##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2003

OR

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 0-21496

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

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

507 West Tenth Street
West Point, Georgia 31833
(Address of principal executive offices, including Zip Code)

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

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

Yes x     No o

Common shares outstanding at August 1, 2003: 49,897,409 shares of Common
Stock, $.01 par value.

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).

Yes x     No o

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TABLE OF CONTENTS



|                                                   |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                   | Condensed Consolidated Balance Sheets                                                        
|                                                   | Condensed Consolidated Statements of Operations (Unaudited)                                  
|                                                   | Condensed Consolidated Statements of Cash Flows (Unaudited)                                  
|                                                   | Condensed Consolidated Statements of Stockholders Equity (Deficit) (Unaudited)              
|                                                   | Notes to Condensed Consolidated Financial Statements                                         
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                       
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-KContinued                                           
|EX-10.1 AMENDMENT NO1 TO LOAN & SECURITY AGREEMENT
|EX-10.2 AMENDMENT DATED 5/30/03 TO THE CREDIT AGMT
|EX-10.3 AMENDMENT NO2 TO LOAN & SECURITY AGREEMENT
|EX-10.5 SECURITY AGREEMENT                        
|EX-10.6 AMENDMENT NO1 TO POST PETITION CREDIT AGMT
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO      
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO      
|EX-32.1 SECTION 906 CERTIFICATION OF THE CEO      
|EX-32.2 SECTION 906 CERTIFICATION OF THE CFO      



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##### Table of Contents



INDEX

|        |  |                                                                                                                             |  |         
|------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | --------
|        |  |                                                                                                                             |  | Page No.
|        |  |                                                                                                                             |  |         
|PART I  |  | FINANCIAL INFORMATION                                                                                                       |  |         
|       
|        |  | Item 1. Financial Statements                                                                                                |  |         
|       
|        |  | Condensed Consolidated Balance Sheets:                                                                                      |  |         
|        |  | June 30, 2003 (Unaudited)
and December 31, 2002                                                                             |  | 3       
|       
|        |  | Condensed Consolidated Statements of
Operations (Unaudited);
    Three and
Six Months Ended June 30, 2003
and June 30, 2002 |  | 4       
|       
|        |  | Condensed Consolidated Statements of
Cash Flows (Unaudited);
    Six
Months Ended June 30, 2003
and June 30, 2002           |  | 5       
|       
|        |  | Condensed Consolidated Statements of
Stockholders Equity
    (Deficit) (Unaudited);
Six Months Ended June 30, 2003         |  | 6       
|       
|        |  | Notes to Condensed Consolidated Financial
Statements
    (Unaudited)                                                        |  | 722    
|       
|        |  | Item 2. Managements Discussion and Analysis of
Financial
    Condition and Results of Operations                           |  | 2334   
|       
|        |  | Item 3. Quantitative and Qualitative Disclosures About Market
Risk                                                          |  | 35      
|       
|        |  | Item 4. Controls and Procedures                                                                                             |  | 35      
|       
|PART II |  | OTHER INFORMATION                                                                                                           |  |         
|       
|        |  | Item 1. Legal Proceedings                                                                                                   |  | 3638   
|       
|        |  | Item 3. Defaults Upon Senior Securities                                                                                     |  | 38      
|       
|        |  | Item 6. Exhibits and Reports on Form 8-K                                                                                    |  | 3940   

2



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##### Table of Contents



WESTPOINT STEVENS INC.




Condensed Consolidated Balance
Sheets(In thousands)

|                                               |                                           |   |           |             |  |              |           |           |  | 
|---------------------------------------------- | ----------------------------------------- | - | --------- | ----------- |  | ------------ | --------- | --------- |  | 
|                                               |                                           |   |           | June 30,    |  | December 31,
|                                               |                                           |   |           | 2003        |  | 2002        
|                                               |                                           |   |           |             |  |             
|                                               |                                           |   |           | (Unaudited) |  |              |           |          
|Assets                                         |                                           |   |           |             |  |              |           |          
|Current Assets                                 |                                           |   |           |             |  |              |           |          
|                                               | Cash and cash equivalents                 |   | $         |            |  |              | $         | 1,096     | 
|                                               | Accounts receivable                       |   |           | 202,382     |  |              |           | 107,751   | 
|                                               | Inventories                               |   |           | 415,519     |  |              |           | 368,743   | 
|                                               | Prepaid expenses and other current assets |   |           | 43,103      |  |              |           | 33,111    | 
|                                               |                                           |   |           |             |  |              |           |          
|Total current assets                           |                                           |   | 661,004   |             |  |              | 510,701   |          
|Property, Plant and Equipment, net             |                                           |   | 673,288   |             |  |              | 711,189   |          
|Other Assets                                   |                                           |   |           |             |  |              |           |          
|                                               | Deferred financing fees                   |   |           | 20,646      |  |              |           | 25,883    | 
|                                               | Other assets                              |   |           | 2,457       |  |              |           | 3,134     | 
|                                               | Goodwill                                  |   |           |            |  |              |           | 46,298    | 
|                                               |                                           |   |           |             |  |              |           |          
|                                               |                                           | $ | 1,357,395 |             |  | $            | 1,297,205 |          
|                                               |                                           |   |           |             |  |              |           |          
|Liabilities and Stockholders Equity (Deficit) |                                           |   |           |             |  |              |           |          
|Current Liabilities                            |                                           |   |           |             |  |              |           |          
|                                               | Senior Credit Facility                    |   | $         | 490,091     |  |              | $         | 447,795   | 
|                                               | DIP Credit Agreement                      |   |           | 80,000      |  |              |           |          | 
|                                               | Long-term debt classified as current      |   |           | 165,000     |  |              |           | 1,165,000 | 
|                                               | Accrued interest payable                  |   |           | 11,345      |  |              |           | 3,949     | 
|                                               | Accounts payable                          |   |           | 37,954      |  |              |           | 57,357    | 
|                                               | Other accrued liabilities                 |   |           | 100,579     |  |              |           | 113,518   | 
|                                               |                                           |   |           |             |  |              |           |          
|Total current liabilities                      |                                           |   | 884,969   |             |  |              | 1,787,619 |          
|Noncurrent Liabilities                         |                                           |   |           |             |  |              |           |          
|                                               | Deferred income taxes                     |   |           | 113,033     |  |              |           | 158,244   | 
|                                               | Pension and other liabilities             |   |           | 151,068     |  |              |           | 156,989   | 
|                                               |                                           |   |           |             |  |              |           |          
|Total noncurrent liabilities                   |                                           |   | 264,101   |             |  |              | 315,233   |          
|Liabilities Subject to Compromise              |                                           |   | 1,104,571 |             |  |              |          |          
|Stockholders Equity (Deficit)                 |                                           |   | (896,246  | )           |  |              | (805,647  | )        
|                                               |                                           |   |           |             |  |              |           |          
|                                               |                                           | $ | 1,357,395 |             |  | $            | 1,297,205 |          
|                                               |                                           |   |           |             |  |              |           |          

See accompanying notes.

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WESTPOINT STEVENS INC.




Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)

|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |         | 
|----------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | - | ------------------ | -------- | ---------------- | - | ------- | ------- | ---- | - | ------- | -------- | - | - | ------- | ------- | 
|                                                                                                                              |                                                       |   | Three Months Ended |          | Six Months Ended
|                                                                                                                              |                                                       |   | June 30,           |          | June 30,        
|                                                                                                                              |                                                       |   |                    |          |                 
|                                                                                                                              |                                                       |   | 2003               |          | 2002             |   | 2003    |         | 2002
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |     
|Net sales                                                                                                                     |                                                       | $ | 365,695            |          |                  | $ | 449,572 |         |      | $ | 744,958 |          |   | $ | 884,716 |        
|Cost of goods sold                                                                                                            |                                                       |   | 307,994            |          |                  |   | 345,800 |         |      |   | 613,862 |          |   |   | 673,143 |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|                                                                                                                              | Gross earnings                                        |   |                    | 57,701   |                  |   |         | 103,772 |      |   |         | 131,096  |   |   |         | 211,573 | 
|Selling, general and administrative expenses                                                                                  |                                                       |   | 60,937             |          |                  |   | 65,613  |         |      |   | 124,400 |          |   |   | 134,513 |        
|Restructuring and impairment charge                                                                                           |                                                       |   | 11,946             |          |                  |   |        |         |      |   | 13,324  |          |   |   |        |        
|Goodwill impairment charge                                                                                                    |                                                       |   | 46,298             |          |                  |   |        |         |      |   | 46,298  |          |   |   |        |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|                                                                                                                              | Operating earnings (loss)                             |   |                    | (61,480  | )                |   |         | 38,159  |      |   |         | (52,926  | ) |   |         | 77,060  | 
|Interest expense (contractual interest of
$37,252 and $69,717 for the three and six
months ended June 30, 2003, respectively) |                                                       |   | 31,194             |          |                  |   | 33,371  |         |      |   | 63,659  |          |   |   | 66,715  |        
|Other expense-net                                                                                                             |                                                       |   | 7,924              |          |                  |   | 1,682   |         |      |   | 10,429  |          |   |   | 4,079   |        
|Chapter 11 expenses                                                                                                           |                                                       |   | 6,244              |          |                  |   |        |         |      |   | 6,244   |          |   |   |        |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|                                                                                                                              | Income (loss) before income tax
expense (benefit)     |   |                    | (106,842 | )                |   |         | 3,106   |      |   |         | (133,258 | ) |   |         | 6,266   | 
|Income tax expense (benefit)                                                                                                  |                                                       |   | (34,795            | )        |                  |   | 1,115   |         |      |   | (44,305 | )        |   |   | 2,255   |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|                                                                                                                              | Net income (loss)                                     |   | $                  | (72,047  | )                |   | $       | 1,991   |      |   | $       | (88,953  | ) |   | $       | 4,011   | 
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|Basic net income (loss) per common share                                                                                      |                                                       | $ | (1.44              | )        |                  | $ | .04     |         |      | $ | (1.78   | )        |   | $ | .08     |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|Diluted net income (loss) per common share                                                                                    |                                                       | $ | (1.44              | )        |                  | $ | .04     |         |      | $ | (1.78   | )        |   | $ | .08     |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|Basic average common shares outstanding                                                                                       |                                                       |   | 49,897             |          |                  |   | 49,662  |         |      |   | 49,874  |          |   |   | 49,657  |        
|                                                                                                                              | Dilutive effect of stock options
and stock bonus plan |   |                    |         |                  |   |         | 1       |      |   |         |         |   |   |         |        | 
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        
|Diluted average common shares outstanding                                                                                     |                                                       |   | 49,897             |          |                  |   | 49,663  |         |      |   | 49,874  |          |   |   | 49,657  |        
|                                                                                                                              |                                                       |   |                    |          |                  |   |         |         |      |   |         |          |   |   |         |        

See accompanying notes.

