21

                            UNITED STATES OF AMERICA

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 1999

                                       OR

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from  _____________  to
______________

Commission File Number: 333-58059

                              Cluett American Corp.
             (Exact Name of Registrant as Specified in Its Charter)

Delaware                                                     22-2397044
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

                     48 West 38th Street New York, NY 10018
               (Address of Principal Executive Offices) (Zip Code)

         Registrant's Telephone Number, Including Area Code 212-984-8900

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

Title of Each class                   Name of each exchange on which registered
None                                  None
-----------------------               ----------------------------------------

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

                                      None
                      --------------------------------------
                                (Title of Class)

     Indicate  by check  mark  whether  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 (section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
form 10-K or any amendment to this Form 10-K. [ ]

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12, 13 or 15 (d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. Yes X No

     No stock is held by any non-affiliates of the registrant as of December 31,
1999.


<PAGE>


                                TABLE OF CONTENTS

PART I

Item 1.    Business

Item 2.    Properties

Item 3.    Legal Proceedings

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


PART II

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

Item 6.    Selected Financial Data

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

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

Item 8.    Financial Statements and Supplementary Data

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


PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.


SIGNATURES

EXHIBIT INDEX


<PAGE>



                                     PART I

Item 1.  Business


    Cluett American Corp. and its subsidiaries (the "Company") is a wholly-owned
subsidiary of Cluett American  Investment  Corp.  ("Holdings").  The Company was
organized in 1982 and primarily  designs,  manufactures  and markets men's socks
and dress shirts in the United States and Canada.  The Company  filed  voluntary
petitions  for  relief  under  the  provisions  of  Chapter  11 of  the  Federal
Bankruptcy Code on July 17, 1995. The Company's recapitalization and refinancing
were consummated on May 18, 1998.


Description of Business

    Based on net sales, the Company believes it is one of the leading designers,
manufacturers and marketers of men's socks and dress shirts in the United States
and has a  significant  market  presence in women's and  children's  socks and a
growing presence in men's and women's sportswear.  While the Company serves most
channels of distribution,  its primary focus is on department and national chain
store retailers. The Company believes its core product offerings, GOLD TOE socks
and ARROW dress shirts,  provide  classic styles at price points which represent
exceptional value and appeal to a broad consumer base.


    The Company  markets its  products  using  widely  recognized  Company-owned
brands such as GOLD TOE,  SILVER TOE and ARROW in the sock segment and ARROW and
its related trade names,  including  DOVER,  KENT,  ARROW "1851",  COLLARMAN and
KHAKI'S by ARROW in the shirt segment.  The Company primarily sells its products
to  department  and  national  chain  stores to maintain  its brand image and to
achieve the relatively higher selling prices and higher margins characterized by
sales to these retail stores.  Approximately  72% of the Company's net sales are
derived from these core offerings, the demand for which is believed to be stable
and resistant to changing fashion trends.


    Within  certain  territories,  the Company also has  licensed the  exclusive
rights to manufacture and market certain apparel  products  (generally socks and
shirts)  under such  widely  recognized  brand names as Kenneth  Cole,  Nautica,
Jockey, Jaclyn Smith and The North Face. This diverse portfolio of Company-owned
and  licensed  brand names  enables the Company to offer  different  brands with
unique value propositions to different channels of distribution.


    The  Company  identifies  its  reportable  segments  based on the  segment's
product  offerings.  For the year ended December 31, 1999, the Company conducted
its business through two principal segments: the Sock Group and the Shirt Group.
The  reportable  segments are each managed  separately as they  manufacture  and
distribute distinct products with different  production  processes.  The Company
evaluates  performance  based on net sales,  gross profit,  operating profit and
EBITDA As  Defined.  EBITDA As Defined is defined  as  operating  income  before
depreciation and  amortization,  interest  expense,  taxes and restructuring and
impairment  charges.  See (5) of Item 6 -  Selected  Financial  Data on pages 13
through 14 for a detailed  discussion  of EBITDA As Defined.  For the year ended
December 31, 1999,  the Company  realized  consolidated  net sales and EBITDA As
Defined of $343.5 million and $22.0 million, respectively.

    The Sock Group (47.9% of net sales for the year ended  December  31,  1999).
The Sock Group is a market leader in department  store sales of socks.  The Sock
Group's  leading  brand,  GOLD  TOE,  was  established  in  1934  and  generates
approximately  62% of the  Sock  Group's  net  sales  with the  remaining  sales
generated through  complementary private labels and through licensed brands such
as Perry Ellis, Nautica, Jockey and Arrow. The Sock Group offers a comprehensive
line of  products  across  multiple  price  points,  ages,  genders  and styles,
enabling  it  to  provide  its  customers  with  a  full  range  of  their  sock
requirements.  For the  fiscal  year ended  December  31,  1999,  the Sock Group
realized  net sales and EBITDA As Defined of $168.4  million and $36.8  million,
respectively. Net sales include intercompany sales of $2.2 million.



<PAGE>



     The Shirt Group (50.2% of net sales for the year ended  December 31, 1999).
The Shirt Group designs,  manufactures  and markets dress shirts and sportswear,
focusing on men's  cotton/polyester  and all cotton  dress shirts which are sold
under the ARROW  brand and its  related  trade  names,  including  DOVER,  KENT,
COLLARMAN  and ARROW "1851".  Sportswear  products  manufactured  by the Company
consist primarily of men's and women's knitted and woven sport shirts, which are
sold  Primarily  under the KHAKI'S by ARROW and ARROW  AMERICA'S  SPORT  labels.
Because of the name  recognition  of its ARROW brand,  which was  established in
1851,  the  Company  is also able to  license  the ARROW  trademark  for  shirts
internationally  and non-shirt  products both domestically and  internationally.
Effective  January 1, 1999,  the Dress Shirt  business  under the  Kenneth  Cole
trademark,  which was  launched  in the Fall  1998  (previously  reported  under
Designer Group) was consolidated for financial  reporting purposes only into the
Shirt Group. The Company has restated the 1998 Shirt Group's  financial  results
for the  addition  of the  Kenneth  Cole  brand to conform  with 1999  financial
reporting. For the fiscal year ended December 31, 1999, the Shirt Group realized
net sales  (including  licensing  fee  revenue  of $6.4  million)  and EBITDA As
Defined  (including net licensing  income of $4.8 million) of $176.5 million and
($11.8)  million,  respectively.  Net sales include  intercompany  sales of $6.0
million.

    For  additional  information  about the  Company's  product  categories  and
reportable segments, see "Note 17 Segment Data" of the Notes to the Consolidated
Financial  Statements  on pages F-8 through F-37 of the  Consolidated  Financial
Statements.


Marketing, Sales & Distribution

The Sock Group

    The Sock Group is a significant  supplier to many leading  department  store
and  national  chain  retailers.  In  addition,  the Sock Group is a supplier to
specialty stores, mass merchants and discount retailers.  The Sock Group segment
uses brand names by distribution channel to solidify the perceived value of such
brands and to maintain their integrity.  Consistent with industry practice,  the
Sock Group does not operate under long-term  written supply  agreements with its
customers. The Sock Group's top ten customers accounted for 78% of its total net
sales in the fiscal year ended December 31, 1999.

    To better serve its  customers,  the Sock Group  installed a vendor  managed
inventory system ("VMI") in 1998. The VMI provides the Sock Group with real time
information  on the sales of the Sock Group's  products by its  customers.  This
system  allows the Sock Group to ship  product  to a customer  immediately  upon
learning that such customer does not have adequate  inventory.  As a result, the
Sock Group no longer  needs to wait  until a request  comes  directly  from that
customer.


    In an effort to maximize  the Sock  Group's  product  exposure  and increase
sales,  the Sock Group works closely with its major  customers to assist them in
managing their entire sock category and to promote the Sock Group's  products to
the consumer.  In addition to frequent personal  consultation with the employees
of these customers, the Sock Group periodically meets with its customers' senior
management  to jointly  develop  merchandise  assortments  and plan  promotional
events  specifically  tailored  to  that  customer.   The  Sock  Group  provides
merchandising  assistance with store layouts,  fixture designs,  advertising and
point of sale  displays.  In addition,  the Sock Group  provides  customers with
preprinted,  customized  advertising  materials  designed to increase sales. The
Sock  Group does not use  national  brand  advertising  because it has found the
above described advertising techniques to be more cost effective.

    As a supplement to the Sock Group's primary distribution channels, the Shirt
Group  operates  five outlet stores for Sock Group  products.  These stores sell
irregulars, and for financial reporting purposes, the financial results of these
stores are consolidated into the US Retail division,  which is part of the Shirt
Group. The stores are located in factory outlet malls and average  approximately
1,200 square feet per store.  During the fiscal year ended December 31, 1999, no
GOLD TOE outlet stores were closed and no stores were opened.

    The Sock  Group  employs  sales  people  who  generally  have many  years of
industry  experience.  Most sales people are  compensated  with a combination of
salary and discretionary bonus, based on established goals and objectives.



<PAGE>


The Shirt Group

    The Shirt Group is a significant  supplier to many leading  department store
and national  chain  retailers.  Additionally,  the Shirt Group is a supplier to
specialty  stores,  mass  merchants  and  discount  retailers.  Consistent  with
industry  practice,  the Shirt Group does not operate  under  long-term  written
supply  agreements  with its  customers.  The Shirt  Group's  top ten  customers
accounted  for  approximately  51% of total net sales for the fiscal  year ended
December 31, 1999.


    In order to better  serve its  customers,  the Shirt  Group has  installed a
vendor managed inventory system with most of its major customers. As a result of
this system, the Shirt Group is one of the few shirt companies that can manage a
customer's  inventory.  As an  example,  this  system  allows the Shirt Group to
monitor inventory levels at a customer and initiate replenishment orders without
having to wait for the customer's direct request.  In addition,  the Shirt Group
uses a balance of  off-shore  sewing and domestic  manufacturing  to provide its
customers  with  timely  dress  shirt   replenishment.   As  a  result  of  this
manufacturing  strategy,  the  Shirt  Group can  deliver  its core  dress  shirt
offerings  within 48 hours of receiving an order.  This order  fulfillment  time
compares favorably to those competitors who rely on foreign  manufacturing for a
majority of their products  where lead times can be as long as five weeks.  As a
result,  management believes certain competitors must hold much higher inventory
levels to effectively compete with the Shirt Group.


    The Shirt  Group  works  closely  with its key  accounts  to assist  them in
managing their entire dress shirt and sport shirt product categories. This close
relationship  insures  increased sales and promotes  maximum product exposure of
the Shirt  Group's  products to the consumer.  In addition to frequent  personal
consultation  with the  buying  teams of these key  accounts,  the  Shirt  Group
frequently  meets with its  customers'  senior  management  to  jointly  develop
merchandise assortments and to plan promotional events specifically tailored for
that account.  The Shirt Group provides  merchandising  assistance with in-store
presentations, fixture designs, advertising and point of sale displays.


    The Shirt Group  employs  sales people who  generally  have several years of
experience in the men's shirt business. Because the turnover of buyers at retail
stores is high,  many  retailers  rely on the experience of their key vendors to
manage their business for them.  The Shirt Group has developed a  well-respected
expertise in managing such businesses for its key accounts. Most sales and sales
management   personnel  are  compensated   with  a  combination  of  salary  and
discretionary bonus, based on established goals and objectives.


    As a  supplement  to its  primary  distribution  channels,  the Shirt  Group
operates 23 retail  outlet stores in the United States and Canada which sell the
Shirt  Group's  products  directly to  consumers.  These stores  generally  sell
irregulars,  discontinued  and  off  price  goods.  The  retail  stores  offer a
collection of the Shirt Group's dress and sport shirts, GOLD TOE socks and other
products such as ties and belts supplied by Arrow licensees. The main purpose of
the retail stores is to help maintain the ARROW brand image by  controlling  the
sale of excess inventory. During the fiscal year ended December 31, 1999, no new
retail  outlet  stores were opened and 1 was  closed.  The average  size of each
store is approximately 3,000 square feet.


<PAGE>


Raw Materials

The Sock Group

    The Sock Group relies on outside  suppliers to meet its raw material  needs.
The Sock Group has  developed  key  relationships  with each of the largest yarn
suppliers in the industry.  Due to its size,  management believes the Sock Group
has developed solid supplier  relationships  and  historically  has been able to
obtain competitive pricing.

    The Sock Group  minimizes the effects of seasonal  variations in yarn prices
by securing long-term contracts for yarn based on its anticipated needs for each
year. Sock manufacturers in the industry  typically  negotiate yarn contracts in
the third  quarter  of the year for the  following  year.  Selling  prices  with
retailers  are then  negotiated  in  January  and  February  based on those yarn
prices.  Historically,  this process has acted as a natural hedge against rising
yarn prices.

The Shirt Group

    The Shirt Group also relies on outside  suppliers  to meet its raw  material
needs,  namely fabric.  The Shirt Group maintains close  relationships  with the
largest suppliers of this material.  The Shirt Group is not heavily dependent on
any one particular supplier.

Manufacturing

The Sock Group

    The Sock Group  produces its sock products  through  domestic  manufacturing
facilities,  imports and subcontracting.  Approximately 85% of all production is
done at Sock Group-owned facilities,  9% is contracted in the United States with
other suppliers and 6% is imported.  The Sock Group operates three manufacturing
facilities  located  in  Newton  and  Burlington,   North  Carolina  and  Bally,
Pennsylvania.  The Sock Group's socks are primarily  made from cotton,  nylon or
acrylic  yarns.  These  yarns  are  knit on a  circular  knitting  machine  in a
tube-like  manner with additional  courses placed in the  construction to form a
pocket for the wearer's heel and toe. The sock is seamed to close the toe end of
the tube, dyed to the proper color and packaged for retail store presentation.

    The Sock  Group's  quality  control  program is  designed to assure that its
products  meet  predetermined  quality  standards.  The Sock  Group has  devoted
significant   resources  to  support  its  quality  improvement  efforts.   Each
manufacturing  facility is staffed with a quality  control team that  identifies
and resolves quality issues.

The Shirt Group

    The Shirt Group  produces its shirt  products  through  owned  manufacturing
facilities in North and Central America and subcontracting. Approximately 40% of
all dress shirt  production  is done at North  American,  Shirt  Group-owned  or
leased facilities, and 60% is sourced outside of North America. All sport shirts
are  sourced  outside of North  America.  The Shirt  Group  owns or leases,  and
operates four facilities  located in  Albertville,  Alabama;  Austell,  Georgia;
Kitchener, Ontario and San Pedro Sula, Honduras.


    For dress shirts, the manufacturing  process begins when rolls of fabric are
received  by the  Shirt  Group's  cutting  facilities.  The  fabric is cut using
automated  technology.  Piece goods are then assembled in bundles and shipped to
sewing plants in the United States,  Canada,  the Caribbean or Central  America.
Shirts that are assembled in the Caribbean or Central  America  comply with Rule
9802 of the U.S.  Tariff Code.  This Rule provides that duties are only assessed
on the value that is added to the garment in the foreign country.  At the sewing
facilities,  collars, cuffs and sleeves are first assembled,  then sewn together
with the body of the shirt and, finally, the garments are inspected, pressed and
packaged. Sport shirts are sourced in the Far East and Central America.


    The  Shirt  Group  purchases  product  through  individual  purchase  orders
specifying  the price and quantity of the items to be produced.  Generally,  the
Shirt Group does not have any  long-term,  formal  arrangements  with any of the
suppliers which  manufacture  its products.  The Shirt Group believes that it is
the  largest  customer  of many of its  manufacturing  suppliers  and  that  its
long-standing  relationships  with its suppliers  provide the Shirt Group with a
competitive  advantage over its  competitors.  No single supplier is critical to
the Shirt Group's  production  needs, and the Shirt Group believes that an ample
number of  alternative  suppliers  exists  should the Shirt Group need to secure
additional or replacement production capacity.

Trademarks and License Agreements

The Sock Group

    The Sock Group markets its products  under its own  proprietary  trademarks,
trade  names and  customer-owned  private  labels,  as well as certain  licensed
trademarks  and trade  names.  The Sock Group uses  trademarks,  trade 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.


    The Sock Group owns various  trademarks  and trade names  including GOLD TOE
and SILVER TOE.  These  trademarks  and trade names  represent  value in product
quality and design.  The Sock Group  regards its  trademarks  and trade names as
valuable assets and rigorously protects them against infringement.

    The Sock Group holds, with the exception of Kenneth Cole, the exclusive sock
licenses for the following  trademarks  (the Kenneth Cole sock license,  as with
the Kenneth Cole shirt license,  is held by the Cluett Designer  Group;  product
sales under the Kenneth Cole licenses are  consolidated  into the Sock Group and
the  Shirt  Group  financial  results,  respectively,  for  financial  reporting
purposes only):


TRADEMARK                   TERRITORY                        EXPIRATION
--------------------------- -------------------------------- ----------


ARROW                       U.S., parts of Central & South   12/31/2000(1)
                                America


The North Face              U.S., Canada, Europe and Asia    12/31/2004(1)


Kenneth Cole                U.S.                             12/31/2003(1)(3)


Nautica                     U.S. and Canada                  12/31/2001

Jockey/Jockey For Her       U.S. and Mexico                  12/31/1999 (2)

Jaclyn Smith                U.S.                             No termination date


(1)  Option to renew.
(2)  Renewal in negotiation.
(3)  United States license held by Cluett Designer Group, Inc.

    The Sock Group is only partially  dependent on these licensed  product lines
(for the year ended  December 31,  1999,  20% of the Sock Group's net sales were
derived from licensed  products),  and the loss of any individual  license would
not have a material adverse affect on the Sock Group's overall profitability.

    The Sock Group has  licensed  the GOLD TOE  trademark  to two  licensees  in
Mexico and Colombia which provide for minimum royalty payments to be paid to the
Sock Group.  The Sock Group  intends to more fully  exploit the  strength of the
GOLD TOE brand by adding new licensees.



<PAGE>


The Shirt Group

    The Shirt Group owns various  trademarks and trade names,  including  ARROW.
The  ARROW  trademark  is  widely  recognized  in the  industry  and  represents
excellence  and value in product  quality,  fashion and design.  The Shirt Group
regards  its  trademarks  and trade  names as  valuable  assets  and  rigorously
protects them against infringement.


    The Shirt Group  licenses the ARROW and related  trademarks  to 21 licensees
for use in territories  within and outside the United States.  Through licensing
alliances,  the Shirt Group combines its consumer insight and design,  marketing
and imaging skills with the specific  product or geographic  competencies of its
licensing  partners  to  create  and  build new  businesses.  The Shirt  Group's
licensing partners, who are often leaders in their respective markets, generally
contribute the majority of product  development  costs,  provide the operational
infrastructure required to support the business and own the inventory. The Shirt
Group works in close  collaboration  with its licensing  partners to ensure that
products are developed,  marketed and distributed to address the intended market
opportunities and present the Shirt Group's products consistently. While product
licensing partners may employ their own designers,  the Shirt Group oversees the
design of all their products.  The Shirt Group also works closely with licensing
partners to coordinate  marketing and  distribution  strategies.  For the fiscal
year ended  December 31, 1999, the Shirt Group had licensing fee revenue of $6.4
million.


    Most of the ARROW license  agreements  provide for a minimum royalty payment
and require the licensee to spend a percentage of net sales on  advertising  and
marketing of products.  The licenses are for three or five year terms which,  in
most cases,  have  provisions for renewal terms if the licensee has not breached
the  agreement  and has met certain  sales  goals.  The Shirt Group also has the
right to supervise  the quality of the licensed  products.  The Shirt Group also
licenses the ARROW  trademark to United  States  licensees  for use on neckwear,
loungewear and men's fashion eyewear.


    Cluett Designer Group,  Inc. holds the exclusive  United States  license for
men's dress shirts under the Kenneth Cole trademark.  The Kenneth  Cole  license
for men's dress shirts expires December 31, 2005.


Backlog and Seasonality

    The  amount  of the  Company's  backlog  orders  at any  particular  time is
affected by a number of factors,  including  seasonality  and  scheduling of the
manufacturing  and shipment of products.  In general,  the Company's  electronic
data  interchange  ("EDI")  system and vendor  managed  inventory  systems  have
resulted in  shortened  lead times  between  submission  of purchase  orders and
delivery and has lowered the level of backlog orders. Consequently,  the Company
believes  that the amount of its  backlog  is not an  appropriate  indicator  of
future production levels.

    The  Company's  business is  generally  divided  among four  retail  selling
seasons:  Spring,  Father's Day, Fall, and Holiday.  Seasonal  factors can cause
some variance in production and sales levels among fiscal quarters in any fiscal
year, but the Company does not regard its overall business as highly seasonal.

Working Capital

     Working  capital  needs  are  affected   primarily  by  inventory   levels,
outstanding  receivables and trade  payables.  The Company had available for its
use,  revolving  credit  facilities  with its primary lender  aggregating  $53.0
million  at  December  31,  1999.  The  commitment  on  these  revolving  credit
facilities was increased to $62.0 million,  on March 29, 2000.  These  revolving
credit  facilities  are used by the  Company  to cover  fluctuations  in working
capital needs. The Company had $32.5 million  outstanding  under these revolving
credit facilities at December 31, 1999. Also, the Company had $10.1 million open
trade letters of credit reserved  against these facilities at December 31, 1999.
In addition to the above,  the Company has  availability  under a revolving loan
facility of up to $15.0 million  Canadian  dollars,  which amount may be reduced
based upon the value of accounts  receivable  outstanding  and inventory held by
Cluett Canada, or upon the good faith  determination by Congress Financial Corp.
("Congress")  that the amount should be reduced to reflect,  among other things,
loss  contingencies or risks,  letters of credit and events of default of Cluett
Canada. At December 31, 1999, the Company had $11.3 million Canadian dollars and
$1.5  million  Canadian  dollars of letters of credit  outstanding  against  the
revolving  loan  facility.  The Company had cash of $7.2 million at December 31,
1999.  Inventory  levels are affected by  anticipated  sales.  It is the general
practice of the Company to offer payment terms of net 30 days to the majority of
its customers from the date of shipment.


Reliance On Certain Customers

    The Sock Group's ten largest  customers  accounted for  approximately 78% of
its net sales in 1999 and the Shirt Group's ten largest customers  accounted for
approximately  51% of its net sales for the fiscal year ended December 31, 1999.
The Company has no long-term  contracts  with these  customers,  and no customer
accounted  for more than 10% of the  Company's  total net  sales.  Although  the
Company has  long-standing  relationships  with these  customers,  a substantial
reduction in sales to these  customers  could have a material  adverse effect on
the financial condition and results of operations of the Company.

Employees

     As of December 31, 1999, the Company employed  approximately  2,772 persons
on a  full-time  basis and  approximately  205  persons  on a  part-time  basis,
including  1,411 persons in the Sock Group and 1,555 persons in the Shirt Group.
Of the total  employees,  2,155 were engaged in  manufacturing  and distribution
operations,  and the remainder were employed in executive,  marketing and sales,
purchasing  activities  and in the  operation  of the  Company's  retail  outlet
stores.  Approximately  28% of the Company's  2,977 employees are represented by
collective  bargaining agreements with one union, which expire between March 31,
2001 and December 31, 2002.  The Company  believes that its  relations  with its
employees are satisfactory.


Competition and Industry Risks

    The apparel industry is highly  competitive due to its fashion  orientation,
its mix of  large  and  small  producers,  the  flow of  domestic  and  imported
merchandise and the wide diversity of retailing  methods.  The Company  competes
with  numerous  domestic  and foreign  designers,  brands and  manufacturers  of
apparel  and  accessories,  some of which may be  significantly  larger and more
diversified  and have greater  financial and other  resources  than the Company.
Increased  competition from these and future  competitors could reduce sales and
prices, adversely affecting the Company's results of operations.

     Although  the  Company  believes  that  most of its  products  are  fashion
staples,  some of the Company's  products,  such as those distributed by Kenneth
Cole, are subject to changing fashion tastes and styles.  The Company's  success
in these  product  lines  depends  on its  ability  to  anticipate  and react to
consumer demands in a timely manner. If the Company misjudges these markets,  it
may be faced  with  significant  excess  inventory  which  could have a material
adverse effect on the Company's financial condition and results of operations.

    The  industries  in which the Company  operates are  cyclical.  Purchases of
apparel  tend to decline  during  recessionary  periods  and also may decline at
other  times.  A recession  in the general  economy or  uncertainties  regarding
future economic  prospects could affect consumer  spending habits and could have
an  adverse  effect on the  Company's  results  of  operations.  Weak  sales and
resulting  markdown  requests from customers could also have a material  adverse
effect on the Company's business, results of operations and financial condition.

