UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 For the quarterly period ended July 1, 2000

                                       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                                   (IRS 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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that  registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirement for the past 90 days.

Yes  X    No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

                  PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:

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 July 1, 2000

<PAGE>


                     Cluett American Corp. and Subsidiaries

                                TABLE OF CONTENTS

                  PART I - FINANCIAL INFORMATION

<TABLE>
<S>                                                                                                  <C>
                                                                                                     Page


Item 1.  Financial Statements (Unaudited)

Report of Independent Auditors'                                                                         3

Condensed Consolidated Balance Sheets as of July 1, 2000 and December 31, 1999                         F-1

Condensed Consolidated  Statements of Operations for the thirteen and twenty-six
weeks ended July 1, 2000 and July 3, 1999                                                              F-2

Condensed  Consolidated  Statements of Cash Flows for the twenty-six weeks ended
July 1, 2000 and July 3, 1999                                                                          F-3

Notes to Condensed Consolidated Financial Statements                                                   F-4


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.                                                                                          4


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.                                    11





                  PART II - OTHER INFORMATION

Item 1.   Legal Proceedings                                                                             12

Item 4.   Submission of Matters to a Vote of Security Holders                                           12

Item 6.   Exhibits and Reports on Form 8-K                                                              12


SIGNATURES                                                                                              17

</TABLE>
<PAGE>




                REPORT OF DELOITTE & TOUCHE, INDEPENDENT AUDITORS

Board of Directors and Stockholder
Cluett American Corp. and Subsidiaries

We have reviewed the accompanying condensed consolidated balance sheet of Cluett
American Corp. and  subsidiaries  as of July 1, 2000, and the related  condensed
consolidated statements of operations and cash flows for the thirteen and twenty
six-week  periods  ended  July  1,  2000.  These  financial  statements  are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with  generally  accepted  auditing  standards,  the  objective  of which is the
expression of an opinion  regarding the financial  statements  taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such condensed  consolidated  financial  statements for them to be in
conformity with generally accepted accounting principles in the United States of
America.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the  consolidated  balance  sheet of the Company as of December  31,
1999,  and the related  consolidated  statements  of  operations,  stockholder's
equity and cash flows for the year then ended (not presented herein); and in our
report  dated March 29,  2000,  we  expressed  an  unqualified  opinion on those
consolidated financial statements.  In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1999 is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.

                            /s/ Deloitte & Touche LLP

Atlanta, Georgia
August 14, 2000


<PAGE>




                      Condensed Consolidated Balance Sheets

                  (Dollars In Thousands, except per share data)
<TABLE>
<S>                                                                             <C>          <C>
                                                                                  July 1,    December 31,

                                                                                   2000          1999
                                                                               ----------------------------
                                                                               (Unaudited)    (Note 1)


                                   Assets


Current assets:

   Cash and cash equivalents..........................................        $     2,643     $  7,239
   Accounts receivable, net...........................................             39,602       45,519
   Inventories, net ..................................................             41,068       78,105
   Net assets from discontinued segment held for sale ................             55,929           --
   Prepaid expenses and other current assets..........................              3,427        3,129
                                                                               --------------------------
Total current assets..................................................            142,669      133,992
Property, plant and equipment, net....................................             28,380       47,794
Pension assets........................................................             33,436       32,187
Deferred financing fees...............................................             10,365       10,842
Goodwill, net.........................................................                 --        4,740
Other noncurrent assets...............................................              1,514        1,951
                                                                               ----------------------------
Total assets..........................................................           $216,364     $231,506
                                                                               ============================


                  Liabilities and stockholder's deficit


Current liabilities:

   Accounts payable and accrued expenses..............................           $ 47,522    $  40,696
   Accrued interest payable...........................................              4,744        3,861
   Short-term debt and current portion of long-term debt..............             25,283       14,209
   Income taxes payable...............................................              1,648        1,970
                                                                               ----------------------------
Total current liabilities.............................................             79,197       60,736
Long-term debt and capital lease obligations..........................            243,721      258,883
Dividends payable.....................................................                664          637
Other non-current liabilities.........................................                154          147

Senior  Exchangeable  Preferred  Stock Due  2010,  cumulative,  $.01
   par  value: authorized  4,950,000, issued and outstanding 636,592
   shares in 2000 and 599,145 shares in 1999 (liquidation preference
   of $63,659 in 2000 and $59,915 in 1999)............................             62,167       58,329

Stockholder's deficit:
   Common stock, $1 par value: authorized, issued and outstanding 1,000
      shares..........................................................                  1            1
   Additional paid-in capital.........................................            131,236      135,100
   Accumulated deficit................................................           (300,320)    (282,046)
   Other comprehensive loss...........................................               (456)        (281)
                                                                               ---------------------------
Total stockholder's deficit...........................................           (169,539)    (147,226)
                                                                               ---------------------------
Total liabilities and stockholder's deficit...........................          $ 216,364    $ 231,506
                                                                               ===========================

</TABLE>

                             See accompanying notes.


<PAGE>


           Condensed Consolidated Statements of Operations (Unaudited)

                             (Dollars In Thousands)
<TABLE>
<S>                                                     <C>              <C>                 <C>           <C>
                                                             Thirteen weeks ended               Twenty-six weeks ended
                                                                July 1,        July 3,             July 1,         July 3,
                                                                   2000           1999                2000            1999
                                                        ---------------- --------------      -------------- ---------------

                                                                          Not covered                        Not covered
                                                                          by Auditors'                       by Auditors'
                                                                            Report                              Report

Net sales..........................................             $38,856        $40,231             $79,388         $76,189
Cost of goods sold.................................              25,121         25,057              50,684          47,369
                                                        ---------------- --------------      -------------- ---------------
Gross profit.......................................              13,735         15,174              28,704          28,820

Selling, general and administrative expenses.......               8,442          8,210              17,619          16,465
Restructuring and impairment charges...............                  72           (272)                 72            (272)
                                                        ---------------- --------------      -------------- ---------------
Operating income from continuing operations........               5,221          7,236              11,013          12,627
Interest expense, net..............................               7,587          6,234              14,600          12,403
Other expense, net.................................                  22             13                  55              27
                                                        ---------------- --------------      -------------- ---------------
Income (loss) from continuing operations before                  (2,388)           989              (3,642)            197
   provision for income taxes......................
Provision for income taxes.........................                 303            286                 497             512
                                                        ---------------- --------------      -------------- ---------------
Income (loss) from continuing operations ..........              (2,691)           703              (4,139)           (315)

Discontinued operations:
     Loss from operations of discontinued segment                (4,659)        (5,227)             (9,937)         (6,374)
     Loss on disposal of business segment,
      including provision of $2,382 for operating
      losses during phase-out period...............              (4,198)            --              (4,198)             --
                                                        ---------------- --------------      -------------- ---------------
Net loss...........................................           $ (11,548)       $(4,524)           $(18,274)       $ (6,689)
                                                        ================ ==============      ============== ===============

</TABLE>




                             See accompanying notes.


<PAGE>


           Condensed Consolidated Statements of Cash Flows (Unaudited)

                             (Dollars in Thousands)
<TABLE>
<S>                                                                            <C>        <C>
                                                                               Twenty-six weeks ended

                                                                                 July 1,       July 3,
                                                                                 2000          1999
                                                                             ----------------------------

                                                                                           Not covered
                                                                                           by Auditors'
                                                                                             Report

Operating activities

Net loss...........................................................            $(18,274)      $(6,689)
Adjustment to reconcile net loss  to net cash and cash equivalents
   used in operating activities:
   Depreciation....................................................               5,084         4,882
   Deferred finance amortization...................................                 853           791
   Goodwill amortization...........................................                 249             -
   Impairment loss on disposition of assets........................               4,497             -
   Loss (gain) on disposal of assets...............................                 367          (129)

Changes in operating assets and liabilities:

   Accounts receivable.............................................               5,788         7,266
   Inventories.....................................................             (11,741)      (14,788)
   Prepaid expenses and other current assets.......................                (118)          894
   Pension and other non-current assets............................              (1,235)       (1,480)
   Accounts payable and accrued expenses...........................               7,750        (1,204)
   Income taxes payable............................................                (322)          207
   Other liabilities...............................................                   7          (270)
   Effect of changes in foreign currency...........................                (374)         (336)
                                                                            ----------------------------
Net cash and cash equivalents used in operating activities.........              (7,469)      (10,856)

Investing activities

Purchase of property, plant and equipment..........................              (2,974)       (5,268)
Proceeds on disposal of property, plant and equipment..............                   5         1,103
                                                                            ----------------------------
Net cash and cash equivalents used in investing activities.........              (2,969)       (4,165)

Financing activities

Principal payments on long-term debt ..............................             (16,215)       (1,300)
Net borrowings under line-of-credit agreement .....................              22,450        14,818
Principal payments on long-term note (CAT).........................                (393)            -
Principal payments under capital lease obligation..................                   -            (5)
                                                                            ----------------------------
Net cash and cash equivalents provided by financing activities.....               5,842        13,513

Effect of exchange rate changes on cash............................                   -             1
                                                                            ----------------------------
Net change in cash and cash equivalents............................              (4,596)       (1,507)
Cash and cash equivalents at beginning of period...................               7,239         2,868
                                                                            ----------------------------
Cash and cash equivalents at end of period.........................            $  2,643      $  1,361
                                                                            ============================
</TABLE>

                             See accompanying notes.