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WESTPOINT STEVENS INC.




Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |         |          |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------ | ---------------- | -------- | ---- | ------- | ------- | -------- | -
|                                                     |                                                                                                     |                                                           |        | Six Months Ended
|                                                     |                                                                                                     |                                                           |        | June 30,        
|                                                     |                                                                                                     |                                                           |        |                 
|                                                     |                                                                                                     |                                                           |        | 2003             |          | 2002
|                                                     |                                                                                                     |                                                           |        |                  |          |     
|Cash flows from operating activities:                |                                                                                                     |                                                           |        |                  |          |      |         |        
|                                                     | Net income (loss)                                                                                   |                                                           | $      | (88,953          | )        |      | $       | 4,011   |         
|                                                     | Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities: |                                                           |        |                  |          |      |         |         |         
|                                                     |                                                                                                     | Depreciation and other amortization                       |        |                  | 37,748   |      |         |         | 41,617   |  
|                                                     |                                                                                                     | Deferred income taxes                                     |        |                  | (44,245  | )    |         |         | 7,821    |  
|                                                     |                                                                                                     | Changes in working capital                                |        |                  | 39,181   |      |         |         | (72,144  | )
|                                                     |                                                                                                     | Other-net                                                 |        |                  | 14,829   |      |         |         | 1,766    |  
|                                                     |                                                                                                     | Non-cash component of restructuring and
impairment charge |        |                  | 6,959    |      |         |         |         |  
|                                                     |                                                                                                     | Goodwill impairment charge                                |        |                  | 46,298   |      |         |         |         |  
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Net cash provided by (used for) operating activities |                                                                                                     |                                                           | 11,817 |                  |          |      | (16,929 | )      
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Cash flows from investing activities:                |                                                                                                     |                                                           |        |                  |          |      |         |        
|                                                     | Capital expenditures                                                                                |                                                           |        | (6,649           | )        |      |         | (21,895 | )       
|                                                     | Net proceeds from sale of assets                                                                    |                                                           |        | 92               |          |      |         | 728     |         
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Net cash used for investing activities               |                                                                                                     |                                                           | (6,557 | )                |          |      | (21,167 | )      
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Cash flows from financing activities:                |                                                                                                     |                                                           |        |                  |          |      |         |        
|                                                     | Senior Credit Facility:                                                                             |                                                           |        |                  |          |      |         |         |         
|                                                     |                                                                                                     | Borrowings                                                |        |                  | 720,333  |      |         |         | 426,197  |  
|                                                     |                                                                                                     | Repayments                                                |        |                  | (678,037 | )    |         |         | (362,662 | )
|                                                     | DIP Credit Agreement:                                                                               |                                                           |        |                  |          |      |         |         |         
|                                                     |                                                                                                     | Borrowings                                                |        |                  | 130,000  |      |         |         |         |  
|                                                     |                                                                                                     | Repayments                                                |        |                  | (50,000  | )    |         |         |         |  
|                                                     | Fees associated with DIP Agreement                                                                  |                                                           |        | (5,150           | )        |      |         |        |         
|                                                     | Trade Receivables Program                                                                           |                                                           |        | (123,502         | )        |      |         | (22,000 | )       
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Net cash provided by (used for) financing activities |                                                                                                     |                                                           | (6,356 | )                |          |      | 41,535  |        
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Net increase (decrease) in cash and cash equivalents |                                                                                                     |                                                           | (1,096 | )                |          |      | 3,439   |        
|Cash and cash equivalents at beginning of period     |                                                                                                     |                                                           | 1,096  |                  |          |      | 3,170   |        
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        
|Cash and cash equivalents at end of period           |                                                                                                     | $                                                         |       |                  |          | $    | 6,609   |        
|                                                     |                                                                                                     |                                                           |        |                  |          |      |         |        

See accompanying notes.

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##### Table of Contents



WESTPOINT STEVENS INC.




Condensed Consolidated Statements of Stockholders Equity (Deficit) (Unaudited)
(In thousands)

|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |         |        |  
|------------------------ | -------------------------------------------------------------------- | --------------------------------------- | -------------------------------------------------- | - | ------ | - | ------- | ------ | ----------- | - | -------------- | --- | ------------- | - | ------------- | ----- | ------------ | - | -------- | ---- | ------- | - | ----------- | - | ---- | ------ | ------ | --- | - | - | -------- | ------- | ------- | ------ | -
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Common      |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |        
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Stock       |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |        
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | and Capital |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |        
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | in          |   |                |     |               |   |               |       |              |   |          |      |         |   | Accumulated |   |      |        |        |     |   |   |         
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Excess of   |   | Treasury Stock |     |               |   |               |       | Other        |   |          |      |         |   |             |   |     
|                         |                                                                      |                                         |                                                    |   | Common |   | Par     |        |             |   | Accumulated    |     | Comprehensive |   | Unearned      |       |              |   |         
|                         |                                                                      |                                         |                                                    |   | Shares |   | Value   |        | Shares      |   | Amount         |     | Deficit       |   | Income (Loss) |       | Compensation |   | Total   
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |         
|Balance, January 1, 2003 |                                                                      |                                         | 71,100                                             |   |        | $ | 408,991 |        |             |   | (21,449        | )   |               | $ | (417,964      | )     |              | $ | (693,652 | )    |         | $ | (99,581     | ) |      | $      | (3,441 | )   |   | $ | (805,647 | )      
|                         | Comprehensive income (loss):                                         |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |        
|                         |                                                                      | Net loss                                |                                                    |   |       |   |         |        |            |   |                |     |              |   |               |       |             |   |          |      | (88,953 | ) |             |   |     |        |        |     |  |   |          |         | (88,953 | )     
|                         |                                                                      | Foreign currency
translation adjustment |                                                    |   |       |   |         |        |            |   |                |     |              |   |               |       |             |   |          |      |        |   |             |   | (918 | )      |        |     |  |   |          |         | (918    | )     
|                         |                                                                      | Cash flow hedges:                       |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |         |         |       
|                         |                                                                      |                                         | Net derivative gains, net
of tax benefit of $1,434 |   |        |  |         |        |             |  |                |     |               |  |               |       |              |  |          |      |         |  |             |   |      | (2,550 | )      |     |   |  |          |         |         | (2,550 | )
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |        
|                         | Comprehensive income (loss)                                          |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          | (92,421 | )      
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |        
|                         | Issuance of stock pursuant
to Stock Bonus Plan
including tax expense |                                         |                                                    |  |        |   |         | 446    |             |   |                | 39  |               |   |               | 413   |              |   |          |     |         |   |             |  |      |        |        |    |   |   |          | 859     |        
|                         | Issuance of stock pursuant
to pension plan                           |                                         |                                                    |  |        |   |         | (1,254 | )           |   |                | 202 |               |   |               | 1,381 |              |   |          |     |         |   |             |  |      |        |        |    |   |   |          | 127     |        
|                         | Issuance of Restricted Stock                                         |                                         |                                                    |  |        |   |         | (34    | )           |   |                | 6   |               |   |               | 37    |              |   |          |     |         |   |             |  |      |        |        | (3  | ) |   |          |        |        
|                         | Amortization of
compensation                                         |                                         |                                                    |  |        |   |         |       |             |   |                |    |               |   |               |      |              |   |          |     |         |   |             |  |      |        |        | 942 |   |   |          | 942     |        
|                         | Stock dividends pursuant
to Stock Bonus Plan                         |                                         |                                                    |  |        |   |         |       |             |   |                |    |               |   |               |      |              |   |          | (106 | )       |   |             |  |      |        |        |    |   |   |          | (106    | )      
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |        
|Balance, June 30, 2003   |                                                                      |                                         | 71,100                                             |   |        | $ | 408,149 |        |             |   | (21,202        | )   |               | $ | (416,133      | )     |              | $ | (782,711 | )    |         | $ | (103,049    | ) |      | $      | (2,502 | )   |   | $ | (896,246 | )      
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |      |        |        |     |   |   |          |        

See accompanying notes.

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##### Table of Contents



WESTPOINT STEVENS INC.




Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.   Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States 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 accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report on
Form 10-K for WestPoint Stevens Inc. (the Company) for the year ended
December 31, 2002.

2.   Chapter 11 Filing

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

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

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##### Table of Contents



WESTPOINT STEVENS INC.

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

2.   Chapter 11 FilingContinued

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

On June 2, 2003, the Bankruptcy Court approved a series of the Companys first
day motions that will enable the Company to continue regular operations
throughout the reorganization proceeding. These motions authorized, among
other things, normal payment of employee salaries, wages and benefits;
continued participation in workers compensation insurance programs; payment to
vendors for post-petition delivery of goods and services; payment of certain
pre-petition obligations to customers; and continued payment of utilities. The
Bankruptcy Court also approved, under interim order, access to $175 million in
debtor-in-possession financing and subsequently approved, under final order,
access to $300 million of debtor-in-possession financing for use by the
Company, pursuant to a Post-Petition Credit Agreement, dated as of June 2,
2003, among WestPoint Stevens Inc. and certain of its subsidiaries, the
financial institutions named therein and Bank of America, N.A. and Wachovia
Bank, National Association (the DIP Credit Agreement).