    The Sock  Group's  primary  sock  competitors  are:  Sara Lee  (`Hanes'  and
`Champion'  brands);  Renfro (`Gitano' and  `Fruit-of-the-Loom'  brands);  Royce
Hosiery Mills, Inc.  (`Dockers' and `Levi' brands);  Kayser-Roth  (`Burlington,'
`Hue'  and `No  Nonsense'  brands);  American  Essentials  (`Calvin  Klein'  and
`American Essentials' brands) and Hot Sox (`Polo,' `Hot Sox,' `Chaps' and `Ralph
Lauren'  brands).  The Company  believes,  however,  that it manufactures a more
extensive  line of socks for both genders and  children  and in a broader  price
range than any of its competitors.


    The Shirt Group's primary dress shirt competitors are:  Phillips-Van  Heusen
Corporation  (`DKNY,' `Van Heusen,'  `Geoffrey  Beene' and `John Henry' brands);
Salant  (`Perry  Ellis'  brand);  Smart Shirt  (private  label shirt division of
Kellwood Company); Capital Mercury (private label shirts); and Oxford Industries
Inc.  (`Tommy  Hilfiger' and `Polo' brands and private label shirts).  The Shirt
Group's  primary  sports  shirt   competitors   are:  Warnaco  (`Chaps'  brand);
Phillips-Van   Heusen   Corporation  (`Van  Heusen'  brand);   and  Perry  Ellis
International,  Inc.  (formerly  Supreme)  (`Natural  Issue'  and  `Munsingwear'
brands).



<PAGE>



     The Company has historically  benefited from import restrictions imposed on
foreign  competitors in the apparel  industry.  The extent of import  protection
afforded to domestic  manufacturers such as the Company,  however, has been, and
is likely to remain,  subject to considerable  political  deliberation.  General
Agreements on Trade and Tariffs ("GATT") will eliminate, over a number of years,
restrictions on imports of apparel.  In addition,  on January 1, 1994, the North
American  Free  Trade  Agreement  ("NAFTA")  became  effective.  Each  of  these
agreements  will reduce  import  constraints  previously  imposed on some of the
Company's  competitors  and will increase the  likelihood of  competition on the
basis of price.

Environmental Matters

    The  Company is subject to various  federal,  state and local  environmental
laws and  regulations  concerning,  among other things,  wastewater  discharges,
storm water flows, air emissions,  ozone depletion and solid waste disposal. The
Company's  plants  generate very small  quantities  of hazardous  waste that are
either  recycled  or disposed of  off-site.  Most of its plants are  required to
possess one or more discharge permits.

    Environmental  regulation applicable to the Company's operations is becoming
increasingly  more stringent.  The Company  continues to incur capital and other
expenditures  each year in order to comply with  current  and future  regulatory
standards.  The  Company  does not  expect,  however,  that the  amount  of such
expenditures in the future will have a material  adverse effect on its financial
condition,  results  of  operations  or  competitive  position.  There can be no
assurance,  however, that future changes in federal, state or local regulations,
interpretations of existing  regulations,  or the discovery of currently unknown
problems or conditions  will not require  substantial  additional  expenditures.
Similarly,  the extent of the Company's liability,  if any, for past failures to
comply with laws, regulations and permits applicable to its operations cannot be
determined.


<PAGE>


Item 2.   Properties

Facilities

     The  Company's  principal  executive  offices  are  located at 48 West 38th
Street, New York, NY 10018. The following table summarizes  certain  information
concerning certain of the Company's facilities:


                                                APPROX.
LOCATION                      USE             SQUARE FEET   OWNED/LEASED

---------------------------   --------------  -----------   ------------
Shirt Group:
  Enterprise, AL...........  Manufacturing (1)  50,000          Owned
  San Pedro Sula, Honduras.  Manufacturing      55,000          Leased
  Kitchener, Ontario.......  Manufacturing      145,000         Owned
  Kitchener, Ontario.......  Distribution       125,000         Leased
  Albertville, AL..........  Manufacturing      57,000          Leased
  Austell, GA..............  Manufacturing/     593,000         Owned
                              Distribution
  Toronto, Ontario.........  Showroom           8,100           Leased
  New York NY..............  Showroom/          30,000          Leased
                              Administrative
  Smyrna, GA...............  Administrative     28,486          Leased

Sock Group:
  Bally, PA................  Manufacturing      155,000         Owned
  Newton, NC...............  Manufacturing      81,600          Owned
  Burlington, NC...........  Manufacturing      251,400         Owned
  Newton, NC...............  Warehouse          36,000          Leased
  Mebane, NC...............  Distribution       150,000         Leased
  New York, NY.............  Showrooms          11,000          Leased
  Boyertown, PA............  Warehouse          35,000          Leased
  Pottstown, PA............  Dye Facility       20,500          Leased
  Burlington, NC...........  Office Space       8,300           Leased

(1)  Property held for sale as of December 31, 1999.


    In addition,  the Company operates 28 outlet stores on leased premises.  The
Company  believes that its existing  facilities  are  adequately  insured,  well
maintained  and in good operating  condition and are otherwise  adequate for its
current and foreseeable level of operations for the next few years.



<PAGE>


Item 3.   Legal Proceedings

    From time to time,  the  Company is involved  in various  legal  proceedings
arising from the ordinary  course of its business  operations,  such as personal
injury claims, employment matters and contractual disputes. The Company believes
that its potential  liability with respect to proceedings  currently  pending is
not material in the aggregate to the Company's  consolidated  financial position
or results of operations.


    In March 2000,  the Company and a former  employee  reached an  agreement in
principle  to settle all matters  relating to an action  brought by the employee
for the sum of $1.75  million  of which  $1.6  million  and  $1.75  million  was
reserved at December 31, 1998 and December 31, 1999, respectively.


    In  connection  with  the  bankruptcy  proceedings,   the  Company  incurred
bankruptcy  reorganization  costs  in 1997  and  1998 of $6.1  million  and $2.5
million  respectively,  for professional  fees. In 1999, the Company  recognized
bankruptcy  credits of  $573,000.  The Company  does not  anticipate  any future
adjustments  with  respect to  disputed  claims or other  events  related to the
bankruptcy.

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

     During the fourth  quarter of 1999,  no matter was  submitted  to a vote of
security  holders  of the  Company  by means of the  solicitation  of proxies or
otherwise.

                                     PART II

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


      All of the Company's  outstanding  common stock is held by Cluett American
Group ("CAG") and there is no established  public trading market for such stock.
The Company has paid no dividends to common  stockholders  since  inception  and
does not have any present  intention to commence  payment of any cash dividends.
The  Company's  ability  to pay such  dividends  is  limited by the terms of its
Senior  Credit  Facility  agreement  and the  Indenture  relating to its 10 1/8%
Senior Subordinated Notes due 2008 and its 12 1/2% Senior Exchangeable Preferred
Stock due 2010.  The Company  intends to retain  earnings  to provide  funds for
operation  and expansion of the Company's  businesses  and to repay  outstanding
indebtedness.



<PAGE>



Item 6.   Selected Financial Data

    The following  table sets forth  summary  historical  financial  data of the
Company  for each of the five years  ended  December  31,  1999.  The  following
summary  financial data with respect to the three years ended December 31, 1999,
are derived from the Consolidated  Financial  Statements  included  elsewhere in
this  document  which have been audited by Ernst & Young LLP (1997 and 1998) and
Deloitte  & Touche LLP  (1999),  independent  auditors,  as  indicated  in their
reports included  elsewhere herein.  The following summary financial data should
be read in conjunction with  "Management's  Discussion and Analysis of Financial
Condition  and Results of  Operations"  and the Financial  Statements  and notes
thereto included elsewhere in this document.


                                         1995    1996     1997    1998    1999
                                         ----    ----     ----    ----    ----

                                                  (DOLLARS IN MILLIONS)

STATEMENT OF OPERATIONS DATA:
Net sales                             $ 486.7  $ 369.0 $ 363.5 $ 373.1  $ 343.5
Cost of goods sold(1)                   369.8    273.8   253.7   264.3    249.1
                                      ------------------------------------------
Gross profit                            116.9     95.2   109.8   108.8     94.4

Selling, general and
administrative expense                  137.9     86.3    76.3    82.4     81.8
Restructuring and impairment charges(2)  22.5     11.6     2.5     2.4      2.2
                                     ------------------------------------------
Operating income (loss)                 (43.5)    (2.7)   31.0    24.0     10.4
Interest expense, net                    22.7     16.9    15.2    20.4     26.5
Other expense (income), net(3)            0.5      3.2     1.2     2.1      0.5

Bankruptcy reorganization costs
 (credits)(4)                            20.9      6.1    (3.9)   37.5     (0.6)
Income (loss) before provision for
  income taxes                          (87.6)   (28.9)   18.5   (36.0)   (16.0)
Provision for income taxes                1.5      1.3     1.3     0.8      1.1
                                      ------------------------------------------
Net income (loss)                    $  (89.1)  $(30.2) $ 17.2  $ 36.8) $ (17.1)
                                      ==========================================

OTHER FINANCIAL DATA:
Capital expenditures                 $    6.1   $  9.8  $ 10.8  $ 11.8  $  10.7
Depreciation                             13.3     10.9     8.1     8.7      9.4
Cash flows provided by (used in):
  Operating activities                    0.4     16.7    13.0   (30.9)    (7.9)
  Investing activities                   25.3     (8.3)   (7.5)  (11.7)   (11.7)
  Financing activities                  (26.1)    13.3    (1.3)   35.5     23.9
EBITDA As Defined(5)                     (7.8)    17.4    39.6    40.9     22.0
Net Sales                               486.7    369.0   363.5   373.1    343.5
EBITDA As Defined margin                  --       4.7%   10.9%   11.0%     6.4%
Ratio of earnings to fixed charges(6)     --        --     2.1x    --        --
Working capital(7)                   $  116.9   $ 82.1  $ 82.3  $ 81.4  $  80.2
Total assets                            252.9    211.1   220.0   220.8    231.5
Total long-term debt, net of current
  portion(8)                              3.6      8.6     2.0   235.7    258.9
Debt subject to compromise              161.1    146.0   145.6    --       --
Preferred stock                          17.4     18.7    20.0    51.3     58.3
Total stockholder's deficit             (44.3)   (74.2)  (56.8) (149.0)  (147.2)

  (1) In 1995, the Company recorded a charge of approximately  $14.0 million for
  the write-down of inventory, which is included in cost of goods sold.

  (2)  Over  the  five-year  period  1995-1999,  restructuring  and  impairments
  charges,  which totaled  $42.0  million,  included  $20.1 million for facility
  closings and related termination  benefits,  $10.5 million for store closings,
  $2.4  million  for Other  Segment (as  defined  herein)  and $8.9  million for
  software, systems development and implementation and other consulting costs.

<PAGE>


  (3) In 1996, the Company began  liquidating its investments in its Mexican and
  Guatemalan  subsidiaries and wrote off $3.1 million  previously  recorded as a
  component of equity for foreign currency translation.  In 1998, other expenses
  is comprised primarily of failed deal costs and litigation reserves.

  (4) Bankruptcy reorganization costs (credits) consist of the following:



                                              YEAR ENDED DECEMBER 31,

                                      ------------------------------------------
                                      1995    1996     1997     1998      1999
                                      ------- -------  -------  -------   ------
                                                (DOLLARS IN MILLIONS)

Professional fees                  $   2.8 $   6.1   $  6.1   $  2.5   $    --
Post petition interest paid in
   accordance with the Plan            --      --       --      35.0        --
Adjustment to lease rejection and
   other pre-petition liabilities      9.8     --     (10.0)     --       (0.6)
Write off of deferred financing costs  3.5     --       --       --         --
Fees related to obtaining the Debtor-
  In-Possession Facility               1.3     --       --       --         --
Claims and related litigation          3.5     --       --       --         --
                                     -------- -------  -------  -------  -------
                                   $  20.9 $   6.1   $ (3.9)  $ 37.5   $  (0.6)
                                     ======== =======  =======  =======  =======


  (5) For 1999,  EBITDA  As  Defined  is  defined  as  operating  income  before
  depreciation and amortization,  interest expense,  taxes and restructuring and
  impairment charges.  EBITDA As Defined for years 1995 through 1997 and 1998 is
  based on a similiar definition as disclosed in the Company's S-4 and 1998 Form
  10-K, respectively,(incorporated herein by reference).EBITDA As Defined should
  not be considered in isolation or as a substitute for net income, certain cash
  flows from  operating  activities  and  other  income or cash  flow  statement
  data  prepared  in  accordance with generally accepted  accounting  principles
  or  as  a  measure of  profitability  or  liquidity. EBITDA As Defined  is not
  necessarily   comparable   to   other  similarly  titled   captions   of other
  companies  due to differences in methods of calculation.

  (6) For  purposes  of  determining  the ratio of  earnings  to fixed  charges,
  earnings are defined as earnings  before  income  taxes,  plus fixed  charges.
  Fixed charges include  interest expense on all  indebtedness,  amortization of
  deferred financing charges, and one-third of rental expense, representing that
  portion of rental expense deemed to be attributable to interest. Earnings were
  insufficient to cover fixed charges by $87.6 million in 1995, $28.9 million in
  1996, $14.2 million in 1998, and $11.9 million in 1999.

  (7)  Working  capital  is  defined  as  current  assets  (less  cash  and cash
  equivalents)  minus current  liabilities (less current maturities of long-term
  debt).

  (8) On July 17, 1995,  $161.1  million of long-term debt was  reclassified  to
  liabilities subject to compromise.


<PAGE>


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

     The  Consolidated  Statement of Operations  present Cluett American Corp.'s
operating performance over the last three years.

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

    The  following  table sets forth,  for the periods  indicated,  statement of
operations data in dollars and as a percentage of net sales.
<TABLE>

                                                                      1999                                1998
                                                              ---------------------               ----------------------
                                                                                      (DOLLARS
                                                                                    IN MILLIONS)

               <S>                                            <C>           <C>                    <C>          <C>
               Net sales                                      $    343.5    100.0%                 $    373.1    100.0%
               Cost of sales                                       249.1     72.5                       264.3     70.8
                                                                   -----     ----                       -----   ------
               Gross profit                                         94.4     27.5                       108.8     29.2
               Selling, general and administrative expense          81.8     23.6                        82.4     22.1
               Restructuring and impairment charges                  2.2      0.6                         2.4      0.6
                                                                     ---      ---                        ----    -----
               Operating income                                     10.4      3.3                        24.0      6.4
               Interest expense                                     26.5      7.7                        20.4      5.5
               Other expense/(income)                                0.5      0.1                         2.1      0.6
               Bankruptcy reorganization                            (0.6)    (0.1)                       37.5     10.5
               Provision for income taxes                            1.1      0.3                         0.8      0.2
                                                                     ---    -----                         ---    -----
               Net income (loss)                                 $ (17.1)    (5.0)%                 $   (36.8)    (9.9)%
                                                               ==========    ======                 ==========  ========

</TABLE>

    Net Sales.  Net sales in 1999  decreased  $29.6  million  to $343.5  million
compared to $373.1 million in 1998.  Net sales in the Sock Group  increased $3.6
million to $168.4  million in 1999 from $164.8  million in 1998.  This  increase
resulted primarily from the Company's  expanded branded product  offerings.  Net
sales in the Shirt Group  decreased  $8.9 million to $176.5 million in 1999 from
$185.4 in 1998. This decrease resulted  primarily from an $18.0 million decrease
in Wholesale business due to a decline in staple dress shirt demand, offset by a
$10.2 million  increase in Kenneth Cole product  offerings.  The Shirt Group net
sales also includes  license fee income of $6.4 million in 1999 compared to $6.3
million in 1998. Net sales of all other products decreased $24.1 million to $6.8
million in 1999  compared  to $30.9  million  in 1998.  This  decrease  resulted
primarily from the Company's exit from the YSL,  Burberry's and Canadian  retail
store businesses.

    Gross Profit.  Gross profit in 1999 decreased $14.4 million to $94.4 million
compared to $108.8 million in 1998. The Company's gross profit margin  decreased
to 27.5% in 1999  compared  to 29.2% in  1998.  The Sock  Group's  gross  profit
increased  $6.2 million to $58.7  million in 1999  compared to $52.5  million in
1998.  This increase is due to increased sales and improved  efficiencies.  Sock
Group gross margin increased to 34.9% in 1999 from 31.9% in 1998,  primarily due
to productivity  and overhead  absorption  improvements as well as material cost
reductions.  The Shirt  Group's  gross profit  decreased  $17.2 million to $35.3
million in 1999 from $52.5 million in 1998, primarily due to decreased sales and
higher  costs.  Shirt Group gross margin  decreased to 20.0% in 1999 compared to
28.3%  in  1998,  primarily  due to  margin  deterioration  at the US  Wholesale
division  where  gross  margin  fell to 13.8% in 1999 from  25.1% in 1998.  This
margin  decrease  was  primarily  due to a decline in staple  dress shirt demand
(traditionally  the  Company's  most  profitable  product),   dress  shirt  cost
increases  due to  quality  improvements  without  offsetting  price  increases,
general plant  inefficiencies,  transition costs for the new Khaki's  sportswear
line, and new product launch costs. Gross profit of all other products decreased
$3.4 million to $382,000 in 1999 compared to $3.8 million in 1998, primarily due
to the  Company's  exit  from the YSL,  Burberry's  and  Canadian  retail  store
businesses.

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses for 1999  decreased  $600,000 to $81.8  million in 1999
compared  with $82.4  million  in 1998.  The  decreased  S,G&A  expenses  relate
primarily to cost savings from the  Company's  exit of the YSL,  Burberry's  and
Canadian retail store businesses.

<PAGE>

    Restructuring and Impairment  charges.  Restructuring and impairment charges
decreased  $200,000 to $2.2  million in 1999  compared to $2.4  million in 1998.
During 1999, the Company recorded net  restructuring  and impairment  charges of
$2.2 million to reduce operating expenses and improve overall productivity.  The
Company closed its owned manufacturing  facility located in Enterprise,  Alabama
and consolidated  certain  administrative  functions within the Shirt Group. The
closure and administrative consolidation costs included  severance costs of $1.6
million and an impairment charge of $383,000 to record the  Enterprise  facility
at its net realizable value.  Both  the  facility closure and the administrative
consolidation are expected to yield annual pre-tax cost savings of approximately
$3.2 million beginning in 2000.  In 1999,  the  Company's  Sock  Group  approved
a  restructuring   plan  to  cease distribution operations at an  owned facility
located in Bally,  Pennsylvania  and  to  close a leased  dye-house  facility in
Pottstown, Pennsylvania  in 2000 and recorded  termination  benefits of $269,000
and other facility  closure costs of $97,000. The restructuring  is expected  to
yield  annual  pre-tax  savings of approximately $1.4 million beginning in 2001.

     Operating Income. Operating income decreased $13.6 million to $10.4 million
in 1999 from $24.0 million in 1998, due to the factors discussed above.

    Interest  Expense.  Interest expense increased $6.1 million to $26.5 million
in 1999,  versus  $20.4  million in 1998,  due  primarily  to higher debt levels
existing in 1999.

     Other Expense,  net. Other expense,  net decreased $1.6 million to $500,000
in 1999  compared  to $2.1  million  in  1998,  due  primarily  to the  Connolly
Litigation.  In March  2000,  the  Company  and a  former  employee  reached  an
agreement in principle  to settle all matters  relating to an action  brought by
the  employee  for the sum of $1.75  million  of which  $1.6  million  and $1.75
million was reserved at December 31, 1998 and December 31, 1999, respectively.

    Bankruptcy  Reorganization Costs. Bankruptcy  reorganization costs decreased
$38.1  million to ($0.6)  million  in 1999  compared  to $37.5  million in 1998.
During 1998, the Company incurred bankruptcy reorganization costs resulting from
the payment of post-petition  interest,  default interest, and fees to creditors
in accordance with the terms of the Plan, with no  corresponding  costs incurred
in 1999.

     Provision for Income Taxes.  Provision for income taxes increased  $300,000
to $1.1  million  in 1999  compared  to  $800,000  in 1998.

     Net  Loss.  Net loss  decreased  $19.7  million  to $17.1  million  in 1999
compared to a net loss of $36.8  million in 1998.  Due to the factors  discussed
above.






<PAGE>


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

The  following  table  sets  forth,  for the  periods  indicated,  statement  of
operations data in dollars and as a percentage of net sales.
<TABLE>

                                                                     1998                                  1997
                                                             ---------------------                ------------------------
                                                                                   (DOLLARS IN
                                                                                    MILLIONS)

               <S>                                           <C>           <C>                        <C>        <C>
               Net sales                                     $    373.1    100.0%                  $    363.5     100.0%
               Cost of sales                                      264.3     70.8                        253.7      69.8
                                                                  -----    -----                       ------     -----
               Gross profit                                       108.8     29.2                        109.8      30.2
               Selling, general and administrative expense         82.4     22.1                         76.3      21.0
               Restructuring and impairment charges                 2.4      0.6                          2.5       0.7
                                                                 ------   ------                      -------     -----
               Operating income (loss)                             24.0      6.4                         31.0       8.5
               Interest expense                                    20.4      5.5                         15.2       4.2
               Other expense/(income)                               2.1      0.6                          1.2       0.3
               Bankruptcy reorganization                           37.5     10.1                         (3.9)     (1.1)
               Provision for income taxes                           0.8      0.2                          1.3       0.4
                                                                 ------    -----                       ------     -----
               Net income (loss)                              $   (36.8)    (9.9)%                  $    17.2       4.7%
                                                              ==========  ========                  =========    =======

</TABLE>

    Net  Sales.  Net sales in 1998  increased  $9.6  million  to $373.1  million
compared to $363.5 million in 1997. Net sales in the Sock Group  increased $13.0
million to $164.8  million in 1998 from $151.8  million in 1997.  This  increase
resulted  primarily  from the Company's  expanded  GOLD TOE,  Nautica and Jockey
product offerings. Net sales in the Shirt Group increased $8.6 million to $185.4
million in 1998 from $176.8 million in 1997.  This increase  resulted  primarily
from an $8.6 million  increase in the  wholesale  business.  The Shirt Group net
sales also include  license fee income of $6.3 million for 1998 compared to $6.7
million for 1997.  The  decrease in license fee income is a result of erosion in
royalties  from ARROW's Asian  licensees  offset by a 15%  improvement  in ARROW
royalties in Europe,  Africa,  South America and the United States. Net sales of
all other products  decreased $12.7 million to $30.9 million in 1998 compared to
$43.6  million in 1997,  due to the Company's  exit from the YSL and  Burberry's
businesses.

    Gross Profit.  Gross profit in 1998 decreased $1.0 million to $108.8 million
compared to $109.8 million in 1997. The Company's gross profit margin  decreased
slightly to 29.2% in 1998  compared  to 30.2% in 1997.  The Sock  Group's  gross
profit increased $3.4 million to $52.5 million in 1998 compared to $49.1 million
in 1997,  primarily due to increased sales. Sock Group gross margin decreased to
31.7% in 1998 from 32.2% in 1997, primarily due to unfavorable mix changes and a
general 3% wage increase.  The Shirt Group's gross profit increased $3.3 million
to $52.5 million in 1998 from $49.2 million in 1997,  primarily due to increased
sales.  Shirt Group gross margin increased to 28.3% in 1998 compared to 27.8% in
1997,  primarily due to reduced off-price selling,  lower excess inventories and
better  execution of deliveries.  Gross profit of all other  products  decreased
$7.7 million to $3.8 million in 1998  compared to $11.5  million in 1997.  Gross
profit  margin of all other  products  decreased  to 12.4% in 1998 from 26.4% in
1997. These other product decreases are primarily due to the Company's  decision
to exit the YSL and Burberry's businesses in 1998.

    Selling,   General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  for 1998  increased  $6.1  million  to  $82.4  million
compared  with  $76.3  million  in 1997.  This  increase  related  to  increased
advertising  at  Arrow,  higher  distribution  expense  from  volume  increases,
excessive overtime and Sock Group distribution center consolidation  charges and
increased    selling   expense    associated   with   new    product-line    and
distribution-channel initiatives.

    Restructuring and Impairment  Charges.  Restructuring and impairment charges
decreased  $100,000 to $2.4  million in 1998  compared to $2.5  million in 1997.
During 1998 and 1997, the Company closed 3 retail outlet stores each year and in
1998  consolidated  certain  distribution  facilities and closed a sock knitting
facility at the Sock Group.  The Company  recorded  restructuring  costs of $2.2
million in 1997 and $2.3 million in 1998, respectively,  related to the closures
and facility consolidation.  Severance costs of $318,000 in 1998 and $338,000 in
1997 were recorded which related to the termination of 100 employees in 1998 and
25  employees  in 1997.  Additional  closure  costs  primarily  related to lease
terminations.  In addition,  the Company recorded impairment charges of $150,000
in 1998 and 1997 related to the  write-off of retail  outlet store  property and
underperforming  assets.  The Company  incurred other operating  expenses during
1997 and 1998 to restructure and operate the Company during bankruptcy. In 1998,
the  Company  also  consolidated  certain  distribution  centers,  closed a sock
knitting  facility  and  disposed  of  certain  under-  performing  assets.  The
restructuring  is  expected to yield  annual  pre-tax  savings of  approximately
$847,000 beginning in 1999.