<PAGE>


        Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Cluett
American  Corp.  and  Subsidiaries,   (the  "Company")  have  been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the  thirteen-week and twenty-six week periods
ended July 1, 2000 are not necessarily  indicative of the operating results that
may be expected for the year ending December 31, 2000.

The  Balance  Sheet at  December  31,  1999 has been  derived  from the  audited
financial  statements  at that date but does not include all of the  information
and footnotes required by generally accepted accounting  principles for complete
financial statements.

For further information,  refer to the annual consolidated  financial statements
and footnotes of the Company,  included in the Annual  Report on Form 10-K,  for
the year ended  December  31,  1999,  filed  with the  Securities  and  Exchange
Commission on March 30, 2000.

The consolidated  financial  statements include all subsidiary  companies of the
Company.   Significant   intercompany   transactions  have  been  eliminated  in
consolidation.

The Company uses a 5-4-4 week fiscal quarter  whereby the fiscal quarter ends on
the Saturday nearest the end of the calendar quarter, which accordingly was July
1, 2000 and July 3, 1999, respectively.

Certain  amounts in the prior year financial  statements and footnotes have been
reclassified to conform to the current year presentation.

2.  Discontinued Operations

On June 13, 2000,  Phillips-Van  Heusen  Corporation,  ("PVH"),  and the Company
announced an agreement (the  "Agreement") for PVH to license the Arrow brand for
men's and boy's dress shirts and sportswear in the United  States.  In addition,
PVH and the Company  agreed in principle  for PVH to acquire the stock of Cluett
Designer Group,  Inc., the licensee for Kenneth Cole dress shirts  ("CDG").  The
closing of these  transactions  was subject to certain  limited  conditions  and
governmental approvals. In conjunction with the Agreement,  the Company approved
a plan to discontinue the Shirt Group segment's  manufacturing  and distribution
operations (the "Operations").

On July 24, 2000, the transactions contemplated by the Agreement,  including the
Purchase and Sale Agreement among Cluett,  Peabody & Co., Inc.  ("CP"),  Cluett,
Peabody  Canada,  Inc.("CP  Canada"),  Arrow Factory Stores Inc.  ("AFS"),  CDG,
Consumer Direct Corporation ("CDC"),  Cluett, Peabody Holding  Corp.("Holding"),
and PVH, (the "Purchase and Sale  Agreement")  and the Share Purchase  Agreement
among CP, CDG,  Bidermann  Tailored  Clothing  Inc.("BTC"),  and PVH (the "Share
Purchase  Agreement") were closed.  Each of the parties to the Purchase and Sale
Agreement and the Share Purchase  Agreement other than PVH and CDG is, and prior
to the closing CDG was, a wholly-owned subsidiary of the Company.

Pursuant to the Purchase and Sale Agreement,  (i) all of the outstanding  shares
of capital  stock of C.A.T.  Industrial  S.A. de C.V.,  ("C.A.T") a  corporation
organized under the laws of Honduras,  were sold to PVH by CP, AFS, CDG, CDC and
Holding,  (ii) PVH purchased all of CP's and AFS's right,  title and interest in
and to certain of the other assets  (principally  inventory)  of CP and AFS used
primarily  by CP and AFS in their Arrow label and private  label men's and boy's
dress and sport shirt  businesses and their Arrow factory  outlet  operations in
the United States and (iii) PVH purchased  all of CP Canada's  right,  title and
interest  in and to Arrow  label  dress and  sport  shirt  inventory  used in CP
Canada's United States "Career Apparel" business. Pursuant to the Share Purchase
Agreement, all of the outstanding shares of capital stock of CDG were sold by CP
and BTC to PVH.

<PAGE>

  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

2.       Discontinued Operations (continued)

The  aggregate  purchase  price paid by PVH  pursuant to the  Purchase  and Sale
Agreement and the Share Purchase  Agreement for the stock and assets referred to
above  was  approximately  $48.9  million  in cash plus the  assumption  of $2.1
million of debt  related to C.A.T.,  calculated  as set forth in, and subject to
adjustment pursuant to, Article 3 of each of the Purchase and Sale Agreement and
the Share Purchase Agreement.  The Company has deposited in escrow $2.0 million,
which is subject final  inventory  adjustment.  The company has  irrevocably and
unconditionally guaranteed the payment of any amount payable by CP or BTC to PVH
under each Agreement which is not paid by CP or BTC when due, including pursuant
to  the  purchase  price  adjustment  and  indemnification   provisions  of  the
Agreements.

Pursuant to the Purchase and Sale Agreement,  the Trademark  License  Agreement,
dated July 24, 2000, by and between  Cluett  Peabody  Resources  Corporation,  a
Delaware  corporation and a wholly-owned  subsidiary of the Company ("CPR"),  CP
and PVH was executed and delivered. Pursuant to the Trademark License Agreement,
CP granted to PVH an exclusive license to use trademarks related to CP's "Arrow"
clothing  line in the  United  States and its  territories  and  possessions  in
connection   with   its   manufacture,    advertising,   marketing,   promotion,
distribution,  offer to sell and sale of men's and boys'  dress  shirts,  sports
shirts  (including  knit,  woven and all forms of  fleece),  pants,  shorts  and
sweaters in certain specified channels of trade, including the Internet. CP also
granted to PVH the right to operate  websites that use URLs that incorporate the
licensed trademarks.  The Trademark License Agreement requires PVH to pay a $5.0
million minimum  guaranteed annual royalty fee to CP, subject to increases based
on the  achievement  by PVH of certain  sales  targets.  The initial term of the
license  expires  on June 30,  2007;  however,  PVH has the  option to renew the
Trademark  License  Agreement for two additional  five-year  terms,  provided it
meets certain conditions.

The Company used the net proceeds  from the  Purchase  and Sale  Agreement,  the
Share  Purchase  Agreement and the  Trademark  License  Agreement  (collectively
referred to as the  "Transactions")  to repay  outstanding  borrowings under its
Senior Credit Facility and CP Canada's Credit Facility.

The Company  expects to complete the  disposition of the remaining net assets of
the Operations through sale by December 31, 2000 and accordingly,  has reflected
the Operations as  discontinued  in the  accompanying  statements of operations.
Additionally, at July 1, 2000 the net assets of the Operations are classified as
held  for  sale in the  accompanying  balance  sheet  and are  comprised  of the
following:

                                                                       July 1,
                                                                        2000
                                                                   ------------
       Assets
         Inventories, net                                              $46,980
         Other assets                                                      215
         Property, plant & equipment, net                               17,117
                                                                        ------
            Total assets                                                64,312

       Liabilities:
         Accounts payable and accrued liabilities                          155
         Canadian revolving facility                                     6,113
         Notes payable - C.A.T                                           2,115
                                                                         -----
            Total liabilities                                            8,383

              Net assets held for sale                                 $55,929
                                                                       =======



<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

2.   Discontinued Operations (continued)

As a result of the Transactions,  the Company recorded a $4.5 million impairment
charge in June, 2000 to adjust the carrying value of goodwill to its fair market
value  based upon  actual  consideration  received  from the  Transactions.  The
impairment  charge  is  included  as a  component  of the  Company's  loss  from
operations of discontinued segment in the accompanying  Statement of Operations.
The $4.2 million  loss on disposal of the  Operations  includes  $0.4 million of
operating  losses  incurred  from June 13, 2000 through  July 1, 2000,  and $2.0
million of estimated  operating  losses from July 2, 2000  through  December 31,
2000.  Included in Accounts  Payable and Accrued  Expenses at July 1, 2000 is an
accrual of $10.6 million for costs directly  associated with the disposal of the
Operations.