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

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

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

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##### Table of Contents



WESTPOINT STEVENS INC.

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

2.   Chapter 11 FilingContinued

There can be no assurance, however, that the Company will be able to comply
with the debt covenants or that, if it fails to do so, it will be able to
obtain amendments to or waivers of such covenants. Failure of the Company to
comply with covenants contained in its DIP Credit Agreement, if not waived, or
to adequately service debt obligations, could result in a default under the DIP
Credit Agreement. Any default under the Companys DIP Credit Agreement,
particularly any default that results in acceleration of indebtedness or
foreclosure on collateral, could have a material adverse effect on the Company.

The Debtors are currently operating their businesses as debtors-in-possession
pursuant to the Bankruptcy
Code. Pursuant to the Bankruptcy Code, prepetition obligations of the Debtors,
including obligations under debt instruments, generally may not be enforced
against the Debtors, and any actions to collect prepetition indebtedness are
automatically stayed, unless the stay is lifted by the Bankruptcy Court. The
rights of and ultimate payments by the Company under prepetition obligations
may be substantially altered. This could result in claims being liquidated in
the Chapter 11 proceedings at less (and possibly substantially less) than 100%
of their face value. The Debtors cannot presently determine or reasonably
estimate the ultimate liability that may result from rejecting contracts or
leases or from the filing of claims for any rejected contracts or leases, and
no provisions have yet been made for these items. The amount of the claims to
be filed by the creditors could be significantly different than the amount of
the liabilities recorded by the Company.

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

Basis of Presentation

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

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##### Table of Contents



WESTPOINT STEVENS INC.

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

2.   Chapter 11 FilingContinued

Basis of PresentationContinued

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

The Companys consolidated financial statements included elsewhere in this
Quarterly Report are presented in accordance with AICPA Statement of Position
90-7 (Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code) (SOP 90-7). In the Chapter 11 proceedings, substantially all unsecured
liabilities as of the Petition Date are subject to compromise or other
treatment under a plan of reorganization which must be confirmed by the
Bankruptcy Court after submission to any required vote by affected parties.
For financial reporting purposes, the categories of liabilities and obligations
whose treatment and satisfaction are dependent on the outcome of the Chapter 11
proceedings and classified as Liabilities Subject to Compromise in the
consolidated balance sheet under SOP 90-7 are identified below (in thousands):

|                                                                                                    |  |               |           | 
|--------------------------------------------------------------------------------------------------- |  | ------------- | --------- | 
|                                                                                                    |  | June 30, 2003
|                                                                                                    |  |              
|Senior Notes due 2005 and 2008
plus related accrued interest net
of related deferred financing fees |  | $             | 1,027,707 | 
|Accounts payable                                                                                    |  |               | 41,912    | 
|Accrued liabilities                                                                                 |  |               | 34,952    | 
|                                                                                                    |  |               |           | 
|Total                                                                                               |  | $             | 1,104,571 | 
|                                                                                                    |  |               |           | 

The ultimate amount of and settlement terms for the Companys pre-bankruptcy
liabilities are subject to the ultimate outcome of its Chapter 11 proceedings
and, accordingly, are not presently determinable. Pursuant to SOP 90-7,
professional fees associated with the Chapter 11 proceedings are expensed as
incurred and reported as reorganization costs (Chapter 11 expenses). Also,
interest expense will be reported only to the extent that it will be paid
during the pendency of the Chapter 11 proceedings or that it is probable that
it will be an allowed claim. During the second quarter of 2003, the Company
recognized a charge of $6.2 million for Chapter 11 expenses. Approximately
$4.9 million of the charge related to the termination of the Companys Trade
Receivables Program, $0.4 million related to the amortization of fees
associated with the DIP Credit Agreement and $0.9 million related to fees
payable to professionals retained to assist with the Chapter 11 proceedings.

Assets of the Companys subsidiaries currently excluded from the bankruptcy
proceedings total $28.0 million as of June 30, 2003, or 2.1% of the Companys
consolidated assets. Revenues of these subsidiaries totaled $12.0 million and
$25.0 million for the three and six month periods ended June 30, 2003, or 3.3%
and 3.4%, respectively, of the Companys consolidated revenues.

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##### Table of Contents



WESTPOINT STEVENS INC.

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

3.   Inventories

The Company uses the last-in, first-out (LIFO) method of accounting for
substantially all inventories for financial reporting purposes. Interim
determinations of LIFO inventories are necessarily based on managements
estimates of year-end inventory levels and costs. Subsequent changes in these
estimates, including the final year-end LIFO determination, and the effect of
such changes on earnings are recorded in the interim periods in which they
occur.

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

|                           |  |          |         |              |  |   |         | 
|-------------------------- |  | -------- | ------- | ------------ |  | - | ------- | 
|                           |  | June 30, |         | December 31,
|                           |  | 2003     |         | 2002        
|                           |  |          |         |             
|Finished goods             |  | $        | 185,593 |              |  | $ | 142,484 | 
|Work in process            |  |          | 189,812 |              |  |   | 174,460 | 
|Raw materials and supplies |  |          | 40,114  |              |  |   | 51,799  | 
|LIFO reserve               |  |          |        |              |  |   |        | 
|                           |  |          |         |              |  |   |         | 
|                           |  | $        | 415,519 |              |  | $ | 368,743 | 
|                           |  |          |         |              |  |   |         | 

4.   Indebtedness and Financial Arrangements

Indebtedness is as follows (in thousands of dollars):

|                        |                              |   |          |         |              |   |           |         | 
|----------------------- | ---------------------------- | - | -------- | ------- | ------------ | - | --------- | ------- | 
|                        |                              |   | June 30, |         | December 31,
|                        |                              |   | 2003     |         | 2002        
|                        |                              |   |          |         |             
|Short-term indebtedness |                              |   |          |         |              |   |           |        
|                        | Senior Credit Facility       |   | $        | 490,091 |              |   | $         | 447,795 | 
|                        | DIP Credit Agreement         |   |          | 80,000  |              |   |           |        | 
|                        | Second-Lien Facility         |   |          | 165,000 |              |   |           | 165,000 | 
|                        | 7-7/8% Senior Notes due 2005 |   |          |        |              |   |           | 525,000 | 
|                        | 7-7/8% Senior Notes due 2008 |   |          |        |              |   |           | 475,000 | 
|                        |                              |   |          |         |              |   |           |        
|                        |                              | $ | 735,091  |         |              | $ | 1,612,795 |        
|                        |                              |   |          |         |              |   |           |        

|                                                                        |                              |   |           |         | 
|----------------------------------------------------------------------- | ---------------------------- | - | --------- | ------- | 
|                                                                        |                              |   | June 30, 
|                                                                        |                              |   | 2003     
|                                                                        |                              |   |          
|Short-term indebtedness classified as liabilities
subject to compromise |                              |   |           |        
|                                                                        | 7-7/8% Senior Notes due 2005 |   | $         | 525,000 | 
|                                                                        | 7-7/8% Senior Notes due 2008 |   |           | 475,000 | 
|                                                                        |                              |   |           |        
|                                                                        |                              | $ | 1,000,000 |        
|                                                                        |                              |   |           |        

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WESTPOINT STEVENS INC.

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

4.   Indebtedness and Financial ArrangementsContinued

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

At June 30, 2003, the Companys Senior Credit Facility with certain lenders
(collectively, the Banks) consists of a $667.1 million revolving credit
facility (Revolver), subject to future scheduled commitment reductions and
interim facility limitations, with a Revolver expiration date of November 30,
2004. Effective with the Chapter 11 filing, additional borrowings under the
Senior Credit Facility are no longer available to the Company. During 2003 the
Revolver commitment decreased $25.0 million as a result of a scheduled
commitment reduction. The Senior Credit Facility provides for a $25.0 million
future reduction in the revolver commitment on each of the following dates:
August 1, 2003 and November 1, 2003 and further provides for a $17.5 million
reduction in the revolver commitment on February 1, 2004, at which time the
revolver commitment will be $599.6 million, subject to adjustments related to
the Trade Receivables Program and asset dispositions.

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

At the option of the Company and effective with the last amendment to the
Senior Credit Facility, interest under the Senior Credit Facility was payable monthly, either at the prime rate plus 5.25% or LIBOR plus 7.00%,
compared to the prime rate plus 2.75% or LIBOR plus 4.50% in effect at December 31,
2002. Effective with the Chapter 11 filing, the Senior Credit Facility LIBOR
loans converted to prime rate loans upon maturity and LIBOR loans are no longer
available to the Company. Prior to the Chapter 11 filing, the Company was
obligated to pay a facility fee in an amount equal to 0.50% of each Banks
commitment under the Revolver, and an unused commitment fee in an amount equal
to 1.00% of the difference between the revolver commitment and the daily
outstanding loans and letters of credit. Effective with the Chapter 11 filing,
the Company is no longer obligated to pay a facility fee or an unused
commitment fee for the Senior Credit Facility. The loans under the Senior
Credit Facility are secured by the pledge of all the stock of the Companys
material subsidiaries and a first priority lien on substantially all of the
assets of the Company, other than the Companys accounts receivables in the
Trade Receivables Program.

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##### Table of Contents



WESTPOINT STEVENS INC.

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

4.   Indebtedness and Financial ArrangementsContinued

The Companys credit agreements contain a number of customary covenants
including, among others, restrictions on the incurrence of indebtedness,
transactions with affiliates, and certain asset dispositions as well as
limitations on restricted debt and equity payments and capital expenditures.
Certain provisions require the Company to maintain certain financial ratios, a
minimum interest coverage ratio, a minimum debt to EBITDA ratio, a minimum
EBITDA and a minimum consolidated net worth (as defined). At June 30, 2003,
the Company could not make restricted debt and equity payments.