    Operating  Income (Loss).  Operating  income decreased $7.0 million to $24.0
million in 1998 from $31.0 million in 1997 due to the factors noted above.

    Interest  Expense.  Interest expense increased $5.2 million in 1998 compared
to $15.2 million in 1997, due primarily to higher debt levels existing after the
bankruptcy reorganization completed on May 18, 1998.

     Other Expense,  net. Other expense,  net increased $900,000 to $2.1 million
in 1998  compared  to $1.2  million  in  1997,  due  primarily  to the  Connally
Litigation previously discussed.

    Bankruptcy  Reorganization.  Bankruptcy reorganization costs increased $41.4
million to $37.5 million in 1998 compared to bankruptcy  reorganization  credits
of $3.9  million in 1997,  due  primarily  to  post-petition  interest,  default
interest,  and fees to creditors in accordance  with the terms of the bankruptcy
reorganization plan.

    Provision for Income Taxes.  Provision for income taxes decreased  $500,000
to $800,000 in 1998 compared to $1.3 million in 1997.

    Net Income (Loss).  Net loss increased  $54.0 million to ($36.8)  million in
1998  compared  to net income of $17.2  million in 1997,  due  primarily  to the
factors noted above.


Liquidity and Capital Resources

     The Company broadly defines liquidity as its ability to generate sufficient
cash flow from operating activities to meet its obligations and commitments.  In
addition,  liquidity  includes the ability to obtain appropriate debt and equity
financing  and to convert into cash those assets that are no longer  required to
meet existing strategic and financial objectives. Therefore, liquidity cannot be
considered  separately  from  capital  resources  that  consist  of  current  or
potentially  available funds for use in achieving long range business objectives
and meeting debt service commitments.

Cash Flows

     Cash and cash  equivalents  increased  $4.3 million to $7.2 million in 1999
from  $2.9  million  in 1998  primarily  as a result of $7.9  million  and $11.7
million in net cash used in operating  and investing  activities,  respectively,
offset by $23.9 million in net cash provided by financing  activities.  Net cash
used in operating activities resulted primarily from the Company's $17.1 million
net loss  offset by $10.9  million in  non-cash  depreciation  and  amortization
charges.  Net cash used in investing  activities  resulted  primarily from $10.7
million in capital  expenditures.  Net cash  provided  by  financing  activities
resulted  primarily  from $24.1  million in net  borrowings  under the Company's
revolving credit facilities.

Liquidity and Capital Resources

     The  Company's  liquidity  needs arise  primarily  from debt service on the
indebtedness   incurred  in  connection   with  the  Company's  1998  bankruptcy
reorganization and the funding of working capital and capital  expenditures.  As
of  December  31,  1999,  the  Company had  outstanding  $273.1  million of debt
consisting of $125.0 million in senior  subordinated notes (including the Parity
Notes),  a Senior Credit  Facility  consisting of a $46.0 million term A loan, a
$59.1  million  term B loan and $32.5  million in  revolving  credit  facilities
borrowings,  $7.8 million in Canadian revolving credit facility borrowings and a
$2.5 million CAT  acquisition  note  payable.  During 1999 the Company had a net
increase in revolving credit facilities  borrowings of $27.9 million, and repaid
$4.0 million in term loans and notes payable.

     In 1999,  the Company  obtained a $3.0 million  revolving  credit  facility
("Additional Revolver") which is guaranteed by Vestar and bears interest, at the
Company's option, at either the Eurodollar rate plus 1.5% or the Prime rate plus
0.5%.  This facility  expires on December 31, 2000. At December 31, 1999,  there
were no amounts outstanding under the Additional Revolver. On February 17, 2000,
the Additional Revolver was increased to $7.5 million.

     On March 29, 2000, the  Additional  Revolver was increased to $12.0 million
and incorporated  into the Senior Credit Facility as Tranche C. Borrowings under
Tranche C are due and payable on June 30, 2000 (unless  certain events occur, in
which case the maturity can be extended to December 31, 2001) and are guaranteed
by Vestar.

Debt Service

     Principal  and  interest  payments  under  the  Company's  debt  agreements
represent  significant  liquidity   requirements  for  the  Company.   Aggregate
principal  payments  on the  Company's  indebtedness  are  $14.2  million,  $9.5
million, $12.9 million, $14.6 million, $40.6 million, for each of the years 2000
through 2004, respectively, with $181.3 million thereafter through 2008.

     The  Company's  senior  subordinated  notes  mature  in  2008  and  require
semi-annual  interest payments at 10 1/8%. The term A and B loans mature in 2004
and 2005,  respectively,  and require quarterly principal payments and quarterly
interest  payments at floating rates based upon the interest rate option elected
by the Company.  The revolving credit facilities expire at various dates through
2004, and require  quarterly  interest payments at floating rates based upon the
interest  rate option  elected by the  Company.  The Canadian  revolving  credit
facility expires in 2000, but can continue year to year thereafter, and requires
monthly interest  payments at floating rates based upon the interest rate option
elected by the Company.  The CAT note payable  requires monthly payments through
2002 with  interest  imputed at 10%.  Cash paid for  interest  in 1999 was $23.3
million.  Interest  expense for 2000 is expected to be $29.9 million,  including
$1.7 million of non-cash amortization of deferred debt issuance costs.

Covenant Restrictions

     The Senior Credit Facility contains a number of covenants that, among other
things,  restrict  the ability of the Company and its  subsidiaries,  other than
pursuant  to  specified  exceptions,  to  dispose of  assets,  incur  additional
indebtedness,   incur  guarantee  obligations,  repay  other  indebtedness,  pay
dividends, create liens on assets, enter into leases, make investments, loans or
advances, make acquisitions,  engage in mergers or consolidations,  make capital
expenditures,  enter into sale and leaseback transactions,  change the nature of
their  business  or  engage  in  certain   transactions  with  subsidiaries  and
affiliates and otherwise restrict corporate activities.  In addition,  under the
Senior  Credit  Facility  the  Company  is  required  to comply  with  specified
financial ratios and tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage  ratios,  including a senior leverage ratio
and a total leverage  ratio,  and a minimum Sock Group EBITDA test each of which
is tested  as of the last day of each  fiscal  quarter  of the  Company  and its
subsidiaries.  The amendments in December 1998,  March 1999,  September 1999 and
March 2000 revised the original  covenants.  Additionally,  the  September  1999
amendment  requires Vestar to infuse up to $30 million of new capital if certain
leverage ratios are not met.

     At December 31, 1999, the Company was not in compliance  with its financial
ratio  covenants  and  received a waiver  dated March 29,  2000.  The March 2000
waiver and amendment, also revised on-going covenants and the Company expects to
meet these covenants in 2000.

     On March 29,  2000,  the Senior  Credit  Facility  and the  Investment  and
Deposit agreement were amended.  The March 2000 amendment requires (i) Vestar to
infuse up to $30 million of new capital into the Company and (ii) the Company to
make  $20  million  in  additional  principal  payments  on  the  Senior  Credit
Facilities between June 30, 2000 (or in certain  circumstances  August 31, 2000)
and December 31, 2000 if certain financial ratios are not met by June 30, 2000.

Capital Expenditures

     Capital  spending  during 1999 was $10.7  million and related  primarily to
general improvements to the Company's  manufacturing  facilities.  Total capital
spending for 2000 is expected to be $7.0  million and also relates  primarily to
general improvements to the Company's manufacturing facilities.

Financing Sources and Cash Flows

     At December  31, 1999 the Company had $7.2  million in cash and  additional
availability of $5.7 million under the revolving credit  facilities  included in
the Senior Credit facility,  after  consideration of $10.1 million in open trade
letters of credit and $1.7 million of stand-by  letters of credit.  These credit
facilities  were  increased by $4.5  million on each of February  17, 2000,  and
March  29,  2000.  At  December  31,  1999  the  Company  also  had   additional
availability  of $2.2 million  Canadian  dollars  under the  Canadian  revolving
credit  facility,  after  consideration of $1.5 million Canadian dollars in open
trade letters of credit.

    The Company has a substantial amount of indebtedness.  The Company relies on
internally generated funds and, to the extent necessary, on borrowings under the
revolving credit  facilities to meet its liquidity needs. The Company's  ability
to incur  additional  indebtedness  is  limited  under  its  existing  borrowing
arrangements.

    Based upon the current level of  operations,  management  believes that cash
flow from  operations and available  cash,  together with  available  borrowings
under the revolving credit facilities, are adequate to meet the Company's future
liquidity needs until at least the end of 2000. The Company may,  however,  need
to refinance all or a portion of the principal of the Senior Credit  Facility on
or prior to maturity and there can be no assurance that the Company will be able
to effect any such refinancing. In addition, there can be no assurances that the
Company's  business will generate  sufficient  cash flow from  operations,  that
anticipated  revenue growth and operating  improvements will be realized or that
future  borrowings  will be  available  under the Senior  Credit  Facility in an
amount  sufficient to (i) enable the Company to service its indebtedness or (ii)
fund its other liquidity needs.

Income Taxes

     See Note 10  "Income  Taxes"  of the  Notes to the  Consolidated  Financial
Statements  included on pages F-8  through  F-37 of the  Consolidated  Financial
Statements.

New Accounting Pronouncements

     See Note 3 "New Accounting Pronouncements" of the Notes to the Consolidated
Financial  Statements  included  on pages F-8 through  F-37 of the  Consolidated
Financial Statements.

Year 2000 Risk

     The Year 2000  ("Y2K")  issue is the  result  of  computer  programs  being
written using two digits  rather than four to define the  applicable  year.  The
Company's computer equipment, software and devices with embedded technology that
are  time-sensitive may recognize a date using "00" as the year 1900 rather than
the Year 2000. This could result in system failures or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send invoices,  or engage in similar normal  business
activities.  In addition,  certain computer programs that are date sensitive may
not  process  the Y2K as a leap year.  As of March 6, 2000,  the Company has not
experienced any significant  business  interruption  related to the Y2K issue or
leap year issues,  nor is it aware of any business  interruptions  at any of its
primary  suppliers or customers.  There can be no assurance,  however,  that the
Company will not be affected in the future by any existing  non-disclosed Y2K or
leap year  non-compliance  of material third parties.  As a result,  the Company
will  continue  to  monitor  its Y2K and leap year  compliance  and the  related
compliance of its suppliers and customers.  Total Y2K costs were not material to
the Company's results of operations and financial condition.


<PAGE>


Cautionary Statement Regarding Forward-Looking Statements

     This Annual Report on Form 10-K contains  certain  statements that describe
the Company's beliefs concerning future business  conditions and the outlook for
the Company based on currently available information. The preceding Management's
Discussion  and  Analysis  contains  forward-looking  statements  regarding  the
Company's  performance,  liquidity  and the  adequacy of its capital  resources.
These forward looking  statements are subject to risks,  uncertainties and other
factors  which  could  cause  the  Company's  actual  results,   performance  or
achievement to differ  materially  from those  expressed in, or implied by these
statements.  These risks,  uncertainties  and other factors  include but are not
limited to, the following: (i) the financial strength of the retail industry and
the level of  consumer  spending  for  apparel,  (ii) the  Company's  ability to
develop,  market and sell its products,  (iii) increased  competition from other
manufacturers of men's dress shirts and socks, (iv) general economic conditions,
(v) hiring and retaining effective team members,  (vi) sourcing merchandise from
domestic and  international  vendors,  and (vii) any  unanticipated  problems or
delays in the completion by the Company to become Year 2000 ready or the failure
of the  Company's  vendors or customers to do so.  Therefore,  while  management
believes that there is a reasonable  basis for the  forward-looking  statements,
undue reliance should not be placed on those statements.


Item 7A. Quantitative and Qualitative disclosures about  Market Risk

Market Risk Factors

     The Company has market risk  exposure  from  changes in interest  rates and
foreign  currency  exchange  rates.  The Company  operates under a senior credit
facility at variable interest rates.  Interest expense is primarily  affected by
the general level of U.S.  interest  rates,  LIBOR and European base rates.  The
Company is subject to risk from  sales and loans to its  foreign  subsidiary  as
well as sales,  purchases from third party  customers,  suppliers and creditors,
denominated  in foreign  currencies.  Currently,  the Company does not currently
engage in any derivative  type  instruments  in order to hedge against  interest
rate and Canadian  foreign currency  exchange rate  fluctuations.  However,  the
Company  feels it is limited in its exposure of foreign  currency  exchange rate
changes as most inventory purchase contracts are denominated in US Dollars.

Floating Interest Rate Risk

     In order to  assess  the  impact  of  changes  in  interest  rate on future
earnings and cash flow, the Company assumed a 1% (100 basis points)  unfavorable
shift in the  underlying  interest  rate  would  result in  additional  interest
expense of $ 1.4 million.

Fixed Interest Rate Risk

     The fair value of long-term  fixed  interest  rate debt and fixed  interest
rate preferred stock is also subject to interest rate risk. Generally,  the fair
value of fixed interest rate debt and preferred  stock will increase as interest
rates fall and decrease as interest rates rise. A  hypothetical  100 basis point
increase in the prevailing interest rates at December 31, 1999 would result in a
decrease  in fair  value  of  total  long-term  debt  and  preferred  stock,  by
approximately $ 4.7 million.

Currency

     The  Company's  Canadian   operations   represented   approximately  4%  of
consolidated  fixed assets and 9% of consolidated net sales for 1999. Because of
the Company's  international  operations,  the Company is exposed to translation
risk when the local  currency  statements  of income  are  translated  into U.S.
dollars. As currency exchange rates fluctuate,  translation of the statements of
income  of   international   businesses  into  U.S.   dollars  will  affect  the
comparability of revenues and expenses between years.  None of the components of
the  Company's  consolidated  statements  of income was  materially  affected by
exchange rate fluctuations in 1997, 1998, or 1999.


The Company's revenues are denominated in each international  subsidiary's local
currency;  thus, the Company is not exposed to currency  transaction risk on its
revenues.  The  Company  is  exposed  to  currency  transaction  risk on certain
purchases of raw materials and equipment by its international  subsidiaries.  At
December 31, 1999, a hypothetical 10% adverse movement in foreign exchange rates
applied to the underlying  exposures  described  above would not have a material
effect on the Company's results of operations.


<PAGE>





Item 8. Consolidated Financial Statements and Supplementary Data

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE

---------
Report of Independent Auditors' as of and for the year ended December 31,
        1999                                                                F-2

Report of Independent  Auditors' as of December 31, 1998 and for the
        years ended December 31, 1997 and 1998                              F-3

Consolidated Financial Statements:

    Consolidated Balance Sheets as of December 31, 1998 and 1999            F-4

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

    Consolidated Statements of Stockholder's Deficit for the years ended
         December 31, 1997, 1998 and 1999                                   F-6

    Consolidated Statements of Cash Flows for the years ended
         December 31, 1997, 1998 and 1999                                   F-7

    Notes to Consolidated Financial Statements                              F-8


Financial Statement Schedule:

    Schedule II - Valuation and Qualifying Accounts for each of the
           years in the three-year period ended December 31, 1999          II-6



All other  schedules are omitted because they are not applicable or the required
information  is provided in the  Consolidated  Financial  Statements  or related
notes thereto.

                                       F-1
<PAGE>
             REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS'


Board of Directors
Cluett American Corp. and Subsidiaries


We have audited the accompanying  consolidated  balance sheet of Cluett American
Corp. and subsidiaries,  a wholly-owned subsidiary of Cluett American Investment
Corp.,  as of December  31, 1999,  and the related  consolidated  statements  of
operations,  stockholder's  deficit and cash flows for the year then ended.  Our
audit also included the financial statement schedule listed in the Index at Item
14(a) for the year ended  December  31, 1999.  These  financial  statements  and
financial statement schedule are the responsibility of the Company's management.
Our  responsibility  is to express an opinion on these financial  statements and
financial statement schedule based on our audit.


We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.


In our opinion, such consolidated financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Cluett  American
Corp. and  subsidiaries at December 31, 1999 and the results of their operations
and their  cash  flows  for the year then  ended in  conformity  with  generally
accepted accounting  principles.  Also, in our opinion, such financial statement
schedule,  when  considered  in  relation  to the basic  consolidated  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.


                                                      /s/ Deloitte & Touche LLP


Atlanta, Georgia
March 29, 2000

                                       F-2



<PAGE>



               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS'

Board of Directors
Cluett American Corp. and Subsidiaries

We have audited the accompanying  consolidated balance sheets of Cluett American
Corp. and subsidiaries,  a wholly owned subsidiary of Cluett American Investment
Corp.  ("Holdings"),  as of December  31,  1998,  and the  related  consolidated
statements of operations, stockholder's deficit and cash flows for the two years
in the period ended  December 31, 1998.  Our audits also  included the financial
statement  schedule  listed in the Index at Item  14(a) for the two years in the
period  ended  December 31,  1998.  These  financial  statements  and  financial
statement  schedule are the  responsibility  of the  Company's  management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial statement 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 financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Cluett American
Corp. at December 31, 1998 and the consolidated  results of their operations and
their cash flows for the two years in the period ended  December  31,  1998,  in
conformity with accounting  principles  generally accepted in the United States.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the basic financial  statements taken as a whole,  present fairly
in all material respects the information set forth therein.

                              /s/ Ernst & Young LLP

Atlanta, Georgia
March 19, 1999

                                       F-3
<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                                                DECEMBER 31,
                                                                                           1998              1999

                                      ASSETS

<S>                                                                                 <C>               <C>
Current assets:
  Cash and cash equivalents                                                          $     2,868       $     7,239
  Accounts receivable, net                                                                46,786            45,519
   Inventories, net                                                                       74,599            78,105
   Prepaid expenses and other current assets                                               3,972             3,129

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

Total current assets                                                                     128,225           133,992
Property, plant and equipment, net                                                        48,124            47,794
Deferred financing costs                                                                  11,198            10,842
Pension assets                                                                            31,383            32,187
Goodwill, net                                                                                 --             4,740
Other non-current assets                                                                   1,845             1,951

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

Total assets                                                                         $   220,775         $ 231,506

                                                                                     ================== ================
                       LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:

  Accounts payable and accrued expenses                                              $    40,107        $   40,696
  Accrued interest payable                                                                 2,332             3,861
  Short-term debt and current portion of long-term debt                                   10,248            14,209
  Income taxes payable                                                                     1,475             1,970

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

Total current liabilities                                                                 54,162            60,736
Due to parent                                                                             27,974                --
Long-term debt and capital lease obligations                                             235,681           258,883
Other non-current liabilities                                                                111               147
Redeemable preferred stock dividends payable                                                 605               637

Commitments and Contingencies:

Senior Exchangeable Preferred Stock Due 2010, cumulative, $.01 par value:
authorized
  4,950,000 shares, issued and outstanding 530,730 shares in 1998 and 599,145
  shares in 1999 (liquidation preference of $53,073 in 1998 and $59,915 in 1999)          51,288            58,329
Stockholder's deficit:
  Common stock, $1 par value: authorized, issued and outstanding 1,000 shares                  1                 1
  Additional paid-in capital                                                             116,919           135,100
  Accumulated deficit                                                                   (264,933)         (282,046)
  Accumulated other comprehensive loss                                                    (1,033)             (281)

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

Total stockholder's deficit                                                             (149,046)         (147,226)

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

Total liabilities and stockholder's deficit                                            $ 220,775        $   231,506

                                                                                     ================== ================
</TABLE>

                              See accompanying notes.





                                       F-4


<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>

                                                                                                   YEAR ENDED DECEMBER 31,
                                                                                          1997              1998              1999
                                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                                 <C>                 <C>             <C>
Net sales                                                                            $  363,528          $ 373,123        $ 343,520
Cost of goods sold                                                                      253,677            264,325          249,126
                                                                                    ---------------- ------------- ----------------

Gross profit                                                                            109,851            108,798           94,394
Selling, general and administrative expenses                                             76,341             82,442           81,790
Restructuring and impairment charges                                                      2,469              2,366            2,228

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


Operating income                                                                         31,041             23,990           10,376
Interest expense, net                                                                    15,233             20,355           26,462
Other expense, net                                                                        1,169              2,131              457

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

Income (loss) before bankruptcy reorganization costs (credits) and income taxes          14,639              1,504          (16,543)
Bankruptcy reorganization costs (credits)                                                (3,883)            37,528             (573)

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

Income (loss) before provision for income taxes                                          18,522            (36,024)         (15,970)
Provision for income taxes                                                                1,326                810            1,143

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

Net income (loss)                                                                    $   17,196           $(36,834)       $ (17,113)

                                                                                    ================ ============== ===============

</TABLE>




                             See accompanying notes.


                                       F-5



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         ADDITIONAL                       OTHER
                                      COMMON STOCK        PAID-IN       ACCUMULATED    COMPREHENSIVE
                                     SHARES  AMOUNT       CAPITAL         DEFICIT         INCOME       TOTAL

<S>                                  <C>      <C>          <C>          <C>             <C>          <C>
Balance at December 31, 1996          2,000         2       174,927      (245,295)       (3,850)      (74,216)

  Net income                           --        --            --          17,196          --          17,196
  Foreign currency translation
   adjustment                          --        --            --            --           1,547         1,547
                                                                                                   ----------
  Comprehensive income                                                                                 18,743
                                                                                                   ----------
  Accretion of dividend on
   redeemable preferred stock          --        --          (1,335)         --            --          (1,335)
                                     ------    ------    ----------    ----------    ----------    ----------
Balance at December 31, 1997          2,000         2       173,592      (228,099)       (2,303)      (56,808)

  Net loss                             --        --            --         (36,834)         --         (36,834)

  Foreign currency translation
   adjustment                          --        --            --            --           1,270         1,270
                                                                                     ----------    ----------
  Comprehensive loss                                                                                  (35,564)
                                                                                                   ----------
  Accretion of dividend on
   redeemable preferred stock          --        --          (2,078)         --            --          (2,078)
  Distribution to CAIC                 --        --         (87,522)         --            --         (87,522)
  Contribution of intercompany
   debt due to CAIC                    --        --          27,609          --            --          27,609
  Distribution to CAIC for
   debt purchase                       --        --         (13,000)         --            --         (13,000)
  Contribution of preferred
    stock from CAIC                    --        --          22,086          --            --          22,086
  Contribution of CDC to CAC
   from CAIC                         (1,000)       (1)         --            --            --              (1)

  Accretion of dividend on
   Senior exchangeable
   preferred stock                     --        --          (3,678)         --            --          (3,678)

  Accretion of fees on Senior
   exchangeable preferred
    stock                              --        --             (90)         --            --             (90)
                                     ------    ------    ----------    ----------    ----------    ----------

Balance at December 31, 1998          1,000         1       116,919      (264,933)       (1,033)     (149,046)

  Net loss                             --        --            --         (17,113)         --         (17,113)
  Foreign currency translation
   adjustment                          --        --            --            --             752           752
                                                                                     ----------    ----------
  Comprehensive loss                                                                                  (16,361)

  Capital contribution from Parent     --        --          25,255          --            --          25,255
  Accretion of dividend on
   redeemable preferred stock          --        --          (6,920)         --            --          (6,920)
  Accretion of fees on senior
   exchangeable preferred stock        --        --            (154)         --            --            (154)
                                     ------    ------    ----------    ----------    ----------    ----------
Balance at December 31, 1999          1,000    $    1    $  135,100    $ (282,046)   $     (281)   $ (147,226)
                                     ======    ======    ==========    ==========    ==========    ==========

</TABLE>



                             See accompanying notes.


