprehensive income:
          Net income ............................        --          --          --            --        78,021           --
          Minimum pension liability adjustment ..        --          --          --            --            --        5,595
          Foreign currency translation adjustment                                                                       (434)
     Comprehensive income .......................
     Exercise of management stock options
          including tax benefit .................       882       7,649         (13)         (282)           --           --
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............        --         308         198         2,240            --           --
     Purchase of treasury shares ................        --          --      (3,369)      (66,147)           --           --
                                                     ------    --------      ------     ---------     ---------     --------

Balance, December 31, 1997 ......................    70,296     337,351     (10,895)     (134,505)     (625,047)      (2,792)

     Comprehensive income:
          Net income ............................        --          --          --            --        39,932           --
          Minimum pension liability adjustment ..        --          --          --            --            --          813
          Foreign currency translation adjustment                                                                       (951)
     Comprehensive income .......................
     Exercise of management stock options
          including tax benefit .................       566       5,235         (57)       (1,666)           --           --
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............        --         851         212         2,421            --           --
     Purchase of treasury shares ................        --          --      (3,837)     (109,094)           --           --
                                                     ------    --------      ------     ---------     ---------     --------

Balance, December 31, 1998 ......................    70,862     343,437     (14,577)     (242,844)     (585,115)      (2,930)

     Comprehensive income:
          Net income ............................        --          --          --            --       104,112           --
          Foreign currency translation adjustment        --          --          --            --            --          818
      Comprehensive income ......................
      Exercise of management stock options
          including tax benefit .................       238       8,744         399           112            --           --
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............        --       2,184         295         3,193            --           --
     Issuance of restricted stock ...............        --       7,139         501         2,255            --           --
     Amortization of  compensation ..............        --          --          --            --            --           --
     Purchase of treasury shares ................        --          --      (5,477)     (126,688)           --           --
     Cash dividends .............................        --          --          --            --        (3,355)          --
     Stock dividends pursuant to Stock
          Bonus Plan ............................        --          --          --            --           (20)          --
                                                     ------    --------      ------     ---------     ---------     --------

Balance, December 31, 1999 ......................    71,100    $361,504     (18,859)    $(363,972)    $(484,378)    $ (2,112)
                                                     ======    ========     =======     =========     =========     ========

<CAPTION>
                                                        UNEARNED
                                                      COMPENSATION   TOTAL
                                                      ------------ ---------
<S>                                                   <C>          <C>

Balance, January 1, 1997 ........................      $    --     $(451,943)
     Comprehensive income:
          Net income ............................           --        78,021
          Minimum pension liability adjustment ..           --         5,595
          Foreign currency translation adjustment                       (434)
                                                                   ---------
     Comprehensive income .......................                     83,182
                                                                   ---------
     Exercise of management stock options
          including tax benefit .................           --         7,367
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............           --         2,548
     Purchase of treasury shares ................           --       (66,147)
                                                       -------     ---------

Balance, December 31, 1997 ......................           --      (424,993)

     Comprehensive income:
          Net income ............................           --        39,932
          Minimum pension liability adjustment ..           --           813
          Foreign currency translation adjustment                       (951)
                                                                   ---------
     Comprehensive income .......................                     39,794
                                                                   ---------
     Exercise of management stock options
          including tax benefit .................           --         3,569
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............           --         3,272
     Purchase of treasury shares ................           --      (109,094)
                                                       -------     ---------

Balance, December 31, 1998 ......................           --      (487,452)

     Comprehensive income:
          Net income ............................           --       104,112
          Foreign currency translation adjustment            --          818
                                                                   ---------
      Comprehensive income ......................                    104,930
                                                                   ---------
      Exercise of management stock options
          including tax benefit .................           --         8,856
     Issuance of stock pursuant to Stock Bonus
          Plan including tax benefit ............           --         5,377
     Issuance of restricted stock ...............       (9,394)           --
     Amortization of  compensation ..............          332           332
     Purchase of treasury shares ................           --      (126,688)
     Cash dividends .............................           --        (3,355)
     Stock dividends pursuant to Stock
          Bonus Plan ............................           --           (20)
                                                       -------     ---------

Balance, December 31, 1999 ......................      $(9,062)    $(498,020)
                                                       =======     =========
</TABLE>


                             See accompanying notes.


                                       22
<PAGE>   24

                             WESTPOINT STEVENS INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            YEAR ENDED DECEMBER 31,
                                                                                -------------------------------------------
                                                                                   1999             1998            1997
                                                                                -----------     -----------     -----------
<S>                                                                             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income .............................................................    $   104,112     $    39,932     $    78,021
    Adjustments to reconcile net income to net
       cash provided by (used for) operating activities:
          Depreciation and other amortization ..............................         84,091          80,567          77,225
          Gain on sale of discontinued operations ..........................             --              --          (6,138)
          Deferred income taxes ............................................         52,213          19,588          34,508
          Extraordinary item - loss on early extinguishment of debt ........             --          79,095              --
          Changes in assets and liabilities excluding the effect of
             acquisitions, dispositions and the Trade Receivables Program:
                Accounts receivable ........................................        (24,333)         (3,319)          1,566
                Inventories ................................................        (67,865)        (31,677)        (54,024)
                Prepaid expenses and other current assets ..................          4,209           4,211          (6,760)
                Accrued interest payable ...................................           (441)         (2,043)            283
                Accounts payable and other accrued liabilities .............            (95)          5,320         (18,113)
                Other-net ..................................................        (18,828)        (10,367)        (22,976)
                                                                                -----------     -----------     -----------
    Total adjustments ......................................................         28,951         141,375           5,571
                                                                                -----------     -----------     -----------
Net cash provided by operating activities ..................................        133,063         181,307          83,592
                                                                                -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures ...................................................       (148,610)       (147,463)       (152,137)
    Net proceeds from sale of business .....................................             --              --         120,840
    Net proceeds from sale of assets .......................................            537             825           1,081
    Purchase of businesses .................................................             --         (42,169)        (57,170)
                                                                                -----------     -----------     -----------
Net cash used for investing activities .....................................       (148,073)       (188,807)        (87,386)
                                                                                -----------     -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Senior Credit Facility:
       Borrowings ..........................................................      1,016,621       1,533,419       1,177,299
       Repayments ..........................................................       (887,218)     (1,360,702)     (1,088,616)
    Principal payments on long-term debt ...................................             --      (1,025,000)             --
    Net proceeds from Trade Receivables Program ............................          9,000          33,233         (21,233)
    Purchase of Common Stock for treasury ..................................       (126,688)       (110,760)        (66,429)
    Proceeds from sale of notes ............................................             --       1,000,000              --
    Proceeds from issuance of Common Stock .................................          6,285           4,679           6,177
    Cash dividends paid ....................................................         (3,355)             --              --
    Fees associated with refinancing .......................................             --         (84,275)             --
                                                                                -----------     -----------     -----------
Net cash provided by (used for) financing activities .......................         14,645          (9,406)          7,198
                                                                                -----------     -----------     -----------
Net increase (decrease) in cash and cash equivalents .......................           (365)        (16,906)          3,404
Cash and cash equivalents at beginning of period ...........................            527          17,433          14,029
                                                                                -----------     -----------     -----------
Cash and cash equivalents at end of period .................................    $       162     $       527     $    17,433
                                                                                ===========     ===========     ===========
</TABLE>

                             See accompanying notes.


                                       23
<PAGE>   25

                             WESTPOINT STEVENS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

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.

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
generally accepted accounting principles 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.

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, 1999, substantially all of the Company's
receivables were from companies in the retail industry.

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 $0.2 million and $0.5 million
are included in cash and cash equivalents at December 31, 1999 and 1998,
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, 1999 and 1998, approximately 83% 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 remainder of the inventories (approximately $75.2
million and $65.7 million at December 31, 1999 and 1998, respectively) are
valued at the lower of cost (substantially first-in, first-out method) or
market.

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

<TABLE>
<CAPTION>
                                     DECEMBER 31,
                              -----------------------
                                 1999          1998
                              ---------     ---------

<S>                           <C>           <C>
Finished goods ...........    $ 203,364     $ 170,896
Work in progress .........      188,778       160,995
Raw materials and supplies       60,164        59,466
LIFO reserve .............       (3,419)      (10,335)
                              ---------     ---------
                              $ 448,887     $ 381,022
                              =========     =========
</TABLE>

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 $82.3 million, $79.5 million
and $76.5 million in the years ended December 31, 1999, 1998 and 1997,
respectively.


                                       24
<PAGE>   26

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED

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

<TABLE>
<S>                                                      <C>
Buildings and improvements.............................. 10 to 40 Years
Machinery and equipment.................................  3 to 18 Years
Leasehold improvements..................................    Lease Terms
</TABLE>

HEDGING TRANSACTIONS. The Company engages in hedging activities within the
normal course of its business. Management has been authorized to manage exposure
to price fluctuations relevant to the purchase of cotton through the use of a
variety of derivative nonfinancial instruments. At December 31, 1999, these
instruments covered a portion of the Company's 2000 cotton needs. Derivative
nonfinancial instruments require or permit settlement by the delivery of
commodities and include exchange traded commodity futures contracts and options.
Gains and losses on these hedges, which were not material at December 31, 1999
and 1998, are deferred and subsequently recognized in income as cost of goods
sold in the same period as the hedged item. The Company does not hold or issue
derivative instruments for trading purposes.

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.

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 which are required by
the Employee Retirement Income Security Act of 1974. See Note 3 - 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 3 - 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 Pensions and Statement No.
112, Employer's Accounting for Postemployment Benefits.

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 6 -
Stockholders' Equity.

FAIR VALUE DISCLOSURES. Cash and cash equivalents: The carrying amounts reported
in the balance sheets for cash and cash equivalents approximates 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. The fair
value of the $1,464.8 million and $1,335.4 million of outstanding debt at
December 31, 1999 and 1998 was approximately $1,372.7 million and $1,349.2
million, respectively.

ACQUISITIONS AND GOODWILL. The Company's acquisitions are accounted for under
the purchase method of accounting. Under the purchase method of accounting, the
results of operations of the acquired businesses are included in the
accompanying consolidated financial statements as of their respective
acquisition dates. The assets and liabilities of acquired businesses are
included based on an allocation of the purchase price. The excess of the
purchase price over identified assets is classified as goodwill and is amortized
on a straight-line basis over a forty year period.


                                       25
<PAGE>   27

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES--CONTINUED

ACQUISITIONS AND GOODWILL (CONTINUED). The Company reviews the recorded value of
its goodwill annually, or sooner if events or changes in circumstances indicate
that the carrying amount may exceed fair value. Recoverability is then
determined by comparing the undiscounted net cash flows of the assets to which
the goodwill applies to the net book value of those assets, including goodwill.

During the year ended December 31, 1997, the Company acquired certain
manufacturing facilities and other operations for approximately $57 million. The
assets acquired consisted of property and equipment, inventories and other
related assets. The excess of the purchase price over the assets acquired was
approximately $38 million.

In October 1998, the Company acquired the operations of a manufacturer of
bedding products for approximately $42.2 million. The assets acquired consisted
of property and equipment, inventories and other related assets. The excess of
the purchase price over the assets acquired was approximately $35.1 million.

Pro forma results have not been presented as they are not significantly
different than reported amounts.

IMPAIRMENT OF LONG-LIVED ASSETS. Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of.