At March 31, 2003 and prior to the petition date, the Company was not in
compliance with certain of its covenants under the Senior Credit Facility and
Second-Lien Facility during which time the Company engaged in active
discussions with its senior lenders to obtain an amendment or waiver of such
non-compliance (See Note 2 where the chronology of the circumstances causing
the Company to file voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code is discussed). At June 30, 2003 and December 31,
2002, the Company classified all of its outstanding debt under all of its
various credit agreements as current as a result of the Companys inability to
obtain temporary waivers discussed above through the end of 2003 and the
potential for the acceleration of the loans outstanding under all of its
various credit agreements.

The Company, through a wholly-owned bankruptcy remote receivables subsidiary,
has a Trade Receivables Program that provides for the sale of accounts
receivable on a revolving basis. The receivables subsidiary, WPS Receivables
Corporation (WPSRC) (which is not a Debtor in the Companys current Chapter
11 proceeding), is a qualified special purpose entity and meets the
requirements of SFAS 140. In January 2002, the Company amended and extended
the maturity date of
its existing Trade Receivables Program with an independent issuer of
receivables backed commercial paper until January 2003. The independent issuer
of receivables backed commercial paper under the Companys Trade Receivables
Program at December 31, 2002 indicated that it would not extend the maturity
date of its current agreement for another year but indicated a willingness to
work with the Company to effect an orderly transition to another securitization
provider. On January 15, and February 10, 2003, the company announced
amendments to the maturity dates of its Trade Receivables Program, extending it
to February 17 and March 31, 2003, respectively. On March 28, 2003, WPSRC and
the Company entered into a loan and security agreement (the Receivables Loan
Agreement) with Congress Financial Corporation (Southern), as Agent
(Congress), pursuant to which the lenders thereunder agreed to provide
receivables backed loans as part of the Companys Trade Receivables Program.
Under the terms of the Trade Receivables Program, the Company agreed to sell on
an ongoing basis, and without recourse for credit loss on the receivables, its
accounts receivable portfolio to WPSRC, and WPSRC used the receivables as
collateral for loans pursuant to the Receivables Loan Agreement. Proceeds from
the loans and collections on receivables were used by WPSRC to purchase

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WESTPOINT STEVENS INC.

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

4.   Indebtedness and Financial ArrangementsContinued

receivables from the Company. The Company maintained the balance in the
designated pool of accounts receivable sold by selling its new receivables on a
revolving basis as they are created. The Receivables Loan Agreement permitted
outstanding loans of up to $160.0 million against the accounts receivable
portfolio. The interest payable by WPSRC on the loans under the Receivables
Loan Agreement is a 2-month LIBOR rate plus 2.50%. The cost of the Trade
Receivables Program is charged
to selling expense in the accompanying Consolidated Statements of Operations.
At June 30, 2003 and December 31, 2002, $31.3 million and $154.8 million,
respectively, of accounts receivable had been sold pursuant to the Trade
Receivables Program and the sale is reflected as a reduction of accounts
receivable in the accompanying Consolidated Balance Sheets. On June 4, 2003,
Congress notified WPRSC that, as a result of the Companys Chapter 11 filing,
Congress was terminating the Receivables Loan Agreement and that no further
loans would be made thereunder. Congress will continue to apply proceeds of
receivables pledged to it to reduce the obligations of WPRSC to Congress under
the Receivables Loan Agreement. As of July 8, 2003, all outstanding loans
under the Receivables Loan Agreement were repaid in full from such proceeds.
The Company is currently financing its accounts receivable through borrowings
under the DIP Credit Agreement and expects to continue to do so during the
pendency of its Chapter 11 proceedings.

5.   Restructuring, Impairment and Other Charges

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

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

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

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WESTPOINT STEVENS INC.

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

5.   Restructuring, Impairment and Other ChargesContinued

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

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

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

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

|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | ---- | ----------- | - | -------- | --- | ------ | - | ---- | ---- | - | - | ----- | ---- | 
|                                          |                |   |           |      |             |   | Employee |     | Other  |   |      |      |  
|                                          |                |   | Writedown |      | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |      | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |      |             |   |          |     |       
|2000 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | Second Quarter |   | $         | 87.9 |             |   | $        | 4.6 |        |   | $    | 3.4  |   |   | $     | 95.9 | 
|                                          | Third Quarter  |   |           |     |             |   |          | 5.8 |        |   |      | 0.3  |   |   |       | 6.1  | 
|                                          | Fourth Quarter |   |           | 2.6  |             |   |          | 4.3 |        |   |      | 0.3  |   |   |       | 7.2  | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2000 Charge                         |                |   | 90.5      |      |             |   | 14.7     |     |        |   | 4.0  |      |   |   | 109.2 |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|2001 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | First Quarter  |   |           |     |             |   |          | 5.0 |        |   |      |     |   |   |       | 5.0  | 
|                                          | Fourth Quarter |   |           |     |             |   |          | 2.0 |        |   |      | (2.0 | ) |   |       |     | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2001 Charge                         |                |   |          |      |             |   | 7.0      |     |        |   | (2.0 | )    |   |   | 5.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Writedown Assets to Net Recoverable Value |                |   | (90.5     | )    |             |   |         |     |        |   |     |      |   |   | (90.5 | )   
|2000 Cash Payments                        |                |   |          |      |             |   | (4.7     | )   |        |   | (0.3 | )    |   |   | (5.0  | )   
|2001 Cash Payments                        |                |   |          |      |             |   | (15.0    | )   |        |   | (0.1 | )    |   |   | (15.1 | )   
|2002 Cash Payments                        |                |   |          |      |             |   | (1.7     | )   |        |   |     |      |   |   | (1.7  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Balance at June 30, 2003                  |                | $ |          |      |             | $ | 0.3      |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

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##### Table of Contents



WESTPOINT STEVENS INC.

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

5.   Restructuring, Impairment and Other ChargesContinued

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



---

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

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

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002 and a restructuring and
impairment charge of $13.3 million, before taxes, in the first six months of
2003 (of which $11.9 million were recognized in the second quarter). The
components of the restructuring and impairment charge in 2002 included $4.4
million for the impairment of fixed assets and $2.2 million in reserves to
cover cash expenses related primarily to severance benefits. The components of
the restructuring and impairment charge in the first six months of 2003
included $7.0 million for the impairment of fixed assets and $6.3 million in
reserves to cover cash expenses related to severance benefits of $5.1 million
and other exit costs.

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WESTPOINT STEVENS INC.

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

5.   Restructuring, Impairment and Other ChargesContinued

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

|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ | - | ---- | --- |  | - | ----- | ---- | 
|                                          |                |   |           |     |             |   | Employee |     | Other  |   |      |     | 
|                                          |                |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|                                          | Third Quarter  |   | $         | 4.3 |             |   | $        | 1.6 |        |   | $    |    |  |   | $     | 5.9  | 
|                                          | Fourth Quarter |   |           | 0.1 |             |   |          | 0.5 |        |   |      | 0.1 |  |   |       | 0.7  | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Total 2002 Charge                         |                |   | 4.4       |     |             |   | 2.1      |     |        |   | 0.1  |     |  |   | 6.6   |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|2003 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|                                          | First Quarter  |   |           | 0.2 |             |   |          | 0.8 |        |   |      | 0.4 |  |   |       | 1.4  | 
|                                          | Second Quarter |   |           | 6.8 |             |   |          | 4.3 |        |   |      | 0.8 |  |   |       | 11.9 | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Total 2003 Charge                         |                |   | 7.0       |     |             |   | 5.1      |     |        |   | 1.2  |     |  |   | 13.3  |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|Writedown Assets to Net Recoverable Value |                |   | (11.4     | )   |             |   |         |     |        |   |     |     |  |   | (11.4 | )   
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |     |     |  |   | (1.5  | )   
|2003 Cash Payments                        |                |   |          |     |             |   | (1.1     | )   |        |   | (0.3 | )   |  |   | (1.4  | )   
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Balance at June 30, 2003                  |                | $ |          |     |             | $ | 4.6      |     |        | $ | 1.0  |     |  | $ | 5.6   |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 

During 2002, other costs of the restructuring initiatives of $11.6 million,
before taxes, were recognized consisting of inventory writedowns of $10.5
million primarily related to the rationalization of its retail store division
and other expenses of $1.1 million, consisting primarily of related unabsorbed
overhead, all reflected in cost of goods sold. During the first six months of
2003, other costs of the restructuring initiatives of $7.6 million, before
taxes, were recognized (of which $4.7 million were recognized in the second
quarter) consisting of inventory writedowns of $3.4 million primarily related
to the rationalization of its retail store division and other expenses of $4.2
million, consisting primarily of related unabsorbed overhead, all reflected in
cost of goods sold.

6.   Comprehensive Income (Loss)

Comprehensive income (loss) is as follows (in thousands):

|                                                   |                                                                               |   |                    |      |                  |   |        |       |      |   |         |        |   |   |        |       | 
|-------------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ------ | ----- | ---- | - | ------- | ------ | - | - | ------ | ----- | 
|                                                   |                                                                               |   | Three Months Ended |      | Six Months Ended
|                                                   |                                                                               |   | June 30,           |      | June 30,        
|                                                   |                                                                               |   |                    |      |                 
|                                                   |                                                                               |   | 2003               |      | 2002             |   | 2003   |       | 2002
|                                                   |                                                                               |   |                    |      |                  |   |        |       |     
|Net income (loss)                                  |                                                                               | $ | (72,047            | )    |                  | $ | 1,991  |       |      | $ | (88,953 | )      |   | $ | 4,011  |      
|Foreign currency translation adjustment            |                                                                               |   | (1,694             | )    |                  |   | (1,459 | )     |      |   | (918    | )      |   |   | (1,065 | )    
|Gain (loss) on derivative instruments,
net of tax: |                                                                               |   |                    |      |                  |   |        |       |      |   |         |        |   |   |        |      
|                                                   | Net changes in fair value of derivatives                                      |   |                    | (494 | )                |   |        | 1,164 |      |   |         | 152    |   |   |        | 1,728 | 
|                                                   | Net (gains) losses reclassified from other
comprehensive income into earnings |   |                    | (882 | )                |   |        | 276   |      |   |         | (2,702 | ) |   |        | 299   | 
|                                                   |                                                                               |   |                    |      |                  |   |        |       |      |   |         |        |   |   |        |      
|Comprehensive income (loss)                        |                                                                               | $ | (75,117            | )    |                  | $ | 1,972  |       |      | $ | (92,421 | )      |   | $ | 4,973  |      
|                                                   |                                                                               |   |                    |      |                  |   |        |       |      |   |         |        |   |   |        |      

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WESTPOINT STEVENS INC.