                                       F-6



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                   YEAR ENDED DECEMBER 31,
                                               --------    ---------  ---------
                                                1997         1998         1999
                                                    (DOLLARS IN THOUSANDS)
                                               --------    ---------  ---------
OPERATING ACTIVITIES
Net income (loss)                          $  17,196    $ (36,834)   $ (17,113)
Adjustments  to  reconcile  net income
 (loss) to net cash and cash  equivalents
  provided by (used in) operating activities:
  Impairment of property, plant and equipment     --        1,094          360
  Write-off of deferred acquisition cost          --          489           --
  Depreciation                                 8,075        8,660        9,378
  Deferred finance amortization                   --          952        1,592
  Goodwill and license fee amortization           30           40          228
  Gain on sale of property, plant and equip     (348)          --          (57)
  Adjustments in 1997 and payments in 1998
   of liabilities subject to compromise-
   reorganization                            (10,000)     (22,442)          --
  Accrual of professional fees, potential
   claims and related litigation matters-
   reorgainzation                              6,117           --           --

Changes in operating assets and liabilities,
  excluding the effect of acquisition:
  Accounts receivable                          3,917        1,070        1,631
  Inventories                                 (6,980)       2,629       (2,718)
  Prepaid expenses and other current assets      178          197          898
  Pension and other non-current assets        (1,808)     (13,772)      (1,683)
  Accounts payable and accrued expenses       (4,430)      (3,871)       2,016
  Income taxes payable                           521         (678)         495
  Other liabilities                             (448)         435         (234)
  Due to parent                                   --       27,974           --
  Effect of changes in foreign currency          930        3,190       (2,683)
                                                 ---        -----       ------
Net cash and cash equivalents provided by
 (used in) operating activities               12,950      (30,867)      (7,890)
                                              ------      -------       ------

INVESTING ACTIVITIES
Purchase of property, plant and equipment    (10,778)     (11,841)     (10,670)
Proceeds on disposal of property, plant and
  equipment                                    3,327          152        1,275
Purchase of CAT, net of cash acquired             --           --       (2,289)
                                              ------       ------       ------
Net cash and cash equivalents used in
  investing activities                        (7,451)     (11,689)     (11,684)
                                              ------      -------      -------

FINANCING ACTIVITIES
Issuance of preferred stock                       --       48,125           --
Distribution to Parent                            --      (87,522)          --
Net borrowings under line-of-credit agreement     --        3,126       27,928
Proceeds from Debtor-in-Possession credit
  facility                                    16,398           --           --
Principal payments on Debtor-in-Possession   (16,795)          --           --
Proceeds from issuance of long term debt       2,246      222,000           --
Principal payments on long term debt          (3,113)      (1,300)      (3,600)
Principle Payment on long-term note CAT           --           --         (374)
Payments on pre-petition liabilities              --     (146,490)          --
Principal payments on capital leases              --       (2,406)         (15)
                                               -----       ------          ---
Net cash and cash equivalents (used in)
  provided by financing activities            (1,264)      35,533       23,939
Effect of exchange rate changes on cash           --         (128)           6
                                             -------      -------      -------
Net change in cash and cash equivalents        4,235       (7,151)       4,371
Cash and cash equivalents at beginning of
  year                                         5,784       10,019        2,868
                                           ---------    ---------    ---------
Cash and cash equivalents at end of year   $  10,019    $   2,868    $   7,239
                                           =========    =========    =========

SUPPLEMENTAL DISCLOSURES
Cash paid during the year:
  Interest                                 $   7,649    $  17,073    $  23,341
  Income taxes                             $   1,163    $   1,236    $     648

SUMMARY OF CAT  ACQUISITION:
  Fair value of assets acquired                                      $   5,288
  Long term notes issued                                                (2,881)
  Liabilities assumed                                                     (118)
                                                                          ----
  Net cash paid for acquisitions                                     $   2,289
                                                                     =========


                             See accompanying notes.


                                       F-7
<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Background


     Cluett  American Corp. and its  subsidiaries  (the  "Company") are a wholly
owned subsidiary of Cluett American  Investment Corp  ("Holdings").  The Company
was organized in 1982 and primarily designs,  manufactures and markets socks and
men's  dress  shirts in the United  States and Canada.  The  Company  also has a
growing presence in men's and women's sportswear.  The Company also manufactures
dress shirts in Honduras.

     The Company filed  voluntary  petitions for relief under the  provisions of
Chapter 11 of the Federal  Bankruptcy Code on July 17, 1995. The Company emerged
from  bankruptcy on May 18, 1998. As part of the approved  reorganization  plan,
Vestar  Capital  Partners III, L.P.  ("Vestar")  and  co-investors  made a $61.3
million equity investment and Alvarez & Marsal, Inc. ("A&M") and certain members
of management made a $6.7 million equity investment in Holdings.


     The Company and Holdings used the equity  investments in  conjunction  with
borrowings under a new $160.0 million senior credit facility,  $112.0 million in
proceeds from the Company's  issuance of Senior  Subordinated Notes Due 2008 and
$48.1 million in net proceeds from the issuance of Senior Exchangeable Preferred
Stock Due 2010, to complete its recapitalization (the "Recapitalization")  under
which all of Holdings' and the Company's existing  pre-petition  obligations and
all borrowings under the Company's  debtor-in-possession  facility, were paid in
full. In addition, the Company issued $13.0 million in Senior Subordinated Notes
Due 2008 (the "Parity Notes") to Holdings  shareholders  that were  shareholders
prior  to the  bankruptcy  as  part of the  Recapitalization.  These  notes  are
identical in, and rank in parity with, the $112.0  million  Senior  Subordinated
Notes Due 2008.  During  1999,  approximately  $2.0 million of Parity Notes were
converted to Senior Subordinated Notes.

2. Acquisition


     On July 13, 1999, the Company acquired 100% of the outstanding common stock
of Central American Tailoring ("CAT"),  incorporated under the laws of Honduras.
CAT had been a captive contractor  providing sewing services to the Company. The
total purchase price was $5.2 million and was comprised of $1.6 million in cash,
the issuance of $2.9 million in long-term  notes and other  related  acquisition
costs of $0.7  million.  The cash  payment was  financed  primarily  through the
Company's revolving credit facility. The acquisition was accounted for using the
purchase  method of accounting.  Accordingly,  the assets and liabilities of the
acquired business are included in the consolidated  balance sheet as of December
31, 1999.  The operating  results of CAT have been included in the  consolidated
statements of operations from the date of acquisition. The excess purchase price
over  the fair  market  value  of the  underlying  assets  of $4.9  million  was
allocated to goodwill and is being  amortized on a  straight-line  basis over 10
years.

                                       F-8



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant Accounting Policies


Principles of Consolidation

     The consolidated  financial  statements include all subsidiary companies of
the Company.  All significant  intercompany  balances and transactions have been
eliminated in consolidation.


Cash Equivalents

    The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Accounts Receivable

    The Company's  principal  customers  are retail stores and chains  primarily
located in the United States and Canada.  Royalty and licensing income is earned
from a  worldwide  base of  licensees  engaged  in the sale and  manufacture  of
textiles and  apparel.  The Company  generally  does not require  collateral  on
accounts receivable.


Inventory Valuation

    Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories  are  stated  net of an  allowance  for  obsolete  and  slow  moving
inventory.


Property, Plant and Equipment

    Property,  plant  and  equipment  are  stated  at cost  and are  depreciated
(including  depreciation of assets recorded under capital leases) principally by
the  straight-line  method  over the  estimated  useful  lives of the  assets as
follows:

         Buildings                                32-39 years
         Site improvements                        15-39 years
         Machinery, equipment and other            3-10 years
         Leasehold improvements                   The lesser of the lease term
                                                   or estimated useful life

Impairment

     The  Company  reviews   long-lived  assets  and  certain   intangibles  for
impairment  when events or changes in  circumstances  indicate that the carrying
amount  of these  assets  may not be  recoverable.  Any  impairment  losses  are
reported in the period in which the recognition criteria are first applied based
on the fair value of the  assets.  Assets held for sale are carried at the lower
of carrying amount or fair value, less estimated costs to sell such assets.  The
Company discontinues depreciating or amortizing assets held for sale at the time
the decision to sell the assets is made.

Goodwill

     Goodwill  represents  the excess of costs of acquired  businesses  over the
fair  value  of the net  identifiable  assets  acquired  and is  amortized  on a
straight-line basis over 10 years, the estimated future economic benefit.

                                       F-9
<PAGE>

                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant Accounting Policies (Continued)

Deferred Financing Fees

    In connection with the  Recapitalization  transactions  discussed in Note 1,
the Company  deferred  financing  fees of $13.4  million.  These costs are being
amortized to interest expense over the lives of the related debt agreements.


Income Taxes

    Deferred  income  taxes are  provided at the enacted  marginal  rates on the
differences  between the financial  statement and income tax basis of assets and
liabilities.  Valuation  allowances  are  established  when  necessary to reduce
deferred tax assets to the amounts expected to be realized.  The Company files a
consolidated federal income tax return with Holdings and separate,  consolidated
or unitary  state and local  income tax  returns in  accordance  with the filing
requirements  and options  applicable  in the  jurisdiction  in which income tax
returns are  required.  Income tax expense for the Company is  presented  in the
accompanying financial statements calculated on a separate return basis.

Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the  reported  amounts of assets and  liabilities,  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could be different from those estimates.


Revenue Recognition

    The Company recognizes  revenue when the apparel is shipped.  At this point,
persuasive  evidence of a sale arrangement  exists,  delivery has occurred,  the
Company's  price to the  buyer is fixed  and  collectibility  of the  associated
receivable is reasonably  assured.  Customer  returns and  allowances  have been
provided based on estimated  returns.  Fees from the licensing of trademarks and
processes  relating to the textile and apparel  industry are recognized  ratably
over the period of time for fixed license fees and based on estimated  sales for
variable  royalty fees. The Company  recognized  licensing fees of $6.9 million,
$6.3 million and $6.4 million in 1997,  1998 and 1999,  respectively,  which are
included in net sales in the accompanying statements of operations.

Interest Expense, net

     The Company  includes  interest  income from  overnight  investment  in net
interest expense. The Company recorded interest income of $0, $178,000, $246,000
in 1997, 1998 and 1999 respectively.

                                      F-10



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Significant Accounting Policies (Continued)

New Accounting Pronouncements

     In June 1998, the Financial  Accounting Standard Board issued Statement No.
133,  "Accounting For Derivative  Instruments And Hedging Activities" ("SFAS No.
133").  This  statement (as amended by SFAS No. 137) is effective  January 2001.
This statement  establishes  accounting  and reporting  standards for derivative
instruments   including  certain  derivative   instruments   embedded  in  other
contracts, and for hedging activities.  It requires that an entity recognize all
derivatives  as either assets or  liabilities  in the balance sheet  measured at
fair value.  The Company will adopt SFAS No. 133 on January 1, 2001.  Management
has not  determined  how SFAS No.  133 will  impact  the  Company's  results  of
operations or financial position.


Foreign Currency Translation

    The Company translates the financial  statements of its foreign subsidiaries
from the local  (functional)  currencies to U.S. dollars in accordance with SFAS
No. 52 "Foreign Currency Translation".  Substantially all assets and liabilities
of the Company's foreign subsidiaries are translated at year-end exchange rates,
while revenue,  expenses and cash flow are translated at average  exchange rates
prevailing during the year. Translation adjustments arising from certain foreign
operations of the Company are reflected as a separate component of stockholder's
deficit.  Selling,  general and  administrative  expense  includes an  aggregate
exchange  loss on  foreign  currency  transactions  of  approximately  $816,000,
$41,000 and $16,000 in 1997, 1998 and 1999, respectively.

Advertising Costs

     The Company expenses  advertising costs as incurred.  The Company charged a
total of $9.5 million,  $9.3 million and $11.6 million to advertising expense in
1997, 1998 and 1999, respectively.


Concentrations of Credit Risk and Financial Instruments

    Financial instruments which subject the Company to credit risk are primarily
trade accounts receivable. Concentration of credit risk with respect to accounts
receivable  is  limited  due to the large  number  and  diversity  of  customers
comprising the Company's  customer base. No single  customer  accounted for more
than 10% of the Company's sales in 1997, 1998, and 1999. Additionally, there was
no single  customer who  accounted  for more than 10% of  consolidated  accounts
receivable  balances at December 31, 1998 or 1999.  Management believes the risk
associated  with trade  accounts  receivable is  adequately  provided for in the
allowance for doubtful accounts.


Reclassifications

     Certain  amounts in the 1997 and 1998  financial  statements  and footnotes
have been reclassified to conform to the 1999 presentation.

                                      F-11



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. Redeemable Preferred Stock

     In connection with the Recapitalization,  the Company issued 500,000 shares
of 12 1/2% Senior Exchangeable  Preferred Stock ("Preferred Stock") due 2010 and
received net proceeds of $48.1 million.  Each preferred  share has a liquidation
preference  of $100.  The  holders of the  Preferred  Stock will be  entitled to
receive, as and if dividends are declared by the Board of Directors out of funds
the Company has legally available,  cumulative  preferential  dividends from the
date of issuance of the Preferred Stock accruing at the rate per share of 12 1/2
% per  annum.  Dividends  are  payable  semiannually  in  arrears  on May 15 and
November 15 of each year,  commencing  on November 15,  1998,  to the holders of
record as of the  preceding  May 1 and  November 1. On or prior to May 15, 2003,
the Company may, at its option,  pay dividends in cash or in additionally  fully
paid  and   non-assessable   shares  of  Preferred  Stock  having  an  aggregate
liquidation preference equal to the amount of such dividends. The carrying value
of Senior  Exchangeable  Preferred Stock at December 31, 1998 and 1999, reflects
accretion of $90,000 and $244,000,  respectively,  in transaction fees.  Through
December 31, 1999,  the Company  declared and paid stock  dividends  aggregating
99,145 shares on its Preferred  Stock.  As of December 31, 1999, the Company had
issued and outstanding 599,145 cumulative shares.

5. Restructuring and Impairment Charges

    In 1995, the Company  developed and implemented a program designed to reduce
operating expenses and improve overall productivity. During 1997, 1998 and 1999,
the Company  incurred  expenses of $2.5 million,  $2.4 million and $2.2 million,
respectively, in implementing this plan.

     During 1999, the Company closed its owned manufacturing facility located in
Enterprise, Alabama and consolidated certain administrative functions within its
Shirt Group.   The  closure  and  administrative  consolidation  costs  included
severance  costs  of  $1.6  million  for  308  employees  at  Enterprise and  in
administrative functions.  In  addition, special  termination  benefits  of $1.7
million related to 280 employees of the Enterprise  facility which were provided
through the Company's employee benefit  plan.  (See Note 11).  All  terminations
were completed by December 31, 1999.  The  Company  also  recorded an impairment
charge of  $383,000  to record the  Enterprise  facility  at its  net realizable
value.  This facility is held for sale at December 31, 1999 and  the  facility's
new basis of $257,000 is included in other assets on the  Company's consolidated
balance sheet.

    Also in 1999,  the Company's  Sock Group  approved a  restructuring  plan to
cease   distribution   operations  at  an  owned  facility   located  in  Bally,
Pennsylvania and to close a lease dye-house facility in Pottstown,  Pennsylvania
in 2000. In 1999, the Company recorded  termination  benefits of $269,000 for 94
employees at the Bally,  Pennsylvania  facility and other facility closure costs
of $97,000. The terminations are expected to occur in the third quarter of 2000.

    During 1998 and 1997,  the Company  closed 3 retail  outlet stores each year
and in 1998  consolidated  certain  distribution  facilities  and  closed a sock
knitting facility at the Sock Group. The Company recorded restructuring costs of
$2.2  million in 1998 and $2.3  million in 1997,  related  to the  closures  and
facility consolidation. Severance costs of $318,000 in 1998 and $338,000 in 1997
were recorded  which related to the  termination of 100 employees in 1998 and 25
employees in 1997. In 1998,  additional closure costs primarily related to lease
termination  costs.  In addition,  the Company  recorded  impairment  charges of
$150,000 in 1998 and 1997  related  to  the  write-off of  outlet store property
and underperforming assets.  The Company also incurred other operating  expenses
during 1997 and 1998 to restructure and operate the Company during bankruptcy.


                                      F-12



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5. Restructuring and Impairment Charges (Continued)

The  provision  and related  ending  accruals for these costs are  summarized as
follows (in thousands):
<TABLE>
                                                                              1997              1998              1999
                                                                              ----              ----              ----
                    <S>                                                   <C>              <C>               <C>
                    Restructuring:
                          Severance costs                                 $     338        $      318        $    1,890
                          Facility closure costs                              1,400             1,816                84
                          Other                                                 581                82              (129)
                                                                       ----------------- ----------------- -----------------
                                                                              2,319             2,216             1,845
                    Impairment-property, plant and equipment                    150               150               383
                                                                       ----------------- ----------------- -----------------

                   Total restructuring and impairment costs               $   2,469        $    2,366        $    2,228
                                                                       ================= ================= =================
</TABLE>
<TABLE>
                   <S>                               <C>               <C>               <C>               <C>

                                                     Severance Costs   Facility Closure       Other             Total
                   Balance, December 31, 1996        $          0      $      5,445      $      144        $     5,589
                       Restructuring expense                  338             1,400             581              2,319
                       Payments                              (313)           (6,118)           (298)            (6,729)
                                                     ----------------- ----------------- ----------------- -----------------
                   Balance, December 31, 1997                  25               727             427              1,179
                       Restructuring expense                  318             1,816              82              2,216
                       Payments                               (68)           (1,921)           (446)            (2,435)
                                                     ----------------- ----------------- ----------------- -----------------
                   Balance, December 31, 1998                 275               622              63                960
                       Restructuring expense,
                         net of $534 reversed               1,890              (129)             84              1,845
                         from prior accruals
                       Payments                             (1889)             (348)           (147)            (2,384)
                                                     ----------------- ----------------- ----------------- -----------------
                   Balance, December 31, 1999         $       276      $         145     $       --        $       421
                                                     ================= ================= ================= =================

</TABLE>


6. Accounts Receivable

    Allowances provided for accounts receivable are as follows:

                                          DECEMBER 31,
                                        1998      1999
                                    (DOLLARS IN THOUSANDS)


Doubtful accounts                     $ 1,610   $ 1,620
Customer allowances                     6,852     8,554

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

                                      $ 8,462   $10,174

                                      =======   =======



                                      F-13



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. Inventories

    Inventories consist of the following:


                                            December 31,
                                         1998        1999
                                      (DOLLARS IN THOUSANDS)

Finished goods                        $ 65,283    $ 60,854
Work in process                          4,189       8,260
Raw material and supplies               10,276      11,613
                                      --------    --------
                                        79,748      80,727
Less: Allowance for obsolete and slow
   moving inventory                     (5,149)     (2,622)
                                      --------    --------
                                      $ 74,599    $ 78,105
                                      ========    ========

8. Property, Plant and Equipment

    Property, plant and equipment consist of the following:


                                              December 31,
                                           1998         1999
                                        (DOLLARS IN THOUSANDS)

Land                                  $   2,091    $   2,049
Buildings and site improvements          24,267       32,224
Machinery, equipment and other           81,200       82,403
Vehicles                                     --           37
Construction in progress                  4,875          485
                                      ---------    ---------
                                        112,433      117,198
Less accumulated depreciation           (64,309)     (69,404)
                                      ---------    ---------
                                      $  48,124    $  47,794
                                      =========    =========


    Included  in the  amounts  above  is  property  held  under  capital  leases
(principally  a  distribution  facility)  of $0.8 million and $0.4  million,  at
December 31, 1998 and 1999, respectively.

                                      F-14



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Arrangements

     The  classification  of the Company's  long-term  obligations and financing
arrangements, including accrued interest, is as follows:

<TABLE>
                                                                                DECEMBER 31,
                                                                         1998                  1999
                                                                 ------------------    ------------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                      <C>               <C>
Short-term debt and current portion of long-term debt:

Current portion of capital lease obligation                                   $ 12                 $ 16
Canadian Facility                                                            3,636                7,788
CAT short-term portion                                                          --                  805
Senior Credit Facility:
     Revolving Credit Facility                                               3,000                   --
     Term Loan A                                                             3,000                5,000
     Term Loan B                                                               600                  600
                                                                 ------------------    ------------------
Total short-term                                                            10,248               14,209

Long-term debt:
  Capital lease obligations                                                    231                  231
  CAT long-term obligation                                                      --                1,702
  Senior Credit Facility:
     Revolving Credit Facility                                               5,350               32,450
     Term Loan A                                                            46,000               41,000
     Term Loan B                                                            59,100               58,500
Senior subordinated notes (includes the Parity Notes)                      125,000              125,000
                                                                 ------------------    ------------------
Total long-term                                                            235,681              258,883
                                                                 ------------------    ------------------
Total debt                                                               $ 245,929            $ 273,092
                                                                 ==================    ==================
</TABLE>

Senior Credit Facility

    On May 18, 1998,  the Company  entered into a $160.0  million  Senior Credit
Facility (the "Senior Credit Facility").  The Senior Credit Facility,  which was
amended on December 18, 1998,  March 19, 1999,  September 30, 1999 and March 29,
2000, is comprised of three different  loans: a $50.0 million  revolving  credit
facility  (the  "Revolver"),  a $50.0 term loan ("Term A"), and a $60.0  million
term loan ("Term B"). As of December 31, 1999,  approximately  $32.5 million was
outstanding on the Revolver and the Company had  approximately  $10.1 million of
open trade  letters of credit  outstanding  for the  purchase of finished  goods
inventory  from  foreign  vendors.  In addition,  approximately  $1.7 million of
stand-by letters of credit were outstanding. Net availability under the Revolver
was $5.7 million at December  31, 1999 in addition to cash and cash  equivalents
of $7.2 million.

    In 1999,  the Company  obtained a $3.0  million  revolving  credit  facility
("Additional Revolver") which is guaranteed by Vestar and bears interest, at the
Company's option, at either the Eurodollar rate plus 1.5% or the Prime rate plus
0.5%.  This facility  expires on December 31, 2000. At December 31, 1999,  there
were no amounts outstanding under the Additional Revolver. On February 17, 2000,
the Additional Revolver was increased to $7.5 million.

                                      F-15



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     9. Long-Term Obligations and Financing Agreements (Continued)


     On March 29, 2000, the  Additional  Revolver was increased to $12.0 million
and incorporated  into the Senior Credit Facility as Tranche C. Borrowings under
Tranche C are due and payable on June 30, 2000 (unless  certain events occur, in
which case the maturity can be extended to December 31, 2001) and are guaranteed
by Vestar.

     The Revolver and the Term A loan mature in 2004 and the Term B loan matures
in 2005. Term Loan A requires  quarterly  principal payments of $500,000 through
June 1999, which increase  annually by $500,000 through June 2002, then increase
by $750,000  through June 2003 and decrease by $250,000 through  maturity.  Term
Loan B requires  quarterly  principal payments of $150,000 through June 2004 and
four quarterly payments of $14,100,000 beginning in September 30, 2004.

     Interest  for  borrowings  under the  Revolver  and Term A loan is based on
either, at the Company's  option,  LIBOR plus 2.5% at December 31, 1998 and 3.0%
at December 31, 1999 or the Alternative Base Rate plus 1.5% at December 31, 1998
and 2.0% at December 31, 1999. The  Alternative  Base Rate is the greater of the
Bank of America  prime rate or the Fed Funds rate plus 0.5%.  Interest  rates on
the Revolver and Term Loan A ranged between 7.56% to 9.13%,  and 9.19% to 10.25%
at December 31, 1998 and 1999, respectively.  Term Loan B interest rate is based
on either LIBOR plus 3.0% at December 31, 1998 and 3.5% at December 31, 1999 or,
at the Company's  option,  the  Alternative  Base Rate plus 2.0% at December 31,
1998 and 2.5% at December 31, 1999. Interest rates on Term Loan B were 7.79% and
9.69% at December  31,  1998 and 1999,  respectively.  At December  31, 1998 and
1999, the weighted  average  interest rate on short term borrowings was 9.0% and
9.41%, respectively.

     The  obligations  of the  Company  under the  Senior  Credit  Facility  are
unconditionally   and   irrevocably   guaranteed  by  the   Company's   domestic
subsidiaries  (the  "Guarantors").  See Note 18. In addition,  the Senior Credit
Facility  is secured by first  priority  or  equivalent  security  interests  in
substantially  all  tangible  and  intangible  assets  of the  Company  and  the
Guarantors,  including all the capital  stock of, or other equity  interests in,
each  direct or  indirect  domestic  subsidiary  of the  Company  and 65% of the
capital stock of, or other equity  interests in, each direct foreign  subsidiary
of the  Company  or  any  Guarantor  (to  the  extent  permitted  by  applicable
contractual and legal provisions).

     The Term A and  Term B loans  (and in the case of (i),  the  Revolver)  are
subject to mandatory  prepayment  (i) with the proceeds of certain  asset sales,
(ii) on an annual basis with 50% of the  Company's  excess cash flow (as defined
in the Senior  Credit  Facility),  (iii)  with the  proceeds  of certain  equity
offerings and (iv) with the proceeds from debt issuance.

     The Senior Credit Facility contains a number of covenants that, among other
things,  restrict  the ability of the Company and its  subsidiaries,  other than
pursuant  to  specified  exceptions,  to  dispose of  assets,  incur  additional
indebtedness,   incur  guarantee  obligations,  repay  other  indebtedness,  pay
dividends, create liens on assets, enter into leases, make investments, loans or
advances, make acquisitions,  engage in mergers or consolidations,  make capital
expenditures,  enter into sale and leaseback transactions,  change the nature of
their  business  or  engage  in  certain   transactions  with  subsidiaries  and
affiliates and otherwise restrict corporate activities.  In addition,  under the
Senior  Credit  Facility  the  Company  is  required  to comply  with  specified
financial ratios and tests, including minimum fixed charge coverage and interest
coverage ratios and maximum leverage  ratios,  including a senior leverage ratio
and a total leverage  ratio and a minimum Sock Group EBITDA test,  each of which
is tested  as of the last day of each  fiscal  quarter  of the  Company  and its
subsidiaries.  The amendments in December 1998,  March 1999,  September 1999 and
March 2000 revised the original covenants.

