##### 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 March 31, 2003

OR

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

For the transition period from             to

Commission File Number 0-21496

WESTPOINT STEVENS INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or other jurisdiction of
incorporation or organization) |  | 36-3498354
(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 [  ] No [X]

Common shares outstanding at May 31, 2003: 49,897,409 shares of Common Stock,
$.01 par value.

1



---

TABLE OF CONTENTS



|                                             |                                                                                               |                                                                                 |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION               
|                                             | Item 1. Financial Statements                                                                 
|                                             |                                                                                               | 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 (Unaudited)               
|                                             | 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                                                     
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



---



##### Table of Contents



INDEX







|         |  |                                                                                                                    |  |         
|-------- |  | ------------------------------------------------------------------------------------------------------------------ |  | --------
|         |  |                                                                                                                    |  | Page No.
|         |  |                                                                                                                    |  |         
|PART I.  |  | FINANCIAL INFORMATION                                                                                              |  |         
|         |  |                                                                                                                    |  |         
|         |  | Item 1. Financial Statements                                                                                       |  |         
|         |  |                                                                                                                    |  |         
|         |  | Condensed Consolidated Balance Sheets: March 31, 2003
(Unaudited) and December 31, 2002                            |  | 3       
|         |  |                                                                                                                    |  |         
|         |  | Condensed Consolidated Statements of
Operations (Unaudited); Three
Months Ended March 31, 2003
and March 31, 2002  |  | 4       
|         |  |                                                                                                                    |  |         
|         |  | Condensed Consolidated Statements of
Cash Flows (Unaudited); Three
Months Ended March 31, 2003
and March 31, 2002  |  | 5       
|         |  |                                                                                                                    |  |         
|         |  | Condensed Consolidated Statements of
Stockholders Equity (Deficit) (Unaudited);
Three Months Ended March 31, 2003 |  | 6       
|         |  |                                                                                                                    |  |         
|         |  | Notes to Condensed Consolidated Financial
Statements (Unaudited)                                                   |  | 721    
|         |  |                                                                                                                    |  |         
|         |  | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations                      |  | 2231   
|         |  |                                                                                                                    |  |         
|         |  | Item 4. Controls and Procedures                                                                                    |  | 32      
|         |  |                                                                                                                    |  |         
|PART II. |  | OTHER INFORMATION                                                                                                  |  |         
|         |  |                                                                                                                    |  |         
|         |  | Item 1. Legal Proceedings                                                                                          |  | 3335   
|         |  |                                                                                                                    |  |         
|         |  | Item 6. Exhibits and Reports on Form 8-K                                                                           |  | 3638   

2



---



##### Table of Contents






WESTPOINT STEVENS INC.Condensed Consolidated Balance Sheets
(In thousands)