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

7.   Deferred Financing Fees

Included in Other expense-net in the accompanying Condensed Consolidated
Statements of Operations for the three and six months ended June 30, 2003 is
the amortization of deferred financing fees of $3.2 million and $5.8 million,
respectively, compared with $2.3 million and $4.6 million, respectively, for
the three and six months ended June 30, 2002.

8.   Litigation and Contingent Liabilities

On June 1, 2003, WestPoint Stevens Inc and certain subsidiaries filed voluntary
petitions for relief under chapter 11, title 11 of the United States Bankruptcy
code. These filings are discussed elsewhere in this Quarterly Report on Form
10-Q.

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

On June, 6, 2002, Defendants filed Motions to Dismiss Plaintiffs Amended
Complaint. On February 3, 2003, the Court denied Defendants Motions to
Dismiss. Proceedings against the Company are stayed due to the recent
bankruptcy filing. However, the action is proceeding to class certification and
discovery against the individual named defendants.

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

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WESTPOINT STEVENS INC.

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

8.   Litigation and Contingent LiabilitiesContinued

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

By agreements between the parties, the Clarkand Hemmer
actions were both stayed pending entry of final judgment by the Court in the Gelleraction. As with the Geller action, the Clark and Hemmer actions
were also stayed due to the Companys bankruptcy filing.

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

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

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

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WESTPOINT STEVENS INC.

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

8.   Litigation and Contingent LiabilitiesContinued

The purported class includes all descendants of African American slaves. The
relief sought includes an accounting, the appointment of an independent
historical commission, imposition of a constructive trust, restitution of the
value of slave labor and defendants unjust enrichment, disgorgement of illicit
profits and compensatory and punitive damages.

The consolidated cases are currently stayed due to the Companys bankruptcy
filing.

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

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

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

9.   New Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition to SFAS No. 123s fair value method of accounting for stock-based
employee compensation. SFAS No. 148 also amends the disclosure provisions of
SFAS No. 123 and Accounting Principles Board (APB) Opinion No. 28, Interim
Financial Reporting, to require disclosure of the effects of an entitys
accounting policy with respect to

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WESTPOINT STEVENS INC.

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

9.   New Accounting PronouncementsContinued

stock-based employee compensation, regardless of whether they account for that
compensation using the fair value method of SFAS No. 123 or the intrinsic value
method of APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS
No. 148s amendments of the transition and annual disclosure requirements of
SFAS No. 123 are effective for fiscal years ending after December 15, 2002.
The Company has adopted SFAS No. 148 through continued application of the
intrinsic value method prescribed in APB No. 25, and related interpretations,
and enhanced financial statement disclosures of the effect on net income (loss)
and earnings (loss) per share if fair value provisions of SFAS No. 148 had been
applied.

At June 30, 2003, the Company had several stock-based compensation plans, which
are described in Note 7  Stockholders Equity (Deficit) of the Notes to
Consolidated Financial Statements contained in the Companys Annual Report on Form 10-K for fiscal
2002. As discussed above, the Company applies APB No. 25, and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its stock incentive plan. Had compensation cost for
the Companys stock-based compensation plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the
method established in SFAS No. 123 as amended by SFAS No. 148, the Companys
net income (loss) and earnings (loss) per common share would have been reduced
to the pro forma amounts indicated below (in thousands, except per share date):

|                                  |                                                                                                             |          |             |     |                    |       |                  |       |      |      |         |       |   |       |       |       |   |      | 
|--------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------- | ----------- | --- | ------------------ | ----- | ---------------- | ----- | ---- | ---- | ------- | ----- | - | ----- | ----- | ----- | - | ---- | 
|                                  |                                                                                                             |          |             |     | Three Months Ended |       | Six Months Ended
|                                  |                                                                                                             |          |             |     | June 30,           |       | June 30,        
|                                  |                                                                                                             |          |             |     |                    |       |                 
|                                  |                                                                                                             |          |             |     | 2003               |       | 2002             |       | 2003 |      | 2002   
|                                  |                                                                                                             |          |             |     |                    |       |                  |       |      |      |        
|Net income (loss) as reported     |                                                                                                             | $        | (72,047     | )   |                    | $     | 1,991            |       |      | $    | (88,953 | )     |   | $     | 4,011 |      
|Deduct:                           |                                                                                                             |          |             |     |                    |       |                  |       |      |      |         |       |   |       |       |      
|                                  | Total stock-based compensation
expenses determined under
fair-value based method for
all awards, net of tax |          |             | 794 |                    |       |                  | 1,412 |      |      |         | 1,444 |   |       |       | 2,570 |  
|                                  |                                                                                                             |          |             |     |                    |       |                  |       |      |      |         |       |   |       |       |      
|Pro forma net income (loss)       |                                                                                                             | $        | (72,841     | )   |                    | $     | 579              |       |      | $    | (90,397 | )     |   | $     | 1,441 |      
|                                  |                                                                                                             |          |             |     |                    |       |                  |       |      |      |         |       |   |       |       |      
|Earnings (loss) per common share: |                                                                                                             |          |             |     |                    |       |                  |       |      |      |         |       |   |       |       |      
|                                  |                                                                                                             | Basic:   |             |     |                    |       |                  |       |      |      |         |       |   |       |       |       |   |     
|                                  |                                                                                                             |          | As reported |     | $                  | (1.44 | )                |       | $    | 0.04 |         |       | $ | (1.78 | )     |       | $ | 0.08 | 
|                                  |                                                                                                             |          | Pro forma   |     | $                  | (1.46 | )                |       | $    | 0.01 |         |       | $ | (1.81 | )     |       | $ | 0.03 | 
|                                  |                                                                                                             | Diluted: |             |     |                    |       |                  |       |      |      |         |       |   |       |       |       |   |     
|                                  |                                                                                                             |          | As reported |     | $                  | (1.44 | )                |       | $    | 0.04 |         |       | $ | (1.78 | )     |       | $ | 0.08 | 
|                                  |                                                                                                             |          | Pro forma   |     | $                  | (1.46 | )                |       | $    | 0.01 |         |       | $ | (1.81 | )     |       | $ | 0.03 | 

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WESTPOINT STEVENS INC.

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

9.   New Accounting PronouncementsContinued

The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model. Option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Companys employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in managements opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

On January 1, 2003, the Company adopted FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others(FIN 45). FIN 45 requires that upon the
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under the guarantee. FIN 45s provisions
for initial recognition and measurement should be applied on a prospective
basis to guarantees issued or modified after December 31, 2002, irrespective of
the guarantors fiscal year-end. On January 1, 2003, the Company adopted FIN
45 and there was no significant impact on the Companys financial position and
results of operations as a result of this adoption.

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

10.   Goodwill

As a result of certain triggering events that occurred during the second
quarter of 2003, including the Company filing a petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code (see Note 2 where the chronology
of the circumstances that led to such filing is discussed), the Company
performed an interim test of the carrying amount of its goodwill in accordance
with SFAS No. 142, Goodwill and Other Intangible Assets. Based on a
preliminary estimate of expected present value of related future cash flows,
the Companys goodwill was deemed to be impaired and was subsequently written
off. The unamortized balance of the goodwill that was written off during the
quarter amounted to $46.3 million and is classified separately in the
accompanying consolidated financial statements.

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WESTPOINT STEVENS INC.

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

Chapter 11 Filing

As discussed in Note 2, the Company and several of its subsidiaries filed a
petition under Chapter 11 of the Bankruptcy Code on June 1, 2003. By reason
thereof, the Companys creditors were automatically stayed from taking certain
enforcement actions under their respective agreements with the Company
unless the stay is lifted by the Bankruptcy Court. In addition, the Company
has entered into the DIP Credit Agreement, which is more fully described
below.

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

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

Basis of Presentation

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

23



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Senior Credit Facility and Second-Lien Facility Amendments

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

At the option of the Company and effective with the last amendment to the
Senior Credit Facility, interest under the Senior Credit Facility was
payable monthly, either at the prime rate plus 5.25% or at LIBOR plus 7.00%,
compared to prime rate plus 2.75% or LIBOR plus 4.50% in effect at December 31,
2002. Effective with the Chapter 11 filing, the Senior Credit Facility LIBOR
loans converted to prime rate loans upon maturity and LIBOR loans are no
longer available to the Company. Prior to the
Chapter 11 filing, the Company was also obligated to pay a facility fee in an
amount equal to 0.50% of each Banks commitment under the Revolver, and an
unused commitment fee in an amount equal to 1.00% of the difference between the
revolver commitment and the daily outstanding loans and letters of credit.
Effective with the Chapter 11 filing, the Company is no longer obligated to pay
a facility fee or an unused commitment fee for the Senior Credit Facility.

At March 31, 2003, the Company was not in compliance with certain of its
covenants under the Senior Credit Facility and Second-Lien Facility. Effective
March 31, 2003, the Companys lenders under the Senior Credit Facility and
Second-Lien Facility temporarily waived the defaults for the period March 31,
2003 through and including June 10, 2003. At June 30, 2003 and December 31,
2002, the Company classified all of its outstanding debt under all of its
various credit agreements as current as a result of the Companys inability to
obtain temporary waivers discussed above through the end of 2003 and the
potential for the acceleration of the loans outstanding under all of its
various credit agreements.

DIP Credit Agreement

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

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

24



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##### Table of Contents



WESTPOINT STEVENS INC.