                                      F-16



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Agreements (Continued)


     At December 31, 1999, the Company was not in compliance  with its financial
ratio  covenants  and  received a waiver  dated March 29,  2000.  The March 2000
amendment also revised on-going  covenants and the Company expects to meet these
covenants throughout 2000.

     In connection  with the  September 30, 1999  amendment of the Senior Credit
Facility,  Vestar and Bank of  America,  N.A.  entered  into an  Investment  and
Deposit agreement for Vestar to infuse up to $30 million of new capital into the
Company if certain leverage ratios are not met.

     On March 29,  2000,  the Senior  Credit  Facility  and the  Investment  and
Deposit agreement were amended.  The March 2000 amendment requires (i) Vestar to
infuse up to $30 million of new capital and (ii) the Company to make $20 million
in additional  principal  payments on the Senior Credit Facilities  between June
30, 2000 (or in certain  circumstances August 31, 2000) and December 31, 2000 if
certain  financial  ratios are not met by June 30, 2000. The Company  expects to
meet these covenants in 2000.

     The Senior Credit Facility  includes a cross-default  provision which makes
it a default  under  the  Senior  Credit  Facility  if,  with  respect  to other
indebtedness  in excess of $2.5  million of  Holdings  and the  Company  and its
subsidiaries,  any such  party  defaults  in any  payment  with  respect to such
indebtedness  or defaults  in a manner  that  permits  such  indebtedness  to be
accelerated or such indebtedness is in fact accelerated.

     The consequences of a default under the Senior Credit Facility are that the
lender may terminate the commitments, accelerate the Company's obligations under
the Senior Credit Facility,  declaring them immediately due and payable, require
the credit  parties to  establish  a cash  collateral  account as  security  for
outstanding letters of credit and enforce any and all other rights and interests
existing under the credit documents.

Senior Subordinated Notes

    In connection with the  Recapitalization,  the Company issued $112.0 million
of 10 1/8% Senior  Subordinated Notes due 2008 and $13.0 million in Parity Notes
(collectively,  the "Notes").  The Parity Notes, which are convertible to senior
subordinated notes have the same terms as the Senior Subordinated Notes with the
exception that accumulated  interest is paid to each Parity Note holder upon the
conversion to Senior  Subordinated  Notes. As of December 31, 1999, $2.0 million
of the  initial  $13.0  million  Parity  Notes  have  been  converted  to Senior
Subordinated  Notes. No mandatory  redeemable dates exist for the parties' notes
to be  converted to Senior  Subordination  Note.  Commencing  November 15, 1998,
interest  is paid  semiannually  on May 15 and  November  15 of each  year.  The
Company is not required to make any mandatory redemption or sinking fund payment
with respect to the Notes prior to  maturity.  The Notes are  redeemable  at the
option of the Company, in whole or in part, at any time on or after May 15, 2003
at the  redemption  prices set forth in the  agreement  plus  accrued and unpaid
interest.  The Notes are subordinate in priority to the Senior Credit  Facility,
are senior in right of payment to the Preferred  Stock and are guaranteed by the
Company's domestic subsidiaries.

                                      F-17



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-Term Obligations and Financing Agreements (Continued

Canadian Facility

    The  Company's  Canadian  division  (Cluett  Peabody  Canada  Inc.  ("Cluett
Canada"))  entered into a loan  agreement  dated  August 8, 1997 (the  "Canadian
Facility")   between   Cluett   Canada  and   Congress   Financial   Corporation
("Congress"). The Canadian Facility provides for a revolving loan facility of up
to  $15,000,000  Canadian  dollars,  which amount may be reduced  based upon the
value of accounts receivable outstanding and inventory held by Cluett Canada, or
upon the good faith  determination by Congress that the amount should be reduced
to reflect,  among other things, loss contingencies or risks,  letters of credit
and event of default of Cluett Canada. The Canadian Facility has an initial term
of three  years  and  continues  year to year  thereafter.  Congress  under  the
Canadian  Facility has a first priority lien on substantially  all of the assets
of Cluett Canada. Interest rates on the Canadian Facility ranged between 8.0% to
9.0%, and 7.75% to 9.75% at December 31, 1998 and 1999, respectively.

    As of December 31, 1999,  $11.3 million  Canadian  dollars were  outstanding
under the Canadian  Facility  plus $1.5 million  Canadian  dollars in open trade
letters of credit.

CAT Notes Payable

     In connection with the CAT acquisition,  the Company entered into long term
note  agreements  with an imputed value of $2.9 million which mature on November
1, 2002 and require monthly  payments of $85,000  beginning  August 1, 1999. The
Company imputed interest on the notes at 10.0%.

The aggregate  maturities of long-term debt and capital lease  obligations as of
December 31, 1999 are as follows:

                     2000                                      $14,209
                     2001                                        9,507
                     2002                                       12,930
                     2003                                       14,613
                     2004                                       40,563
                     Thereafter                                181,270
                                                              --------
                                                              $273,092
                                                              ========

                                      F-18



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Income Taxes


The provision for income taxes is summarized as follows:
<TABLE>
                                                                            YEAR ENDED DECEMBER 31,
                                                                    1997             1998              1999
                                                                             (DOLLARS IN THOUSANDS)
            <S>                                                  <C>            <C>              <C>
            Current:
              Federal                                            $  4,606       $     (146)          $    --
              State and local                                         485              550               600
              Foreign(1)                                              575              406               543
              Benefit of net operating loss carryforward           (4,340)              --                --

                                                               ---------------- ---------------- -----------------
                                                                 $  1,326       $      810           $ 1,143
                                                               ================ ================ =================
</TABLE>


(1) Includes  approximately $0.5 million, $0.4 million and $0.5 million relating
to foreign withholding taxes for 1997, 1998 and 1999, respectively.

    A reconciliation of the statutory federal income tax provision  (benefit) to
the Company's provision for income taxes is as follows:
<TABLE>
                                                                             YEAR ENDED DECEMBER 31,
                                                                    1997             1998             1999
                                                                            (DOLLARS IN THOUSANDS)
           <S>                                                  <C>                <C>               <C>
           Computed at statutory rate                           $    6,297        $  (12,248)        $ (5,430)
           Foreign subsidiaries loss (income)                        1,482            (2,314)           2,751
           State and local income taxes, net of federal
           income tax benefit                                          320               363              396
           Dedeuctions relating to foreign taxes                       575               268              361
           Changes in valuation allowance for deferred tax
           assets                                                   (7,383)           14,812            2,953
           Other, net                                                   55               (71)             112
                                                               ---------------- ---------------- ----------------
                                                                $    1,326        $      810          $ 1,143
                                                               ================ ================ ================
</TABLE>
     Deferred   income  taxes   represent  the  net  tax  effects  of  temporary
differences  between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.


                                      F-19



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Income Taxes (Continued)

    The significant components of the Company's domestic deferred tax assets and
liabilities are as follows:
<TABLE>
                                                                                                  DECEMBER 31,
                                                                                             1998              1999
                                                                                           ------              ----
                                                                                         (DOLLARS    IN THOUSANDS)
                  <S>                                                                   <C>               <C>
                  Deferred tax liabilities:
                      Workers compensation                                               $    580          $    893
                      Depreciation                                                          4,268             4,180
                      Pension income                                                        4,685             4,847
                      Other                                                                   578               354
                                                                                            -----             -----
                      Total deferred tax liabilities                                       10,111            10,274
                  Deferred tax assets:
                      Net operating loss carryforwards                                     80,355            83,821
                      AMT credits                                                             119               119
                      Restructuring reserves                                                  864               861
                      Bankruptcy reorganization                                             1,181             1,094
                      Litigation reserve                                                        -                 -
                      Interest to parent                                                        -                 -
                      Allowance for bad debts                                                 554               473
                      Inventory overhead cost adjustment, net                                 952             1,056
                      Reserves                                                              1,613             1,128
                      Other                                                                 4,841             5,043
                                                                                            -----             -----
                  Total deferred tax assets                                                90,479            93,595
                  Valuation allowance for deferred tax assets                             (80,368)          (83,321)
                                                                                          --------          --------

                  Net deferred taxes                                                     $     --          $     --
                                                                                         =========         =========
</TABLE>

    As of December 31, 1999,  the Company had federal net operating loss ("NOL")
carryforwards  of  approximately  $246  million.  These  NOL  carryforwards  are
scheduled to expire from the year 2005 through 2019.  The Internal  Revenue Code
and Treasury Regulations  prescribe a limitation on the use of NOL carryforwards
following an ownership change. The Company  experienced such an ownership change
as a result of its Plan of  Reorganization  following  the  Company's  exit from
Chapter 11 of the United  States  Bankruptcy  Code on May 18,  1998.  Therefore,
approximately  $206 million of the Company's NOL carryforwards are subject to an
annual usage limitation of approximately $6.0 million plus an additional amounts
related to any realized built in gains.

     Based on the Company's history of earnings and the limitation on the use of
its NOL carryforwards, the  Company's  entire  balance  of net domestic deferred
tax assets have been reduced by a valuation allowance of $80.4 million and $83.3
million at December 31, 1998  and 1999,  respectively as it was not assured that
such assets would be realized in the future. The Company increased its valuation
allowance by  $25.1  million to $80.4  million in 1998 and $3.0 million to $83.3
million in 1999.

    Undistributed  earnings of foreign  subsidiaries deemed permanently invested
for which no deferred  income taxes have been provided were  approximately  $5.1
million at December 31, 1997, and $0 at December 31, 1998 and $0 at December 31,
1999.

                                      F-20



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. Employee Benefit Plans

    The  Company  has  a  qualified   defined   benefit  pension  plan  covering
essentially all employees of the Company in the United States.  The pension plan
employs a cash  balance form of benefit  that  provides  for  benefits  based on
salary, age and service. The benefit available for certain union employees under
the plan is based on a flat dollar per year of service.  The Company's  practice
is to fund amounts that are required by statute and applicable  regulations  and
which  are  tax  deductible.  Assets  of  the  plans  are  investments  in  cash
equivalents,  publicly-traded  fixed  income  and  equity  securities,  and real
estate. Assets are valued using a method which recognizes the difference between
actual and expected market values over a period of five years.

     At December 31, 1998 and 1999, the funded status of the Company's qualified
defined benefit pension plan was as follows:

                                                 DECEMBER 31,
                                               1998         1999
                                           (DOLLARS IN THOUSANDS)
Benefit Obligation Information
Benefit obligation at beginning of year    $  74,073    $  77,582
Service cost                                   1,724        2,086
Interest cost                                  5,346        5,034
Actuarial loss/(gain)                          3,794      (10,093)
Benefits paid                                 (8,232)     (11,703)
Amendments                                         -        1,186
Special termination benefits                     877        3,178
                                           ---------    ---------
Benefit obligation at end of year          $  77,582    $  67,270
                                           =========    =========

Fair Value of Plan Assets

Fair value of plan assets at beginning of
   year                                     $109,129    $ 113,244
Actual return on plan assets                  12,347       11,370
Benefits paid                                 (8,232)     (11,703)
                                           ---------    ---------
Fair value of plan assets at end of year   $ 113,244    $ 112,911
                                           =========    =========

Reconciliation of Funded Status, Amounts
   Not recognized, and Amounts Recognized
Funded status                              $  35,662    $  45,641
Unrecognized prior service cost                3,222        4,037
Unrecognized loss/(gain)                         765      (10,455)
Unrecognized reversion value discount         (8,266)      (7,036)
                                           ---------    ---------
Prepaid benefit costs                      $  31,383    $  32,187
                                           =========    =========





                                      F-21



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. Employee Benefit Plans (Continued)

    Net pension benefit of the Company's  qualified defined benefit plan for the
years ended December 31, 1997, 1998 and 1999 include the following components:
<TABLE>
                                                                  DECEMBER 31,
                                                         1997        1998        1999
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Service cost                                         $  1,675    $  1,724    $  2,086
Interest cost                                           5,345       5,346       5,034
Actual return on plan assets                          (16,498)    (12,347)    (11,370)
Amortization of unrecognized reversion value discount  (1,230)     (1,230)     (1,230)
Asset gain deferred for later recognition               8,030       4,474       1,496
                                                     --------    --------    --------
                                                       (2,678)     (2,033)     (3,984)
Other benefit charges:
Early retirement program / special retirement benefit     642         877       3,178
                                                     --------    --------    --------
Net pension benefit                                  $ (2,036)   $ (1,156)   $   (806)
                                                     ========    ========    ========
</TABLE>

    The  assumptions  used in  determining  the funded  status of the  Company's
defined  benefit  pension plans for the years ended December 31, 1997,  1998 and
1999 were discount rates of 7.5%,  7.0% and 8.25%  respectively,  and an average
rate of increase in compensation  levels ranging from 3.25% to 13.25%  depending
on the  participant's  age at the  valuation  date.  In  addition,  the expected
long-term rate of return on plan assets was 9.5% for all periods.  The change in
assumptions  between  periods is reflected as an  actuarial  loss/(gain)  and is
reflected as a component of benefit obligation.


    During 1990, in connection with the acquisition of certain  businesses,  the
Company adjusted the actuarial  valuation of certain estimated pension assets to
reflect  their  net  realizable  value  based  upon a planned  reversion  to the
Company.  In August  1991,  the Company  decided not to revert the assets.  As a
result of this change,  the excess pension assets are being  recognized over the
Average  Future  Working  Lifetime of the plan  participants,  estimated to be a
period of 14 years. Amortization of this amount was $1,230,000 in 1997, 1998 and
1999, and is included in pension benefit for each  respective  year. The Company
periodically performs an actuarial valuation of these pension assets and adjusts
the  amount of the  pension  assets  and the  annual  amortization  based on the
results of the valuation.

    During 1995,  the Company's  qualified  defined  benefit plan was amended to
provide an Enhanced Retirement Program ("ERP"). The total charge in 1997 related
to this program was $642,000.

    During 1998,  the Company's  qualified  defined  benefit plan was amended to
provide an Early Retirement Program ("CERP").  The total charge in 1998 and 1999
related to the program was $877,000 and $1,443,000.

     During 1999, the Company's  qualified  defined  benefit plan was amended to
provide special  termination  benefits to those employees severed as a result of
the  Enterprise  facility  closing.  The total  charge in 1999  related  to this
program was $1,735,000.

                                      F-22



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. Commitments and Contingencies


     The Company  and certain of its  subsidiaries  are party to  litigation  in
connection  with the normal  conduct of their  businesses.  In March  2000,  the
Company and a former  employee  reached an  agreement in principle to settle all
matters  relating  to an action  brought  by the  employee  for the sum of $1.75
million of which $1.6  million and $1.75  million was  reserved at December  31,
1998 and December 31, 1999, respectively.  Management believes, based in part on
the opinion of  counsel,  that its  potential  liability  with  respect to other
proceedings  currently pending is not material in the aggregate to the Company's
consolidated results of operations or financial position.


    The Company leases certain land,  buildings and equipment under both capital
and  noncancelable  operating  leases that expire in various years through 2013.
Certain of the operating leases contain rent escalation  clauses and require the
Company to pay maintenance  costs,  property taxes and insurance  obligations on
the leased property. Future minimum lease payments under noncancelable operating
leases and capital  leases,  together  with the present value of the net minimum
lease payments as of December 31, 1999 are as follows:


                                                  CAPITAL  OPERATING
                                                   LEASES     LEASES
                                               (DOLLARS IN THOUSANDS)
                             Year payable:
                             2000                 $    41    $ 3,826
                             2001                      38      2,708
                             2002                      37      2,420
                             2003                      31      1,940
                             2004                      30      1,466
                             Thereafter               240      2,072
                                                  -------    -------
Total minimum lease payments                          417    $14,432
                                                  =======    =======
Amount representing interest                         (170)
                                                  -------
Present value of net minimum lease payments           247
Current portion                                        16
                                                  -------
Long-term portion                                 $   231
                                                  =======



    Rent expense  totaled  approximately  $3.9 million in 1997,  $4.3 million in
1998 and $3.4 million in 1999.

                                      F-23



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. Licensing Agreements

    Certain of the Company's  subsidiaries have licensing  agreements which give
them the  exclusive  rights to use certain  trademarks,  logos and related trade
names in connection  with the  manufacture and sale of certain men's and women's
apparel in specified  territories.  License fees are based on percentages of net
sales,  as defined,  for the various  products sold, but not less than specified
minimum amounts. The licensing agreements have various renewal dates. Certain of
the license agreements  contain automatic  renewals and are  noncancelable.  The
renewal terms range to five years and expire in various years through 2003.

    Future minimum  license fees payable in the five years  succeeding  December
31, 1999 are as follows (in thousands):

Year payable:
 2000                                               $      566
 2001                                                      695
 2002                                                      955
 2003                                                      763


14. Related Party Transactions


    Subsequent to the emergence from  bankruptcy,  Holdings  allocated  interest
expense  of $24.3  million  related to  post-petition  interest  on  prepetition
obligations to the Company. This amount is included in bankruptcy reorganization
costs in 1998.  This amount was  contributed  by Holdings to the Company in 1999
and is reflected as a component of Stockholder's  Deficit.  In addition,  a $1.5
million and $2.1 million liability related to an employee stock plan was assumed
by the Company and the pension plan, respectively.  The liability assumed by the
pension plan is reflected  as a component  of the benefit  obligation  (see Note
11).

    Pursuant to a management  advisory  agreement (the  "Management  Agreement")
entered  into in  connection  with the  reorganization  of the  Company in 1998,
Vestar receives an annual advisory fee equal to $500,000.  The Company  expensed
$250,000 in 1998 and $500,000 in 1999 in consideration  for certain advisory and
consulting  services  (excluding  investment banking or other financial advisory
services  and  full-  or  part-time   employment  by  Holdings  or  any  of  its
subsidiaries  of any employee or partner of Vestar and its  affiliates,  in each
case for which Vestar and its affiliates shall be entitled to receive additional
compensation).  Holdings has agreed to reimburse Vestar for expenses incurred in
connection  with, and to indemnify Vestar and its affiliates for any liabilities
arising from,  such advisory and  consulting  services.  In connection  with the
Recapitalization, Vestar received a one-time transaction fee of $3.25 million in
1998.

    During 1995 Mr.  Marsal  (founding  Managing  Director of A&M) was appointed
Chief Executive Officer of the Company. In connection with this appointment, the
Company paid A&M $1.4 million,  $957,000, and $963,000 for 1997, 1998, and 1999,
respectively for compensations and other related expenses.

                                      F-24



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. Risks, Uncertainties and Significant Concentrations

     The  Company  manufactures  and sources a portion of its  products  and raw
materials from foreign  subsidiaries or vendors.  The Company  attempts to limit
the concentration  with any one manufacturer or vendor.  The Company believes it
has alternative  manufacturing  and raw material  sources  available to meet its
current and future production  requirements in the event the Company is required
to change  current  manufacturers  or vendors  are  unavailable  to fulfill  the
Company's needs.

     The Company's principal customer base, the retail industry, has experienced
significant  changes and  difficulties  over the past several  years,  including
consolidation  of ownership,  increased  centralization  of buying decisions and
restructurings.  The Company  cannot  predict  what  effect,  if any,  continued
changes within this industry will have on the Company's operations.


     Included in the Company's  consolidated  balance sheet at December 31, 1999
are the net assets of the Company's manufacturing facility located in Kitchener,
Ontario and San Pedro Sula,  Honduras,  which total $ 1.1 million.  The Honduras
facility does not sell products to external customers.  As of December 31, 1999,
28%  of the  Company's  labor  force  is  covered  under  collective  bargaining
agreements with one union,  which expire between March 31, 2001 and December 31,
2002.


16. Fair Value of Financial Instruments


     The  carrying  amount of cash and cash  equivalents,  accounts  receivable,
short-term borrowings, accounts payable and accrued liabilities approximate fair
value  due to the  short  maturities  of these  instruments.  The fair  value of
long-term debt was approximately  $222.5 million at December 31, 1998 and $225.1
million  (book value of $257.0  million) at December  31, 1999 based on interest
rates that are  believed to be  available  to the Company for debt with  similar
provisions  provided for in the existing debt agreements.  The fair value of the
senior exchangeable  Preferred Stock was approximately $45.7 million at December
31, 1998 and $20.0  million  (book value of $58.3  million) at December 31, 1999
based on a market value analysis.


17. Segment Data


     The  Company is  organized  by  product  line in three  business  segments.
Foreign sales,  primarily  Canadian,  were approximately 9.4%, 9.1% and 8.9%, in
1997,  1998 and 1999,  respectively.  There were no  customers  for which  sales
exceeded 10% during the three-year period presented.

    The  Company  incurred  a  number  of  one-time  costs  associated  with the
restructuring  of  its  operations  and  bankruptcy  reorganization  costs.  The
financial results  associated with the Burberrys,  YSL, Latin America,  Canadian
retail operations,  Apparel On-line and unallocated  corporate overhead charges,
are referred to collectively as "All other".

                                      F-25



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data (Continued)
<TABLE>

                                                              1997                   1998                 1999
                                                                            (Dollars in Thousands)
<S>                                                        <C>                <C>                  <C>
Net Sales
         Sock                                              $151,789            $164,760          $168,366
         Shirt                                              176,753             185,353           176,500
         All other                                           43,588              30,854             6,829
         Intercompany                                        (8,602)             (7,844)           (8,175)
                                              ----------------------- ------------------ -----------------
                                                           $363,528            $373,123          $343,520
                                              ======================= ================== =================
Gross Profit
         Sock                                              $ 49,144            $ 52,497          $ 58,735
         Shirt                                               49,193              52,479            35,277
         All other                                           11,514               3,821               382
                                              ----------------------- ------------------ -----------------
                                                           $109,851            $108,797          $ 94,394
                                              ======================= ================== =================
Selling, General and Administrative
         Sock                                              $ 25,874            $ 26,454          $ 27,750
         Shirt                                               38,319              41,969            50,531
         All other                                           12,148              14,019             2,946
                                              ----------------------- ------------------ -----------------
                                                           $ 76,341            $ 82,442          $ 81,227
                                              ======================= ================== =================
Operating Income
    excluding restructuring and
    impairment charges
         Sock                                              $ 23,270            $ 26,043          $ 30,985
         Shirt                                               10,874              10,510           (15,245)
         All other                                             (634)            (10,197)           (3,136)
                                              ----------------------- ------------------ -----------------
                                                           $ 33,510            $ 26,356          $ 12,604
                                              ======================= ================== =================
Identifiable Assets
         Sock                                              $ 77,841            $ 80,766          $ 82,562
         Shirt                                               92,412              90,239           104,356
         All other                                           17,342               7,057               772
                                              ----------------------- ------------------ -----------------
                                                           $187,595            $178,062          $187,690
                                              ======================= ================== =================
Depreciation
         Sock                                              $  4,640            $  5,403          $  5,815
         Shirt                                                3,424               3,235             3,455
         All other                                               11                  22               108
                                              ----------------------- ------------------ -----------------
                                                           $  8,075            $  8,660          $  9,378
                                              ======================= ================== =================
Capital expenditures
         Sock                                              $  7,475            $  7,987          $  5,745
         Shirt                                                3,075               3,816             4,277
         All other                                              228                  38               648
                                              ----------------------- ------------------ -----------------
                                                           $ 10,778            $ 11,841          $ 10,670
                                              ======================= ================== =================

</TABLE>

                                      F-26



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data (Continued)


Interest expense,  interest income and income taxes are excluded from reportable
segment data as such amounts are not included in segment information reviewed by
the chief operating decision maker.