Net  sales  of the  above  noted  entities  for  the  thirteen  and
twenty-six weeks ended July 1, 2000 and July 3, 1999:


                 Thirteen weeks ended             Twenty-six weeks ended
            July 1, 2000       July 3, 1999     July 1, 2000     July 3, 1999
            -------------     --------------    -------------    -------------

Net sales       $ 50,993           $ 40,619         $ 97,673         $ 87,462


3. Inventories

         Inventories consist of the following at the specified date:

                                                  July 1,       December 31,
                                                    2000              1999
                                           ------------------ -----------------
                                                    (Dollars In Thousands)

Finished goods                                      $34,180            $60,854
Work in process                                       2,420              8,260
Raw materials and supplies                            4,926             11,613
                                           ------------------ -----------------
                                                     41,526             80,727
Less: Allowance for obsolete and slow moving
      inventory                                        (458)            (2,622)
                                           ------------------ -----------------
                                                    $41,068            $78,105
                                           ================== =================


4. Long-Term Obligations and Financing Arrangements

As of  July  1,  2000,  the  Company  had  outstanding  $275.0  million  of debt
consisting  of $125.0  million in senior  subordinated  notes,  a Senior  Credit
Facility consisting of a $35.5 million term A loan, a $53.4 million term B loan,
$35.0  million in revolving  credit  borrowings  and $19.9  million in Tranche C
Loans and $6.1 million in Canadian  revolving  credit  borrowings.  For the 2000
Quarter,  the Company had a net decrease in revolving credit  borrowings of $1.3
million and repaid $15.3 million in term loans and notes payable. As a result of
the Transactions  that were completed on July 24, 2000, the Company  permanently
reduced  the  Term A Loan,  the  Term B Loan  and the  Tranche  C Loans  by $6.8
million, $9.4 million and $8.7 million,  respectively.  In addition, the Company
made payments on the revolving credit borrowings,  without a permanent reduction
in the revolving credit committed amounts and net of expense associated with the
Transactions of $13.3 million.  The Canadian  revolving credit facility was paid
down $1.1 million and the maturity date was extended to August 8, 2001.

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. As of July 1,
2000, the Company was in compliance with all financial covenants.  Additionally,
on July 24, 2000, the Company  satisfied all  requirements  under the March 2000
amendments, and as such, Vestar's requirement to infuse up to $30 million of new
capital  and  the  Company's  requirement  to make  $20  million  in  additional
principal payments on the Senior Credit Facilities have been extinguished.

<PAGE>

  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

5. Comprehensive Loss

For the  periods  ending  July 1,  2000  and  July 3,  1999,  accumulated  other
comprehensive loss as shown in the consolidated  balance sheets was comprised of
foreign currency translation adjustments.  The components of comprehensive loss,
for these periods were as follows:

<TABLE>
<S>                                                     <C>              <C>                 <C>            <C>
                                                          Thirteen weeks ended               Twenty-six weeks ended
                                                            July 1,         July 3,             July 1,        July 3,
                                                             2000            1999                2000            1999
                                                        ---------------- --------------      -------------- ---------------
                                                                              (Dollars In Thousands)

Net loss...........................................           $(11,548)       $(4,524)           $(18,274)       $ (6,689)
Foreign currency translation adjustment............               (107)          (765)               (175)           (401)
                                                        ----------------- --------------      -------------- ---------------
Comprehensive loss.................................            $(11,655)      $ (5,289)           $(18,449)      $ (7,090))
                                                        ================= ==============      ============== ===============

</TABLE>
<PAGE>

  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

6. Restructuring and Facility Closure Charges

During the  twenty-six  week period ended July 1, 2000, the Company did not have
any terminations related to the 1999 approved  restructuring plan. The following
is a summary of the components of the restructuring reserve at July 1, 2000.


                        Severance Costs      Facility Closure            Total


                                           (Dollars in Thousands)

Balance, December 31, 1999    $    276           $     145             $    421
    Charges                         --                  60                   60
    Payments                        --                 (50)                 (50)
                            ------------         ------------        -----------
Balance, April 1, 2000             276                 155                  431
    Payments                        --                 (38)                 (38)
                            -------------        ------------        -----------
Balance, July 1, 2000         $    276           $     117             $    393
                            =============        ============       ============


7. Segment Data

The Company  identifies its reportable  segments based on the segment's  product
offerings.  As a result of the Company's  June 13, 2000 decision to  discontinue
the Operations and license the Arrow tradename, the composition of the Company's
reportable  segments  changed.  The  licensing of the Arrow brand will result in
minimum annual license revenue of $5.0 million. Subsequent to June 13, 2000, the
Company  conducted its business through two principal  segments:  the Sock Group
and the Licensing  Group. The financial  results  associated with Latin America,
Apparel On-Line LLC, Cluett American Receivables,  LLC and unallocated corporate
overhead  charges are  referred to  collectively  as "All  other".  Segment data
disclosures  for the thirteen weeks and twenty-six  weeks ended July 1, 2000 and
July 3, 1999 have been restated to reflect the above noted change,  exclusive of
the $5.0 million in licensing revenue received on July 24, 2000.

<TABLE>
<S>                                                     <C>                   <C>               <C>           <C>
                                                                Thirteen weeks ended              Twenty-six weeks ended
                                                                 July 1,          July 3,         July 1,          July 3,
                                                                    2000             1999            2000             1999
                                                        -----------------    -------------    ------------    -------------

                                                                              (Dollars in Thousands)

Net sales
                                      Sock                       $37,323           $38,771        $76,131          $72,909
                                      Licensing                    1,478             1,460          3,130            3,280
                                      All Other                       55                --            127               --
                                      Intersegment                   (--)              (--)           (--)             (--)
                                                                    ----              ----           ----             ----
                                                                  38,856            40,231         79,388           76,189
                                                                  ======            ======         ======           ======
Operating income (loss) excluding
facility closing and reengineering
costs
                                      Sock                         4,954             6,916         10,065           11,438
                                      Licensing                      919             1,189          2,105            2,450
                                      All Other                     (580)           (1,141)        (1,085)          (1,533)
                                                                   -----           -------        -------          -------
                                                                   5,293             6,964         11,085           12,355
                                                                   =====             =====         ======           ======

Depreciation expense
                                      Sock                         1,572             1,510          3,143            3,020
                                      Licensing                       19                18             38               35
                                      All Other                      952               922          1,903            1,827
                                                                     ---               ---         ------            -----
                                                                   2,543             2,450          5,084            4,882
                                                                   =====             =====          =====            =====
Amortization expense
                                      Sock                           ---               ---            ---              ---
                                      Licensing                      ---                 4            ---               10
                                      All Other                      555               392          1,102              781
                                                                     ---               ---          -----              ---
                                                                     555               396          1,102              791
                                                                     ===               ===          =====              ===

Identifiable assets
                                      Sock                        83,472            86,271         83,472           86,271
                                      Licensing                    2,131             1,821          2,131            1,821
                                      All Other                    1,575            89,607          1,575           89,607
                                                                   -----            ------          -----           ------
                                                                 $87,178          $177,699        $87,178         $177,699
                                                                 =======          ========        =======         ========
</TABLE>
<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

7. Segment Data (Continued)

Reconciliation of Reportable Segments Net sales, Operating income and
Identifiable assets

<TABLE>
<S>                                                       <C>            <C>                <C>               <C>
                                                              Thirteen weeks ended            Twenty-six weeks ended
                                                          July 1, 2000   July 3, 1999        July 1, 2000      July 3, 1999
                                                          ------------   ------------       -------------     -------------

                                                                               (Dollars In Thousands)
   Net sales

       Total net sales for reportable segments             $ 38,801           $ 40,231      $ 79,261           $ 76,189
       Other net sales                                           55                 --           127                 --
       Elimination of intersegment net sales                    (--)               (--)          (--)               (--)
                                                               ----               ----          ----               ----
       Total consolidated net sales                          38,856             40,231        79,388             76,189
                                                             ======             ======        ======             ======


   Operating profit (loss)

       Total operating profit or loss for
        reportable segments                                   5,873              8,105        12,170             13,888
       Other operating profit or loss                          (238)                --          (444)            (5,000)
       Unallocated amounts:
            Corporate expense before pension income            (967)            (1,641)       (1,891)            (2,533)
            Pension income                                      625                500         1,250              1,000
            Restructuring & impairment (charges) credits        (72)               272           (72)              (775)
                                                              -----              -----        ------              -----
       Total operating profit                                 5,221              7,236        11,013              6,580
                                                              =====              =====        ======              =====