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

DIP Credit AgreementContinued

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

There can be no assurance, however, that the Company will be able to comply
with the debt covenants or that, if it fails to do so, it will be able to
obtain amendments to or waivers of such covenants. Failure of the Company to
comply with covenants contained in its DIP Credit Agreement, if not waived, or
to adequately service debt obligations, could result in a default under the DIP
Credit Agreement. Any default under the Companys DIP Credit Agreement,
particularly any default that results in acceleration of indebtedness or
foreclosure on collateral, could have a material adverse effect on the Company.

Restructuring, Impairment, and Other Charges

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

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

Four plant closings have been announced under the Eight-Point Plan. On October
2, 2000, the Rosemary greige plant, a towel plant located in Roanoke Rapids,
North Carolina, and the Liebhardt basic bedding plant in Union, South
Carolina, were scheduled for closing. On January 29, 2001, the Seneca plant, a
sheeting plant in Seneca, South Carolina, was scheduled for closing. On March
1, 2001,

25



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Restructuring, Impairment, and Other ChargesContinued

the Whitmire yarn plant in Whitmire, South Carolina, was scheduled for closing.
In addition to these closings, a reduction in the workforce of the remaining
finishing and fabricating facilities at the Rosemary complex was announced on
February 5, 2001. These plant closings will enable the Company to consolidate
its manufacturing in locations that allow the most efficient work flow.

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

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

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

|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | ---- | ----------- | - | -------- | --- | ------ | - | ---- | ---- | - | - | ----- | ---- | 
|                                          |                |   |           |      |             |   | Employee |     | Other  |   |      |      |  
|                                          |                |   | Writedown |      | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |      | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |      |             |   |          |     |       
|2000 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | Second Quarter |   | $         | 87.9 |             |   | $        | 4.6 |        |   | $    | 3.4  |   |   | $     | 95.9 | 
|                                          | Third Quarter  |   |           |     |             |   |          | 5.8 |        |   |      | 0.3  |   |   |       | 6.1  | 
|                                          | Fourth Quarter |   |           | 2.6  |             |   |          | 4.3 |        |   |      | 0.3  |   |   |       | 7.2  | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2000 Charge                         |                |   | 90.5      |      |             |   | 14.7     |     |        |   | 4.0  |      |   |   | 109.2 |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|2001 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | First Quarter  |   |           |     |             |   |          | 5.0 |        |   |      |     |   |   |       | 5.0  | 
|                                          | Fourth Quarter |   |           |     |             |   |          | 2.0 |        |   |      | (2.0 | ) |   |       |     | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2001 Charge                         |                |   |          |      |             |   | 7.0      |     |        |   | (2.0 | )    |   |   | 5.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Writedown Assets to Net Recoverable Value |                |   | (90.5     | )    |             |   |         |     |        |   |     |      |   |   | (90.5 | )   
|2000 Cash Payments                        |                |   |          |      |             |   | (4.7     | )   |        |   | (0.3 | )    |   |   | (5.0  | )   
|2001 Cash Payments                        |                |   |          |      |             |   | (15.0    | )   |        |   | (0.1 | )    |   |   | (15.1 | )   
|2002 Cash Payments                        |                |   |          |      |             |   | (1.7     | )   |        |   |     |      |   |   | (1.7  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Balance at June 30, 2003                  |                | $ |          |      |             | $ | 0.3      |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

26



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Restructuring, Impairment, and Other ChargesContinued

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



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

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

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002 and a restructuring and
impairment charge of $13.3 million, before taxes, in the first six months of
2003. The components of the restructuring and impairment charge in 2002
included $4.4 million for the impairment of fixed assets and $2.2 million in
reserves to cover cash expenses related primarily to severance benefits. The
components of the restructuring and impairment charge in the first six months
of 2003 included $7.0 million for the impairment of fixed assets and $6.3
million in reserves to cover cash expenses related to severance benefits of
$5.1 million and other exit costs.

27



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Restructuring, Impairment, and Other ChargesContinued

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

|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ | - | ---- | --- |  | - | ----- | ---- | 
|                                          |                |   |           |     |             |   | Employee |     | Other  |   |      |     | 
|                                          |                |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|                                          | Third Quarter  |   | $         | 4.3 |             |   | $        | 1.6 |        |   | $    |    |  |   | $     | 5.9  | 
|                                          | Fourth Quarter |   |           | 0.1 |             |   |          | 0.5 |        |   |      | 0.1 |  |   |       | 0.7  | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Total 2002 Charge                         |                |   | 4.4       |     |             |   | 2.1      |     |        |   | 0.1  |     |  |   | 6.6   |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|2003 Restructuring and Impairment Charge: |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|                                          | First Quarter  |   |           | 0.2 |             |   |          | 0.8 |        |   |      | 0.4 |  |   |       | 1.4  | 
|                                          | Second Quarter |   |           | 6.8 |             |   |          | 4.3 |        |   |      | 0.8 |  |   |       | 11.9 | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Total 2003 Charge                         |                |   | 7.0       |     |             |   | 5.1      |     |        |   | 1.2  |     |  |   | 13.3  |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |     
|Writedown Assets to Net Recoverable Value |                |   | (11.4     | )   |             |   |         |     |        |   |     |     |  |   | (11.4 | )   
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |     |     |  |   | (1.5  | )   
|2003 Cash Payments                        |                |   |          |     |             |   | (1.1     | )   |        |   | (0.3 | )   |  |   | (1.4  | )   
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 
|Balance at June 30, 2003                  |                | $ |          |     |             | $ | 4.6      |     |        | $ | 1.0  |     |  | $ | 5.6   |     
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |       |      | 

During 2002, other costs of the restructuring initiatives of $11.6 million,
before taxes, were recognized consisting of inventory writedowns of $10.5
million primarily related to the rationalization of its retail store division
and other expenses of $1.1 million, consisting primarily of related unabsorbed
overhead, all reflected in cost of goods sold. During the first six months of
2003, other costs of the restructuring initiatives of $7.6 million, before
taxes, were recognized (of which $4.7 million were recognized in the second
quarter) consisting of inventory writedowns of $3.4 million primarily related
to the rationalization of its retail store division and other expenses of $4.2
million, consisting primarily of related unabsorbed overhead, all reflected in
cost of goods sold.

28



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations

The table below is a summary of the Companys operating results for the three
and six months ended June 30, 2003 and June 30, 2002 (in millions of dollars).

|                                           |  |                    |        |                  |  |      |       |      |  |   |        |    |  |   |       |  
|------------------------------------------ |  | ------------------ | ------ | ---------------- |  | ---- | ----- | ---- |  | - | ------ | -- |  | - | ----- | -
|                                           |  | Three Months Ended |        | Six Months Ended
|                                           |  | June 30,           |        | June 30,        
|                                           |  |                    |        |                 
|                                           |  | 2003               |        | 2002             |  | 2003 |       | 2002
|                                           |  |                    |        |                  |  |      |       |     
|Net sales                                  |  | $                  | 365.7  |                  |  | $    | 449.6 |      |  | $ | 745.0  |    |  | $ | 884.7 |  
|Gross earnings                             |  | $                  | 57.7   |                  |  | $    | 103.8 |      |  | $ | 131.1  |    |  | $ | 211.6 |  
|Restructuring and impairment charge        |  | $                  | 11.9   |                  |  |      |      |      |  | $ | 13.3   |    |  |   |      |  
|Goodwill impairment charge                 |  | $                  | 46.3   |                  |  |      |      |      |  | $ | 46.3   |    |  |   |      |  
|Operating earnings (loss)                  |  | $                  | (61.5  | )                |  | $    | 38.2  |      |  | $ | (52.9  | )  |  | $ | 77.1  |  
|Interest expense                           |  | $                  | 31.2   |                  |  | $    | 33.4  |      |  | $ | 63.7   |    |  | $ | 66.7  |  
|Other expense-net                          |  | $                  | 7.9    |                  |  | $    | 1.7   |      |  | $ | 10.4   |    |  | $ | 4.1   |  
|Chapter 11 expenses                        |  | $                  | 6.2    |                  |  |      |      |      |  | $ | 6.2    |    |  |   |      |  
|Income (loss) from operations before taxes |  | $                  | (106.8 | )                |  | $    | 3.1   |      |  | $ | (133.3 | )  |  | $ | 6.3   |  
|Net income (loss)                          |  | $                  | (72.0  | )                |  | $    | 2.0   |      |  | $ | (89.0  | )  |  | $ | 4.0   |  
|Gross margin                               |  |                    | 15.8   | %                |  |      | 23.1  | %    |  |   | 17.6   | %  |  |   | 23.9  | %
|Operating margin                           |  |                    | (16.8  | )%               |  |      | 8.5   | %    |  |   | (7.1   | )% |  |   | 8.7   | %

29



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##### Table of Contents



WESTPOINT STEVENS INC.

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

|                       |  |                                                                                        
|---------------------- |  | ---------------------------------------------------------------------------------------
|Results of Operations: |  | Three Months Ended June 30, 2003 Compared to
Three Months Ended June 30, 2002Continued

Net Sales.Net sales for the three months ended June 30, 2003 decreased $83.9
million, or 18.7 % to $365.7 million compared with net sales of $449.6 million
for the three months ended June 30, 2002. The decline in sales reflected the
combined effects of retailers efforts to reduce inventories and ongoing weak
retail demand across all distribution channels and amongst all product
categories with the exception of specialty stores where the Companys efforts
to increase market share have been successful.

For the three months ended June 30, 2003, bed products sales were $211.1
million compared with $251.3 million for the same period in 2002; bath products
sales were $116.6 million compared with $150.5 million for the same period in
2002; and other sales (consisting primarily of sales from the Companys mill
stores and foreign operations) were $38.0 million compared with $47.7 million
for the same period in 2002.