COMMON STOCK. On February 2, 1998, the Board of Directors declared a two-for-one
split of the Company's common stock, effected in the form of a stock dividend
payable on March 2, 1998 to stockholders of record on February 16, 1998. All
agreements concerning stock options and other commitments payable in shares of
the Company's common stock provide for the issuance of additional shares due to
the declaration of the stock split. This stock split has been reflected in the
Consolidated Statements of Stockholders' Equity (Deficit) at January 1, 1997.
All references to number of shares, except shares authorized, and to per share
information in the accompanying consolidated financial statements have been
adjusted to reflect the stock split on a retroactive basis.

REVENUE RECOGNITION. The Company recognizes revenue when title to the goods sold
passes to the buyer, which is generally at the time of shipment.

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 excludes any dilutive effects of options, warrants and convertible
securities. All earnings per share amounts for all periods have been presented,
and where appropriate, restated to conform to the Statement 128 requirements.

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.

ACCOUNTING POLICIES ADOPTED AND NOT YET ADOPTED. In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities; in June 1999, the FASB issued
Statement No. 137, which deferred the effective date for the Company until
January 1, 2001. The FASB is also currently considering several amendments to
FAS 133. The statement (and its amendments) could require the Company to
recognize all derivatives on the balance sheet at fair value. The Company plans
to adopt Statement 133 at January 1, 2001 but has not yet completed its analysis
of the impact that this pronouncement (and the potential amendments) may have on
its financial statements.

Effective January 1, 1999, the Company adopted Statement of Position 98-1 ("SOP
98-1"), Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use, which provides guidance as to when certain costs incurred during
an internal-use software development project should be capitalized. Adoption of
SOP 98-1 did not have a material effect on the Company's financial statements.

RECLASSIFICATIONS. Certain prior period amounts have been reclassified to
conform with the 1999 presentation.


                                       26
<PAGE>   28

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2.   INDEBTEDNESS AND FINANCIAL ARRANGEMENTS

Indebtedness is as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                            -------------------------
                                               1999           1998
                                            ----------     ----------
<S>                                         <C>            <C>
Short-term indebtedness
    Senior Credit Facility .............    $   89,803     $   60,400
                                            ==========     ==========

Long-term indebtedness
    Senior Credit Facility .............    $  375,000     $  275,000
    7 7/8% Senior Notes due 2005 .......       525,000        525,000
    7 7/8% Senior Notes due 2008 .......       475,000        475,000
                                            ----------     ----------
                                            $1,375,000     $1,275,000
                                            ==========     ==========
</TABLE>

On April 29, 1998, the Company announced cash tender offers and consent
solicitations for all of its then outstanding 8 3/4% Senior Notes due 2001 and
its 9 3/8% Senior Subordinated Debentures due 2005. The tender offers were
consummated on June 9, 1998. The Company purchased the tendered notes with the
proceeds from the issuance of $525 million of its 7 7/8% Senior Notes due 2005
and $475 million of its 7 7/8% Senior Notes due 2008 and with the proceeds from
the refinancing of its existing Senior Credit Facility with an amended and
restated Senior Credit Facility that provided for a term of 6 1/2 years and an
increased commitment to $550 million. The issuance of the new notes and the
amendment and restatement of the Senior Credit Facility were also consummated on
June 9, 1998. On June 10, 1998, the Company announced the redemption of its 9%
Sinking Fund Debentures due 2017 and the redemption was consummated on July 9,
1998 with available borrowings under the Senior Credit Facility. During the
third quarter of 1998, the Company amended the Senior Credit Facility to provide
for an increased commitment to $575 million. As a result of the refinancing
transactions discussed above, the Company recorded an extraordinary charge of
$50.6 million, net of income taxes of $28.5 million, related to the early
extinguishment of debt. The extraordinary charge consisted primarily of tender
premiums and the write-off of deferred debt fees. During the second quarter of
1999, the Company increased availability under the Senior Credit Facility from
$575 million to $800 million. The conditions of the increased revolver continue
as previously stated, including the revolver expiration date of November 30,
2004.

The Company's Senior Credit Facility with certain lenders (collectively, the
"Banks") consists of a $800 million revolving credit facility ("Revolver") due
November 30, 2004. The Company has included $375 million of Revolver in
long-term debt at December 31, 1999 because the Company intends that at least
that amount would remain outstanding during the next twelve months. Borrowing
availability under the Senior Credit Facility was reduced by approximately $20.5
million of outstanding letters of credit at December 31, 1999.

At the option of the Company, interest under the Senior Credit Facility will be
payable monthly, either at the prime rate or at LIBOR plus 0.75%. Upon the
Company achieving certain ratios of EBITDA (as defined) to cash interest
expense, interest rates can be reduced up to 0.5%. At December 31, 1999, the
interest rates under this facility were LIBOR plus 0.25%. The Company pays a
facility fee in an amount equal to 0.25% of each Bank's commitment under the
Revolver. 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 receivable.

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.


                                       27
<PAGE>   29

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2.   INDEBTEDNESS AND FINANCIAL ARRANGEMENTS--CONTINUED

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. Certain provisions
require the Company to maintain certain financial ratios, a minimum interest
coverage ratio and a minimum consolidated net worth (as defined). At December
31, 1999, the Company could have made restricted payments aggregating
approximately $111.7 million.

The Company, through a "bankruptcy remote" receivables subsidiary, has a Trade
Receivables Program which provides for the sale of accounts receivable on a
revolving basis. In December 1999, the Company amended and extended its existing
Trade Receivables Program for an additional one-year period with an independent
issuer of receivables backed commercial paper. Under the terms of the Trade
Receivables Program, the Company has agreed to sell on an ongoing basis, and
without recourse, an undivided ownership interest in its accounts receivable
portfolio. The Company maintains the balance in the designated pool of accounts
receivable sold by selling undivided interests in new receivables as existing
receivables are collected. The agreement permits the sale of up to $160 million
of accounts receivable. The cost of the Trade Receivables Program is charged to
selling and administrative expense in the accompanying Consolidated Statements
of Income. At December 31, 1999 and 1998, $154.0 million and $145.0 million,
respectively, of accounts receivable had been sold pursuant to the trade
receivables programs and the sale is reflected as a reduction of accounts
receivable in the accompanying Consolidated Balance Sheets.

Excluding amounts related to the Revolver, there are no maturities of long-term
debt for the next five years.


3.   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, 1999
and 1998 (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                     --------------------------
                                                                        1999            1998
                                                                     ----------      ----------

<S>                                                                  <C>             <C>
Change in benefit obligation:
    Projected benefit obligation at beginning of year ......         $  331,846      $  311,001
    Service cost ...........................................              8,601           7,838
    Interest cost ..........................................             23,305          23,080
    Plan amendments ........................................                 27              --
    Actuarial (gains) or losses ............................            (29,404)         15,040
    Benefit payments .......................................            (28,127)        (25,113)
                                                                     ----------      ----------
Projected benefit obligation at end of year ................         $  306,248      $  331,846
                                                                     ==========      ==========

Change in plan assets:
    Fair value of plan assets at beginning of year .........         $  340,739      $  331,396
    Actual return on plan assets ...........................             (9,711)         26,039
    Employer contributions .................................             10,377           8,417
    Benefit payments .......................................            (28,127)        (25,113)
                                                                     ----------      ----------
Fair value of plan assets at end of year ...................         $  313,278      $  340,739
                                                                     ==========      ==========
</TABLE>


                                       28
<PAGE>   30

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3.  EMPLOYEE BENEFIT PLANS--CONTINUED

PENSION PLAN--CONTINUED

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                        --------------------------
                                                           1999             1998
                                                        ---------        ---------
<S>                                                     <C>              <C>
Funded status:
    Projected benefit obligation .................      $(306,248)       $(331,846)
    Fair value of assets .........................        313,278          340,739
                                                        ---------        ---------
    Funded status ................................          7,030            8,893
                                                        ---------        ---------
    Unrecognized amounts:
       Prior service cost ........................              7              (38)
       Net actuarial losses ......................         54,952           42,729
                                                        ---------        ---------
       Total unrecognized ........................         54,959           42,691
                                                        ---------        ---------
Prepaid pension cost at year-end .................      $  61,989        $  51,584
                                                        =========        =========

Weighted average assumptions as of December 31:
    Discount rate ................................           8.25%            7.25%
    Expected return on plan assets ...............           10.0%            10.0%
    Rate of compensation increase ................            3.5%             3.5%


<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        --------------------------
                                                           1999            1998
                                                        ---------        ---------
<S>                                                     <C>            <C>
Components of net periodic pension cost (benefit):
    Service cost .................................      $   8,601        $   7,838
    Interest cost ................................         23,305           23,080
    Expected return on plan assets ...............        (33,058)         (32,177)
    Net amortization .............................          1,124              227
                                                        ---------        ---------
Net periodic pension benefit .....................      $     (28)       $  (1,032)
                                                        =========        =========
</TABLE>


Plan assets are primarily invested in United States Government and corporate
debt securities and equity securities. At December 31, 1999 and 1998, the
Company's pension plans held 705,558 shares of the Company's common stock with
an aggregate cost of $20 million and market values of $12.3 million and $22.3
million, respectively.

RETIREMENT SAVINGS PLAN

The Company matches 50 percent of each employee's before-tax contributions up to
two percent of the employee's compensation. Company contributions may be made
either in cash or in shares of Common Stock of the Company. During 1999, 1998
and 1997, the Company charged $2.6 million, $2.3 million and $2.2 million,
respectively, to expense in connection with the 401K Plan.


                                       29
<PAGE>   31
                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3.   EMPLOYEE BENEFIT PLANS--CONTINUED

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):

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                               -------------------------
                                                                                  1999           1998
                                                                               ----------     ----------
<S>                                                                            <C>            <C>
Accumulated post-retirement benefit obligation at beginning of year .......    $   16,173     $   17,517
    Service cost ..........................................................             1              1
    Interest cost .........................................................         1,105          1,194
    Actuarial gains .......................................................        (1,214)          (729)
    Benefit payments ......................................................        (1,462)        (1,810)
                                                                               ----------     ----------
Accumulated post-retirement benefit obligation at end of year .............    $   14,603     $   16,173
                                                                               ==========     ==========
</TABLE>

Net periodic post-retirement benefit plans expense is not material during the
three year period ended December 31, 1999.

As of December 31, 1999, the actuarial assumptions include a discount rate of
8.25% and a medical care trend rate of 7.5% for 2000, grading down to 6% by
2003. 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, 1999 by
approximately $0.4 million, and the aggregate service and interest cost
components of net periodic post-retirement benefit cost for the year ended
December 31, 1999 by an immaterial amount.


4.   OTHER EXPENSE--NET

Included in "Other expense-net" in the accompanying Consolidated Statements of
Income for each of the years in the three year period ended December 31, 1999,
1998 and 1997, is the amortization of deferred financing fees of $2.9 million,
$3.3 million and $3.9 million, respectively, less certain miscellaneous income
items.