Reconciliation   of  Reportable   Segments  Net  sales,   Operating  Income  and
Identifiable Assets
<TABLE>

                                                                1997                1998                 1999
                                                                ----                ----                 ----
<S>                                                        <C>                   <C>                    <C>
Net Sales
Total net sales for reportable segments                    $  368,381          $ 350,113              $ 344,866
Other net sales                                                 3,749             30,854                  6,829
Eliminations of intersegment net sales                         (8,602)            (7,844)                (8,175)
                                                          ------------------ ------------------ -------------------
Total consolidated net sales                               $  363,528          $ 373,123              $ 343,520
                                                          ================== ================== ===================
Operating Profit (Loss)
Total operating profit or loss for reportable segments     $   33,465          $  36,553              $  15,740
Other operating profit or loss                                   (558)            (7,764)                  (150)
Eliminations of intersegement operating profit (loss)               -                  -                      -
Unallocated amounts:
     Other corporate income (expense)                             603             (2,433)                (2,986)
     Restructuring and impairment charges                      (2,469)            (2,366)                (2,228)
                                                          ------------------ ------------------ -------------------
Total operating profit (loss)                              $   31,041          $  23,990              $  10,376
                                                          ================== ================== ===================

Assets
Total assets for reportable segments                       $  186,485          $ 171,005              $ 186,918
Other assets                                                    1,110              7,057                    772
Unallocated amounts:
     Deferred finance costs                                         -             11,198                 10,842
     Pension assets                                            30,227             31,383                 32,187
     Other unallocated amounts                                  2,195                132                    787
                                                          ------------------ ------------------ -------------------
Consolidated total                                         $  220,017          $ 220,775              $ 231,506
                                                          ================== ================== ===================

Capital Expenditures
Total capital expenditures for reportable segments         $   10,778          $  11,803              $  10,022
Adjustments                                                         -                 38                    648
                                                          ------------------ ------------------ -------------------
Consolidated total                                         $   10,778          $  11,841              $  10,670
                                                          ================== ================== ===================


</TABLE>









                                      F-27



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Segment Data (Continued)
<TABLE>
                                                              1997                 1998                1999
                                                              ----                 ----                ----
                                                                         (Dollars in Thousands)
<S>                                                     <C>                  <C>                  <C>
Depreciation & Amortization

Total depreciation for reportable segments                 $       8,075       $      8,638         $    9,270
Amortization                                                          30                992              1,928
                                                       -------------------- ------------------- -------------------
Consolidated total                                         $       8,105       $      9,630         $   11,198
                                                       ==================== =================== ===================

Geographic Information
Net Sales
United States                                              $   329,358         $ 339,276            $  313,063
Foreign                                                         34,170            33,847                30,457
                                                       -------------------- ------------------- -------------------
Total                                                      $   363,528         $ 373,123            $  343,520
                                                       ==================== =================== ===================

Operating Income (Loss)
United States                                              $    29,327         $  25,205            $   13,829
Foreign                                                          1,714             (1,215)              (3,453)
                                                       -------------------- ------------------- -------------------
Total                                                      $    31,041         $  23,990            $   10,376
                                                       ==================== =================== ===================

Identifiable Assets
United States                                              $   197,621         $ 201,026            $  209,594
Foreign                                                         22,396             19,749               21,912
                                                       -------------------- ------------------- -------------------
 Total                                                     $   220,017         $ 220,775            $  231,506
                                                       ==================== =================== ===================
</TABLE>
18. Guarantor Subsidiaries


     The Company's payment  obligations under the Senior Credit Facility and the
Senior Subordinated Notes (the "Notes") are fully and unconditionally guaranteed
on a joint and several basis by its current domestic subsidiaries,  principally:
Cluett Peabody & Co., Inc., Great American Knitting Mills, Inc., Cluett Designer
Group  Inc.,   Consumer  Direct   Corporation  and  Arrow  Factory  Stores  Inc.
(collectively the "Guarantor Subsidiaries").  Each of the Guarantor Subsidiaries
is a direct or indirect  wholly-owned  subsidiary of the Company.  The Company's
payment  obligations  under  the  Notes  are  not  guaranteed  by the  remaining
subsidiaries:  Bidermann  Womenswear  Corp.  (formerly  Ralph Lauren  Womenswear
Inc.),  Cluett,  Peabody  Canada Inc.,  Arrow de Mexico S.A. de C.V.,  and Arrow
Inter-America & Co., Ltd. (collectively the "Non-Guarantor  Subsidiaries").  The
obligations  of each Guarantor  Subsidiary  under its guarantee of the Notes are
subordinated to such subsidiary's  obligations under its guarantee of the Senior
Credit Facility.
     Presented below is condensed consolidating financial information for Cluett
American  Corp.   ("Parent  Company"),   the  Guarantor   Subsidiaries  and  the
Non-Guarantor  Subsidiaries.   In  the  Company's  opinion,  separate  financial
statements and other disclosures  concerning each of the Guarantor  Subsidiaries
would  not  provide  additional  information  that  is  material  to  investors.
Therefore,  the Guarantor  Subsidiaries  are  consolidated  in the  presentation
below.  Investments in  subsidiaries  are accounted for by Cluett American Corp.
using the equity method of accounting.  Earnings of subsidiaries are, therefore,
reflected  in  the  Parent   Company's   investments  in  and  advances  to/from
subsidiaries  account and earnings (losses).  The elimination  entries eliminate
investments  in  subsidiaries,  the  related  stockholder's  deficit  and  other
intercompany balances and transactions.

     In 1997, 1998 and 1999, the Company allocated  external interest expense to
its subsidiaries, based on a percentage of net sales.

                                    F-28



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>
                                                                SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET


                                                                           DECEMBER 31, 1998
                                                                          (DOLLARS IN THOUSANDS)

                                                       PARENT       GUARANTOR     NON-GUARANTOR
                                                      COMPANY       SUBSIDIARIES   SUBSIDARIES    ELIMINATIONS  CONSOLIDATED
                                                      --------      ------------  -------------   ------------   ----------
<S>                                                <C>              <C>            <C>            <C>            <C>
ASSETS
Current assets:
Cash and cash equivalents                          $       --       $   2,396        $    472      $       --    $    2,868
Accounts receivable, net                                   --          42,599           4,187              --        46,786
Inventories                                                --          63,158          11,441              --        74,599
Prepaid expenses and other current assets                  --           3,168             804              --         3,972
                                                   ----------     -----------         -------    ------------    ----------
Total current assets                                       --         111,321          16,904              --       128,225
Investment in subsidiaries                            (86,330)             --              --          86,330            --
Intercompany receivable (payable)                      15,000         (15,000)             --              --            --
Property, plant and equipment, net                         --          46,112           2,012              --        48,124
Deferred finance costs                                     --          11,198              --              --        11,198
Pension assets                                             --          31,383              --              --        31,383
Other noncurrent assets                                    --           1,012             833              --         1,845
                                                   ----------     -----------         -------    ------------    ----------
Total assets                                       $  (71,330)      $ 186,026        $ 19,749      $   86,330    $  220,775
                                                     ========         =======          ======         =======       =======

LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses              $       --       $  37,781        $   4,658     $       --    $   42,439
Short-term debt and current portion of
  long-term debt                                           --           6,600            3,648             --        10,248
Income taxes payable                                       --       1,268 207               --            207         1,475
                                                   ----------     -----------          -------   ------------    ----------
Total current liabilities                                  --          45,649            8,513             --        54,162
Due to parent                                              --          27,974               --             --        27,974
Long-term debt and capital lease
  obligations                                              --         235,450              231             --       235,681
Other noncurrent liabilities                               --             111               --             --           111
Dividends payable                                         605              --               --             --           605
Senior exchangeable preferred stock,
cumulative, $.01 par value: authorized
4,950,000, issued and outstanding 530,730
shares (liquidation preference)                        51,288              --               --             --        51,288

Stockholder's deficit                                (123,223)       (123,158)          11,005         86,330      (149,046)
                                                   ----------     -----------          -------    -----------    ----------
Total liabilities and stockholder's deficit        $  (71,330)      $ 186,026       $   19,749     $   86,330    $  220,775
                                                     ========         =======           ======        =======       =======

</TABLE>



                                      F-29



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>
                                                                 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

                                                                                DECEMBER 31,1999

                                                                             (DOLLARS IN THOUSANDS)

                                                              PARENT    GUARANTOR   NON-GUARANTOR
                                                             COMPANY   SUBSIDIARIES  SUBSIDARIES    ELIMINATIONS  CONSOLIDATED
<S>                                                       ----------  ------------ --------------  ------------   ----------
ASSETS
Current assets:                                          <C>           <C>           <C>          <C>          <C>
Cash and cash equivalents                                  $     --      $    7,099    $      140   $     --     $    7,239
Accounts receivable, net                                         --          40,635         4,884         --         45,519
Inventories                                                      --          64,608        13,497         --         78,105
Prepaid expenses and other current assets                        --           2,422           707         --          3,129
                                                           ----------    ----------    ----------   ----------   ----------
Total current assets                                             --         114,764        19,228         --        133,992
Investment in subsidiaries                                   (103,443)         --            --        103,443         --
Intercompany receivable (payable)                              15,000       (15,000)         --           --           --
Property, plant and equipment, net                               --          45,802         1,992         --         47,794
Deferred finance costs                                           --          10,842          --           --         10,842
Pension assets                                                   --          32,187          --           --         32,187
Goodwill, net                                                    --           4,740          --           --          4,740
Other noncurrent assets                                          --           1,259           692         --          1,951
                                                           ----------    ----------    ----------   ----------   ----------
Total assets                                               $  (88,443)   $  194,594    $   21,912   $  103,443   $  231,506
                                                           ==========    ==========    ==========   ==========   ==========


LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses                      $       --    $   38,239    $    2,457   $       --   $   40,696
Accrued interest expense                                           --         3,861            --                     3,861
Short-term debt and current portion of
  long-term debt                                                   --         6,405         7,804           --       14,209
Income taxes payable                                               --         1,763           207           --        1,970
                                                           ----------    ----------    ----------   ----------   ----------
Total current liabilities                                          --        50,268        10,468           --       60,736
Long-term debt and capital lease
  obligations                                                      --       258,652           231           --      258,883
Other noncurrent liabilities                                       --           147            --           --          147
Dividends payable                                                 637            --            --           --          637
Senior exchangeable preferred stock,
cumulative, $.01 par value: authorized
4,950,000, issued and outstanding 599,145
shares (liquidation preference of $ 59,915)                    58,329            --            --           --       58,329

Stockholder's deficit                                        (147,409)     (114,473)       11,213      103,443     (147,226)

                                                           ----------    ----------    ----------   ----------   ----------
Total liabilities and stockholder's deficit                 $ (88,443)   $  194,594    $   21,912    $ 103,443   $  231,506
                                                           ==========    ==========    ==========   ==========   ==========

</TABLE>




                                                                      F-30



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                                                        YEAR ENDED DECEMBER 31, 1997

                                                             (DOLLARS IN THOUSANDS)

                                                 PARENT    GUARANTOR   NON-GUARANTOR
                                                COMPANY   SUBSIDIARIES  SUBSIDARIES    ELIMINATIONS  CONSOLIDATED
                                              ----------   ---------   --------------  ------------   ----------
<S>                                             <C>         <C>           <C>           <C>           <C>
Net sales                                       $      --   $  329,358    $   34,170    $       --    $  363,528
Cost of goods sold                                     --      229,303        24,374            --       253,677
                                               ----------   ----------    ----------    ----------    ----------
Gross profit                                           --      100,055         9,796            --       109,851
Selling, general and administrative expenses           --       66,817         9,524            --        76,341
Restructuring and impairment charges                   --        3,911        (1,442)           --         2,469
                                               ----------   ----------    ----------    ----------    ----------

Operating income (loss)                                --       29,327         1,714            --        31,041

Income (loss) on investments in subsidiaries       17,196           --            --       (17,196)           --
Interest expense, net                                  --       12,275         2,958            --        15,233
Other expense, net                                     --          853           316            --         1,169
                                               ----------   ----------    ----------    ----------    ----------
Income (loss) before reorganization costs
  (credits) and income taxes                       17,196       16,199        (1,560)      (17,196)       14,639
Bankruptcy reorganization credits                      --       (3,883)           --            --        (3,883)
                                               ----------   ----------    ----------    ----------    ----------
Income (loss) before provision for income
  taxes                                            17,196       20,082        (1,560)      (17,196)       18,522
Provision for income taxes                             --            --        1,326            --         1,326
                                               ----------   ----------    ----------    ----------    ----------
Net income (loss)                              $   17,196   $   18,756    $   (1,560)   $  (17,196)   $   17,196
                                               ==========   ==========    ==========    ==========    ==========

</TABLE>


















                                                                      F-31



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                          YEAR ENDED DECEMBER 31, 1998

                                                             (DOLLARS IN THOUSANDS)

                                                PARENT      GUARANTOR   NON-GUARANTOR
                                               COMPANY   SUBSIDIARIES     SUBSIDARIES ELIMINATIONS CONSOLIDATED
                                            ----------    -----------   ------------- ------------  ----------

<S>                                          <C>           <C>           <C>           <C>          <C>
Net sales ................................   $     --      $  339,276    $   33,847    $     --     $  373,123
Cost of goods sold .......................         --         239,479        24,846          --        264,325
                                             ----------    ----------    ----------    ----------   ----------
Gross profit .............................         --          99,797         9,001          --        108,798
Selling, general and administrative
  expenses ...............................         --          72,866         9,576          --         82,442
Restructuring and impairment charges costs         --           1,726           640          --          2,366
                                             ----------    ----------    ----------    ----------   ----------
Operating income (loss) ..................         --          25,205        (1,215)         --         23,990

Loss on investments in subsidiaries ......      (36,834)         --            --          36,834         --
Interest expense, net ....................         --          16,907         3,448          --         20,355
Other expense, net .......................         --           2,131          --            --          2,131
                                             ----------    ----------    ----------    ----------   ----------
Income (loss) before reorganization costs
  and income taxes .......................      (36,834)        6,167        (4,663)       36,834        1,504
Bankruptcy reorganization costs ..........         --          37,528          --            --         37,528
                                             ----------    ----------    ----------    ----------   ----------
Loss before provision for income taxes ...      (36,834)      (31,361)       (4,663)       36,834      (36,024)
Provision for income taxes ...............         --             851           (41)         --            810
                                             ----------    ----------    ----------    ----------   ----------
Net income (loss) ........................   $  (36,834)   $  (32,212)   $   (4,622)   $   36,834   $  (36,834)
                                             ==========    ==========    ==========    ==========   ==========

</TABLE>


















                                      F-32



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                              SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                                                            YEAR ENDED DECEMBER 31, 1999

                                                                (DOLLARS IN THOUSANDS)

                                                PARENT      GUARANTOR   NON-GUARANTOR
                                               COMPANY    SUBSIDIARIES   SUBSIDARIES   ELIMINATIONS CONSOLIDATED
                                             ----------    -----------  -------------  ----------    ----------
<S>                                          <C>           <C>          <C>           <C>          <C>
Net sales                                    $     --      $  311,989    $   31,531    $     --     $  343,520
Cost of goods sold                                 --         222,610        26,516          --        249,126

                                             ----------    ----------    ----------    ----------   ----------
Gross profit                                       --          89,379         5,015          --         94,394
Selling, general and administrative
  expenses                                         --          74,000         7,790          --         81,790
Restructuring and impairment charges costs         --           1,550           678          --          2,228
                                             ----------    ----------    ----------    ----------   ----------
Operating income (loss)                            --          13,829        (3,453)         --         10,376

Loss on investments in subsidiaries             (17,113)         --            --          17,113         --
Interest expense, net                              --          23,184         3,278          --         26,462
Other expense, net                                 --             457          --            --            457
                                             ----------    ----------    ----------    ----------   ----------
Income (loss) before reorganization costs
  and income taxes                              (17,113)       (9,812)       (6,731)       17,113      (16,543)
Bankruptcy reorganization credits                  --            (573)         --            --           (573)
                                             ----------    ----------    ----------    ----------   ----------
Loss before provision for income taxes          (17,113)       (9,239)       (6,731)       17,113      (15,970)
Provision for income taxes                         --           1,051            92          --          1,143
                                             ----------    ----------    ----------    ----------   ----------
Net income (loss)                            $  (17,113)   $  (10,290)   $   (6,823)   $   17,113   $  (17,113)
                                             ==========    ==========    ==========    ==========   ==========


</TABLE>

















                                                                      F-33



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                        SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                                           YEAR-END DECEMBER 31, 1997

                                                             (DOLLARS IN THOUSANDS)

                                                          PARENT      GUARANTOR  NON-GUARANTOR
                                                         COMPANY   SUBSIDIARIES    SUBSIDARIES  ELIMINATIONS CONSOLIDATED
<S>                                                    ----------   -----------  -------------- ------------  ----------
OPERATING ACTIVITIES                                  <C>           <C>           <C>           <C>           <C>
Net income (loss)                                 $ 17,196    $ 18,756    $ (1,560)   $(17,196)   $ 17,196
Adjustment to reconcile net income (loss) to
net cash and cash equivalents provided by
(used in) operating activities:
(Income) on investments in
    subsidiaries                                   (17,196)       --          --        17,196        --
  Depreciation and amortization                       --         7,779         326        --         8,105
  Gain on sale of assets                              --          --          (348)       --          (348)
  Accrual of professional fees, potential
     claims and related litigation matters-
      reorganization                                  --         6,117        --          --         6,117
   Adjustments of liabilities subject to
    compromise                                        --       (10,000)       --          --       (10,000)
Changes in operating assets and liabilities           --        (7,746)       (374)       --        (8,120)
                                                  --------    --------    --------    --------    --------
Net cash and cash equivalents provided by (used
in) operating activities                              --        14,906      (1,956)       --        12,950

INVESTING ACTIVITIES

Purchase of Property, Plant & Equipment               --       (10,554)       (224)       --       (10,778)
Proceeds on disposal Property, Plant &
   Equipment                                          --         1,786       1,541        --         3,327
                                                  --------    --------    --------    --------    --------
Net cash and cash equivalents provided by
(used in) investing activities                        --        (8,768)      1,317        --        (7,451)

FINANCING ACTIVITIES
Proceeds from DIP credit facility                     --        16,398        --          --        16,398
Principal payments on DIP credit facility             --       (16,398)       (397)       --       (16,795)
Proceeds from issuance of long term debt              --           456       1,790        --         2,246
Principal payments on long term debt                  --        (2,621)       (492)       --        (3,113)
                                                  --------    --------    --------    --------    --------
Net cash and cash equivalents provided by (used
 in) financing activities                             --        (2,165)        901        --        (1,264)
                                                  --------    --------    --------    --------    --------
Net change in cash and cash equivalents               --         3,973         262        --         4,235
Cash and cash equivalents at beginning of
 year                                                 --         5,578         206        --         5,784
                                                  --------    --------    --------    --------    --------
Cash and cash equivalents at end of year          $   --      $  9,551    $    468    $   --      $ 10,019
                                                  ========    ========    ========    ========    ========

</TABLE>



                                                                      F-34



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                                     SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                                                 YEAR ENDED DECEMBER 31, 1998
                                                                    (DOLLARS IN THOUSANDS)

                                                     PARENT     GUARANTOR  NON-GUARANTOR
                                                     COMPANY  SUBSIDIARIES    SUBSIDARIES   ELIMINATIONS   CONSOLIDATED
<S>                                                ----------   ----------- --------------  ------------   ------------
OPERATING ACTIVITIES                             <C>           <C>           <C>           <C>           <C>
Net income (loss)                                 $  (86,330)   $  (32,212)   $   (4,622)   $   86,330    $  (36,834)
Adjustment to reconcile net income
(loss) to net cash and cash equivalents
 used in operating activities:

  Loss on investments in subsidiaries                 86,330          --            --         (86,330)         --
  Write-down of deferred acquisition activities         --             489          --            --             489
  Write-down of property, plant and equipment           --           1,094          --            --           1,094
  Depreciation                                         9,340           312          --           9,652
Adjustments of liabilities subject to
    compromise                                          --         (22,442)         --            --         (22,442)
Changes in operating assets and liabilities             --          13,640         3,534          --          17,174
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents used in
 operating activities                                   --         (30,091)         (776)         --         (30,867)

INVESTING ACTIVITIES
Purchase of fixed assets                                --         (11,482)         (359)         --         (11,841)
Proceeds on disposal of fixed assets                    --             152          --            --             152
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents used in
investing activities                                    --         (11,330)         (359)         --         (11,689)

FINANCING ACTIVITIES
Issuance of preferred stock                             --          48,125          --            --          48,125
Distribution to parent                                  --         (87,522)         --            --         (87,522)
Net proceeds from DIP credit facility                   --           2,124         1,002          --           3,126
Net proceeds from issuance of long term debt            --         222,000          --            --         222,000
Principal payments on long term debt                    --          (1,300)         --            --          (1,300)
Principle payments on pre-petition liabilities          --        (146,490)         --            --        (146,490)
Principle payments on capital lease                     --          (2,377)          (29)         --          (2,406)
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents provided by
  financing activities                                  --          34,560           973          --          35,533
Effect of foreign currency translations                 --            --            (128)         --            (128)
                                                  ----------    ----------    ----------    ----------    ----------
Net change in cash and cash equivalents                 --          (6,861)         (290)         --          (7,151)
Cash and cash equivalents at beginning of year          --           9,551           468          --          10,019
                                                  ----------    ----------    ----------    ----------    ----------
Cash and cash equivalents at end of year          $     --      $    2,690    $      178    $     --      $    2,868
                                                  ==========    ==========    ==========    ==========    ==========


</TABLE>



                                      F-35



<PAGE>


                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. Guarantor Subsidiaries (Continued)
<TABLE>

                                          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                                          YEAR ENDED DECEMBER 31, 1999
                                                             (DOLLARS IN THOUSANDS)

                                                   PARENT    GUARANTOR  NON-GUARANTOR
                                                  COMPANY SUBSIDIARIES    SUBSIDARIES  ELIMINATIONS  CONSOLIDATED
<S>                                              --------  ----------- --------------  ------------   ----------
OPERATING ACTIVITIES                            <C>          <C>           <C>          <C>          <C>
Net income (loss)                                 $  (17,113)   $  (10,290)   $   (6,823)   $   17,113    $  (17,113)
Adjustment to reconcile Net income
(loss) to net cash and cash equivalents
 used in operating activities:
  Loss on investments in subsidiaries                 17,113          --            --         (17,113)         --
  Write-down of property, plant & equipment             --             360          --            --             360
  Depreciation                                          --           9,094           284          --           9,378
  Deferred finance amortization                         --           1,592          --            --           1,592
  Goodwill and License fee amortization                 --             228          --            --             228
  Gain on sale of fixed assets                          --             (57)         --            --             (57)
Adjustments of liabilities subject to
    compromise                                          --            --            --            --            --
Changes in operating assets and liabilities             --           7,989       (10,267)         --          (2,278)
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents used in
 operating activities                                   --           8,916       (16,806)         --          (7,890)

INVESTING ACTIVITIES
Purchase of fixed assets                                --         (10,536)         (134)         --         (10,670)
Proceeds on disposal of fixed assets                    --           1,274             1          --           1,275
Purchase of CAT, net of cash acquired                   --          (2,289)         --            --          (2,289)
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents used in
  investing activities                                  --         (11,551)         (133)         --         (11,684)

FINANCING ACTIVITIES
Issuance of preferred stock                             --            --            --            --
Distribution to parent                                  --         (12,950)       12,950          --            --
Net borrowings under line-of-credit agreement .         --          24,101         3,828          --          27,929
Net proceeds from issuance of long term debt ..         --            --            --            --            --
Principal payments on long term debt                    --          (3,600)         --            --          (3,600)
Principal payment on long-term notes (CAT)              --            (374)         --            --            (374)
Principle payments on capital lease                     --            --             (15)         --             (15)
                                                  ----------    ----------    ----------    ----------    ----------
Net cash and cash equivalents provided by
  financing activities                                  --           7,177        16,763          --          23,940
Effect of foreign currency translations                 --            --               6          --               6

                                                  ----------    ----------    ----------    ----------    ----------
Net change in cash and cash equivalents                 --           4,541          (170)         --           4,371
Cash and cash equivalents at beginning of year          --           2,690           178          --           2,868
                                                  ----------    ----------    ----------    ----------    ----------
Cash and cash equivalents at end of year          $     --      $    7,231    $        8    $     --      $    7,239
                                                  ==========    ==========    ==========    ==========    ==========
</TABLE>



                                                                      F-36



<PAGE>



                     CLUETT AMERICAN CORP. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19.      UNAUDITED QUARTERLY FINANCIAL INFORMATION

      (Dollars in thousands)

Quarterly financial information for 1998 and 1999 is summarized as follows:

Year Ended                              Quarter
December 31,         First       Second        Third       Fourth

1998
Net Sales        $  92,355    $  76,279    $  93,264    $ 111,225
Gross Profit        28,449       23,747       27,007       29,595
Net Income (Loss)    2,341      (11,025)        (715)     (27,435)(1)

1999
Net Sales           81,099       79,219       87,438       95,764
Gross Profit        23,712       22,509       22,492       25,681
Net Loss         $  (2,165)   $  (4,524)   $  (4,939)   $  (5,485)



Notes:
(1) Includes $24.3 million in post-petition  interest  expense  allocated to the
    Company by Holdings





















                                      F-37



<PAGE>

Item 9.  Changes  in  and  disagreements  with with Accountants on Accounting
and Financial Disclosures

        None other than previously reported on Cluett American Corp.'s Form 8-K
dated January 3, 2000 and filed January 10, 2000.


                   PART III

Item 10. Directors and  Executive Officers of the Registrant

    Set forth below are the names and  positions of the  directors and executive
officers of the Parent and the Company. All directors hold office until the next
annual meeting of  stockholders  of the Parent and the Company,  and until their
successors are duly elected and qualified. All officers serve at the pleasure of
the Board of Directors.