Gross Earnings/Margin.Gross earnings for the three months ended June 30, 2003
decreased $46.1 million, or 44.4%, to $57.7 million compared with $103.8
million for the same period of 2002, and reflect a gross margin of 15.8% in
2003 versus 23.1% in 2002. Gross earnings and margin decreased primarily as a
result of lower sales, a less profitable mix of revenues, reduced production
rates and increased royalties. Included in the cost of goods sold in the
second quarter of 2003 are charges associated with recent restructuring
initiatives of $4.7 million, the majority of which reflects costs for
unabsorbed overhead at affected facilities and inventory write-offs primarily
related to the rationalization of the retail store division.

Operating Earnings/Margins.Selling, general and administrative expenses
decreased $4.7 million, or 7.1%, in the second quarter of 2003 compared with
the same period of last year, and as a percentage of net sales represent 16.7%
in the 2003 period and 14.6% in the 2002 period. The decrease in selling,
general and administrative expenses in the second quarter of 2003 was due to
lower advertising, lower selling expense for the Companys retail stores due to
fewer stores and reduced warehousing and shipping expenses. However, as a
percentage of sales, selling, general and administrative expenses increased in
the 2003 period compared with the same period last year due to increased
selling and warehousing and shipping expenses relative to sales.

Operating earnings for the second quarter of 2003 decreased $99.6 million to a
loss of $61.5 million, compared with operating earnings of $38.2 million, or
8.5% of sales, for the same period in 2002. Operating earnings for the three
months ended June 30, 2003, include a separate line item for restructuring and
impairment charges of $11.9 million to reflect $4.3 million in severance
benefits, $6.8 million of fixed asset write-offs, $0.8 million of other exit
costs, in addition to charges associated with recent restructuring initiatives
previously discussed of $4.7 million, the majority of which reflects costs for
unabsorbed overhead and inventory write-offs. Operating earnings in 2003 also
reflect a $46.3 million goodwill impairment charge that resulted from certain
triggering events that occurred during the second quarter of 2003, including
the Companys Chapter 11 filing. (See Note 10 where the goodwill impairment
charge is discussed further.)

30



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##### Table of Contents



WESTPOINT STEVENS INC.

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

|                       |  |                                                                                        
|---------------------- |  | ---------------------------------------------------------------------------------------
|Results of Operations: |  | Three Months Ended June 30, 2003 Compared to
Three Months Ended June 30, 2002Continued

Interest Expense.Interest expense for the three months ended June 30, 2003 of
$31.2 million decreased $2.2 million compared with interest expense of $33.4
million for the three months ended June 30, 2002. The decrease was due
somewhat to lower debt levels offset by higher interest rates on the Companys
variable rate bank debt for 2003 compared with corresponding 2002 outstanding
debt and average interest rate levels. Effective with the Companys Chapter 11
filing, interest was no longer accrued on the Senior Notes due 2005 and 2008,
and the impact in the second quarter of 2003 was $6.1 million.

Other Expense-Net.Other expense-net in the second quarter of 2003 consisted
primarily of $4.9 million in transaction costs associated with an unsuccessful
acquisition effort and the amortization of deferred financing fees of $3.2
million, less certain miscellaneous income items. Other expense-net in the
second quarter of 2002 of $1.7 million consisted primarily of the amortization
of deferred debt fees of $2.3 million, less certain miscellaneous income
items.

Chapter 11 Expenses.The Company recognized $6.2 million in bankruptcy
reorganization related expenses in the second quarter of 2003 consisting
primarily of $4.9 million associated with the termination of the Companys
Trade Receivables Program, $0.4 million related to amortization of fees
associated with the DIP Credit Agreement and $0.9 million related to fees
payable to professionals retained to assist with the Chapter 11 proceedings.

Income Tax Expense.The Companys effective tax rate differed from the federal
statutory rate primarily due to state income taxes and nondeductible items.

Net Income (Loss).Net loss for the second quarter of 2003 was $72.0 million
or a loss of $1.44 per share diluted, compared with net income of $2.0 million
or $0.04 per share diluted, for the same period in 2002. Included in net loss
for the three months ended June 30, 2003 were costs related to restructuring
initiatives, net of taxes, of $10.6 million, or $0.21 loss per diluted share,
as previously discussed.

Diluted per share amounts are based on 49.9 million and 49.7 million average
shares outstanding for 2003 and 2002, respectively.

|                       |  |                                                                          
|---------------------- |  | -------------------------------------------------------------------------
|Results of Operations: |  | Six Months Ended June 30, 2003 Compared to
Six Months Ended June 30, 2002

Net Sales.Net sales for the six months ended June 30, 2003 decreased $139.8
million, or 15.8 % to $745.0 million compared with net sales of $884.7 million
for the six months ended June 30, 2002. The decline in sales reflected the
combined effects of retailers efforts to reduce inventories and the ongoing
weak retail demand across all distribution channels and amongst all product
categories with the exception of specialty stores where the Companys efforts
to increase market share have been successful.

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WESTPOINT STEVENS INC.

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

|                       |  |                                                                                    
|---------------------- |  | -----------------------------------------------------------------------------------
|Results of Operations: |  | Six Months Ended June 30, 2003 Compared to
Six Months Ended June 30, 2002Continued

For the six months ended June 30, 2003, bed products sales were $425.7 million
compared with $517.3 million for the same period in 2002; bath products sales
were $244.6 million compared with $271.4 million for the same period in 2002;
and other sales (consisting primarily of sales from the Companys mill stores
and foreign operations) were $74.6 million compared with $95.9 million for the
same period in 2002.

Gross Earnings/Margin.Gross earnings for the six months ended June 30, 2003
decreased $80.5 million, or 38.0%, to $131.1 million compared with $211.6
million for the same period of 2002, and reflect a gross margin of 17.6% in
2003 versus 23.9% in 2002. Gross earnings and margin decreased primarily as a
result of lower sales, a less profitable mix of revenues, reduced production
rates and increased royalties. Included in the cost of goods sold for the six
months ended June 30, 2003 are charges associated with recent restructuring
initiatives of $7.6 million, the majority of which reflects costs for
unabsorbed overhead at affected facilities and inventory write-offs primarily
related to the rationalization of the retail store division.

Operating Earnings/Margins.Selling, general and administrative expenses
decreased $10.1 million, or 7.5%, for the six months ended June 30, 2003
compared with the same period of last year, and as a percentage of net sales
represents 16.7% in the 2003 period and 15.2% in the 2002 period. The decrease
in selling, general and administrative expenses for the first six months of
2003 was due to lower advertising and bad debt expense and lower selling
expense for the Companys retail stores due to fewer stores. However, as a
percentage of sales, selling, general and administrative expenses increased in
the 2003 period compared with the same period last year due to increased
selling and increased warehousing and shipping expenses relative to sales.

Operating earnings for the first six months of 2003 decreased $130.0 million to
a loss of $52.9 million, compared with operating earnings of $77.1 million, or
8.7% of sales, for the same period in 2002. Operating earnings for the six
months ended June 30, 2003, include a separate line item for restructuring and
impairment charges of $13.3 million to reflect $5.1 million in severance
benefits, $7.0 million of fixed asset write-offs, $1.2 million of other exit
costs, in addition to charges associated with recent restructuring initiatives
previously discussed of $7.6 million, the majority of which reflects costs for
unabsorbed overhead and inventory write-offs. Operating earnings in 2003 also
reflect a $46.3 million goodwill impairment charge that resulted from certain
triggering events that occurred during the second quarter of 2003, including
the Companys Chapter 11 filing. (See Note 10 where the goodwill impairment
charge is discussed further.)

Interest Expense.Interest expense for the six months ended June 30, 2003 of
$63.7 million decreased $3.1 million compared with interest expense of $66.7
million for the six months ended June 30, 2002. The decrease was due somewhat
to lower debt levels offset by higher interest rates on the Companys variable
rate bank debt for 2003 compared with corresponding 2002 outstanding debt and
average interest rate levels. Effective with the Companys Chapter 11 filing,
interest was no longer accrued on the Senior Notes due 2005 and 2008, and the
impact in the first six months of 2003 was $6.1 million.

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WESTPOINT STEVENS INC.

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

|                       |  |                                                                                    
|---------------------- |  | -----------------------------------------------------------------------------------
|Results of Operations: |  | Six Months Ended June 30, 2003 Compared to
Six Months Ended June 30, 2002Continued

Other Expense-Net.Other expense-net for the first six months of 2003
consisted primarily of the amortization of deferred financing fees of $5.8
million, less certain miscellaneous income items and $4.9 million in
transaction costs associated with an unsuccessful acquisition effort. Other
expense-net in the first six months of 2002 of $4.1 million consisted primarily
of the amortization of deferred financing fees of $4.6 million, less certain
miscellaneous income items.

Chapter 11 Expenses.The Company recognized $6.2 million in bankruptcy
restructuring related expenses consisting primarily of $4.9 million associated
with early termination of leases and other related fees resulting from the
accelerated closing of certain of the Companys retail stores and $1.3 million
of expenses related to ongoing professional fees.

Income Tax Expense.The Companys effective tax rate differed from the federal
statutory rate primarily due to state income taxes and nondeductible items.

Net Income (Loss).Net loss for the six months ended June 30, 2003 was $89.0
million or a loss of $1.78 per share diluted, compared with net income of $4.0
million or $0.08 per share diluted, for the same period in 2002. Included in
net loss for the six months ended June 30, 2003 were costs related to
restructuring initiatives, net of taxes, of $13.4 million, or $0.27 loss per
diluted share, as previously discussed.

Diluted per share amounts are based on 49.9 million and 49.7 million average
shares outstanding for 2003 and 2002, respectively.

Effects of Inflation

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

Liquidity and Capital Resources

So long as the Company remains under the protection of Chapter 11 of the U.S.
Bankruptcy Code, its principal sources of liquidity are expected to be cash
from its operations and funds available under the DIP Credit Agreement. The
maximum commitment under the DIP Credit Agreement is $300 million, of which as
of June 18, 2003, the Company has access to $300 million under final order of
the Bankruptcy Court. At August 1, 2003, the Company had unused borrowing
availability under the DIP Credit Agreement totaling $163.1 million, reflecting
outstanding loans of $111.7 million and outstanding letters of credit of $25.2
million. For additional information about the DIP Credit Agreement, see DIP
Credit Agreement above.