   Depreciation and amortization

   Total depreciation for reportable segments                 1,591              1,528         3,181              3,055
   Other depreciation                                           952                922         1,903              1,827
   Amortization                                                 555                396         1,102                791
                                                                ---                ---         -----                ---
   Total depreciation and amortization                        3,098              2,846         6,186              5,673
                                                              =====              =====         =====              =====

   Identifiable assets

       Total assets for reportable segments                  85,603             88,092        85,603             88,092
       Other assets                                           1,575             89,607         1,575             89,607
        Net assets held for sale                             55,929                 --        55,929                 --
       Unallocated amounts:
            Deferred finance costs                           10,365             10,902        10,365             10,902
            Pension assets                                   33,436             32,383        33,436             32,383
            Other unallocated amounts                        29,456              6,169        29,456              6,169
                                                             ------              -----        ------              -----
       Consolidated total                                  $216,364           $227,153      $216,364           $227,153
                                                           ========           ========      ========           ========


</TABLE>



<PAGE>


 Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. 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.,  Apparel
On-Line,  LLC, 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., Cluett American Receivables, LLC,
Arrow de Mexico S.A. de C.V., and Arrow Inter-American & Co., Ltd. (collectively
the "Non-Guarantor  Subsidiaries").  The obligation of each Guarantor Subsidiary
under its guarantee of the Notes is subordinated to such subsidiary's obligation
under its guarantee of the Senior Credit Facility.

Presented  below  is  condensed  consolidating  financial  information  for  the
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 the Company using the equity  method of  accounting.  Earnings
(losses)  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.


<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

              SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                 JULY 1, 2000
                            (DOLLARS IN THOUSANDS)
<TABLE>
<S>                                     <C>             <C>              <C>                    <C>             <C>

                                                                            NON-
                                         PARENT        GUARANTOR         GUARANTOR
                                        COMPANY      SUBSIDIARIES        SUBSIDIARIES           ELIMINATION    CONSOLIDATED
Assets
Current assets:

   Cash and cash equivalents......     $        --      $     2,503       $         140        $         -       $      2,643
   Accounts receivable, net.......              --           33,270               6,332                 --             39,602
   Inventories, net...............              --           41,068                  --                 --             41,068
   Assets from discontinued
      segment held for sale.......                           49,466              12,576                                62,042
   Prepaid expenses and other
      current assets..............              --            2,788                 639                 --              3,427
                                                --            -----                 ---                 --              -----
Total current assets..............              --          129,095              19,687                 --            148,782
Investment in subsidiaries........        (121,717)              --                  --            121,717                 --
Intercompany receivable (payable)           15,000          (15,000)                 --                 --                 --
Property, plant and equipment, net              --           28,372                   8                 --             28,380
Pension assets....................              --           33,436                  --                 --             33,436
Deferred financing fees...........              --           10,365                  --                 --             10,365
Goodwill, net.....................              --               --                  --                 --                 --
Other noncurrent assets...........              --              930                 584                 --              1,514
                                                --              ---                 ---                 --              -----
Total assets......................     $  (106,717)     $   187,198      $       20,279       $    121,717       $    222,477
                                         =========          =======              ======            =======            =======

Liabilities and stockholder's deficit Current liabilities:

   Accounts payable and accrued
      expenses....................     $        --      $    45,426      $        2,096        $         -       $     47,522
   Accrued interest payable.......                            4,744                  --                                 4,744
   Short-term debt and current
      portion of long-term debt...              --           25,283               6,113                 --             31,396
   Income taxes payable...........              --            1,441                 207                 --              1,648
                                                --            -----                 ---                 --              -----
Total current liabilities.........              --           76,894               8,416                 --             85,310

Due to parent.....................
Long-term debt and capital lease
   obligations....................              --          243,502                 219                 --            243,721
Dividends payable.................             664               --                  --                 --                664
Other non-current liabilities.....              --              154                  --                 --                154

Commitments & Contingencies:

Senior exchangeable preferred
   stock, cumulative, $.01 par
   value: authorized 4,950,000,
   issued and outstanding 636,592
   shares (liquidation preference
   of $63,659)                              62,167               --                  --                 --             62,167
Stockholder's deficit.............        (169,548)        (133,352)              11,644            121,717          (169,539)
                                         ---------        ---------               ------            -------          ---------
Total liabilities and
   stockholder's deficit..........     $  (106,717)      $  187,198      $        20,279      $     121,717      $    222,477
                                         =========          =======               ======            =======           =======


</TABLE>









<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

               SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 1999
                             (DOLLARS IN THOUSANDS)


<TABLE>
<S>                                                 <C>           <C>             <C>             <C>            <C>

                                                    PARENT          GUARANTOR     NON-GUARANTOR
                                                    COMPANY       SUBSIDIARIES    SUBSIDIARIES    ELIMINATION    CONSOLIDATED
Assets
Current assets:
   Cash and cash equivalents...............     $      --        $   7,099       $      140      $      --      $   7,239
   Accounts receivable, net................            --           40,635            4,884             --         45,519
   Inventories, net........................            --           64,608           13,497             --         78,105
   Prepaid expenses and other current                  --            2,422              707             --          3,129
      assets...............................            --            -----              ---             --          -----

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 financing fees....................            --           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 payable................            --            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                       --          258,652              231             --        258,883
   obligations.............................
Other non-current liabilities..............            --              147               --             --            147
Redeemable preferred stock dividends                  637               --               --             --            637
   payable.................................

Commitments and contingencies:

Senior exchangeable preferred stock due 2010
  cumulative, $.01 par value: authorized
  4,950,000 shares, 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>


<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                           THIRTEEN WEEKS ENDED JULY 1, 2000
                                (DOLLARS IN THOUSANDS)
<TABLE>
<S>                                     <C>         <C>                 <C>                    <C>            <C>

                                                                            NON-
                                         PARENT        GUARANTOR         GUARANTOR
                                       COMPANY      SUBSIDIARIES        SUBSIDIARIES           ELIMINATION    CONSOLIDATED

Net sales.............................  $       --  $  38,856     $         --                $         --  $  38,856
Cost of goods sold....................          --     25,121               --                          --     25,121
                                                --     ------               --                          --     ------
Gross profit..........................          --     13,735               --                          --     13,735

Selling, general and administrative
   expenses...........................          --      8,397               45                          --      8,442
Restructuring and impairment charges..
                                                --         72               --                          --         72
                                                --         --               --                          --         --
Operating income (loss) from
   continuing operations..............          --      5,266              (45)                         --      5,221
Loss on investments in subsidiaries ..    (11,548)         --               --                      11,548         --
Interest expense, net.................          --      7,485              102                          --      7,587
Other expense, net....................          --         22               --                          --         22
                                                --         --               --                          --         --
Income (loss) from continuing
   operations before provision for
   income taxes.......................
                                          (11,548)     (2,241)            (147)                     11,548     (2,388)
Provision for income taxes............          --        303               --                          --        303
                                                --        ---               --                          --        ---
Income (loss) from continuing
   operations ........................    (11,548)     (2,544)            (147)                     11,548     (2,691)

Discontinued operations:
Loss from operations of discontinued
   segment............................          --     (5,255)             596                          --     (4,659)
Estimated loss on disposal of
   business segment and operating
   losses during the phase out period.