5.   INCOME TAXES

The Company accounts for income taxes in accordance with Statement 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 before extraordinary item
consisted of the following (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                ----------------------------------------
                                                                   1999           1998           1997
                                                                ----------     ----------     ----------

<S>                                                             <C>            <C>            <C>
Current
        Federal ............................................    $    2,039     $      966     $    2,945
        State ..............................................         2,018            792          2,302
        Foreign ............................................          (136)           (50)           461
Deferred ...................................................        54,829         49,417         40,247
                                                                ----------     ----------     ----------
                                                                $   58,750     $   51,125     $   45,955
                                                                ==========     ==========     ==========
</TABLE>


                                       30
<PAGE>   32

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5.   INCOME TAXES--CONTINUED

Income tax expense (benefit) is included in the financial statements as follows
(in thousands of dollars):

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------------
                                                                        1999           1998           1997
                                                                     ----------     ----------     ----------
<S>                                                                  <C>            <C>            <C>
Continuing operations ...........................................    $   58,750     $   51,125     $   40,982
Discontinued operations .........................................            --             --          1,368
Gain on sale of discontinued operations .........................            --             --          3,605
                                                                     ----------     ----------     ----------
                                                                     $   58,750     $   51,125     $   45,955
                                                                     ==========     ==========     ==========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------------
                                                                        1999           1998           1997
                                                                     ----------     ----------     ----------
<S>                                                                  <C>            <C>            <C>
Income tax expense (benefit) at federal statutory income
    tax rate ....................................................    $   57,002     $   49,587     $   43,391
State income taxes (net of effect of federal
    income tax) .................................................         3,303          1,232          2,264
Other-net .......................................................        (1,555)           306            300
                                                                     ----------     ----------     ----------
Income tax expense ..............................................    $   58,750     $   51,125     $   45,955
                                                                     ==========     ==========     ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                    -------------------------
                                                                                       1999           1998
                                                                                    ----------     ----------

<S>                                                                                 <C>            <C>
Deferred tax liabilities:
        Basis differences resulting from reorganization ........................    $ (185,146)    $ (148,501)
        Accelerated depreciation ...............................................       (81,632)       (77,398)
        Income taxes related to prior years, including interest ................       (16,815)       (17,264)
        Nondeductible expenses .................................................       (41,549)       (37,948)
        Other ..................................................................            --         (1,424)

Deferred tax assets:
        Reserves for litigation, environmental, employee benefits and other ....        29,874         37,543
        Other ..................................................................        11,265          8,664
                                                                                    ----------     ----------
                                                                                    $ (284,003)    $ (236,328)
                                                                                    ==========     ==========
</TABLE>

At December 31, 1999, the Company has estimated operating net loss carryforwards
("NOLs") expiring in 2004-2009 of approximately $168 million available to reduce
future federal taxable income. Due to the ownership change which occurred
September 16, 1992 in connection with a reorganization, the utilization of NOLs
generated prior to this date are subject to limitation under Internal Revenue
Code Section 382.


                                       31
<PAGE>   33

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6.   STOCKHOLDERS' EQUITY (DEFICIT)

COMPREHENSIVE INCOME

In 1998 the Company adopted Statement No. 130, Reporting Comprehensive Income.
Statement 130 requires presentation of comprehensive income (net income plus
changes in currency translation adjustments and minimum pension liability). The
Company has changed the format of the Consolidated Statements of Stockholders'
Equity (Deficit) to present comprehensive income for all periods.

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

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                                     ----------------------------------------
                                                                        1999           1998           1997
                                                                     ----------     ----------     ----------

<S>                                                                  <C>            <C>            <C>
Foreign currency translation adjustment .........................    $   (2,112)    $   (2,930)    $   (1,979)
Minimum pension liability .......................................            --             --         (1,291)
Income tax benefit ..............................................            --             --            478
                                                                     ----------     ----------     ----------
Accumulated other comprehensive income (loss) ...................    $   (2,112)    $   (2,930)    $   (2,792)
                                                                     ==========     ==========     ==========
</TABLE>


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 which 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 5.4 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 approximately equal to fair market value on
the date of grant. Such options are exercisable on the date of grant for a
period of ten years. 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," 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 the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted using the fair
value method of that Statement. The fair value for these options was estimated
at the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1999, 1998 and 1997, respectively:
risk-free interest rates of 5.8%, 5.6% and 6.1%; no dividend yield; volatility
factors of the expected market price of the Company's common stock of .300, .265
and .25; and a weighted-average expected life of the option of 8 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which 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.


                                       32
<PAGE>   34

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6.   STOCKHOLDERS' EQUITY (DEFICIT)--CONTINUED

STOCK OPTIONS AND RESTRICTED STOCK--CONTINUED

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Pro forma stock based
compensation costs resulted in 1999 pro forma net income of $96.6 million (or
pro forma diluted net income per share of $1.71), 1998 pro forma net income of
$35.5 million (or pro forma diluted net income per share of $.59) and 1997 pro
forma net income of $75.5 million (or pro forma diluted net income per share of
$1.20).

Changes in outstanding options were as follows:

<TABLE>
<CAPTION>
                                                         NUMBER OF SHARES
                                                          (IN THOUSANDS)                   WEIGHTED AVERAGE
                                              -------------------------------------------    OPTION PRICE
                                              QUALIFIED PLANS  CONTRACTUAL       TOTAL         PER SHARE
                                              ---------------  -----------     ----------  ----------------

<S>                                           <C>              <C>             <C>         <C>
Options outstanding at December 31, 1996              3,380            410          3,790     $     9.78
    Granted                                           1,176             20          1,196     $    20.07
    Exercised and terminated                           (514)          (390)          (904)    $     7.15
                                                 ----------     ----------     ----------     ----------
Options outstanding at December 31, 1997              4,042             40          4,082     $    13.37
    Granted                                             754             --            754     $    34.08
    Exercised and terminated                           (605)            --           (605)    $     8.79
                                                 ----------     ----------     ----------     ----------
Options outstanding at December 31, 1998              4,191             40          4,231     $    17.71
    Granted                                           2,477             --          2,477     $    25.98
    Exercised and terminated                           (817)           (20)          (837)    $    14.30
                                                 ----------     ----------     ----------     ----------
Options outstanding at December 31, 1999              5,851             20          5,871     $    21.42
                                                 ==========     ==========     ==========
</TABLE>

At December 31, 1999, options for 2,635,863 shares were exercisable at prices
ranging from $6.25 to $36.81 per share.

During 1999, the Company awarded to certain key employees 510,000 restricted
shares, of which 500,000 were not granted pursuant to any plan. The awards are
subject to certain vesting requirements and accordingly 501,000 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 1999, $0.3 million was
charged to expense related to restricted shares. In conjunction with one of the
restricted stock awards, income tax withholding obligations were paid by the
Company on November 26, 1999, and the Company received reimbursement for those
income tax withholding obligations (plus interest) from the employee on February
4, 2000.


STOCK BONUS PLAN

The Company sponsors an employee benefit plan, the WestPoint Stevens Inc. 1995
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 1999, 1998 and 1997, respectively, bonus awards were deemed
earned by forty-four, forty-nine and forty-seven employees covering an aggregate
of 194,604 shares, 266,121 shares and 398,456 shares of Common Stock. For
performance year 1999 the Stock Bonus Plan provided for vesting of the bonus
awards of 10 percent on January 1 of the year following the year of award and 10
percent 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 percent on January 1 of the
year following the year of award and 20 percent in each of the next four years
if the employee continues employment with the Company. The Company charged $7.9
million, $6.6 million and $4.4 million to expense in 1999, 1998 and 1997,
respectively, in connection with the Stock Bonus Plan.


                                       33
<PAGE>   35

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7.   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 sixteen 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, 1999 under operating leases that have initial or remaining
noncancellable lease terms in excess of one year (in thousands of dollars):


<TABLE>
    YEAR ENDING DECEMBER 31,
    ------------------------
                 <S>                                            <C>
                 2000 .....................................     $   22,091
                 2001 .....................................         17,679
                 2002 .....................................         12,968
                 2003 .....................................         10,842
                 2004 .....................................          7,650
                 Years subsequent to 2004 .................          8,207
                                                                ----------
                 Total minimum lease payments .............     $   79,437
                                                                ==========
</TABLE>

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):


<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31,
                                  ----------------------------------------
                                     1999           1998           1997
                                  ----------     ----------     ----------

<S>                               <C>            <C>            <C>
Minimum lease payments .......    $   37,256     $   34,295     $   30,662
Less sublease rentals ........        (3,907)        (3,738)        (3,986)
                                  ----------     ----------     ----------
Rent expense .................    $   33,349     $   30,557     $   26,676
                                  ==========     ==========     ==========
</TABLE>


8.   LITIGATION AND CONTINGENT LIABILITIES

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 non-hazardous 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.


                                       34
<PAGE>   36

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8.   LITIGATION AND CONTINGENT LIABILITIES--CONTINUED

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.


9.   CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                      ----------------------------------------
                                                         1999           1998           1997
                                                      ----------     ----------     ----------
(IN THOUSANDS OF DOLLARS)

<S>                                                   <C>            <C>            <C>
Supplemental disclosures of cash flow information:
   Cash paid during the period:
        Interest .................................    $  104,062     $  107,720     $  107,410
                                                      ==========     ==========     ==========

        Income taxes .............................    $    2,669     $    2,326     $    9,444
                                                      ==========     ==========     ==========
</TABLE>

Included in the above 1999 interest paid is $1.2 million of capitalized interest
related to capital expenditure projects.


10.  DISCONTINUED OPERATIONS

On August 27, 1997, the Company closed a transaction pursuant to which WestPoint
Stevens sold its subsidiaries AIH Inc., Alamac Knit Fabrics, Inc. and Alamac
Enterprises Inc. (collectively, "Alamac Knit Fabrics subsidiary"), other than
cash, accounts receivable of approximately $42.5 million and a yarn mill located
in Whitmire, S.C., to Dyersburg Corporation for approximately $126 million. The
Whitmire facility was transferred by the Company to Home Fashions to support the
Company's expansion of its sheeting production capacity. As a result of the
transaction, the Company accounted for the Alamac Knit Fabrics subsidiary as a
discontinued operation and the accompanying financial statements have been
adjusted and restated accordingly.

Data relative to Alamac Knit Fabrics subsidiary is as follows (in thousands of
dollars):

<TABLE>
<CAPTION>
                                                            PERIOD ENDED
                                                           AUGUST 27, 1997
                                                           ---------------

<S>                                                        <C>
Net sales ........................................              $  162,428
                                                                ==========

Operating earnings ...............................              $    9,189
                                                                ==========

Net income .......................................              $    2,625
                                                                ==========

Gain on sale, net of income taxes of $3,605 ......              $    6,138
                                                                ==========

Capital expenditures, including capital leases ...              $    3,237
                                                                ==========

Depreciation and other amortization ..............              $    5,501
                                                                ==========
</TABLE>


                                       35
<PAGE>   37

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11.  MAJOR CUSTOMER INFORMATION

The Company's consumer home fashions products are sold primarily to domestic
chain stores, mass merchants, department and specialty stores. Sales to three
customers, as a percent of net sales, amounted to approximately 14%, 13% and 11%
for the year ended December 31, 1999. Sales to two customers, as a percent of
net sales, amounted to approximately 13% and 11% for the year ended December 31,
1998. Sales to two customers, as a percent of net sales, amounted to
approximately 13% and 10% for the year ended December 31, 1997. During 1999,
1998 and 1997, the Company's six largest customers accounted for approximately
56%, 53% and 52%, respectively, of the Company's net sales.