<TABLE>
<S>                             <C>                     <C>
NAME                            AGE                     POSTION(S)
-----------------               -----                   ---------------------------------------------------------------------
Bryan P. Marsal                  49                     Director and Chief Executive Officer of Holdings, CAG and the Company

James A. Williams                57                     Director of  Holdings,  CAG and the  Company;  President
                                                              and Chief Executive Officer of the Sock Group

Joseph A. Rosato                 41                     President and Chief Operating Officer of the Shirt Group


William S. Sheely                41                     Executive Vice President--Operations of the Sock Group


Kathy D. Wilson                  40                     Senior Vice  President  and Chief  Financial  Officer of the Sock Group


W. Todd Walter                   34                     Vice President and Chief Financial  Officer of Holdings,
                                                               CAG, the Shirt Group and the Company

Scott R. Coleman                 39                     Acting General Counsel of Holdings, CAG and the Company

Norman W. Alpert                 41                     Director of Holdings, CAG and the Company

Sander M. Levy                   38                     Director of Holdings, CAG and the Company


Daniel S. O'Connell              46                     Director of Holdings, CAG and the Company


Steven M. Silver                 31                     Director of Holdings, CAG and the Company


Neil P. DeFeo                    53                     Director of Holdings, CAG and the Company

</TABLE>

     BRYAN P.  MARSAL is a founding  Managing  Director  of A&M, a firm that was
formed in 1983. Mr. Marsal has been Chief Executive Officer of the Company since
1995. Mr. Marsal is a director of Timex Corporation and Aearo  Corporation.  Mr.
Marsal received both a B.B.A. and an M.B.A. from the University of Michigan.

     JAMES A. WILLIAMS is President of the Sock Group.  Mr.  Williams joined the
Sock Group in July 1986 as Senior Vice  President--Sales  and  Marketing and was
promoted to his current  position as President in August 1991. Mr. Williams is a
director of Ithaca Industries,  Inc. and Esprit de Corp. and is the Chairman and
a director of Maidenform  Worldwide Inc. Prior to joining the Company, he worked
for 15 years for  Adams-Millis  Corporation,  where his last position was Senior
Vice  President--Sales  and Marketing.  Mr.  Williams earned a B.S. in chemistry
from the University of Southern Mississippi.

     JOSEPH.  A. ROSATO is the President and Chief  Operating  Officer of Cluett
Peabody & Co. Mr. Rosato joined the Company in September 1999. Mr. Rosato has 16
years of  experience  in the apparel  industry.  He has worked for  Phillips-Van
Heusen Corporation, Tommy Hilfiger, Inc., and most recently Warnaco Group, Inc.,
and has held various  positions in sourcing and production  related  areas.  Mr.
Rosato  earned  a B.A.  from  New  York  University  and  an  M.B.A.  from  Pace
University.

     WILLIAM S. SHEELY is the Executive Vice  President--Operations  of the Sock
Group. Mr. Sheely joined the Company as Vice President of Finance and Controller
of the Sock Group in February  1993 and was promoted to his current  position of
Executive Vice President--Operations in April 1994. Prior to his tenure with the
Company,  Mr. Sheely was controller at Kayser-Roth's  sock division where he was
employed for seven years, and with Springs  Industries for five years in various
financial  positions.  Mr.  Sheely  is a  graduate  of the  University  of South
Carolina where he received a B.S. in Business Administration - Accounting and is
also a C.P.A.

     KATHY D. WILSON is the Senior Vice President and Chief Financial Officer of
the Sock Group.  Ms.  Wilson  joined the Company in January 1994 and became Vice
President of Finance in April 1994.  During the three years prior to joining the
Company,  Ms.  Wilson  had a  consulting  practice  in  Singapore  for the hotel
industry.  She also worked five years with various  accounting firms. Ms. Wilson
earned a B.S. in Business  Administration  - Accounting  from the  University of
North Carolina and is also a C.P.A.

     W. TODD WALTER is a Director of A&M and became the Chief Financial  Officer
of the Parent and the Company effective March 1999. Mr. Walter joined A&M in May
1996 and has served in  various  financial  and  operating  positions  at client
companies.  Between June 1992 and April 1996, Mr. Walter was a Vice President in
the Special Loan Group at Chemical  Bank in New York.  Mr.  Walter  earned a B.A
degree from  Middlebury  College and an M.B.A.  degree from the Darden  Graduate
School of Business Administration, University of Virginia.

     SCOTT R. COLEMAN is Acting General  Counsel and Secretary of the Parent and
the Company  effective  August 1999. Mr. Coleman joined the Company in July 1998
as Assistant General Counsel.  Prior to joining the Company,  Mr. Coleman worked
for four  years as  corporate  associate  at Paul,  Weiss,  Rifkind,  Wharton  &
Garrison,  and five years as an attorney for the City of New York.  Mr.  Coleman
earned a J.D.  from New York  University  School of Law and a B.A. from Columbia
College.

     NORMAN W. ALPERT is a Managing  Director of Vestar Capital Partners and was
a founding partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of
the Board of Directors of Aearo Corporation  and Advanced  Organics,  Inc.,  and
a  director of  Russell-Stanley  Holdings,  Inc., Siegelgale  Holdings, Inc. and
Remington  Products  Company,  L.L.C.,  all  companies  in  which  Vestar or its
affiliates have  a  significant equity  interest. Mr.  Alpert  received  an A.B.
degree from Brown University.

     SANDER M. LEVY is a Managing  Director of Vestar and was a founding partner
of  Vestar  at its  inception  in  1988.  Mr.  Levy  is a  director  of  Gleason
Corporation  and  St.  John  Knits,  Inc.,  companies  in  which  Vestar  or its
affiliates have a significant  equity interest.  Mr. Levy received a B.S. degree
from The Wharton School of the University of Pennsylvania  and an M.B.A.  degree
from Columbia University.

     DANIEL S.  O'CONNELL is the founder and Chief  Executive  Officer of Vestar
Capital Partners. Mr.  O'Connell  is  a  director of Aearo Corporation,  Insight
Communications  Company,  L.P., Remington  Products  Company,  L.L.C.,  Russell-
Stanley Holdings, Inc., Sheridan Healthcare, Inc., Siegelgale Holdings, Inc. and
St. John Knits, Inc., all companies in  which  Vestar  or  its affiliates have a
significant  equity interest.  Mr. O'Connell  received an A.B. degree from Brown
University and an M.P.P.M. degree from Yale University School of Management.

     STEVEN M. SILVER is a Vice President of Vestar Capital Partners. Mr. Silver
joined Vestar in May of 1995. Between July 1990 and July 1993, Mr. Silver was an
analyst in Wasserstein  Perella & Co.'s mergers and  acquisitions  groups in New
York and London.  Mr. Silver holds a B.A. degree from Yale College and an M.B.A.
degree from Harvard University.

     NEIL P.  DEFEO has  served as  President,  Chief  Executive  Officer  and a
director of Remington Products Company,  L.L.C. since January 1997. Mr. DeFeo is
a director of Driscoll Strawberry Associates,  Inc. From 1993 to 1996, Mr. DeFeo
was Group Vice President,  U.S. Operations for The Clorox Company.  For 25 years
prior to 1993,  Mr.  DeFeo  worked  for  Procter & Gamble in  various  executive
positions,  including Vice President and Managing Director,  Worldwide Strategic
Planning,  Laundry  and  Cleaning  Products.  Mr.  DeFeo  holds a B.S.E.E.  from
Manhattan College.

Compliance with Section 16(a) of the Exchange Act

     Each new executive  officers of the Company was required to file an Initial
Statement of  Beneficial  Ownership of Securities on Form 3 to report his or her
beneficial  ownership of equity  securities  of the Company  August 11, 1999 and
November 20, 1999, the effective date the individuals became a reporting person.
Through an oversight such forms were not filed until early in 2000. None of such
directors or officers reported beneficial  ownership of any equity securities of
the Company.

Item 11. Executive Compensation

    The following table sets forth the cash and noncash  compensation  earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of the Parent and the Company.

                           SUMMARY COMPENSATION TABLE
<TABLE>
                                                                                         LONG-TERM
                                                                                     COMPENSATION
                                                                                          AWARDS
                                                                                     ------------------

                                              ANNUAL COMPENSATION
                                              -------------------
                                                                                        SECURITIES
                                                                                        UNDERLYING           ALL OTHER
                                      YEAR       SALARY ($)         BONUS               OPTIONS (#)        COMPENSATION
                                   ------------  ---------- -----------------       ---------------      ------------------
<S>                                    <C>           <C>             <C>                <C>                <C>             <C>
Bryan P. Marsal(1)                      1999          $700,000               0                       0                    0
  Chief  Executive Officer of           1998           700,000               0                       0                    0
  Holdings and the Company              1997           700,000               0                       0                    0

James A.Williams                        1999           432,600        $412,000                       0                    0
  President of the Sock Group           1998           412,000         400,000                       0                    0
                                        1997           400,000         410,000                       0                    0

Philip L. Molinari                      1999                 0               0                       0             $347,000   (2)
  Former President of the Shirt         1998           330,000         150,000                       0               52,000   (3)
  Group                                 1997           320,000               0                       0                    0

Robert J. Riesbeck                      1999           260,800          41,000  (4)                  0                    0
  Former Executive Vice President       1998           235,000         124,000                       0                    0
  and Chief Operating and               1997           181,000               0                       0                    0
  Financial Officer of the
  Shirt Group

William S. Sheely                       1999           170,000         162,500                       0                    0
  Executive Vice President              1998           162,000         156,000                       0                    0
  --Operations of the Sock Group        1997           156,000         150,000                       0                    0

Kathy D. Wilson                         1999           165,000         150,000                       0                    0
 Senior Vice President and              1998           150,000         135,900                       0                    0
 Chief Financial Officer of the Sock    1997           135,900         140,000                       0                    0
 Group

</TABLE>

(1) A&M also received, for services other than those of Mr. Marsal, compensation
    of  $738,000,  $257,000,  and  $263,000  for each of 1997,  1998,  and 1999,
    respectively.

(2)  Severance  paid as part of  termination  of  employment  that was effective
     December 31, 1998.

(3)  Accrued vacation pay and deferred compensation paid at time of termination
     of employment.

(4) Effective October 31, 1999, Robert Riesbeck no longer acted in the capacity
    of executive officer.

Employment and Severance Agreements

    Mr.  Williams  entered  into an  employment  agreement  with the Sock  Group
effective  as of March 7, 1997,  pursuant  to which he serves as  President  and
Chief Executive  Officer of the Sock Group. Such employment  agreement  provides
for Mr.  Williams to receive an annual base salary of $400,000.  Mr. Williams is
also  entitled to annual  incentive  bonuses  under the Sock  Group's  executive
management  incentive  plan,  with  no  guaranteed  minimum  bonus  amount.  The
employment  agreement  continues until  terminated (a) by the Sock Group with or
without cause or (b) by Mr.  Williams with cause or upon 90 days notice.  In the
event that Mr.  Williams'  employment  is  terminated  without cause by the Sock
Group or with cause by Mr. Williams,  Mr. Williams will be entitled to severance
pay in an amount equal to two times the sum of $400,000 plus his average  annual
bonus calculated from prior years, up to a maximum severance of $1,200,000.

     Each of Mr. Sheely,  Ms. Wilson and Mr.  Coleman (each an "Employee")  have
entered into  severance  agreements.  Each Employee is entitled to severance pay
equal to his or her  current  base  salary  for a period of one year  (excluding
bonus  compensation)  with the exception of Mr. Coleman,  upon the occurrence of
the  termination  of  his  or  her  employment   without  cause.  Mr.  Coleman's
entitlement  covers a period of six months.  These severance payments cease upon
the Employee becoming a full-time  employee or full-time  consultant  (including
self-employment) of another entity. Each of the severance  agreements  described
in this paragraph  terminates one year from the date of the  consummation of the
Plan.

     Mr.  Molinari's  employment with the Company  terminated as of December 31,
1998. Mr. Molinari will receive severance  payments equal to his base salary for
a period of up to one year. In addition,  the Company  exercised its call rights
and purchased the shares of Holdings  Common Stock owned by Mr.  Molinari at the
initial purchase price paid by Mr. Molinari in May 1998.

     Mr.  Kaufman's  employment with the Company  terminated as of September 30,
1999. The Company exercised its call rights and purchased the shares of Holdings
Common  Stock  owned by Mr.  Kaufman at the initial  purchase  price paid by Mr.
Kaufman in May 1998.

     Mr.  Riesbeck stopped serving as executive officer effective October 31,
1999, but continued to receive salary continuation through on March 31,
2000. The Company exercised its call rights and purchased the shares of Holdings
Common  Stock owned by Mr.  Riesbeck at the initial  purchase  price paid by Mr.
Riesbeck in May 1998.

Bonus Plans

    Executive  officers along with certain other employees (the  "Participants")
of each  of the  Shirt  Group  and  the  Sock  Group  participate  in  incentive
compensation  plans pursuant to which the  Participants  are eligible to receive
bonus  compensation  based  upon  annual  minimum  EBITDA  targets  and upon the
weighing  of  certain  other  performance  criteria  by Bryan P.  Marsal and the
Compensation Committee of the Board of Directors.  Yearly bonus awards under the
incentive  plans are  limited  to 100% of the  respective  Participant's  annual
salary.



<PAGE>



Management Equity Participation

    In  connection  with  the  Recapitalization,   Holdings  (i)  permitted  the
Management  Investors  to  subscribe  in the  aggregate  for up to  5.1%  of the
outstanding  Holdings  Common Stock (the  "Purchased  Stock") and (ii) adopted a
stock option plan (the "Option Plan")  providing for options to purchase  shares
of Holdings Common Stock  ("Options") to be granted to the Management  Investors
at the  consummation of the  Recapitalization  and to certain other employees of
Holdings  and its  subsidiaries  from time to time  thereafter,  in each case in
order to provide additional  compensation and financial incentives to Management
Investors and such other employees. The Option Plan may be amended, suspended or
terminated by the Holdings' Board of Directors at any time.

    Purchased Stock. On May 18, 1998 (the "the Recapitalization  closing date"),
the  Management  Investors  became  holders of an  aggregate  of $1.8 million of
Purchased Stock,  representing 5.1% of the outstanding  Holdings Common Stock on
the  Recapitalization  closing date.  All Purchased  Stock is subject to certain
forfeiture  provisions  referred to in the paragraph  entitled  "Puts and Calls"
below.

    Stock Options.  On the  Recapitalization  closing date,  Holdings  agreed to
grant  nonqualified  Options to purchase 5% of Holdings Common Stock (on a fully
diluted  basis).  Such  Options  will (i) vest and become  exercisable  in equal
installments in each of the five years following the grant date, (ii) expire ten
years from the grant date,  or earlier in certain  instances of  termination  of
employment and upon certain change of control events, and (iii) have an exercise
price  equal  to  $98.01  (the  per  share  price  at  which  Vestar,  A&M,  the
Co-Investors  and the Management  Investors  acquired  shares of Holdings Common
Stock   in  the   Recapitalization).   From   time   to   time   following   the
Recapitalization,  the  Board  of  Directors  of  Holdings,  or  a  compensation
committee  thereof,  may grant these or additional Options under the Option Plan
to various employees of Holdings,  the Company and their  subsidiaries on terms,
including vesting schedule,  term and exercise price, determined by the Board of
Directors or such committee in accordance  with the Option Plan. No options have
been granted under the Option Plan through December 31, 1999.

    Puts And Calls. Purchased Stock, Options and Holdings Common Stock purchased
upon the exercise of Options will be subject to certain put and call  provisions
relating to the death,  disability,  retirement and termination of employment of
the holder. Put and call prices will vary depending on the number of years since
grant or purchase,  the reason the put or call became exercisable,  and the fair
market value and initial  purchase price of Holdings Common Stock subject to the
put or call.  Under  certain  circumstances,  Holdings is permitted (i) to defer
exercise of the put or call to the extent prohibited by financing  agreements or
other  instruments,  and (ii) to pay the purchase price under the put or call in
prime-rate junior subordinated notes with maturities up to five years.

Compensation of Directors

     Directors  of the  Company  who are  neither  employees  of the Company nor
affiliated with Vestar receive annual  compensation of $20,000 payable quarterly
for services in such capacity.  Other directors do not receive any  compensation
for services in such capacity.

Compensation Committee Interlocks and Insider Participation

     Directors Alpert and Levy, each of whom is affiliated with Vestar,  are the
members of the Compensation  Committee which reviews the future compensation and
benefits of the Company's executive officers and key employees.

     Since the  Recapitalization,  each of these individuals has had an interest
in  transactions  or  business  relationships  involving  the  Company.  See the
information   contained  in  Item  13,   "Certain   Relationships   and  Related
Transactions", which is incorporated herein by reference.

Report on Executive Compensation

     This report sets forth the  compensation  policies that guide  decisions of
the  Compensation  committee with respect to the  compensation  of the Company's
executive  officers.  This report also reviews the  rationale  for pay decisions
that  affected  Mr.  Marsal  during the 1999 fiscal  year,  and, in that regard,
offers  additional  insight  into the figures  that  appear in the  compensation
tables  which are an  integral  part of the  overall  disclosures  of  executive
compensation. Any consideration to pay-related actions that may become effective
in future fiscal years are not reported in this statement.

     The central  responsibility  of the  Compensation  Committee  is to oversee
compensation  practices of the Company's executive offices. In this capacity, it
reviews  salaries,  benefits,  and  other  compensation  paid  to the  Company's
executive  officers and  recommends  actions to the full Board of Directors with
respect to those matters.

     The  Compensation  Committee is dedicated  to ensuring  that the  Company's
financial  resources  are used  effectively  to support the  achievement  of its
short-term and long-term business  objectives.  In general,  it is the policy of
the Company that executive  compensation  reflect  relevant market standards for
individuals  with  superior  capabilities  and be  driven  substantially  by the
Company's  performance as measured by the  achievement  of internally  generated
earnings targets.  The members of the Compensation  committee  believes that the
Company's  executive  compensation  program is well  structured  to achieve  its
objectives.



<PAGE>



Item 12.  Security Ownership of Certain Beneficial Owners and Management

    All of the issued and outstanding  shares of common stock of the Company are
held by Cluett  American  Group ("CAG"),  which is a wholly-owned  subsidiary of
Cluett American Investment Corp.  ("Holdings").  The following table sets forth,
as of February 29, 2000, certain information  regarding the beneficial ownership
of the voting  securities of Holdings by each person who beneficially  owns more
than 5% of any class of Holdings  voting  securities  and by the  directors  and
certain executive officers of Holdings,  individually,  and by the directors and
executive  officers of  Holdings  as a group.  Except as  indicated  below,  the
address for each of the persons listed below is c/o Cluett  American Corp., 48 W
38th Street, New York, NY 10018.




                                                 HOLDINGS COMMON STOCK
                                               -------------------------
                                               SHARES BENEFICIALLY OWNED
                                               -------------------------
                                                NUMBER OF    PERCENT OF
                                                  SHARES       COMMON
5% STOCKHOLDERS:
  Vestar Capital Partners  III, L.P. .........    217,285      60.8%(1)
    245 Park Avenue
    New York, New York 10017
  A&M ........................................     49,995      14.0%(1)
    599 Lexington Avenue
    Suite 2700
    New York, New York 10022
  Societe Anonyme D'Etudes et de Participation
Industrielles
    et Commerciales ..........................     24,699       6.9%(1)
    114 rue de Turenne
    75003 Paris
  Cerebus Partners, L.P ......................     20,622       5.8%(1)
    450 Park Avenue
    New York, New York 10022
OFFICERS AND DIRECTORS:
  Bryan P. Marsal(2) .........................     49,995      14.0%
  James A. Williams ..........................      4,388       1.2%
  Norman W. Alpert(3) ........................    217,285      60.8%
  Sander M. Levy(3) ..........................    217,285      60.8%
  Daniel S. O'Connell(3) .....................    217,285      60.8%
  Steven M. Silver(3) ........................    217,285      60.8%
  Kathy D. Wilson ............................      2,041      (4)
  William S. Sheely ..........................      1,633      (4)
  All executive officers and directors as a
  group (11 persons)(2)(3)  ..................    275,342      77.1%

(1) For a discussion of certain voting arrangements among these holders see
    Item 13. "Certain Relationship and Related Transactions--Stock Ownership
     and Stockholder's Agreement". Each of Vestar, A&M, Societe Anonyme
    D'Etudes et de Participation  Industrielles  et Commerciales  ("SAEPIC") and
    Cerebus  Partners,  L.P.  disclaims  the  existence of a group and disclaims
    beneficial ownership of Holdings Common Stock not owned of record by them.

(2) Includes shares owned by A&M. Mr. Marsal disclaims the existence of a group
    and disclaims beneficial ownership of the Holdings Common Stock not held by
    him.

(3) Includes shares owned by Vestar. Each of Mr. Alpert, Mr. O'Connell, Mr.
    Levy, and Mr. Silver disclaims the existence of a group and disclaims
    beneficial ownership of the Holdings Common Stock not held by him.

(4) Less than 1%.


 Item 13.  Certain Relationships and Related Transactions

Issuance Of Shares Pursuant To Recapitalization

     In connection with the Plan and pursuant to the Subscription Agreement, the
Equity  Investors made the Equity  Investment in Holdings.  Approximately  $52.7
million of the Equity  Investment  was provided by Vestar in the form of a $21.3
million  common equity  investment in Holdings  Common Stock and a $31.4 million
investment  in  Holdings  Class C Junior  Preferred  Stock.  Approximately  $8.6
million of the Equity Investment was provided by the Co-Investors in the form of
a $3.5 million investment in Holdings Common Stock and a $5.1 million investment
in Holdings Class C Junior  Preferred  Stock.  A&M and the Management  Investors
provided the remaining Equity  Investment in the form of a $4.9 million and $1.8
million  investment  in  Holdings  Common  Stock,  respectively.  Each of  these
issuances of securities  were made in reliance on Section 4(2) of the Securities
Act of 1993,  as amended  (the  "Securities  Act").  The balance of the Holdings
Common Stock is held by former stockholders of Holdings.

Stock Ownership And Stockholders' Agreement

     In the  Recapitalization:  (i)  Vestar  acquired  60.8% of the  outstanding
Holdings Common Stock, (ii) A&M acquired 14% of the outstanding  Holdings Common
Stock,  (iii) the  Management  Investors  acquired in the aggregate  5.1% of the
outstanding Holdings Common Stock, and (iv) the Co-Investors acquired 10% of the
outstanding Holdings Common Stock.  Following the  Recapitalization,  the former
stockholders  of  Holdings  (the  "Original  Equity  Holders")  retained  in the
aggregate  10.1% of the  outstanding  Holdings  Common  Stock.  There  can be no
assurance  as to how long any of Vestar,  A&M,  the  Management  Investors,  the
Co-Investors  or the Original  Equity Holders will hold their shares of Holdings
Common Stock,  although certain transfers by them may be restricted as described
below.

     Vestar, A&M, the Co-Investors and the Management  Investors  (including any
employees of Holdings and its  subsidiaries  who purchase  Holdings Common Stock
from, or are granted options by, Holdings following the  Recapitalization)  (the
foregoing parties, collectively, the "Initial Investors") and SAEPIC and certain
other Original  Equity Holders  (SAEPIC and such other Original  Equity Holders,
the  "Participating   Original  Equity  Holders";   together  with  the  Initial
Investors, the "Participating Stockholders"),  have entered into a Stockholders'
Agreement  (the  "Stockholders'  Agreement")  which  provides  for,  among other
things, the matters described below.

     Transfers Of Holdings Common Stock And Holdings Preferred Stock. Subject to
certain  limitations,  transfers of Holdings  securities by A&M, the  Management
Investors,  the Co-Investors and the Participating  Original Equity Holders will
be restricted  unless the  transferee  agrees to become a party to, and be bound
by, the Stockholders'  Agreement.  In addition,  subject to certain limitations,
A&M, the Management Investors,  the Co-Investors and the Participating  Original
Equity Holders will agree that, unless a public offering of Holdings  securities
(a "Holdings Public Offering") has occurred, they will not transfer any Holdings
securities  for a period of five years  other  than as  described  below.  Under
certain  circumstances,  the transfer of Holdings  securities  by  Participating
Stockholders to their respective affiliates will be permitted.

     Election Of Directors. Subject to certain requirements and exceptions, each
Participating  Stockholder  will vote all of the Holdings  Common Stock owned or
held of record by such Participating  Stockholder so as to elect to the Board of
Directors  of  Holdings  and each of its  subsidiaries:  (i) four  designees  of
Vestar, (ii) three additional  designees of Vestar who are not affiliates of any
Participating  Stockholder or employees of Holdings or any of its affiliates and
(iii)  three  designees  of A&M and the  Management  Investors.  The  number  of
designees  to which  Vestar and A&M and the  Management  Investors  are entitled
decrease  according to a formula based on the number of shares owned as compared
to the number acquired in the Recapitalization.  Mr. Marsal shall be Chairman of
the Board of  Directors  and a designee of A&M and the  Management  Investors so
long as he remains Chief Executive Officer of Holdings.  See Item 10. "Directors
and  Executive  Officers  of the  Registrant"  for a  discussion  of the present
officers and directors and their relationship to Vestar and A&M.