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WESTPOINT STEVENS INC.

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

Liquidity and Capital ResourcesContinued

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

There can be no assurance, however, that the Company will be able to comply
with the debt covenants or that, if it fails to do so, it will be able to
obtain amendments to or waivers of such covenants. Failure of the Company to
comply with covenants contained in its DIP Credit Agreement, if not waived, or
to adequately service debt obligations, could result in a default under the DIP
Credit Agreement. Any default under the Companys DIP Credit Agreement,
particularly any default that results in acceleration of indebtedness or
foreclosure on collateral, could have a material adverse effect on the Company.

Adequacy of Capital Resources

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

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

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

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WESTPOINT STEVENS INC.

Item 3. Quantitative and
Qualitative Disclosures About Market Risk

The Companys exposure to market
risk has not materially changed from what was reported on the
Companys Form 10-K for the year ended December 31, 2002.

Item 4. Controls and Procedures

Company management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e)
as of June 30, 2003. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that as of June 30, 2003 the disclosure controls and procedures
were effective in ensuring that all
material information required to be filed in this quarterly report has been
made known to them in a timely fashion. There have been no significant changes
in internal controls, or in factors that could significantly affect internal
controls during the period covered by this report.

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WESTPOINT STEVENS INC.




PART II  OTHER INFORMATION




Item 1.   Legal Proceedings

On June 1, 2003, WestPoint Stevens Inc and certain subsidiaries filed voluntary
petitions for relief under chapter 11, title 11 of the United States Bankruptcy
code. These filings are discussed elsewhere in this Quarterly Report on Form
10-Q.

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

On June, 6, 2002, Defendants filed Motions to Dismiss Plaintiffs Amended
Complaint. On February 3, 2003, the Court denied Defendants Motions to
Dismiss. Proceedings against the Company are stayed due to the recent
bankruptcy filing. However, the action is proceeding to class certification and
discovery against the individual named defendants.

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

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATION (Continued)

Item 1.   Legal ProceedingsContinued

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

By agreements between the parties, the Clarkand Hemmeractions were both
stayed pending entry of final judgment by the Court in the Gelleraction. As with the Geller action the Clark and
Hemmer actions were also stayed due to the Companys
bankruptcy filing.

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

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

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

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATION (Continued)

Item 1.   Legal ProceedingsContinued

The purported class includes all descendants of African American slaves. The
relief sought includes an accounting, the appointment of an independent
historical commission, imposition of a constructive trust, restitution of the
value of slave labor and defendants unjust enrichment, disgorgement of illicit
profits and compensatory and punitive damages.

The consolidated cases are currently stayed due to the Companys bankruptcy
filing.

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

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

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

Item 3.   Defaults Upon Senior Securities

The commencement of the
Chapter 11 proceedings constitutes an event of default under the
Companys Senior Credit Facility, Second-Lien Facility and
indentures governing the Companys senior unsecured notes. On
June 30, 2003, the principal amount of indebtedness in default
is approximately $1,655.1 million and the amount of accrued
interest in default on the senior unsecured notes is approximately
$36.1 million. Approximately $6.1 million of interest has
not been accrued on the senior unsecured notes as a result of the
Chapter 11 filing.

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATION (Continued)

Item 6.   Exhibits and Reports on Form 8-K

a.)

|        |  |                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                      
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                      
|10.1    |  | Amendment No. 1 to Loan and Security Agreement, dated as of April 15,
2003, by and among WPS Receivables Corporation, WestPoint Stevens Inc.,
Congress Financial Corporation (Southern), The CIT Group/Commercial
Services, Inc. and the parties to the Loan Agreement as lenders.                                                                                   
|       
|10.2    |  | Amendment dated as of May 30, 2003, to the $165,000,000 Credit Agreement
dated as of June 29, 2001, among WestPoint Stevens Inc., certain of its
Subsidiaries and Deutschebank Trust Company America (f/k/a Bankers Trust
Company) in its capacity as Agent and the parties to the Loan Agreement as
lenders.                                                        
|       
|10.3    |  | Amendment No. 2 to Loan and Security Agreement dated as of June 1, 2003,
by and among WPS Receivables Corporation, WestPoint Stevens Inc., Congress
Financial Corporation (Southern), The CIT Group/Commercial Services, Inc.
and the parties to the Loan Agreement as lenders.                                                                                      
|       
|10.4    |  | Post-Petition Credit Amendment, dated as of June 2, 2003, among WestPoint
Stevens Inc. and certain of its subsidiaries, the financial institutions
named therein and Bank of America, N.A. and Wachovia Bank, National
Association, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on June 5, 2003.
|       
|10.5    |  | Security Agreement dated June 2, 2003 by WestPoint Stevens Inc.
and certain of its subsidiaries, the financial institutions named
therein and Bank of America, N.A. in its capacity as administrative
and collateral agent.                                                                                                                                          
|       
|10.6    |  | First Amendment to Post-Petition Credit Agreement dated June 26, 2003,
among WestPoint Stevens Inc. and certain of its subsidiaries, the
financial institutions named therein and Bank of America, N.A. and
Wachovia Bank, National Association.                                                                                                                     
|       
|31.1    |  | Chief Executive Officers Section 302 Certification.                                                                                                                                                                                                                                                                                                                 
|       
|31.2    |  | Chief Financial Officers Section 302 Certification.                                                                                                                                                                                                                                                                                                                 
|       
|32.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906
of the Sarbanes-Oxley Act of 2002 as signed by the Chief Executive Officer.                                                                                                                                                                                                              
|       
|32.2    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906
of the Sarbanes-Oxley Act of 2002 as signed by the Chief Financial Officer.                                                                                                                                                                                                              

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATION (Continued)




Item 6.   Exhibits and Reports on Form 8-KContinued

b.)



| | b.1.) |  | The Company filed a Current Report on Form 8-K on April 1,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures and Item 7. Financial Statements, Proforma
Financial Information and Exhibits. 
| | ----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b.2.) |  | The Company filed a Current Report on Form 8-K on April 16,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures and Item 7. Financial Statements, Proforma
Financial Information and Exhibits.
|
| | b.3.) |  | The Company filed a Current Report on Form 8-K on June 2,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures.                                                                                  
|
| | b.4.) |  | The Company filed a Current Report on Form 8-K on June 5,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures.                                                                                  
|
| | b.5.) |  | The Company filed a Current Report on Form 8-K on June 9,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures.                                                                                  
|
| | b.6.) |  | The Company filed a Current Report on Form 8-K on June 27,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures.                                                                                 

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WESTPOINT STEVENS INC.

SIGNATURE

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

| |  |  |  |                                                                                           
| |  |  |  | ------------------------------------------------------------------------------------------
| |  |  |  | WESTPOINT STEVENS INC.Registrant                                                          
|
| |  |  |  |                                                                                           
|
| |  |  |  | /s/ L. Dupuy SearsL. Dupuy Sears
Senior Vice President-Finance
and Chief Financial Officer

Date: August 14, 2003

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WESTPOINT STEVENS INC.

EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                       |  |        |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | 
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                       |  | PAGE  
|NUMBER  |  |                                                                                                                                                                                                                                                                                                                                                                       |  | NUMBER
|        |  |                                                                                                                                                                                                                                                                                                                                                                       |  |       
|10.1    |  | Amendment No. 1 to Loan and Security Agreement,
dated as of April 15, 2003, by and among WPS
Receivables Corporation, WestPoint Stevens Inc.,
Congress Financial Corporation (Southern),
The CIT Group/Commercial Services, Inc. and
the parties to the Loan Agreement as lenders.                                                                                   
|       
|10.2    |  | Amendment dated as of May 30, 2003, to the
$165,000,000 Credit Agreement dated as of
June 29, 2001, among WestPoint Stevens Inc.,
certain of its Subsidiaries and Deutschebank
Trust Company America (f/k/a Bankers Trust
Company) in its capacity as Agent and the
parties to the Loan Agreement as lenders.                                                        
|       
|10.3    |  | Amendment No. 2 to Loan and Security Agreement
dated as of June 1, 2003, by and among WPS
Receivables Corporation, WestPoint Stevens Inc.,
Congress Financial Corporation (Southern),
The CIT Group/Commercial Services, Inc. and
the parties to the Loan Agreement as lenders.                                                                                      
|       
|10.4    |  | Post-Petition Credit Amendment, dated as of
June 2, 2003, among WestPoint Stevens Inc.
and certain of its subsidiaries, the financial
institutions named therein and Bank of
America, N.A. and Wachovia Bank,
National Association, incorporated by
reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the
Commission on June 5, 2003.
|       
|10.5    |  | Security Agreement dated June 2, 2003 by WestPoint Stevens Inc.
and certain of its subsidiaries, the financial institutions named
therein and Bank of America, N.A. in its capacity as administrative
and collateral agent.                                                                                                                                          
|       
|10.6    |  | First Amendment to Post-Petition Credit Agreement
dated June 26, 2003, among WestPoint Stevens Inc.
and certain of its subsidiaries, the financial institutions
named therein and Bank of America, N.A. and
Wachovia Bank, National Association.                                                                                                                     
|       
|31.1    |  | Chief Executive Officers Section 302 Certification.                                                                                                                                                                                                                                                                                                                 
|       
|31.2    |  | Chief Financial Officers Section 302 Certification.                                                                                                                                                                                                                                                                                                                 
|       
|32.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906
of the Sarbanes-Oxley Act of 2002 as signed by the Chief Executive Officer.                                                                                                                                                                                                              
|       
|32.2    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted by Section 906
of the Sarbanes-Oxley Act of 2002 as signed by the Chief Financial Officer.                                                                                                                                                                                                              

42