                                       36
<PAGE>   38

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12.  QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                QUARTER
                                                                        ----------------------------------------------------
                                                                          FIRST         SECOND       THIRD          FOURTH
                                                                        ----------    ----------   ----------     ----------

(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31, 1999

<S>                                                                     <C>           <C>          <C>            <C>
Net sales .......................................................       $    441.5    $    453.5   $    503.1     $    485.2
Gross earnings ..................................................            113.5         118.3        143.7          129.8
Operating earnings ..............................................             49.3          56.4         86.5           75.9

Net income ......................................................             15.6          19.6         38.1           30.8

Basic net income per common share (1):
    Net income per common share .................................              .28           .35          .69            .57

Diluted net income per common share (1):
    Net income per common share .................................              .27           .34          .67            .56




YEAR ENDED DECEMBER 31, 1998
<S>                                                                     <C>           <C>          <C>            <C>
Net sales .......................................................       $    398.7    $    437.0   $    473.2     $    470.1
Gross earnings ..................................................             99.5         113.3        134.4          127.5
Operating earnings ..............................................             44.4          52.6         79.3           72.0

Income from continuing operations ...............................             11.7          15.8         34.1           29.0
Extraordinary item - loss on early extinguishment of debt .......               --         (50.6)          --             --
                                                                        ----------    ----------   ----------     ----------
Net income (loss) ...............................................             11.7         (34.8)        34.1           29.0

Basic net income (loss) per common share (1):
    Continuing operations .......................................              .20           .27          .59            .51
    Extraordinary item - loss on early extinguishment of debt ...               --          (.87)          --             --
                                                                        ----------    ----------   ----------     ----------
    Net income (loss) per common share ..........................              .20          (.60)         .59            .51

Diluted net income (loss) per common share (1):
    Continuing operations .......................................              .19           .26          .57            .49
    Extraordinary item - loss on early extinguishment of debt ...               --          (.83)          --             --
                                                                        ----------    ----------   ----------     ----------
    Net income (loss) per common share ..........................              .19          (.57)         .57            .49
</TABLE>

(1) Net income (loss) per common share calculations for each of the quarters is
based on the average common shares outstanding for each period.


                                       37
<PAGE>   39

                             WESTPOINT STEVENS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13.  SUBSEQUENT EVENTS

On February 11, 2000, the Company announced that it received a proposal from
Holcombe T. Green, Jr., Chairman and Chief Executive Officer of the Company, to
acquire the Company in a leveraged buyout transaction. Mr. Green proposed that
all of the outstanding shares of the Company's common stock, other than shares
held by Mr. Green and his affiliates and certain other shareholders to be
identified in the future (which might include certain members of the Company's
management), be acquired for a cash purchase price of $21.00 per share through a
merger of an entity owned by Mr. Green's affiliates with the Company.

On February 14, 2000, seven individual suits were filed against the Company and
certain of its directors in the Court of Chancery of the State of Delaware in
and for New Castle County. The plaintiffs in these cases allege, among other
things, that the $21 offer is unfair and inadequate; was not negotiated at arms
length; that members of the Company's management including certain defendants
violated their duty of fair dealing by timing the Transaction to cap the market
price for the Company's stock before the market reacted to the announcement of
the Company's excellent results in 1999; and the management group with the
acquiescence of the Company's Board of Directors will continue to breach their
fiduciary duties owed to the plaintiffs unless injunctive relief is granted. The
Complainants seek class action status, preliminary and permanent injunctive
relief against the consummation of the Transaction, to rescind the Transaction
if consummated or the award of an unspecified amount of class rescissory
damages, an order for the defendants to account to the plaintiffs and other
class members for all damages suffered as the result of alleged wrongdoing,
costs, disbursements and attorneys' and experts' fees in an unspecified amount.
The Company believes that the allegations contained in the complaints are
without merit and intends to contest the action vigorously on behalf of itself
and its directors.

On March 24, 2000, the Company announced that its Board of Directors had
approved and adopted a plan of recapitalization pursuant to which shares of
common stock held by all stockholders, other than the Company's Chief Executive
Officer, President, Chief Financial Officer, other senior managers and their
affiliates and certain other stockholders, will be reclassified into a new
series of stock that will be redeemed for $22.00 per share in cash in the
recapitalization. Consummation of the plan of recapitalization is subject to,
among other things, stockholders' approval and the negotiation of agreements
relating to the equity and debt financing necessary to pay the redemption price,
refinance outstanding bank indebtedness, provide for sufficient working capital
and pay all related fees and expenses. The Company's senior notes due 2005 and
2008 will remain outstanding. The Company is in the process of evaluating
commitment letters received from various prospective equity and debt financing
sources. There can be no assurance that a transaction with Mr. Green and his
affiliates or any other party will result from this process.

                                       38

<PAGE>   40

                                    PART III

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

    None.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    IDENTIFICATION OF DIRECTORS

    The following table lists the name, age 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.


<TABLE>
<CAPTION>

                                                   Term    Positions with                       Served as
               Name                    Age        Expires    the Company                       Director Since
               ----                    ---        -------  --------------                      --------------
     <S>                               <C>        <C>      <C>                                 <C>                <C>
     Class I
     M. Katherine Dwyer                 51          2002     Director                          October            1996
     Gerald B. Mitchell                 72          2002     Director                          September          1992

     Class II
     Holcombe T. Green, Jr.             60          2000     Chairman of the Board and         September          1992
                                                                Chief Executive Officer
     John F. Sorte                      52          2000     Director                          January            1993


     Class III
     Hugh M. Chapman                    67          2001     Director                          August             1997
     John G. Hudson                     74          2001     Director                          September          1992
     Thomas J. Ward                     53          2001     Director; President and           October            1998
                                                                Chief Operating Officer
</TABLE>

         M. KATHERINE DWYER. Until January 1, 2000, Ms. Dwyer was Senior Vice
President of Revlon, Inc. and President of two divisions, Revlon Consumer
Products USA and from November 1995, Revlon Cosmetics USA. Previously, Ms. Dwyer
served as Executive Vice President and General Manager of Mass Cosmetics and
Executive Vice President of Cosmetics and Fragrance Marketing for Revlon North
America. She joined Revlon in June 1993. Prior to joining Revlon, Ms. Dwyer was
Vice President of Marketing Consumer Products for Clairol, Inc., from 1991 until
1993; Executive Vice President and General Manager for Victoria Creations from
1989 to 1991; and Vice President of US Communications and Group Director of Skin
Care for Avon Products, Inc., from 1987 until 1989. Ms. Dwyer is a director of
Reebok International Ltd. (and a member of its compensation and audit
committees).

         GERALD B. MITCHELL. Mr. Mitchell retired in 1988 after serving as
Chairman of Dana Corporation, an auto parts original equipment manufacturer. He
also is a director of Geo Weston Ltd. (and a member of its pension committee and
chairman of its environment, health and safety committee), Worthington
Industries (and a member of its compensation committee) and Eastman Chemical
Company, Inc. (and a member of its director affairs committee and chairman of
its nominating committee).

         HOLCOMBE T. GREEN, JR. Mr. Green has been Chairman and Chief Executive
Officer of the Company since October 22, 1992. Mr. Green is the sole shareholder
of the general partner of WPS Investors, L.P., a significant shareholder of the
Company.

         JOHN F. SORTE. Mr. Sorte has been President of New Street Advisors
L.P., a merchant bank, and of New Street Investments L.P., its broker-dealer
affiliate, since he co-founded such entities in March 1994. From April 1992
until February 1994, Mr. Sorte served as President and Chief Executive Officer
of New Street Capital Corporation ("New Street Capital"). Mr. Sorte served as
President and Chief Executive Officer of The Drexel Burnham Lambert Group Inc.
from July 1990 until April 1992; as Executive Vice President and co-head of
Corporate Finance of Drexel Burnham Lambert Incorporated ("Drexel"), an
investment banking firm and predecessor to New Street Capital, from January 1989
to June 1990 and previously as a Managing Director of Drexel. Mr. Sorte also is
a director of Vail Resorts, Inc. (and a member of its audit committee) and is
Chairman of The New York Media Group, Inc.


                                      39


<PAGE>   41

         HUGH M. CHAPMAN. Mr. Chapman, from January 1992 until his retirement in
June 1997, served as Chairman of NationsBank, National Association (South). He
also is a director of SCANA Corporation (and a member of its executive
committee, chairman of its management development and corporate performance
committee and chairman of its long term compensation committee), The Williams
Companies Inc. (and a member of its nominating committee) and Printpack Inc.
(and chairman of its audit committee).

         JOHN G. HUDSON. Mr. Hudson, from July 1986 until his retirement in
September 1990, served as President of Avondale Mills, Inc., a textile
manufacturer.

         THOMAS J. WARD. Mr. Ward has been President and Chief Operating Officer
since January 1, 1997. Mr. Ward was Executive Vice President/Sales and Marketing
and President-Home Fashions Division from October 1992 and September 1992,
respectively, until December 31, 1996. Mr. Ward originally joined the Company in
connection with its acquisition of J.P. Stevens & Co., Inc. ("Stevens") in 1988;
he had been with Stevens since 1969. Mr. Ward served as Vice President/Sales of
Stevens since August 1988 and as President of Stevens since August 1989.

         COMMITTEES OF THE BOARD OF DIRECTORS

         The Board of Directors of the Company has an Audit Committee, a
Compensation Committee, a Cotton Committee and a Nominating Committee, the
current members of which are named below.

                        BOARD COMMITTEE MEMBERSHIP ROSTER
                            (AS OF FEBRUARY 1, 2000)

<TABLE>
<CAPTION>
                                                                                               MANAGEMENT
              NAME                AUDIT       COMPENSATION    COTTON       NOMINATING           PENSION**
=========================================================================================================
        <S>                       <C>         <C>             <C>          <C>                 <C>
         H. M. Chapman             X*                                                               X
=========================================================================================================
          M. K. Dwyer                              X                            X
---------------------------------------------------------------------------------------------------------
        H. T. Green, Jr.                                        X               X*
---------------------------------------------------------------------------------------------------------
          J. G. Hudson             X               X            X*              X
---------------------------------------------------------------------------------------------------------
         G. B. Mitchell                            X*                           X
---------------------------------------------------------------------------------------------------------
          J. F. Sorte              X                                                                X*
---------------------------------------------------------------------------------------------------------
           T. J. Ward                                                                               X
=========================================================================================================
</TABLE>

*    Chairperson
**   The Management Pension Committee is not a committee of the Board of
     Directors.




                                       40

<PAGE>   42



         IDENTIFICATION OF EXECUTIVE OFFICERS

         The following individuals are the executive officers of the Company:


<TABLE>
<CAPTION>

                   NAME OF OFFICER                         Age                        Title
                   ---------------                         ---                        -----
<S>                                                        <C>      <C>
Holcombe T. Green, Jr................................       60      Chairman of the Board of Directors and
                                                                         Chief Executive Officer

Thomas J. Ward.......................................       53      President and Chief Operating Officer

David C. Meek........................................       45      Executive Vice President/Finance and
                                                                         Chief Financial Officer

William F. Crumley...................................       62      Executive Vice President/Operations

John T. Toolan.......................................       41      Executive Vice President/President Sales and
                                                                    Marketing

Joan E. Amberg.......................................       38      Senior Vice President/President Domestic Sales

Lanny L. Bledsoe.....................................       63      Senior Vice President - Sheet Manufacturing

</TABLE>

         For a discussion of the business experience of Messrs. Green and Ward,
see "Identification of Directors."