                                                --     (3,493)            (705)                         --     (4,198)
                                                --     -------            -----                         --     -------

Net loss..............................  $ (11,548)  $ (11,292)     $      (256)               $     11,548  $ (11,548)
                                          ========   ========             =====                   ========    ========

</TABLE>
<PAGE>


   Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                          THIRTEEN WEEKS ENDED JULY 3, 1999
                                 (DOLLARS IN THOUSANDS)
<TABLE>
<S>                                    <C>            <C>               <C>                     <C>            <C>
                                                                            NON-
                                         PARENT        GUARANTOR         GUARANTOR
                                        COMPANY      SUBSIDIARIES        SUBSIDIARIES           ELIMINATION    CONSOLIDATED

Net sales.............................    $     --  $  40,231      $        --                 $        --   $ 40,231
Cost of goods sold....................          --     25,057               --                          --     25,057
                                                --     ------               --                          --     ------
Gross profit..........................          --     15,174               --                          --     15,174

Selling, general and administrative
   expenses...........................          --      8,210               --                          --      8,210
                                                --
Restructuring Charges                                    (272)              --                                   (272)
                                                         -----              --                                   -----
Operating income (loss) from                    --      7,236               --                          --      7,236
   continuing operations..............
Loss on investments in subsidiaries ..     (4,524)         --               --                       4,524         --
Interest expense, net.................          --      6,234               --                          --      6,234
Other expense, net....................          --         13               --                          --         13
                                                --         --               --                          --         --
Income (loss) from continuing
   operations before provision for
   income taxes.......................     (4,524)        989               --                       4,524        989
Provision for income taxes............          --        286               --                          --        286
                                                --        ---               --                          --        ---
Income (loss) from continuing
   operations ........................     (4,524)        703               --                       4,524        703

Discontinued operations:
Loss from operations of discontinued
   segment............................          --     (4,351)            (876)                         --     (5,227)
                                                --     -------            -----                         --     -------

Net loss..............................  $  (4,524)  $  (3,648)     $      (876)                $     4,524  $  (4,524)
                                           =======     =======             =====                     =====    =======

</TABLE>
<PAGE>

   Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

         SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                      TWENTY-SIX WEEKS ENDED JULY 1, 2000
                             (DOLLARS IN THOUSANDS)

<TABLE>
<S>                                    <C>           <C>                 <C>                 <C>             <C>
                                                                            NON-
                                         PARENT        GUARANTOR         GUARANTOR
                                        COMPANY      SUBSIDIARIES        SUBSIDIARIES        ELIMINATION     CONSOLIDATED

Net sales.............................    $     --  $  79,388      $                         $         --   $ 79,388
Cost of goods sold....................          --     50,684               --                         --     50,684
                                                --     ------               --                         --     ------
Gross profit..........................          --     28,704               --                         --     28,704

Selling, general and administrative
   expenses...........................          --     17,574               45                         --     17,619
Restructuring Charges.................
                                                --         72               --                         --         72
                                                --         --               --                         --         --
Operating income (loss) from
   continuing operations..............          --     11,058              (45)                        --     11,013
Loss on investment in subsidiaries....    (18,274)         --               --                     18,274         --
Interest expense, net.................          --     14,498              102                         --     14,600
Other expense, net....................          --         55               --                         --         55
                                                --         --               --                         --         --
Loss from continuing operations
   before reorganization costs and
   income taxes.......................    (18,274)     (3,495)            (147)                    18,274     (3,642)
Bankruptcy reorganization costs.......          --         --               --                         --         --
                                                --         --               --                         --         --
Income (loss) from continuing
   operations before provision for
   income taxes.......................    (18,274)     (3,495)            (147)                    18,274     (3,642)
Provision for income taxes............          --        497               --                         --        497
                                                --        ---               --                         --        ---
Loss from continuing operations ......    (18,274)     (3,992)            (147)                    18,274     (4,139)

Discontinued operations:
Loss from operations of discontinued
   segment............................          --    (10,634)             697                         --     (9,937)
Estimated loss on disposal of
   business segment and operating
   losses during the phase out period.          --     (3,493)            (705)                        --     (4,198)
                                                --     -------            -----                        --     -------

Net Loss..............................   $ (18,274) $ (18,119)      $     (155)               $    18,274  $ (18,274)
                                          =======     ========            =====                     =====    ========


</TABLE>
<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                       TWENTY-SIX WEEKS ENDED JULY 3, 1999
                             (DOLLARS IN THOUSANDS)


<TABLE>
<S>                                   <C>            <C>                <C>               <C>               <C>
                                                                            NON-
                                         PARENT        GUARANTOR         GUARANTOR
                                        COMPANY      SUBSIDIARIES        SUBSIDIARIES     ELIMINATION       CONSOLIDATED

Net sales.............................    $     --  $  76,189       $        --             $         --  $  76,189
Cost of goods sold....................          --     47,369                --                       --     47,369
                                                --     ------                --                       --     ------
Gross profit..........................          --     28,820                --                       --     28,820
Selling, general and administrative
   expenses...........................          --     16,465                --                       --     16,465
Restructuring Charges.................
                                                --       (272)               --                       --       (272)
                                                --       -----               --                       --      -----
Operating income (loss)...............          --     12,627                --                       --     12,627
Loss on investment in subsidiaries....
                                           (6,689)         --                --                    6,689         --
Interest expense, net.................          --     12,403                --                       --     12,403
Other expense, net....................          --         27                --                       --         27
                                                --         --                                          --        --
Loss before reorganization costs and
   income taxes.......................     (6,689)        197                --                    6,689        197
Bankruptcy reorganization costs.......          --         --                --                       --         --
                                                --         --                --                       --         --
Income (loss) before provision for
   income taxes.......................     (6,689)        197                --                    6,689        197
Provision for income taxes............          --        512                --                       --        512
                                                --        ---                --                       --        ---
Loss from continuing operations ......     (6,689)       (315)               --                    6,689       (315)

Discontinued operations:
Loss from operations of discontinued
   segment............................          --     (5,206)            (1,168)                      --    (6,374)
                                                --     -------            -------                      --    -------
Net Loss..............................  $  (6,689)  $  (5,521)      $    (1,168)                  $ 6,689  $ (6,689)
                                           ======      =======            =======                   =====    =======

</TABLE>

<PAGE>


  Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                       TWENTY-SIX WEEKS ENDED JULY 1, 2000
                             (DOLLARS IN THOUSANDS)


<TABLE>
<S>                                       <C>          <C>                  <C>             <C>                <C>
                                                                               NON-
                                            PARENT        GUARANTOR         GUARANTOR
                                           COMPANY      SUBSIDIARIES        SUBSIDIARIES     ELIMINATION       CONSOLIDATED

Operating activities

Net loss................................   $ (18,274)    $    (18,119)      $        (155)     $    18,274     $     (18,274)
Adjustment to reconcile net loss to net
cash and cash equivalents provided by
(used in) operating activities:
  Loss on investments in subsidiaries...       18,274               --                 --          (18,274)               --
  Depreciation..........................           --            4,932                152              --              5,084
  Amortization..........................           --            1,102                 --              --              1,102
  Loss on disposal of assets............           --            4,864                 --              --              4,864
  Changes in operating assets and
    liabilities.............................       --             (270)                25              --              (245)
                                                   --           -------               ---              --              -----
Net cash and cash equivalents used in
operating activities....................           --           (7,491)                22              --            (7,469)

Investing activities

Purchase of fixed assets................           --           (2,952)               (22)             --            (2,974)
Proceeds on disposal of fixed assets....           --                5                                 --                 5
                                                   --             ----                 --              --             -----
Net cash and cash equivalents used in
investing activities....................           --           (2,947)               (22)             --            (2,969)

Financing activities

Net borrowing under line-of-credit agreements      --            6,235                  --             --             6,235
Principal payments on long term debt....           --               --                  --             --                --
Principal payments on long note (CAT)...           --             (393)                 --             --              (393)
Principal payments on capital leases....           --               --                  --             --                --
                                                   --               --                  --             --                --
Net cash and cash equivalents provided
by financing activities.................           --            5,842                  --             --             5,842
Effect of exchange rate changes on cash.           --               --                  --             --                --
                                                   --               --                  --             --                --

Net change in cash and cash equivalents.           --           (4,596)                 --             --            (4,596)

Cash and cash equivalents at beginning
year.................................              --            7,231                   8             --             7,239
                                                   --            -----                   -             --             -----
Cash and cash equivalents at end of period    $    --     $      2,635             $     8      $      --      $      2,643
                                                =====          =======             =======          =======          ======


</TABLE>
<PAGE>


 Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)

8. Guarantor Subsidiaries (Continued)

          SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                       TWENTY-SIX WEEKS ENDED JULY 3, 1999
                             (DOLLARS IN THOUSANDS)


<TABLE>
<S>                                     <C>            <C>                 <C>                <C>           <C>
                                                                               NON-
                                            PARENT        GUARANTOR         GUARANTOR
                                          COMPANY      SUBSIDIARIES        SUBSIDIARIES        ELIMINATION  CONSOLIDATED