     Other Voting Matters.  So long as Vestar and its affiliates continue to own
at least one-half of the shares of Holdings Common Stock acquired by them in the
Recapitalization,  each Participating Stockholder (excluding the Original Equity
Holders)  will vote all of its  Holdings  Common  Stock in favor of adopting and
approving any action adopted and approved by the Holdings Board of Directors.

     Tag-Along  Rights.  So long  as no  Holdings  Public  Offering  shall  have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares  of  Holdings  Common  Stock  acquired  by them in the  Recapitalization,
subject to certain exceptions, with respect to any proposed transfer of Holdings
Common Stock or Holdings Class C Junior  Preferred  Stock by Vestar,  other than
transfers to  affiliates,  each other  Participating  Stockholder  will have the
right  to  require  that  the  proposed   transferee  purchase  a  corresponding
percentage  of any shares of Holdings  Common  Stock or Holdings  Class C Junior
Preferred Stock, as the case may be, owned by such Participating  Stockholder at
the same price and upon the same terms and conditions.

     Drag-Along  Rights.  So long as no  Holdings  Public  Offering  shall  have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares  of  Holdings  Common  Stock  acquired  by them in the  Recapitalization,
subject  to  certain  limitations,   each  Participating   Stockholder  will  be
obligated,  in  connection  with an offer by a third party to Vestar to purchase
(pursuant  to a sale of stock,  a merger or  otherwise)  all of the  outstanding
shares of Holdings Common Stock or Holdings Class C Junior  Preferred Stock held
by the Participating  Stockholders  (other than shares not purchased in order to
reserve availability of recapitalization  accounting treatment), to transfer all
of its shares of  Holdings  Common  Stock or Holdings  Class C Junior  Preferred
Stock to such third party on the terms of the offer accepted by Vestar.

     Participation  Rights.  So long as no Holdings  Public  Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,  under
certain  circumstances,  if  Holdings or its  subsidiaries  propose to issue any
common stock to an Initial Investor or  Participating  Original Equity Holder or
to an affiliate thereof,  each other Initial Investor or Participating  Original
Equity Holder shall have the  opportunity to purchase such Holdings Common Stock
on a pro rata basis.

     Right Of First  Refusal.  After five  years and prior to a Holdings  Public
Offering,  if A&M, a Management  Investor,  the  Co-Investors or a Participating
Original Equity Holder or any of their transferees receives an offer to purchase
any  Holdings  securities  held by it, other than from its  affiliate,  and such
Participating  Stockholder or transferee  wishes to accept such offer, then such
Participating  Stockholder  or  transferee  shall  be  required  to  offer  such
securities  first to Holdings (or its designee) on the same terms and conditions
(provided  that Holdings may pay cash  consideration  equivalent to any non-cash
consideration offered) before accepting such third-party offer.

     Registration Rights. Subject to certain limitations, upon a written request
by Vestar, its affiliates or its transferees, Holdings will use its best efforts
to effect the  registration of all or part of the Holdings Common Stock owned by
Vestar or such affiliate or  transferee,  provided that (i) Holdings will not be
required to effect more than one registration within any 360-day period and (ii)
no more than six such  registrations  may be  requested,  unless the  requesting
party agrees to pay all costs and expenses thereof.

     Incidental Registration.  Under certain circumstances, if Holdings proposes
to register  shares of Holdings  Common Stock, it will, upon the written request
of any  Participating  Stockholder,  use all  reasonable  efforts  to effect the
registration of such Participating Stockholder's common stock.

     Termination.  The Stockholders' Agreement will terminate (i) in full on the
earliest of (A) the Initial Investors and their affiliates owning less than 5%of
the  outstanding  Holdings  Common Stock (on a fully  diluted  basis) or (B) the
Participating Stockholders,  including their affiliates and transferees,  owning
less than 50% of the  outstanding  Holdings  Common  Stock  (on a fully  diluted
basis) and (C) ten years after the  Recapitalization and (ii) as to any Holdings
securities,  on the  date  such  securities  are sold in a  public  offering  or
pursuant to Rule 144.



<PAGE>



Other Relationships

     Management  Advisory  Agreement.   Holdings  will  pay  a  $500,000  annual
management fee to Vestar in  consideration  for certain  advisory and consulting
services  provided by Vestar  (excluding  investment  banking or other financial
advisory  services and full- or part-time  employment  by Holdings or any of its
subsidiaries of any employee or partner of any of Vestar and its affiliates,  in
each case for which  Vestar  and its  affiliates  shall be  entitled  to receive
additional  compensation).  Holdings has agreed to reimburse Vestar for expenses
incurred in connection  with, and to indemnify Vestar and its affiliates for any
liabilities arising from, such advisory and consulting services.

     Management Loans. At the closing of the  Recapitalization,  Holdings loaned
$1.35 million to A&M, and $0.9 million to the Management Investors,  in order to
provide A&M and such Management  Investors with funds to be applied to a portion
of the purchase price of the Holdings  Common Stock to be issued to A&M and such
Management  Investors in  connection  with the  Recapitalization.  Such recourse
loans (i) are secured by pledges of the Holdings  common stock  purchased by the
respective borrowers, (ii) have a term of seven years, (iii) bear interest at an
annual rate of 5.69%, and (iv) are subject to mandatory  prepayment (a) with the
net  proceeds of any sales of Holdings  Common  Stock and (b) in full in certain
other  events  including,  in the  case  of  the  Management  Investors,  if the
employment  by  Holdings  and  its  subsidiaries  of  such  Management  Investor
terminates other than as a result of death, disability or retirement.  The terms
of  these  loans  may be more  favorable  to  Management  Investors  than  terms
obtainable from an unrelated third-party.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)          (1)      Financial Statements

                      Included in Part II, Item 8

                      Consolidated Balance Sheets as of December 31, 1998 and
                      December 31, 1999

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

                      Consolidated  Statements of Stockholder's Deficit for the
                      years  ended  December  31,  1997,  December  31, 1998 and
                      December 31, 1999

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

                      Notes to Consolidated Financial Statements

             (2)      Financial Statement Schedule

                      Schedule II - Valuation and Qualifying
                      Accounts

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

             (3)      List of Exhibits



<PAGE>



EXHIBIT

   NO.                                             DESCRIPTION OF EXHIBIT
--------------------------------------------------------------------------------

2.1  Third Amended plan of  Reorganization  of Cluett  American Corp. and Cluett
     American Investment Corp.  (incorporated by reference to Exhibit 2.1 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

2.2  Subscription   Agreement  dated  as  of  March  30,  1998  among  Bidermann
     Industries  U.S.A.,  Inc.,  Vestar Capital Partners III, L.P. and Alvarez &
     Marsal,  Inc.  (incorporated  by reference to Exhibit 2.2 to the  Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

2.3Stockholders'  Agreement  dated  as of May 18,  1998  among  Cluett  American
     Investment  Corp.,  Vestar  Capital  Partners  III,  L.P.,  A&M  Investment
     Associates #7, LLC, the  Co-Investors  named therein,  the Original  Equity
     Holders  named  therein  and  the   Management   Investors   named  therein
     (incorporated  by  reference to Exhibit 2.3 to the  Company's  Registration
     Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

2.4  Joinder  Agreement  dated  as  of  June  30,  1998  among  Cluett  American
     Investment  Corp.,  Vestar  Capital  Partners  III,  L.P.  and  each  other
     signatory thereto (an "Additional Stockholder")  (incorporated by reference
     to Exhibit 2.4 to the  Company's  Registration  Statement on Form S-4 (Reg.
     No. 333-58059) filed on June 30, 1998).

3.1  Restated   Certificate   of   Incorporation   of  Cluett   American   Corp.
     (incorporated  by  reference to Exhibit 3.1 to the  Company's  Registration
     Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

3.2  Bylaws of Cluett American Corp.  (incorporated  by reference to Exhibit 3.2
     to the Company's  Registration  Statement on Form S-4 (Reg. No.  333-58059)
     filed on June 30, 1998).

4.1  Indenture  between  Cluett  American  Corp.  and The Bank of New  York,  as
     Trustee  (incorporated  by  reference  to  Exhibit  4.1  to  the  Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

4.2  Exchange Debenture  Indenture between Cluett American Corp. and The Bank of
     New York,  as Trustee  (incorporated  by  reference  to Exhibit  4.2 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

4.3  Certificate of  Designations  of the 121/2% Senior  Exchangeable  Preferred
     Stock Due 2010  (incorporated  by reference to Exhibit 4.3 to the Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

4.4  Form of 10  1/8%  Senior  Subordinated  Notes  Due  2008  (incorporated  by
     reference to Exhibit 4.4 to the  Company's  Registration  Statement on Form
     S-4 (Reg. No. 333-58059) filed on June 30, 1998).

4.5  Form of 10 1/8% Series B Senior  Subordinated  Notes Due 2008 (incorporated
     by reference to Exhibit 4.5 to the Company's Registration Statement on Form
     S-4  (Reg.  No.  333-58059)  filed on June 30,  1998).

4.6  Form of 12 1/2% Senior Exchangeable  Preferred Stock Due 2010 (incorporated
     by reference to Exhibit 4.6 to the Company's Registration Statement on Form
     S-4  (Reg.  No.  333-58059)  filed on June 30,  1998).

4.7  Form of 12 1/2%  Series  B Senior  Exchangeable  Preferred  Stock  Due 2010
     (incorporated  by  reference to Exhibit 4.7 to the  Company's  Registration
     Statement on Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).

4.8  Note Registration Rights Agreement dated May 18, 1998 among Cluett American
     Corp.,  NationsBanc  Montgomery  Securities LLC and NatWest Capital Markets
     Limited  (incorporated  by  reference  to  Exhibit  4.8  to  the  Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

4.9  Preferred  Stock  Registration  Rights  Agreement  dated May 18, 1998 among
     Cluett American Corp.,  NationsBanc  Montgomery  Securities LLC and NatWest
     Capital  Markets Limited  (incorporated  by reference to Exhibit 4.9 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

10.1 $160,000,000  Credit  Agreement  dated  as of May  18,  1998  among  Cluett
     American Corp., as the Borrower, NationsBank, N.A., as Administrative Agent
     and Collateral Agent,  NationsBanc  Montgomery  Securities LLC, as Arranger
     and Syndication  Agent,  and lenders  (incorporated by reference to Exhibit
     10.1  to the  Company's  Registration  Statement  on  Form  S-4  (Reg.  No.
     333-58059) filed on June 30, 1998).

10.2 First Amendment to the Credit  Agreement and Assignment  dated May 27, 1998
     by an among Cluett American Corp., Cluett American Investment Corp., Cluett
     American Group, Inc. and certain  subsidiaries,  the Existing Lenders,  New
     Lenders,  and agents  (incorporated  by  reference  to Exhibit  10.2 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

10.2.1 Second Amendment to the Credit Agreement and Assignment dated as December
     18, 1998 by an among Cluett  American  Corp.,  Cluett  American  Investment
     Corp., Cluett American Group, Inc. and certain  subsidiaries,  the Existing
     Lenders,  New  Lenders,  and agents  (incorporated  by reference to Exhibit
     10.2.1 to the  Company's  Annual Report on Form 10-K (Reg.  No.  333-58059)
     filed on March 29, 1999).

10.2.2 Third Amendment to the Credit  Agreement and Assignment dated as of March
     19, 1999 by an among Cluett  American  Corp.,  Cluett  American  Investment
     Corp., Cluett American Group, Inc. and certain  subsidiaries,  the Existing
     Lenders,  New  Lenders,  and agents  (incorporated  by reference to Exhibit
     10.2.2 to the  Company's  Annual Report on Form 10-K (Reg.  No.  333-58059)
     filed on March 29, 1999).

10.2.3 Waiver to the Credit  Agreement and Assignment  dated July 28, 1999 by an
     among Cluett  American  Corp.,  Cluett American  Investment  Corp.,  Cluett
     American Group, Inc. and certain  subsidiaries,  the Existing Lenders,  New
     Lenders,  and agents  (incorporated  by reference to Exhibit  10.2.3 to the
     Company's Annual Report on Form 10-K (Reg No. 333-58059) filed on March 29,
     1999).

10.2.4 Fourth  Amendment to the Credit  Agreement and Assignment dated September
     30, 1999 by an among Cluett  American  Corp.,  Cluett  American  Investment
     Corp., Cluett American Group, Inc. and certain  subsidiaries,  the Existing
     Lender, New Lender, and agents (incorporated by reference to Exhibit 10.2.4
     to the Company's Quarterly Report on Form 10-Q (Reg No. 333-58059) filed on
     November 16, 1999).

10.2.5 Investment and Deposit Agreement between Vestar Capital Partners and Bank
     of America dated September 30, 1999  (incorporated  by reference to Exhibit
     10.2.5 to the Company's  Quarterly Report on Form 10-Q (Reg No.  333-58059)
     filed on November 16, 1999).

10.2.6 $3.0 million Credit  Agreement  dated as of November 9, 1999 among Cluett
     American  Corp,  as the borrower Bank of America,  N.A. and Vestar  Capital
     Partners  III,  L.P. as  guarantor  (incorporated  by  reference to Exhibit
     10.2.6 to the Company's  Quarterly Report on Form 10-Q (Reg No.  333-58059)
     filed on November 16, 1999).

*10.2.7 $7.5 million Amended and Restated Credit  Agreement dated as of February
     17, 2000,  among Cluett  American  Corp, as the borrower,  Bank of America,
     N.A. and Vestar Capital Partners III, L.P., as guarantor (filed herewith as
     Exhibit 10.2.7).

*10.2.8 Fifth  Amendment to Credit  Agreement and Waiver dated March 29, 2000 by
     and among Cluett American Corp., Cluett American  Investment Corp.,  Cluett
     American Group,  Inc. and certain  subsidiaries,  the Existing Lender,  New
     Lender, and agents (filed herewith as Exhibit 10.2.8).

*10.2.9 Amended and Restated  Investment  and Deposit  Agreement  between Vestar
     Capital  Partners III, L.P. and Bank of America dated March 29, 2000 (filed
     herewith as Exhibit 10.2.9).

10.3 Security  Agreement dated as of May 18, 1998 made by Cluett American Corp.,
     Cluett American  Investment Corp.,  Cluett American Group, Inc. and certain
     Subsidiaries of Cluett American  Investment  Corp. in favor of NationsBank,
     N.A. as agent  (incorporated  by reference to Exhibit 10.3 to the Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

10.4 Pledge  Agreement  dated as of May 18, 1998 made by Cluett  American Corp.,
     Cluett American  Investment Corp.,  Cluett American Group, Inc. and certain
     Subsidiaries of Cluett American  Investment  Corp. in favor of NationsBank,
     N.A., as agent  (incorporated by reference to Exhibit 10.4 to the Company's
     Registration  Statement on Form S-4 (Reg. No.  333-58059) filed on June 30,
     1998).

10.5 Joinder  Agreement  dated  as of May  18,  1998  by and  between  Bidermann
     Tailored  Clothing,  Inc., and NationsBank,  N.A., in its capacity as Agent
     under that certain Credit Agreement dated as of May 18, 1998  (incorporated
     by  reference to Exhibit 10.5 to the  Company's  Registration  Statement on
     Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

10.6 CDN  $15,000,000  Loan Agreement dated as of August 8, 1997 between Cluett,
     Peabody Canada Inc., as the Borrower,  and Congress  Financial  Corporation
     (Canada),  as Lender  (incorporated  by  reference  to Exhibit  10.6 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

+10.7Employment  Agreement  dated  March 7, 1997 by and between  Great  American
     Knitting Mills,  Inc. and James A. Williams  (incorporated  by reference to
     Exhibit 10.7 to the  Company's  Registration  Statement on Form S-4/A (Reg.
     No. 333-58059) filed on September 3, 1998).

+10.8Severance  Agreement  dated as of  August 8,  1997 by and  between  Cluett,
     Peabody & Co., Inc. and Phil Molinari (incorporated by reference to Exhibit
     10.8 to the  Company's  Registration  Statement  on Form  S-4/A  (Reg.  No.
     333-58059) filed on September 3, 1998).

+10.9Severance  Agreement  dated as of May 5, 1997 by and between Great American
     Knitting  Mills,  Inc.  and William  Sheely  (incorporated  by reference to
     Exhibit 10.9 to the  Company's  Registration  Statement on Form S-4/A (Reg.
     No. 333-58059) filed on September 3, 1998).

+10.10 Severance Agreement dated as of May 5, 1997 by and between Great American
     Knitting Mills, Inc. and Kathy Wilson (incorporated by reference to Exhibit
     10.10 to the  Company's  Registration  Statement  on Form S-4/A  (Reg.  No.
     333-58059) filed on September 3, 1998).

+10.11 Advisory  Agreement dated May 18, 1998 among Cluett  American  Investment
     Corp.,  Cluett American Corp. and Vestar Capital Partners  (incorporated by
     reference to Exhibit 10.11 to the Company's  Registration Statement on Form
     S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

10.12Secured  Promissory  Note  dated  May  18,  1998  made  by  A&M  Investment
     Associates  #7,  LLC  in  favor  of  Cluett   American   Investment   Corp.
     (incorporated  by reference to Exhibit 10.12 to the Company's  Registration
     Statement on Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).

10.13Form of Secured  Promissory Note made by the Management  Investors in favor
     of Cluett American  Investment Corp.  (incorporated by reference to Exhibit
     10.13 to the  Company's  Registration  Statement  on Form S-4/A  (Reg.  No.
     333-58059) filed on September 3, 1998).

+10.14 Severance  Agreement  dated as of August 8, 1997 by and  between  Cluett,
     Peabody & Co.,  Inc.  and Robert  Riesbeck  (incorporated  by  reference to
     Exhibit 10.14 to the Company's  Registration  Statement on Form S-4/A (Reg.
     No. 333-58059) filed on October 15, 1998).

+10.15 Severance Agreement dated as of January 16, 1996 by and between Bidermann
     Industries  Corp.  and Steven J.  Kaufman  (incorporated  by  reference  to
     Exhibit 10.15 to the Company's  Registration  Statement on Form S-4/A (Reg.
     No. 333-58059) filed on October 15, 1998).

16.1 Letter from Ernst & Young LLP, former Certifying Accountants  (incorporated
     by reference to Exhibit 16.1 to the Company's  Current Report filed on Form
     8-K (Reg. No. 333-58059) filed on January 10,2000).

21   List of  Subsidiaries  (incorporated  by  reference  to Exhibit 10.6 to the
     Company's  Registration Statement on Form S-4 (Reg. No. 333-58059) filed on
     June 30, 1998).

*23.1Consent  of Ernst & Young LLP,  independent  certified  public  accountants
     (filed herewith as Exhibit 23.1)

24   Powers  of  Attorney  (included  on  pages  II-5--II-11)  (incorporated  by
     reference to Exhibit 24 to the Company's Registration Statement on Form S-4
     (Reg. No. 333-58059) filed on June 30, 1998).

*27  Financial Data Schedule (filed herewith as Exhibit 27)

99.1 Form of Note Letter of  Transmittal  (incorporated  by reference to Exhibit
     99.1  to the  Company's  Registration  Statement  on  Form  S-4  (Reg.  No.
     333-58059) filed on June 30, 1998).

99.2 Form of Preferred Stock Letter of Transmittal (incorporated by reference to
     Exhibit 99.2 to the Company's  Registration Statement on Form S-4 (Reg. No.
     333-58059) filed on June 30, 1998).

99.3 Form of Note Notice of Guaranteed  Delivery  (incorporated  by reference to
     Exhibit 99.3 to the Company's  Registration Statement on Form S-4 (Reg. No.
     333-58059) filed on June 30, 1998).

99.4 Form of Preferred  Stock Notice of  Guaranteed  Delivery  (incorporated  by
     reference to Exhibit 99.4 to the Company's  Registration  Statement on Form
     S-4 (Reg. No. 333-58059) filed on June 30, 1998).

+    This is a management contract or compensatory plan or arrangement

*    Filed herewith

(b)  No report was filed on Form 8-K during the three months ended  December 31,
     1999 . (c)  Exhibits:  See  (a)(3)  above  for a  listing  of the  exhibits
     included as part of this report.

(d)  Financial Statement Schedules: See (a)(1) and (a)(2) above for a listing of
     the financial statements and schedules submitted as part of this report.



<PAGE>
                                   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.

                        CLUETT AMERICAN CORP.
                               (Registrant)

                  By:        /s/   Bryan P. Marsal
                           -----------------------------------------------------
                  Name: Bryan P. Marsal
                  Title:   PRESIDENT AND CHIEF EXECUTIVE OFFICER


                  Date:   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.

                  /s/   Bryan P. Marsal

                  --------------------------------------------------------------
                  Name:    Bryan P. Marsal
                  Title:   Director and Chief Executive Officer

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/   W. Todd Walter

                  --------------------------------------------------------------
                  Name:    W. Todd Walter
                  Title:   Vice President and Chief Financial Officer

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/     James A. Williams

                  --------------------------------------------------------------
                  Name:    James A. Williams
                  Title:   Director

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/   Norman W. Alpert

                  --------------------------------------------------------------
                  Name:    Norman W. Alpert
                  Title:   Director

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/   Steven M. Silver

                  --------------------------------------------------------------
                  Name:    Steven  M. Silver
                  Title:   Director

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/   Sander M. Levy

                  --------------------------------------------------------------
                  Name:    Sander M. Levy
                  Title:   Director

                  Date:    March 29, 2000
                  --------------------------------------------------------------


                  /s/   Daniel S. O' Connell

                  --------------------------------------------------------------
                  Name:    Daniel S. O'Connell
                  Title:   Director

                  Date:    March 29, 2000
                  --------------------------------------------------------------

<PAGE>


                                  EXHIBIT INDEX

10.2.7 $7.5 million  Amended and Restated  Credit  Agreement  dated February 17,
       2000.

10.2.8 Fifth Amendment to Credit Agreement and Waiver dated March 29, 2000.

10.2.9 Amended and Restated  Investment  and Deposit  Agreement  dated March 29,
       2000

23.1 Consent of Ernst & Young, LLP Certified  Public  Accountant dated March 29,
     2000

27  Financial Data Schedule



<PAGE>



 Item 14 (d).  Financial Statement Schedules


                                   SCHEDULE II

                              CLUETT AMERICAN CORP.

                        VALUATION AND QUALIFYING ACCOUNTS

                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
COLUMN A                            COLUMN B       COLUMN C          COLUMN D     COLUMN E
--------                            --------  --------------------   --------     --------
                                                   ADDITIONS
                                              --------------------
                                              CHARGED TO   CHARGED                BALANCE
                                     BEGINNING COSTS AND  TO OTHER                 AT END
DESCRIPTION                           BALANCE  EXPENSES   ACCOUNTS  DEDUCTIONS    OF YEAR
-----------                           -------  --------   --------  ----------    -------
<S>                                   <C>       <C>       <C>        <C>          <C>
YEAR ENDED DECEMBER 31, 1997:
    Deduction from asset account:
    Allowance for Doubtful Accounts   $ 3,292   $  (717)        --   $   773(1)   $ 1,802
    Customer Allowances                12,122     6,877         --    10,828(1)     8,171
    Inventory Reserves                  4,550     2,937         --     3,002(1)     4,485
                                        -----     -----       -----    -------      -----
        Total                         $19,964   $ 9,097         --   $14,603(1)   $14,458
                                      =======   =======       =====  =========    =======

YEAR ENDED DECEMBER 31, 1998 :
Deduction from asset account:
    Allowance for Doubtful Accounts   $ 1,802   $   424         --   $   616(1)   $ 1,610
    Customer Allowances                 8,171    12,432         --    13,751(1)     6,852
    Inventory Reserves                  4,485    14,470         --    13,807(1)     5,149
                                        -----    ------      ------   --------      -----
        Total                         $14,458   $27,326         --   $28,174(1)   $13,611
                                      =======   =======      ======  =========    =======

YEAR ENDED DECEMBER 31, 1999:
    Deduction from asset account:
    Allowance for Doubtful Accounts   $ 1,610   $   327         --   $   317(1)   $ 1,620
    Customer Allowances                 6,852    12,403         --    10,701(1)     8,554
    Inventory Reserves                  5,149     3,178         --     5,705(1)     2,622
                                        -----     -----       -----    -------      -----
        Total                         $13,611   $15,908         --   $16,723(1)   $12,796
                                      =======   =======       =====  =========    =======



<FN>
(1)  Writeoffs, net of recoveries
</FN>
</TABLE>