         DAVID C. MEEK. Mr. Meek joined the Company on November 22, 1999, as
Executive Vice President and became Executive Vice President-Finance and Chief
Financial Officer on January 1, 2000. Prior to joining the Company Mr. Meek was
employed as Managing Director, Textiles, Floor Coverings and Apparel Investment
Banking for SunTrust Equitable Securities from 1998, Director, Corporate
Finance, SunTrust Capital Markets, Inc. from 1997 and Executive Vice President
and Director for Mount Vernon Mills, Inc. from 1991.

         WILLIAM F. CRUMLEY. Mr. Crumley originally joined the Company as Vice
President/Manufacturing for Stevens Terry and Bath Products in 1989. He then
became Vice President/Manufacturing for Bed Products, Finishing Fabrication and
Distribution, and in 1991 assumed the same additional responsibilities for the
Company's accessories operations. In September 1992, Mr. Crumley became
Executive Vice President/Manufacturing of the Company and became Executive Vice
President/Operations on February 11, 2000. See "Employment Agreements,
Termination Provisions and Change in Control Arrangements."

         JOHN T. TOOLAN. Mr. Toolan has been Executive Vice President of the
Company and President of Sales and Marketing since October 28, 1999. He was
Executive Vice President of the Company and President of the Domestic Marketing
Division from January 1, 1999. He was Senior Vice President of the Company from
January 1, 1997, and President of the Fashion Brands Division since January 1,
1998. Previously he served as Senior Vice President/Home Fashions Division from
January 1, 1996, and Vice President/Home Fashions Division from October 1, 1994.
Since May 1990 until joining the Company in October 1994, Mr. Toolan was Vice
President Sales of Crown Crafts Inc.

         JOAN E. AMBERG. Ms. Amberg has been Senior Vice President of the
Company and President of the Domestic Sales since January 28, 2000. She was
Senior Vice President-Merchandising from January 1, 2000, Vice President
Operations from January 1, 1999, and Vice President Custom Brands Division from
January 1, 1997. Since January 1, 1995, she served in other sales management
positions.

         LANNY L. BLEDSOE. Mr. Bledsoe has been Senior Vice President - Sheet
Manufacturing for the Company since 1992 and on March 21, 2000, assumed
additional responsibilities for key operational functions.


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 1999 all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were met.



                                       41

<PAGE>   43


ITEM 11. EXECUTIVE COMPENSATION

         DIRECTORS' COMPENSATION

         We do not pay directors or other committee members who are employees of
the Company additional compensation for service as directors or committee
members. In 1999 non-employee directors received the following compensation:


                          DIRECTORS' COMPENSATION TABLE
<TABLE>
<CAPTION>


TYPE OF COMPENSATION                                     CASH              STOCK OPTIONS(1)
===========================================================================================
<S>                                                   <C>                  <C>
Annual Retainer                                        $25,000                 5,000
===========================================================================================
Annual Retainer for Committee Chair                    $ 4,000
-------------------------------------------------------------------------------------------
Annual Retainer for Committee Members                  $ 3,000
-------------------------------------------------------------------------------------------

Board or Committee Attendance Fee (per meeting)        $ 1,500(2)
-------------------------------------------------------------------------------------------
</TABLE>

(1) Immediately following each annual meeting of stockholders, each non-employee
director then in office is granted an option to purchase 5,000 shares of Company
stock pursuant to the Omnibus Stock Incentive Plan at a price equal to the fair
market value of the shares on the date of the grant of the option.

(2) Mr. Hudson is paid a fee of $1,000 per month in connection with meetings of
the Cotton Committee.

         COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS

         The members of the Compensation Committee are Gerald B. Mitchell
(Chairman), John G. Hudson and M. Katherine Dwyer. None of the current members
of the Compensation Committee of the Board of Directors of the Company is an
executive officer of the Company.

         EXECUTIVE OFFICER COMPENSATION

         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 of December 31, 1999,
(the "Named Officers") during the fiscal years indicated for services rendered
to the Company and its subsidiaries.



                                       42

<PAGE>   44



                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>


                                                                              LONG-TERM COMPENSATION


                                         ANNUAL COMPENSATION                           AWARDS
                                         -------------------            -----------------------------------

                                                                        Restricted Stock   Stock Options     All Other
Name and Principal Position      Year      Salary ($)   Bonus ($)(1)    Awards ($)(2)      (# of shares)(3)  Comp. ($)(4)
---------------------------      -----     ----------   ------------    ----------------   ----------------  ------------
<S>                              <C>       <C>          <C>             <C>                <C>               <C>
Holcombe T. Green, Jr......      1999          715,000      858,000        9,883,583(5)       1,050,000(6)        1,600
  Chairman and Chief             1998          673,000      807,600           577,573           100,000           1,600
      Executive Officer          1997          650,000      780,000           529,983                 0           1,600

Thomas J. Ward.............      1999          500,000      600,000           393,703           100,000           1,600
  President and Chief            1998          414,000      496,800           355,315           100,000           1,600
      Operating Officer          1997          400,000      480,000           326,145                 0           1,600

Morgan M. Schuessler.......      1999          325,000      474,620           231,167            75,000           1,600
  Executive Vice President       1998          310,500      372,600           266,486            50,000           1,600
                                 1997          300,000      360,000           244,617                 0           1,600

William F. Crumley.........      1999          310,000      372,000           220,500            35,000           1,600
  Executive Vice President       1998          295,000      354,000           253,178            50,000           1,600
                                 1997          285,000      342,000           232,368                 0           1,600

John T. Toolan.............      1999          302,500      363,000           213,389            50,000           1,600
  Executive Vice President       1998          236,500      236,500           202,980            50,000           1,600
                                 1997          215,000      215,000           175,307            20,000           1,600
</TABLE>


(1)      Bonuses earned for Fiscal 1997, 1998 and 1999 were paid in the first
         quarter of the following year.

(2)      Bonus Awards earned under the WestPoint Stevens Inc. 1995 Key Employee
         Stock Bonus Plan (the "Key Employee Stock Bonus Plan") are subject to
         vesting requirements. The dollar value is based upon the share price on
         the date of grant of the Bonus Awards.

(3)      Shares available under stock option awards are adjusted to reflect the
         two-for-one stock split effective in March 1998.

(4)      These amounts represent the Company's matching contributions under the
         Savings Plan which were $1,600 in 1999, 1998 and 1997 for each of the
         Named Officers.

(5)      On October 27, 1999, the Compensation Committee awarded Mr. Green
         500,000 shares of the Company's Common Stock pursuant to an agreement
         under which Mr. Green will be obligated to return a pro rata portion of
         the awarded shares if his employment with the Company terminates for
         any reason other than death, total disability, or a change in control
         of the Company, prior to October 27, 2004.

(6)      Of the options granted to Mr. Green, 800,000 shares are subject to
         stockholder approval in addition to vesting requirements.



                                       43

<PAGE>   45



         SENIOR MANAGEMENT INCENTIVE PLAN

         Pursuant to the WestPoint Stevens Inc. Senior Management Incentive Plan
(the "MIP"), performance awards were made to key employees of the Company and
its subsidiaries with respect to Fiscal 1999. The purpose of this incentive plan
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. Incentive payments for certain participants are based
solely upon predetermined annual operating profit goals of the Company. Other
participants' payments are based on the operating profit (as defined in the MIP)
of the Company and certain business units and/or divisions. The MIP provides
that no participant will receive payments under the plan unless the Company's
actual annual operating profit equals or exceeds 90% of the predetermined
operating profit goal. Incentive payments to each of the Named Officers under
the MIP and previous years' management incentive plans are included in the
Summary Compensation Table.

         Performance awards payable to the Named Officers with respect to 2000
will be determined based on the terms and provisions of the MIP with new
predetermined operating profit goals established by the Compensation Committee
in writing during the first 90 days of 2000.

         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 11, 1999, the Company granted Bonus
Awards (as such term is defined in the Key Employee Stock Bonus Plan) for Fiscal
Year 1999 covering an aggregate of 206,888 shares of Common Stock (on a
post-split basis) to certain key employees, including each of the Named
Officers. On February 11, 2000, the Compensation Committee certified in writing
that Bonus Awards for Fiscal Year 1999 were earned (except for Bonus Awards
forfeited by certain individuals). Ten percent of each earned Bonus Award for
Fiscal Year 1999 vested on February 11, 2000, and the remainder of such Bonus
Award is subject to vesting ratably on January 1 of each of years 2001 through
2009.

         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 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 1999. 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
1999 (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 (the
"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.



                                       44

<PAGE>   46



                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                      -------------------------------------

<TABLE>
<CAPTION>



                                                                                          Potential Realizable Value at
                                                                                          Assumed Annual Rates of Stock
                                                                                         Price Appreciation for Ten-Year
                                                     Individual Grants                            Term of Options
                                    --------------------------------------------------   --------------------------------

                                               % of Total
                               Number of      Options/SARs   Exercise Price
                              Options/SARs   Granted to All    Per Share    Expiration    At 5% Annual     At 10% Annual
Name of Executive               Granted         Employees        ($/Sh)        Date      Growth Rate ($)  Growth Rate ($)
-----------------             ------------   --------------  -------------  ----------   ---------------  ---------------
<S>                           <C>            <C>             <C>            <C>          <C>              <C>
Holcombe T. Green, Jr.           50,000         2.04            $  26.75       1/28/09       841,147           2,131,631
Holcombe T. Green, Jr.        1,000,000 (1)    40.87            $  18.75      10/27/09    11,791,774          29,882,671
Thomas J. Ward                   50,000         2.04            $  26.75       1/28/09       841,147           2,131,631
Thomas J. Ward                   50,000         2.04            $ 18.125      12/14/09       569,936           1,444,329
Morgan M. Schuessler             25,000         1.02            $  26.75       1/28/09       420,573           1,065,815
Morgan M. Schuessler             50,000         2.04            $  18.00      11/23/09       566,005           1,434,368
William F. Crumley               25,000         1.02            $  26.75       1/28/09       420,573           1,065,815
William F. Crumley               10,000          .41            $ 16.625      12/27/09       104,554             264,960
John T. Toolan                   25,000         1.02            $  26.75       1/28/09       420,573           1,065,815
John T. Toolan                   25,000         1.02            $18.0625      10/28/09       283,985             719,674
</TABLE>


(1)  Of the options granted to Mr. Green on October 27, 1999, 800,000 shares
     are subject to stockholder approval as well as vesting requirements.


     FISCAL YEAR-END OPTION HOLDINGS

     The following table summarizes for each of the Named Officers option
exercises during Fiscal 1999, 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, 1999, and the aggregate dollar value of unexercised
in-the-money options for Common Stock, if any, held at December 31, 1999. 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, 1999, which was $17.50 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.


                     AGGREGATED OPTION/SAR EXERCISES IN THE
                  LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES


<TABLE>
<CAPTION>

                                                                                                Value of Unexercised
                                                                                                    (at year end)
                                                                 Number of Unexercised              in-the-Money
                                                               Options at FY-End (#)(1)         Options at FY-End ($)
                            Shares                             ---------------------            ---------------------
                          Acquired on          Value
Name                      Exercise (#)(1)  Realized ($)       Exercisable    Unexercisable    Exercisable    Unexercisable
----                      ---------------  ------------       -----------    -------------    -----------    -------------
<S>                       <C>              <C>                <C>            <C>              <C>            <C>
Holcombe T. Green, Jr.             0               0              354,980        1,180,000      1,277,104          335,000
Thomas J. Ward                31,300         899,875              310,000          190,000      1,677,500          162,500
Morgan M. Schuessler               0               0              189,000           70,000        707,500           81,250
William F. Crumley            46,920         930,828              115,000           80,000        405,000           90,000
John T. Toolan                     0               0               79,208           94,000        151,157           65,000
</TABLE>

(1) The number of shares shown is an adjusted number reflecting the two-for-one
    stock split effective in March 1998.