Operating activities

Net loss................................    $ (6,689)     $    (5,521)      $      (1,168)     $     6,689     $      (6,689)
Adjustment to reconcile net loss to net
cash and cash equivalents provided by
(used in) operating activities:
  Loss on investments in subsidiaries...       6,689               --                  --           (6,689)               --
  Depreciation..........................          --            4,727                 155               --             4,882
  Amortization..........................          --              791                  --               --               791
  Loss on disposal of assets............          --             (129)                 --               --              (129)
  Changes in operating assets and
    liabilities.............................      --           (6,597)             (3,114)              --            (9,711)
                                                  --           -------             -------              --            -------
Net cash and cash equivalents used in
operating activities....................          --           (6,729)             (4,127)              --           (10,856)

Investing activities

Purchase of fixed assets................          --           (5,263)                 (5)              --            (5,268)
Proceeds on disposal of fixed assets....          --            1,102                   1               --             1,103
                                                  --           -------                  --              --             -----
Net cash and cash equivalents used in
investing activities....................          --           (4,161)                 (4)              --            (4,165)

Financing activities

Net borrowings under line-of-credit               --           11,000               3,818               --            14,818
agreement
Principal payments on long term debt....          --           (1,300)                 --               --            (1,300)
Principal payments on capital leases....          --               --                  (5)              --                (5)
                                                  --               --                  ---              --                ---
Net cash and cash equivalents provided
by financing activities.................          --            9,700               3,813               --            13,513
Effect of foreign currency translation..          --               --                   1               --                 1
                                                  --               --                  --               --                --

Net change in cash and cash equivalents.          --           (1,190)               (317)              --            (1,507)

Cash and cash equivalents at beginning
of year.................................          --            2,396                 472               --             2,868
                                                  --            -----                 ---               --             -----
Cash and cash equivalents at end of period    $   --     $      1,206       $         155      $        --      $      1,361
                                                  ==            =====                 ===               ==             =====




</TABLE>

<PAGE>


                                        9

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations


On June 13, 2000,  Phillips-Van  Heusen  Corporation,  ("PVH"),  and the Company
announced an agreement (the  "Agreement") for PVH to license the Arrow brand for
men's and boy's dress shirts and sportswear in the United  States.  In addition,
PVH and the Company  agreed in principle  for PVH to acquire the stock of Cluett
Designer Group,  Inc., the licensee for Kenneth Cole dress shirts  ("CDG").  The
closing of these  transactions  was subject to certain  limited  conditions  and
governmental approvals. In conjunction with the Agreement,  the Company approved
a plan to discontinue the Shirt Group segment's  manufacturing  and distribution
operations (the "Operations").

On July 24, 2000, the transactions contemplated by the Agreement,  including the
Purchase and Sale Agreement among Cluett,  Peabody & Co., Inc.  ("CP"),  Cluett,
Peabody  Canada,  Inc.("CP  Canada"),  Arrow Factory Stores Inc.  ("AFS"),  CDG,
Consumer Direct Corporation ("CDC"),  Cluett, Peabody Holding  Corp.("Holding"),
and PVH, (the "Purchase and Sale  Agreement")  and the Share Purchase  Agreement
among CP, CDG,  Bidermann  Tailored  Clothing  Inc.("BTC"),  and PVH (the "Share
Purchase  Agreement") were closed.  Each of the parties to the Purchase and Sale
Agreement and the Share Purchase  Agreement other than PVH and CDG is, and prior
to the closing CDG was, a wholly-owned subsidiary of the Company.

Pursuant to the Purchase and Sale Agreement,  (i) all of the outstanding  shares
of capital  stock of C.A.T.  Industrial  S.A. de C.V.,  ("C.A.T") a  corporation
organized under the laws of Honduras,  were sold to PVH by CP, AFS, CDG, CDC and
Holding,  (ii) PVH purchased all of CP's and AFS's right,  title and interest in
and to certain of the other assets  (principally  inventory)  of CP and AFS used
primarily  by CP and AFS in their Arrow label and private  label men's and boy's
dress and sport shirt  businesses and their Arrow factory  outlet  operations in
the United States and (iii) PVH purchased  all of CP Canada's  right,  title and
interest  in and to Arrow  label  dress and  sport  shirt  inventory  used in CP
Canada's United States "Career Apparel" business. Pursuant to the Share Purchase
Agreement, all of the outstanding shares of capital stock of CDG were sold by CP
and BTC to PVH.

The  aggregate  purchase  price paid by PVH  pursuant to the  Purchase  and Sale
Agreement and the Share Purchase  Agreement for the stock and assets referred to
above  was  approximately  $48.9  million  in cash plus the  assumption  of $2.1
million of debt  related to C.A.T.,  calculated  as set forth in, and subject to
adjustment pursuant to, Article 3 of each of the Purchase and Sale Agreement and
the Share Purchase Agreement.  The Company has deposited in escrow $2.0 million,
which is subject final  inventory  adjustment.  The company has  irrevocably and
unconditionally guaranteed the payment of any amount payable by CP or BTC to PVH
under each Agreement which is not paid by CP or BTC when due, including pursuant
to  the  purchase  price  adjustment  and  indemnification   provisions  of  the
Agreements.

Pursuant to the Purchase and Sale Agreement,  the Trademark  License  Agreement,
dated July 24, 2000, by and between  Cluett  Peabody  Resources  Corporation,  a
Delaware  corporation and a wholly-owned  subsidiary of the Company ("CPR"),  CP
and PVH was executed and delivered. Pursuant to the Trademark License Agreement,
CP granted to PVH an exclusive license to use trademarks related to CP's "Arrow"
clothing  line in the  United  States and its  territories  and  possessions  in
connection   with   its   manufacture,    advertising,   marketing,   promotion,
distribution,  offer to sell and sale of men's and boys'  dress  shirts,  sports
shirts  (including  knit,  woven and all forms of  fleece),  pants,  shorts  and
sweaters in certain specified channels of trade, including the Internet. CP also
granted to PVH the right to operate  websites that use URLs that incorporate the
licensed trademarks.  The Trademark License Agreement requires PVH to pay a $5.0
million minimum  guaranteed annual royalty fee to CP, subject to increases based
on the  achievement  by PVH of certain  sales  targets.  The initial term of the
license  expires  on June 30,  2007;  however,  PVH has the  option to renew the
Trademark  License  Agreement for two additional  five-year  terms,  provided it
meets certain conditions.

The Company used the proceeds  from the Purchase and Sale  Agreement,  the Share
Purchase Agreement and the Trademark License Agreement (collectively referred to
as the  "Transactions") to repay outstanding  borrowings under its Senior Credit
Facility and CP Canada's Credit Facility.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

The Company  expects to complete the  disposition of the remaining net assets of
the Operations through sale by December 31, 2000 and accordingly,  has reflected
the Operations as  discontinued  in the  accompanying  statements of operations.
Additionally, at July 1, 2000 the net assets of the Operations are classified as
held  for  sale in the  accompanying  balance  sheet  and are  comprised  of the
following:

As a result of the Transactions,  the Company recorded a $4.5 million impairment
charge in June, 2000 to adjust the carrying value of goodwill to its fair market
value  based upon  actual  consideration  received  from the  Transactions.  The
impairment  charge  is  included  as a  component  of the  Company's  loss  from
operations of discontinued segment in the accompanying  Statement of Operations.
The $4.2 million  loss on disposal of the  Operations  includes  $0.4 million of
operating  losses  incurred  from June 13, 2000 through  July 1, 2000,  and $2.0
million of estimated  operating  losses from July 2, 2000  through  December 31,
2000.  Included in Accounts  Payable and Accrued  Expenses at July 1, 2000 is an
accrual of $10.6 million for costs directly  associated with the disposal of the
Operations.


<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (continued)

Results of Operations: Thirteen weeks ended July 1, 2000 vs. July 3, 1999

The  following  table is  derived  from  the  Company's  Condensed  Consolidated
Statements of Operations and sets forth,  for the period  indicated,  net sales,
gross profit,  income from  continuing  operations,  interest  expense,  loss on
discontinued operations and net loss of the Company:


<TABLE>
<S>                                                                            <C>              <C>
                                                                                    Thirteen weeks ended
                                                                                   July 1,       July 3,
                                                                                    2000           1999
                                                                               ------------------------------
                                                                                   (Dollars In Thousands)

Net sales.................................................................        $ 38,856        $40,231
Gross profit..............................................................          13,735         15,174
Income from continuing operations ........................................           5,221          7,236
Interest expense .........................................................           7,587          6,234
Loss on discontinued operations ..........................................          (8,857)        (5,227)
Net loss..................................................................        $(11,548)       $(4,524)

</TABLE>


Net Sales:  For the thirteen  weeks ended July 1, 2000 (the "2000  Quarter") net
sales from continuing operations declined $1.4 million to $38.9 million compared
to $40.2  million  for the same  period  last year.  Timing of sales at the Sock
Group  accounts for  virtually  all of the  year-over-year  decline;  as will be
discussed  below,  first  half  sales  at the  Sock  Group  are up $3.2  million
year-over-year  following a 13.7%  increase in the first quarter 2000. Net sales
in the Licensing Group were flat at $1.5 million for the quarter.