                                       45

<PAGE>   47

         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.

         Contributions to the plan are computed on an actuarial basis and, as
such, individual employee payments (or accruals) 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. With respect to executive officers, plan compensation
covers up to a maximum of $160,000 per individual for Fiscal 1999. 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 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 years of benefit service, plus 0.6% of a
participant's average compensation which exceeds the Social Security Integration
Level ($33,060 in Fiscal 1999), multiplied by the participant's years of benefit
service, not to exceed 35 years.

         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.




                                       46

<PAGE>   48



                              PENSION PLAN TABLE(1)

                                YEARS OF SERVICE
                                ----------------
<TABLE>
<CAPTION>


     AVERAGE(2)
    COMPENSATION         15           20            25            30               35
------------------    -------      -------       -------       --------         --------
<S>                   <C>          <C>           <C>           <C>              <C>
$  250,000.........   $57,025      $76,033       $95,041       $114,049         $133,057
   300,000.........    69,025       92,033       115,041        138,049          161,057
   350,000.........    81,025      108,033       135,041        162,049          189,057
   400,000.........    93,025      124,033       155,041        186,049          217,057
   450,000.........   105,025      140,033       175,041        210,049          245,057
   500,000.........   117,025      156,033       195,041        234,049          273,057
   550,000.........   129,025      172,033       215,041        258,049          301,057
   600,000.........   141,025      188,033       235,041        282,049          329,057
   650,000.........   153,025      204,033       255,041        306,049          357,057
   700,000.........   165,025      220,033       275,041        330,049          385,057
   750,000.........   177,025      236,033       295,041        354,049          413,057
   800,000.........   189,025      252,033       315,041        378,049          441,057
   850,000.........   201,025      268,033       335,041        402,049          469,057
   900,000.........   213,025      284,033       355,041        426,049          497,057
   950,000.........   225,025      300,033       375,041        450,049          525,057
 1,000,000.........   237,025      316,033       395,041        474,049          553,057
 1,050,000.........   249,025      332,033       415,041        498,049          581,057
 1,100,000.........   261,025      348,033       435,041        522,049          609,057
 1,150,000.........   273,025      364,033       455,041        546,049          637,057
 1,200,000.........   285,025      380,033       475,041        570,049          665,057
 1,400,000.........   333,025      444,033       555,041        666,049          777,057
 1,600,000.........   381,025      508,033       635,041        762,049          889,057
</TABLE>

----------------
(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 1999, which was $33,060. Includes benefits payable under the
     Supplemental Retirement Plan (as defined under "-- Supplemental Retirement
     Plan").

(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.

The following table indicates the credited years of service as of the date
hereof for each of the Named Officers and the annual average compensation for
each of their five consecutive plan years of highest compensation during their
last ten years of service:


<TABLE>
<CAPTION>

                                  Credited         Average
                                   Years         Compensation
                                  -------        ------------
     <S>                          <C>            <C>
     Holcombe T. Green, Jr.         7.5          $1,269,989
     Thomas J. Ward                24.3             822,760
     Morgan M. Schuessler           7               632,593
     William F. Crumley            10.9             597,863
     John T. Toolan                10.3             244,338
</TABLE>



                                       47

<PAGE>   49
         SUPPLEMENTAL RETIREMENT PLAN

         The Company's Supplemental Retirement Plan for Eligible Executives
("Supplemental Retirement Plan") provides for payment of amounts which 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. Benefits payable under the Supplemental
Retirement Plan are included in the "Pension Plan Table" above.

         SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

         The Supplemental Executive Retirement Plan (the "Executive Retirement
Plan") provides an enhanced level of post-retirement income to those executives
who participated in the 1982 Restricted Stock and Performance Share Plan of
West Point-Pepperell, Inc. and its successor plans (collectively, the
"RSPSP"), all of which were terminated in the first half of 1989. The benefit
is based on the executive's average monthly compensation ("AMC"), including
salary, bonus and commissions during the 60 consecutive calendar months during
which compensation was highest out of the executive's last 120 calendar months
of employment. The Executive Retirement Plan provides a monthly benefit
calculated as a single life and 10-year certain annuity based upon the
following formula:

              3.5% x (AMC) x (lesser of 10 or number of years of
              service under RSPSP) plus 1% x (AMC) x (years of
              service under RSPSP in excess of 10 not to exceed
              30) minus benefits payable under the WestPoint
              Pension Plan and the Supplemental Retirement Plan
              and minus amounts attributable to employer
              contributions under the WestPoint Stevens Inc.
              Retirement Savings Value Plan ("RSVP").

         Participation in the Executive Retirement Plan was frozen by the
Company as of December 31, 1993. At such time, two of the Company's current
executives were accruing benefits under the Executive Retirement Plan. Of the
Named Officers, only Mr. Ward was a participant and accruing a benefit under
the Executive Retirement Plan. As of December 31, 1999, benefits payable at
termination of employment at age 65 to Mr. Ward under the Executive Retirement
Plan amount to $1,254 per month.

         EMPLOYMENT AGREEMENTS, TERMINATION PROVISIONS AND CHANGE IN CONTROL
ARRANGEMENTS

         The Company entered into employment agreements with Messrs. Green
(effective as of March 8, 1993), Ward (effective as of March 8, 1993), and
Schuessler (effective as of April 1, 1993).

         Each agreement was for a three-year term and, except for Mr.
Schuessler's employment agreement, is automatically renewable for successive
additional one-year terms, unless a notice of termination is given one year
prior to the expiration of any such term. On November 23, 1999, Mr.
Schuessler's agreement was superseded by a new agreement under which, effective
January 1, 2000, he left the office of Executive Vice President-Finance and
Chief Financial Officer and became a special advisor to the Chairman of the
Board and Chief Executive Officer. Mr. Schuessler remains an employee of the
Company. Mr. Green and Mr. Ward each receive an annual base salary, subject to
annual review. Annual base salaries in Fiscal 1999 were as follows: Mr. Green
-- $715,000; Mr. Ward -- $500,000; and Mr. Schuessler -- $325,000. For 2000 the
annual base salaries for Mr. Green and Mr. Ward were increased effective January
1, 2000, to $730,000 and $510,000, respectively. Mr. Green also is entitled
under his employment agreement to reimbursement from the Company for all
reasonable living expenses for maintaining a residence in New York, New York,
that are reasonably attributable to business time he spends there for the
Company. Mr. Green and Mr. Ward also are entitled to receive an annual bonus in
an amount up to 120% of such executive's annual base salary based on the
Company's achievement of certain performance goals in accordance with the
Company's management incentive plan in existence from time to time. 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 will receive the following payments within 30 days after such
termination becomes effective (in addition to all compensation owed to the
executive at the time of such termination): a one-time, lump-sum cash payment
equal to the sum of (i) two times



                                      48
<PAGE>   50

the executive's 1993 annual base salary (plus, in the case of Mr. Green,
$50,000) and (ii) the maximum bonus amount payable to such executive under the
Management Incentive Plan applicable to the year in which such termination
becomes effective, whether or not the requirements otherwise applicable to the
payment of such bonus amount under such plan have been met. Accordingly, if
such a termination were to occur in 2000, Mr. Green would be entitled to a
payment of $2,126,000 and Mr. Ward -- $1,212,000. 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's then unvested options will become immediately vested at the time of
such termination and each executive will be entitled to receive all fringe
benefits provided by the Company under such agreements for a period of one year
following such termination (see "-- Option/SAR Grants in Last Fiscal Year" and
"-- Fiscal Year-End Option Holdings").

         The Company entered into an arrangement with Mr. Meek (effective as of
November 22, 1999) under which he is entitled to receive an initial annual base
salary of $300,000. He is entitled to receive an annual cash bonus in an amount
initially up to 120% of his annual base salary based on the Company's
achievement of certain performance goals in accordance with the Company's
Management Incentive Plan. Mr. Meek was also granted a one time incentive grant
of 10,000 shares of restricted Common Stock as an inducement to accept
employment with the Company and was granted options to purchase 50,000 shares
of Common Stock, both pursuant to the terms of the Company's Omnibus Stock
Incentive Plan. Mr. Meek is entitled to reimbursement from the Company for rent
for reasonable accommodations in the West Point area for the first two years of
his employment. If Mr. Meek is terminated from employment with the Company
within the first five years of his employment, the Company will pay a one time,
lump sum cash payment equal to his annual base salary.

         On March 21, 2000, the Company entered into an arrangement with Mr.
William F. Crumley under which he will leave the office of Executive Vice
President-Operations and become a special advisor to the President and Chief
Operating Officer of the Company effective April 30, 2000. He will remain an
employee and advisor until his retirement on January 1, 2001.



                                      49
<PAGE>   51

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of February 11,
2000, (except as otherwise specified in the footnotes) about beneficial
ownership of the 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.

<TABLE>
<CAPTION>
                                                                        Amount and Nature of       Percent
              Name and Address of Beneficial Owner(1)                   Beneficial Ownership       of Class
              ------------------------------------                      --------------------       --------

<S>                                                                     <C>                        <C>
Holcombe T. Green, Jr..............................................               18,216,667(2)       36.15%
WPS Investors, L.P.................................................               15,483,306(2)       30.78%
Green Capital IV...................................................                  475,333(2)         .94%
Green & Company....................................................                  325,000(2)         .65%
   3475 Piedmont Road, N.E. Suite 1600
   Atlanta, Georgia  30305

Hugh M. Chapman....................................................                   34,000(3)         *

M. Katherine Dwyer.................................................                   35,000(4)         *

John G. Hudson.....................................................                   85,400(5)         *

Gerald B. Mitchell.................................................                   45,000(6)         *

John F. Sorte......................................................                  135,000(7)         *

Thomas J. Ward.....................................................                  525,842(8)        1.03%

William F. Crumley.................................................                  258,591(9)         *

Morgan M. Schuessler...............................................                  369,579(10)        *

John T. Toolan.....................................................                  150,151(11)        *

All Directors and Executive Officers as a group (10 persons).......               19,855,230(12)      38.73%
</TABLE>

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

*  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)      As of February 11, 2000, Mr. Green possessed shared voting and
investment power with respect to (i) 15,483,306 shares held directly by WPS
Investors, L.P., of which HTG Corp., a company owned by him, is general
partner; (ii) 475,333 shares held directly by Green Capital IV, of which HTG
Corp., a company owned by him, is general partner; (iii) 325,000 shares held
directly by Green & Company, of which HTG Corp., a company owned by him, is
general partner; (iv) 232,500 shares held by Hall Family Investments, L.P., of
which Mr. Green's wife is general partner and (v) 338 shares held in a
non-employee compensation plan of which Mr. Green is trustee. In addition, the
total amount for Mr. Green includes (vi) 1,620,190 shares owned directly by Mr.
Green and (vii) 80,000 shares as to which Mr. Green holds currently exercisable
options. See "EXECUTIVE COMPENSATION -- Employment Agreements, Termination
Provisions and Change in Control Arrangements."

(3)      Includes 4,000 shares held directly and 30,000 shares as to which Mr.
Chapman holds currently exercisable options.

(4)      Includes 35,000 shares as to which Ms. Dwyer holds currently
exercisable options.

(5)      Includes 20,000 shares held directly, 400 shares held by Mr. Hudson's
daughter as custodian for a grandson and 65,000 shares as to which Mr. Hudson
holds currently exercisable options. Mr. Hudson disclaims beneficial ownership
of the 400 shares held by his daughter for his grandson.

(6)      Includes 20,000 shares held directly and 25,000 shares as to which Mr.
Mitchell holds currently exercisable options.

(7)      Includes 70,000 shares held directly and 65,000 shares as to which Mr.
Sorte holds currently exercisable options.



                                      50
<PAGE>   52

(8)      Includes 116,092 shares held directly, 380,000 shares as to which Mr.
Ward holds currently exercisable options and 29,750 shares held through the
Savings Plan. See "EXECUTIVE COMPENSATION -- Employment Agreements, Termination
Provisions and Change in Control Arrangements."

(9)      Includes 78,912 shares held directly, 29,000 shares held by Mr.
Crumley's wife, 150,000 shares as to which Mr. Crumley holds currently
exercisable options and 679 shares held through the Savings Plan. Mr. Crumley
disclaims beneficial ownership of the 29,000 shares held by his wife.

(10)     Includes 123,903 shares held directly, 21,000 shares held by Mr.
Schuessler's wife, 224,000 shares as to which Mr. Schuessler holds currently
exercisable options and 676 shares held through the Savings Plan. Mr.
Schuessler disclaims beneficial ownership of the 21,000 shares held by his
wife. See "EXECUTIVE COMPENSATION -- Employment Agreements, Termination
Provisions and Change in Control Arrangements."

(11)     Includes 26,684 shares held directly, 119,208 shares as to which Mr.
Toolan holds currently exercisable options and 4,259 shares held through the
Savings Plan.

(12)     Includes 2,079,781 shares held directly, 17,775,449 shares held
indirectly, of which 35,364 shares are held through the Savings Plan, 953,208
shares as to which certain members of management hold currently exercisable
options, and 220,000 shares as to which non-employee directors hold currently
exercisable options. See footnotes 2-11.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      In Fiscal 1999, the Company made payments to Mr. Green and HTG Corp. in
the aggregate amount of $597,488 (i) as payments to HTG Corp. for use by the
Company of an airplane HTG Corp. owns and (ii) as reimbursement from the
Company for all reasonable living expenses for maintaining a residence in New
York, New York, pursuant to his employment agreement (see "EXECUTIVE
COMPENSATION -- Employment Agreements, Termination Provisions and Change in
Control Arrangements"). Such payments were made at rates that the Company
believes were no less favorable than rates available from non-affiliated third
parties for comparable services and premises.

      On November 5, 1999, the Company entered into an option agreement with
HTG Corp. pursuant to which the Company obtained an exclusive option to
purchase a one-half undivided interest in the rights of HTG Corp. under its
agreement with Dassault Falcon Jet Corp. for the purchase of a Falcon 900EX Jet
Aircraft to be built and delivered on or about October 31, 2000. Under the
terms of the option agreement the Company made a $1.5 million payment to
Dassault, which payment was subsequently repaid to the Company by HTG Corp. on
February 4, 2000, following the expiration of the unexercised option in
accordance with the terms of the option agreement.

      On February 4, 2000, the Company made a $6 million contribution to and
acquired an 80.62% membership interest in HTG Falcon LLC, a Georgia limited
liability company ("HTGF"), which owned an equity interest in a Falcon 2000 jet
aircraft. At that time the Company entered into a Membership Interest Purchase
Agreement (the "Agreement") with HTGF and HTG Corp., the other member of HTGF
which had contributed to HTGF an equity interest in the Falcon 2000 jet
aircraft valued at $1,443,141 for a 19.38% membership interest in HTGF.
Pursuant to the Agreement the usage and costs related to the Falcon 2000 are
governed by each member's percentage contribution to HTGF.

      On November 18, 1999, the Company entered into a Stock Award Agreement
("Award Agreement") with Mr. Holcombe T. Green, Jr., pursuant to which Mr.
Green vests in non-forfeitable rights to 500,000 shares of restricted common
stock in the Company over a five year period (see "EXECUTIVE COMPENSATION --
Summary Compensation Table"). On November 24, 1999, Mr. Green filed an 83(b)
election with the Internal Revenue Service under which he elected to include
the value of such shares as ordinary income to him in 1999. An income tax
withholding obligation of $1,335,937.58 was paid to the Internal Revenue
Service by the Company on November 26, 1999. Pursuant to agreement between Mr.
Green and the Company 425,781 shares of restricted common stock in the Company
were distributed to Mr. Green on November 30, 1999, and the Company retained
possession of the remaining 74,219 shares of restricted common stock in the
Company as security for repayment of the amount of the income tax withholding
paid by the Company plus interest thereon. Pursuant to agreement Mr. Green paid
the Company $1,350,406.53 in principal and interest on February 4, 2000, and
the 74,219 shares of restricted stock were distributed to him.



                                      51
<PAGE>   53

                                    PART IV


ITEM 14. 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,
1999.

<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
                  <S>                                                                       <C>
                  Report of Ernst & Young LLP,  Independent Auditors......................       18
                  Consolidated Balance Sheets.............................................  19 - 20
                  Consolidated Statements of Income . . . . . . . . . . ..................       21
                  Consolidated Statements of Stockholders' Equity (Deficit)...............       22
                  Consolidated Statements of Cash Flows...................................       23
                  Notes to Consolidated Financial Statements..............................  24 - 38
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
                  <S>                                                                          <C>
                  Schedule II -- Valuation and Qualifying Accounts........................       58
</TABLE>

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 filed current Reports on Form 8-K on October 27, 1999 and November
29, 1999. The item reported in both was "Item 5. Other Events." The Form 8-K
filed on October 27, 1999 and exhibits filed therewith contained condensed
consolidated statements of income, condensed consolidated balance sheets,
condensed consolidated statements of cash flows and condensed consolidated
statements of stockholders' equity (deficit).

EXHIBITS

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     2.1          Plan of Recapitalization dated as of March 24, 2000,
                  incorporated by reference to Exhibit 2.1 to the Current Report
                  on Form 8-K (Commission File No. 0-21496) filed by the Company
                  with the Commission on March 27, 2000.

     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.

     10.1         Form of Registration Rights Agreement, dated as of May 7,
                  1993, among the Company and the Purchaser (as defined
                  therein) incorporated by reference to Exhibit 1 to the Form
                  of Securities Purchase Agreement filed as Exhibit 10.13 to
                  the Registration Statement on Form 10 (Commission File No.
                  0-21496) filed by the Company with the Commission on July 1,
                  1993.
</TABLE>



                                      52
<PAGE>   54

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     10.2         Amended and Restated Credit Agreement, dated as of May 7,
                  1993, by and among West Point-Pepperell, Inc., the banks
                  listed on the signature pages thereof, Bankers Trust Company,
                  as administrative agent, and The Chase Manhattan Bank, N.A.,
                  Citicorp USA, Inc., NationsBank of North Carolina, Inc., The
                  Bank of New York and The Bank of Nova Scotia, as co-agents,
                  incorporated by reference to the Registration Statement on
                  Form 10 (Commission File No. 0-21496) filed by Valley
                  Fashions Corp. with the Commission on July 1, 1993.

     10.3         Employment Agreement, dated as of March 8, 1993, between West
                  Point-Pepperell, Inc. and Holcombe T. Green, Jr., together
                  with Letter, dated as of March 8, 1993, from the Company to
                  Holcombe T. Green, Jr., incorporated by reference to the
                  Registration Statement on Form 10 (Commission File No.
                  0-21496) filed by Valley Fashions Corp. (since renamed
                  WestPoint Stevens Inc.) with the Commission on July 1, 1993.

     10.4         Employment Agreement, dated as of April 1, 1993, between West
                  Point-Pepperell, Inc. and Morgan M. Schuessler, together with
                  Letter, dated as of April 1, 1993, from the Company to Morgan
                  M. Schuessler, incorporated by reference to the Registration
                  Statement on Form 10 (Commission File No. 0-21496) filed by
                  Valley Fashions Corp. (since renamed WestPoint Stevens Inc.)
                  with the Commission on July 1, 1993.

     10.5         Employment Agreement, dated as of March 8, 1993, between West
                  Point-Pepperell, Inc. and Thomas J. Ward, 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.

     10.6         Form of directors and officers Indemnification Agreement with
                  West Point-Pepperell, Inc., incorporated by reference to the
                  Registration Statement on Form S-1 (Commission File No.
                  33-69858) filed by the Company with the Commission on October
                  1, 1993.

     10.7         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.

     10.8         Description of 1993 Senior Management Incentive Plan,
                  incorporated by reference to the Company's 1994 Proxy
                  Statement (Commission File No. 0-21496) filed by the Company
                  with the Commission.

     10.9         West Point-Pepperell, Inc. Supplemental Retirement Plan for
                  Eligible Executives, as amended, incorporated by reference to
                  the Schedule 14D-9 dated November 3, 1988 (Commission File
                  No. 1-4490) filed by West Point-Pepperell, Inc. with the
                  Commission.

     10.10        West Point-Pepperell, Inc. Supplemental Executive Retirement
                  Plan, as amended, incorporated by reference to the Schedule
                  14D-9 dated November 3, 1988 (Commission File No. 1-4490)
                  filed by West Point-Pepperell, Inc. with the Commission.

     10.11        Credit Agreement, dated as of December 1, 1993, among Valley
                  Fashions Corp., Bankers Trust Company as Administrative
                  Agent, the Co-Agents parties thereto and the other financial
                  institutions parties thereto as amended on December 10, 1993,
                  incorporated by reference to the Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1993 (Commission File
                  No. 0-21496) filed by the Company with the Commission.

     10.12        Form of Securities Purchase Agreement, dated as of March 12,
                  1993, among the Company, New Street Capital Corporation,
                  Magten Asset Management Corporation and each Other Holder (as
                  defined therein), 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.

     10.13        Amended and Restated Credit Agreement dated November 23,
                  1994, among the Company, NationsBank of North Carolina, N.A.
                  as Administrative Agent, the Co-Agents parties thereto and
                  the other financial institutions parties thereto,
                  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.
</TABLE>



                                      53
<PAGE>   55
<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     10.14        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.

     10.15        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.

     10.16        Description of Senior Management Incentive Plan, incorporated
                  by reference to the Company's 1995 Proxy Statement
                  (Commission File No. 0-21496) filed by the Company with the
                  Commission on April 7, 1995.

     10.17        WestPoint Stevens Inc. 1995 Key Employee Stock Bonus Plan,
                  incorporated by reference to the Registration Statement Form
                  S-8 (Registration No. 33-95580) filed by the Company on
                  August 11, 1995.

     10.18        Amendment Agreement dated December 4, 1995 among the Company,
                  NationsBank, N.A., The Bank of New York, The First National
                  Bank of Boston, The First National Bank of Chicago, The
                  Nippon Credit Bank, Ltd., Wachovia Bank of Georgia, N.A.,
                  Trust Company Bank, AmSouth Bank of Alabama and ABN AMRO
                  Bank, N.V., 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.

     10.19        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.

     10.20        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.