Gross Profit: For the 2000 Quarter, gross profit decreased to $13.7 million from
$15.2  million for the thirteen  weeks ended July 3, 1999 (the "1999  Quarter").
Gross margin at the Sock Group decreased from 35.4% in the 1999 Quarter to 32.7%
in the 2000  Quarter.  The $1.5  million  gross  profit  decline is due to lower
volume in the second quarter of $.5 million and product mix  deterioration of $1
million.

Income  from  Continuing  Operations:   The  Company's  income  from  continuing
operations for the 2000 Quarter  decreased $2.0 million to $5.2 million compared
to $7.2 million for the 1999 Quarter. This change is due to the decline in gross
profit discussed above. In addition, the Sock Group initiated a packaging change
in 2000  for its  Gold Toe  products;  costs  associated  with  this  initiative
approximated $0.6 million in the 2000 Quarter.

Interest  expense:  Interest expense increased $1.4 million for the 2000 Quarter
as a result of increased debt levels and higher interest rates.

Loss on discontinued  operations:  In connection with the Company's  decision to
discontinue the Shirt Group segment's manufacturing and distribution operations,
the  Company  reclassified   operating  losses  for  this  segment  as  loss  on
discontinued operations. For the 2000 Quarter, operating losses for this segment
were $8.9 million,  which included a goodwill  impairment charge of $4.5 million
and estimated  operating losses of $2.3 million during the phase out period. For
the 1999 Quarter, operating losses for this segment were $4.7 million.

Net loss:  Net loss for 2000 Quarter  increased  $7.0  million to $11.5  million
compared to a $4.5 million loss for the 1999 Quarter. The increase was primarily
related  to  impairment   charges  and  estimated   operating  losses  from  the
discontinued  segment,  gross  profit  decreases  in the Sock  Group and  higher
interest expense for the period, all as discussed above.


<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (Continued)

Results of Operations: Twenty-six weeks ended July 1, 2000 vs. July 3, 1999

The  following  table is  derived  from  the  Company's  Condensed  Consolidated
Statements of Operations and sets forth,  for the period  indicated,  net sales,
gross profit,  income from  continuing  operations,  interest  expense,  loss on
discontinued operations and net loss of the Company:

<TABLE>
<S>                                                                            <C>            <C>

                                                                                   Twenty-six weeks ended
                                                                                   July 1,        July 3,
                                                                                    2000           1999
                                                                               ------------------------------
                                                                                   (Dollars In Thousands)

Net sales.................................................................        $ 79,388        $76,189
Gross profit..............................................................          28,704         28,820
Income from continuing operations.........................................          11,013         12,627
Interest expense .........................................................          14,600         12,403
Loss on discontinued operations ..........................................         (14,135)        (6,374)
Net loss..................................................................        $(18,274)       $(6,689)

</TABLE>

Net Sales: For the twenty-six weeks ended July 1, 2000 (the "2000 Period"),  net
sales for reportable segments were up 4.2% versus the prior year. The Sock Group
recorded a 4.5% first half net sales increase, or $3.2 million,  versus the same
period last year,  driven by volume.  Licensing  revenue for the period was down
modestly to $3.1 million from $3.3 million in the prior-year period.

Gross Profit: For the 2000 Period, gross profit was essentially flat as the Sock
Group's  increased  sales  volume  was  offset by its first  half  gross  margin
decline,  from  35.0% to 33.4% of net sales year over  year.  As was  previously
stated, this margin decline is due to product mix deterioration, or higher sales
volumes of lower margin product.

Income  from  Continuing  Operations:   The  Company's  income  from  continuing
operations  declined to $11.0  million  from $12.6  million for the 2000 Period,
primarily due to increased  promotional expense at the Sock Group resulting from
a new Gold Toe packaging initiative, launched in 2000.

Interest expense: Interest expense increased $2.2 million for the 2000 Period as
a result of increased debt levels and higher prevailing interest rates.

Loss on discontinued  operations:  In connection with the Company's  decision to
discontinue the Shirt Group segment's manufacturing and distribution operations,
the  Company  reclassified   operating  losses  for  this  segment  as  loss  on
discontinued operations.  For the 2000 Period, operating losses for this segment
were $14.1 million,  which included a goodwill impairment charge of $4.5 million
and estimated operating losses of $2.3 million during the phase out period.

Net loss:  Net loss for 2000 Period  increased  $11.6  million to $18.3  million
compared to a $6.7 million loss for the 1999 Period.  The increase was primarily
related to estimated operating losses from the discontinued segment,  impairment
charges,  higher interest expense for the period and higher promotional costs in
the Sock Group, all as discussed above.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (Continued)

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.

In 1999,  the Company  obtained a revolving  credit  facility ( the  "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 was originally set to expire on December 31, 2000.

On March 29, 2000,  the  Additional  Revolver was increased to $12.0 million and
was  incorporated  into the Senior Credit  Facility as Tranche C (the "Tranche C
Loan").  During the 2000  Quarter,  the  Tranche C Loan was  increased  to $28.3
million. Borrowings under the Tranche C Loan are due and payable on December 31,
2001 and are guaranteed by Vestar.

The  Company's  liquidity  needs  arise  primarily  from  debt  service  on  the
indebtedness and the funding of working capital and capital expenditures.  As of
July 1, 2000, the Company had  outstanding  $275.0 million of debt consisting of
$125.0 million in senior subordinated notes, a Senior Credit Facility consisting
of a $35.5  million term A loan, a $53.4  million term B loan,  $35.0 million in
revolving  credit  borrowings  and  $19.9  million  in  Tranche C Loans and $6.1
million in Canadian  revolving  credit  borrowings.  For the 2000  Quarter,  the
Company had a net decrease in revolving  credit  borrowings  of $1.3 million and
repaid  $15.3  million  in term  loans  and  notes  payable.  As a result of the
Transactions  that were  completed  on July 24,  2000,  the Company  permanently
reduced  the  Term A Loan,  the  Term B Loan  and the  Tranche  C Loans  by $6.8
million, $9.4 million and $8.7 million,  respectively.  In addition, the Company
made payments on the revolving credit borrowings,  without a permanent reduction
in the revolving credit committed amounts and net of expense associated with the
Transactions of $13.3 million.  The Canadian  revolving credit facility was paid
down $1.1 million.

On May 12, 2000, the Company formed a special purpose  non-guarantee  subsidiary
for the purpose of accounts  receivable  sales  transactions  allowed  under the
Senior Credit Facility.  The Company has the right,  but not the obligation,  to
sell up to $24.0  million of accounts  receivable on or before June 30, 2000. On
May 12, 2000 and June 29, 2000, the Company sold  approximately $6.4 million and
$8.2 million of accounts receivable, respectively.

Cash Flows

Cash and cash  equivalents  decreased  to $2.6 million at July 1, 2000 from $7.2
million at December 31, 1999 as a result of $5.9 million and $3.0 million in net
cash used in operating and investing activities,  respectively.  These cash uses
were offset by $5.8 million in net cash  provided by financing  activities.  Net
cash used in operating  activities  resulted  primarily from the Company's $18.3
million  net loss and a $11.7  million  increase in  inventories  offset by $6.2
million in non-cash  depreciation  and  amortization  charges,  $4.9  million in
impairment  and  non-cash  losses  associated  with assets held for sale, a $5.8
million reduction in accounts receivable and a $7.8 million increase in accounts
payable and accrued expense. Net cash used in investing activities resulted from
$3.0 million in capital expenditures.  Net cash provided by financing activities
resulted primarily from $22.5 million in proceeds on credit facility  borrowings
offset by a $16.2 million principal payments on the Company's Long-term debt.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (Continued)

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. As of July 1,
2000, the Company was in compliance with all financial covenants.  Additionally,
on July 24, 2000, the Company  satisfied all  requirements  under the March 2000
amendments, and as such, Vestar's requirement to infuse up to $30 million of new
capital  and  the  Company's  requirement  to make  $20  million  in  additional
principal payments on the Senior Credit Facilities have been extinguished.