     10.21        Second Amendment and Waiver Agreement dated as of January 23,
                  1997, among the Company, NationsBank, N.A. (formerly known as
                  NationsBank of North Carolina, N.A.), The Bank of New York,
                  The First National Bank of Boston, The First National Bank of
                  Chicago, The Nippon Credit Bank, Ltd., Wachovia Bank of
                  Georgia, N.A., SunTrust Bank, Atlanta (formerly known as
                  Trust Company Bank), AmSouth Bank of Alabama, and ABN AMRO
                  Bank, N.V., incorporated by reference to the Annual Report on
                  Form 10-K/A for the fiscal year ended December 31, 1996
                  (Commission File No. 0-21496) filed by the Company with the
                  Commission.

     10.22        Credit Agreement dated as of January 23, 1997, among
                  WestPoint Stevens (UK) Limited, P.J. Flower & Co. Limited, as
                  the Borrowers, the Company as Guarantor, the several lenders
                  identified on the signature pages thereto and such other
                  lenders as may from time to time become a party thereto and
                  NationsBank, N.A., as agent for the Lenders, incorporated by
                  reference to the Annual Report on Form 10-K/A for the fiscal
                  year ended December 31, 1996 (Commission File No. 0-21496)
                  filed by the Company with the Commission.

     10.23        First Amendment to the WestPoint Stevens Inc. Supplemental
                  Retirement Plan dated as of September 6, 1996, incorporated
                  by reference to the Annual Report on Form 10-K/A for the
                  fiscal year ended December 31, 1996 (Commission File No.
                  0-21496) filed by the Company with the Commission.

     10.24        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.

     10.25        Third Amendment Agreement, dated as of May 22, 1997, among
                  the Company, as Borrower, NationsBank, N.A. (formerly known
                  as NationsBank of North Carolina, N.A.), The Bank of New
                  York, The First National Bank of Boston, The First National
                  Bank of Chicago, Scotiabank Inc., Wachovia Bank of Georgia,
                  N.A., SunTrust Bank, Atlanta, AmSouth Bank of Alabama, and
                  ABN AMRO Bank, N.V., incorporated by reference to the Form
                  10-Q for the quarterly period ended June 30, 1997 (Commission
                  File No. 0-21496) filed by the Company with the Commission.
</TABLE>



                                      54
<PAGE>   56

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     10.26        Stock Purchase Agreement by and among Dyersburg Corporation,
                  as Purchaser, Alamac Sub Holdings Inc., as Seller, AIH Inc.
                  and the Company dated as of July 15, 1997, incorporated by
                  reference to the Current Report on Form 8-K (Commission File
                  No. 0-21496) filed by the Company with the Commission on
                  September 11, 1997.

     10.27        Amendment to Stock Purchase Agreement among Alamac Sub
                  Holdings Inc., AIH Inc., the Company and Dyersburg
                  Corporation dated as of August 15, 1997, incorporated by
                  reference to the Current Report on Form 8-K (Commission File
                  No. 0-21496) filed by the Company with the Commission on
                  September 11, 1997.

     10.28        Supplemental Environmental Indemnity among Alamac Sub
                  Holdings Inc., AIH Inc., the Company and Dyersburg
                  Corporation dated as of August 20, 1997, incorporated by
                  reference to the Current Report on Form 8-K (Commission File
                  No. 0-21496) filed by the Company with the Commission on
                  September 11, 1997.

     10.29        Second Supplemental Environmental Indemnity among Alamac Sub
                  Holdings Inc., AIH Inc., the Company and Dyersburg
                  Corporation dated as of August 27, 1997, incorporated by
                  reference to the Current Report on Form 8-K (Commission File
                  No. 0-21496) filed by the Company with the Commission on
                  September 11, 1997.

     10.30        Assignment and Assumption Agreement among the Company (the
                  "Assignor"), Alamac Knit Fabrics, Inc. (the "Assignee") and
                  Dyersburg Corporation dated as of August 27, 1997,
                  incorporated by reference to the Current Report on Form 8-K
                  (Commission File No. 0-21496) filed by the Company with the
                  Commission on September 11, 1997.

     10.31        Letter Amendment Agreement, dated as of July 22, 1997, among
                  the Company, as Borrower, NationsBank, N.A. (formerly known
                  as NationsBank of North Carolina, N.A.), The Bank of New
                  York, BankBoston, N.A. (formerly known as The First National
                  Bank of Boston), The First National Bank of Chicago,
                  Scotiabank Inc., Wachovia Bank of Georgia, N.A., SunTrust
                  Bank, Atlanta, AmSouth Bank of Alabama and ABN AMRO Bank,
                  N.A., incorporated by reference to the Form 10-Q for the
                  quarterly period ended September 30, 1997 (Commission File
                  No. 0-21496) filed by the Company with the Commission.

     10.32        Letter Amendment Agreement, dated as of August 5, 1997, among
                  the Company, as Borrower, NationsBank, N.A. (formerly known
                  as NationsBank of North Carolina, N.A.), The Bank of New
                  York, BankBoston, N.A. (formerly known as The First National
                  Bank of Boston), The First National Bank of Chicago,
                  Scotiabank Inc., Wachovia Bank of Georgia, N.A., SunTrust
                  Bank, Atlanta, AmSouth Bank of Alabama, and ABN AMRO Bank,
                  N.V., incorporated by reference to the Form 10-Q for the
                  quarterly period ended September 30, 1997 (Commission File
                  No. 0-21496) filed by the Company with the Commission.

     10.33        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.

     10.34        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.

     10.35        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.

     10.36        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.

     10.37        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.
</TABLE>



                                      55
<PAGE>   57

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     10.38        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.

     10.39        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.

     10.40        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.

     10.41        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.

     10.42        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.

     10.43        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.

     10.44        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.

     10.45        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.

     10.46        Receivables Purchase Agreement dated as of December 18, 1998,
                  by and between the Company and WPS Receivables Corporation,
                  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.

     10.47        Non-Negotiable Promissory Note, dated as of December 18,
                  1998, by WPS Receivables Corporation in favor of the Company,
                  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.

     10.48        Asset Interest Transfer Agreement, dated as of December 18,
                  1998, among WPS Receivables Corporation, the Company, Blue
                  Ridge Funding Corporation and Wachovia Bank, N.A.,
                  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.

     10.49        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.
</TABLE>



                                      56
<PAGE>   58

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER                         DESCRIPTION OF EXHIBIT
     -------                        ----------------------

     <S>          <C>
     10.50        Second Amendment dated February 11, 1999, to the WestPoint
                  Stevens Inc. Supplemental Retirement Plan, 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.

     10.51        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.

     10.52        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.

     10.53        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.

     10.54        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.

     10.55        Letter Agreement dated November 5, 1999, between the Company
                  and David C. Meek.

     10.56        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.

     10.57        WestPoint Stevens Inc. Stock Award Agreement dated November
                  18, 1999, between the Company and Holcombe T. Green, Jr.

     10.58        Letter Agreement dated November 23, 1999, between the Company
                  and Morgan M. Schuessler.

     10.59        First Amendment, dated as of December 17, 1999, among WPS
                  Receivables Corporation, the Company, Blue Ridge Funding
                  Corporation and Wachovia Bank, N.A.

     21           List of Subsidiaries of the Registrant.

     23.1         Consent of Ernst & Young  LLP, independent auditors.

     27.1         Financial Data Schedule for the period ended December 31,
                  1999.
</TABLE>



                                      57
<PAGE>   59

                             WESTPOINT STEVENS INC.
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   ADDITIONS
                                                  BALANCE AT       CHARGED TO                                      BALANCE AT
                                                 BEGINNING OF      COSTS AND                           OTHER         END OF
                                                    PERIOD          EXPENSES         DEDUCTIONS    ADJUSTMENTS(3)   PERIOD (4)
                                                 ------------    --------------    --------------  --------------  -----------

<S>                                              <C>             <C>               <C>             <C>             <C>
Year Ended December 31, 1999
    Accounts receivable allowances:
      Doubtful accounts .....................     $   13,348     $      947         $    1,162(1)  $       --     $   13,133
      Cash and/or trade discounts
         and returns and allowances .........          5,903            (86)(2)             --             --          5,817
                                                  ----------     ----------         ----------     ----------     ----------
                                                  $   19,251     $      861         $    1,162     $       --     $   18,950
                                                  ==========     ==========         ==========     ==========     ==========
    Inventory reserves:
      Market and obsolescence ...............     $   27,126     $    4,324(2)      $       --     $       --     $   31,450
                                                  ==========     ==========         ==========     ==========     ==========
Year Ended December 31, 1998
    Accounts receivable allowances:
      Doubtful accounts .....................     $   13,137     $    1,627         $    1,506(1)  $       90     $   13,348
      Cash and/or trade discounts
          and returns and allowances ........          5,076            334(2)              --            493          5,903
                                                  ----------     ----------         ----------     ----------     ----------
                                                  $   18,213     $    1,961         $    1,506     $      583     $   19,251
                                                  ==========     ==========         ==========     ==========     ==========
    Inventory reserves:
      Market and obsolescence ...............     $   21,050     $    4,176(2)      $       --     $    1,900     $   27,126
                                                  ==========     ==========         ==========     ==========     ==========
Year Ended December 31, 1997
    Accounts receivable allowances:
      Doubtful accounts .....................     $   12,536     $    1,555         $    1,001(1)  $       47     $   13,137
      Cash and/or trade discounts
          and returns and allowances ........          4,429            428(2)              --            219          5,076
                                                  ----------     ----------         ----------     ----------     ----------
                                                  $   16,965     $    1,983         $    1,001     $      266     $   18,213
                                                  ==========     ==========         ==========     ==========     ==========
    Inventory reserves:
      Market and obsolescence ...............     $   15,599     $    2,252(2)      $       --     $    3,199     $   21,050
                                                  ==========     ==========         ==========     ==========     ==========
</TABLE>

(1) Accounts written off, less recoveries of accounts previously written off.
(2) Net change.
(3) Additions relate to acquisitions closed during the period.
(4) Reserves are deducted from assets to which they apply.



                                      58
<PAGE>   60

                                   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

                                          March 29, 2000


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



<TABLE>
<S>                                                           <C>



By /s/ Holcombe T. Green, Jr.                                 By /s/ David C. Meek
   --------------------------------------------                  ------------------------------------------
   Holcombe T. Green, Jr.                                        David C. Meek
   Chairman of the Board and Chief Executive                     Executive Vice President/Finance
   Officer (principal executive officer)                         and Chief Financial Officer
                                                                 (principal financial officer)

   March 29, 2000                                                March 29, 2000



By /s/ Thomas J. Ward                                         By /s/ J. Nelson Griffith
   --------------------------------------------                  ------------------------------------------
   Thomas J. Ward                                                J. Nelson Griffith
   President and Chief Operating Officer                         Controller
                                                                 (principal accounting officer)

   March 29, 2000                                                March 29, 2000



By /s/ Hugh M. Chapman                                        By /s/ M. Katherine Dwyer
   --------------------------------------------                  ------------------------------------------
   Hugh M. Chapman                                               M. Katherine Dwyer
   Director                                                      Director

   March 29, 2000                                                March 29, 2000
</TABLE>



                                      59
<PAGE>   61

<TABLE>
<S>                                                           <C>
By /s/ John G. Hudson                                         By /s/ Gerald B. Mitchell
   --------------------------------------------                  ------------------------------------------
   John G. Hudson                                                Gerald B. Mitchell
   Director                                                      Director

   March 29, 2000                                                March 29, 2000



By /s/ John F. Sorte
   --------------------------------------------
   John F. Sorte
   Director

   March 29, 2000

</TABLE>

                                      60