Capital Expenditures

Capital  spending for the 2000 Period was $3.0 million and related  primarily to
general improvements to the Company's  manufacturing  facilities.  Total capital
spending for 2000 is expected to be $5.5  million and also relates  primarily to
general improvements to the Company's manufacturing facilities.

Financing Sources and Cash Flows

At July 1, 2000 the Company had $2.6  million in cash and cash  equivalents  and
additional  availability of $10.3 million under the revolving credit  facilities
included in the Senior Credit Facility,  after consideration of $11.7 million in
open trade letters of credit and $1.4 million of stand-by letters of credit.  At
July 1, 2000, the Company also had additional availability of $2.3 million under
the Canadian revolving credit facility,  after  consideration of $1.7 million in
open trade letters of credit.

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.

<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations (Continued)

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 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  Company's  business is seasonal,  with higher  sales and income  during its
third and fourth  quarters.  The third and  fourth  quarters  coincide  with the
Company's two peak retail  selling  seasons:  (i) the first season runs from the
start of the  back-to-school  and fall selling seasons,  beginning in August and
continuing through September;  and (ii) the second season runs from the start of
the Christmas selling season beginning with the weekend  following  Thanksgiving
and continuing through the week after Christmas.

Also  contributing  to the  strength of the third  quarter is the high volume of
fall shipments to wholesale  customers  which are generally more profitable than
spring  shipments.  The slower spring selling season at wholesale  combines with
retail seasonality to make the first half of the year particularly weak.

Cautionary Statement Regarding Forward-Looking Statements

The Quarterly Report on Form 10-Q contains certain statements which 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.   As  a  result,  the  Company  cautions  that  the  forward-looking
statements are qualified by the financial  strength of the retail industry,  the
risks of increased  competition  from other  manufacturers of men's dress shirts
and socks,  shifting  consumer  demand,  changing  consumer  credit  markets and
general  economic  conditions,  hiring and  retaining  effective  team  members,
sourcing  merchandise from domestic and international  vendors,  and other risks
and  uncertainties.  Therefore,  while  management  believes  that  there  is  a
reasonable basis for the forward-looking  statements,  undue reliance should not
be placed on those statements.


<PAGE>


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The Company has exposure to fluctuations 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 engage in any material  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.

The Company  evaluated its market risks (floating  interest rate, fixed interest
rate and currency  risks) at the fiscal year ended  December 31, 1999,  which is
disclosed in the Company's  annual report filed on Form 10-K. There has not been
any material change (adverse or favorable) in the risk factors  identified since
the evaluation performed by the Company at December 31, 1999.


<PAGE>



                           Part II - OTHER INFORMATION

Item 1.     Legal Proceedings

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

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

There were no matters submitted to a vote of security holders during the quarter
ended July 1, 2000.

Item 6.  Exhibits and Reports on Form 8-K

(a) (1)      Financial Statements

             Included in Part I, Item 1

    (2)      Financial Statement Schedules

             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

(b) The Company filed reports on Form 8-K on June 13, 2000 and July 25, 2000 and
subsequently filed reports on Form 8-K/A on August 8, 2000.

(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.


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).

2.3 Stockholders' 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).

<PAGE>

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  10.2.1  to the
Company's  Annual  Report on Form 10-K  (Reg No.  333-58059)  filed on March 29,
1999).

<PAGE>

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  (incorporated  by reference to
Exhibit 10.2.7 to the Company's  Annual Report on Form 10-K (Reg NO.  333-58059)
filed on March 30, 2000).

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  (incorporated by reference to Exhibit 10.2.8 to the Company's Annual
Report on Form 10-K (Reg NO. 333-58059) filed on March 30, 2000).

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
((incorporated  by reference to Exhibit 10.2.9 to the Company's Annual Report on
Form 10-K (Reg NO. 333-58059) filed on March 30, 2000).

*10.2.9.1  Six  Amendment to Credit  Agreement and Waiver dated June 30, 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 10.2.9.1.

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).

+10.7  Employment  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).

+10.8  Severance  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).

+10.9 Severance  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).

10.12  Secured  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).

10.13 Form 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).

<PAGE>


10.16 Limited Liability Company Agreement of Cluett American  Receivables,  LLC,
entered into by Great American  Knitting  Mills,  Inc. as the sole equity member
and  Dwight  Jenkins  and Lori  Rezza as the  special  members  (incorporate  by
reference to Exhibit 10.16 to the Company's  Quarterly  Report on Form 10-Q (Reg
No. 333-58059) filed on May 16, 2000).

10.16.1 Receivable  Transfer Agreement dated May 12, 2000 between Great American
Knitting  Mills,  Inc. and Cluett  American  Receivables,  LLC  (incorporate  by
reference to Exhibit 10.16.1 to the Company's Quarterly Report on Form 10-Q (Reg
No. 333-58059) filed on May 16, 2000).

10.16.2  Receivable  Purchase  Agreement  entered into between  Cluett  American
Receivable,  LLC  and  Banc of  America  Commercial  Corp.  dated  May 12,  2000
(incorporate by reference to Exhibit 10.16.2 to the Company's  Quarterly  Report
on Form 10-Q (Reg No. 333-58059) filed on May 16, 2000).

10.16.3  Partial  Release  Agreement  dated May 12,  2000,  by and among Bank of
America, N.A. f/k/a/ Nationsbank, N.A. as agent for the Lenders under the Credit
Agreement,  Great  American  Knitting  Mills,  Inc.  and Cluett  American  Corp.
(incorporate by reference to Exhibit 10.16.3 to the Company's  Quarterly  Report
on Form 10-Q (Reg No. 333-58059) filed on May 16, 2000).

10.16.4  Guarantee  Agreement  dated May 12, 2000 made by Cluett  American Corp.
(incorporate by reference to Exhibit 10.16.4 to the Company's  Quarterly  Report
on Form 10-Q (Reg No. 333-58059) filed on May 16, 2000).

10.16.5 Repurchase  Agreement dated May 12, 2000 made by Vestar Capital Partners
III, L.P. in favor of Banc of America  Commercial  Corporation  (incorporate  by
reference to Exhibit 10.16.5 to the Company's Quarterly Report on Form 10-Q (Reg
No. 333-58059) filed on May 16, 2000).

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).

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

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                        CLUETT AMERICAN CORP.
                                        (Registrant)


August 14, 2000                          /s/ Bryan P. Marsal
                                         ---------------------------------------
                                             Bryan P. Marsal
                                             Director, President and Chief
                                               Executive Officer



August 14, 2000                         /s/ W. Todd Walter
                                        ----------------------------------------
                                            W. Todd Walter
                                            Vice President and  Chief Financial
                                              Officer


<PAGE>




Item 6 (d). Financial Statement Schedules

                                   SCHEDULE II
                              CLUETT AMERICAN CORP.
                        VALUATION AND QUALIFYING ACCOUNTS
                             (DOLLARS IN THOUSANDS)

<TABLE>

<S>                                   <C>              <C>               <C>              <C>              <C>
COLUMN A                               COLUMN B                  COLUMN C                   COLUMN D        COLUMN E
                                                                ADDITIONS

                                      BALANCE AT       CHARGED TO        CHARGED TO                          BALANCE
                                      BEGINNING         COSTS AND           OTHER                            AT END
DESCRIPTION                           OF PERIOD         EXPENSES          ACCOUNTS         DEDUCTIONS       OF PERIOD
-----------                           ---------         --------          --------         ----------       ---------

Period Ended April 1, 2000:

    Deductions from asset accounts:
     Allowance for doubtful accounts    $ 1,620          $  234           $   --          $  106 (1)         $ 1,748
     Customer allowances                  8,554           3,220               --           3,865 (1)           7,909
     Inventory reserves                   2,622           2,150               --           1,283 (1)           3,489
                                          -----           -----             ----           ---------           -----
           Total                        $12,796          $5,604           $   --          $5,254 (1)         $13,146
                                        =======          ======            =====         ===========         =======

Period Ended July 1, 2000:

    Deductions from asset  accounts:
     Allowance for doubtful accounts    $ 1,748          $  167           $   --          $   19 (1)         $ 1,896
     Customer allowances                  7,909           3,832               --           1,369 (1)          10,372
     Inventory reserves                   3,489             833               --           2,539 (1)           1,783
                                          -----            ----             ----          ----------           -----
           Total                        $13,146          $4,832           $   --          $3,927 (1)         $14,051
                                        =======          ======          =======         ===========         =======

</TABLE>

(1) Write offs, net of recoveries.