|                                               |                                           |   |             |           |              |   |           |           | 
|---------------------------------------------- | ----------------------------------------- | - | ----------- | --------- | ------------ | - | --------- | --------- | 
|                                               |                                           |   | March 31,   |           | December 31,
|                                               |                                           |   | 2003        |           | 2002        
|                                               |                                           |   |             |           |             
|                                               |                                           |   | (Unaudited) |           |              |   |          
|Assets                                         |                                           |   |             |           |              |   |           |          
|Current Assets                                 |                                           |   |             |           |              |   |           |          
|                                               | Cash and cash equivalents                 |   | $           | 2,663     |              |   | $         | 1,096     | 
|                                               | Accounts receivable                       |   |             | 115,819   |              |   |           | 107,751   | 
|                                               | Inventories                               |   |             | 412,088   |              |   |           | 368,743   | 
|                                               | Prepaid expenses and other current assets |   |             | 35,510    |              |   |           | 33,111    | 
|                                               |                                           |   |             |           |              |   |           |          
|Total current assets                           |                                           |   | 566,080     |           |              |   | 510,701   |          
|                                               |                                           |   |             |          
|Property, Plant and Equipment, net             |                                           |   | 696,532     |           |              |   | 711,189   |          
|                                               |                                           |   |             |          
|Other Assets                                   |                                           |   |             |           |              |   |           |          
|                                               | Deferred financing fees                   |   |             | 23,185    |              |   |           | 25,883    | 
|                                               | Other assets                              |   |             | 2,839     |              |   |           | 3,134     | 
|                                               | Goodwill                                  |   |             | 46,298    |              |   |           | 46,298    | 
|                                               |                                           |   |             |           |              |   |           |          
|                                               |                                           | $ | 1,334,934   |           |              | $ | 1,297,205 |          
|                                               |                                           |   |             |           |              |   |           |          
|Liabilities and Stockholders Equity (Deficit) |                                           |   |             |           |              |   |           |          
|Current Liabilities                            |                                           |   |             |           |              |   |           |          
|                                               | Senior Credit Facility                    |   | $           | 464,399   |              |   | $         | 447,795   | 
|                                               | Long-term debt                            |   |             | 1,165,000 |              |   |           | 1,165,000 | 
|                                               | Accrued interest payable                  |   |             | 30,348    |              |   |           | 3,949     | 
|                                               | Accounts payable                          |   |             | 63,159    |              |   |           | 57,357    | 
|                                               | Other accrued liabilities                 |   |             | 120,125   |              |   |           | 113,518   | 
|                                               |                                           |   |             |           |              |   |           |          
|Total current liabilities                      |                                           |   | 1,843,031   |           |              |   | 1,787,619 |          
|                                               |                                           |   |             |          
|Noncurrent Liabilities                         |                                           |   |             |           |              |   |           |          
|                                               | Deferred income taxes                     |   |             | 148,578   |              |   |           | 158,244   | 
|                                               | Pension and other liabilities             |   |             | 164,925   |              |   |           | 156,989   | 
|                                               |                                           |   |             |           |              |   |           |          
|Total noncurrent liabilities                   |                                           |   | 313,503     |           |              |   | 315,233   |          
|                                               |                                           |   |             |          
|Stockholders Equity (Deficit)                 |                                           |   | (821,600    | )         |              |   | (805,647  | )        
|                                               |                                           |   |             |           |              |   |           |          
|                                               |                                           | $ | 1,334,934   |           |              | $ | 1,297,205 |          
|                                               |                                           |   |             |           |              |   |           |          

See accompanying notes

3



---



##### Table of Contents






WESTPOINT STEVENS INC.Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)

|                                             |                                                       |   |                    |         |      |   |         |         | 
|-------------------------------------------- | ----------------------------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | 
|                                             |                                                       |   | Three Months Ended
|                                             |                                                       |   | March 31,         
|                                             |                                                       |   |                   
|                                             |                                                       |   | 2003               |         | 2002
|                                             |                                                       |   |                    |         |     
|Net sales                                    |                                                       | $ | 379,263            |         |      | $ | 435,144 |        
|Cost of goods sold                           |                                                       |   | 305,868            |         |      |   | 327,343 |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Gross earnings                                        |   |                    | 73,395  |      |   |         | 107,801 | 
|                                             |                                                       |   |                    |        
|Selling, general and administrative expenses |                                                       |   | 63,463             |         |      |   | 68,900  |        
|Restructuring and impairment charge          |                                                       |   | 1,378              |         |      |   |        |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Operating earnings                                    |   |                    | 8,554   |      |   |         | 38,901  | 
|                                             |                                                       |   |                    |        
|Interest expense                             |                                                       |   | 32,465             |         |      |   | 33,344  |        
|Other expense-net                            |                                                       |   | 2,505              |         |      |   | 2,397   |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Income (loss) before income tax
expense (benefit)     |   |                    | (26,416 | )    |   |         | 3,160   | 
|                                             |                                                       |   |                    |        
|Income tax expense (benefit)                 |                                                       |   | (9,510             | )       |      |   | 1,140   |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Net income (loss)                                     |   | $                  | (16,906 | )    |   | $       | 2,020   | 
|                                             |                                                       |   |                    |         |      |   |         |        
|Basic net income (loss) per common share     |                                                       | $ | (.34               | )       |      | $ | .04     |        
|                                             |                                                       |   |                    |         |      |   |         |        
|Diluted net income (loss) per common share   |                                                       | $ | (.34               | )       |      | $ | .04     |        
|                                             |                                                       |   |                    |         |      |   |         |        
|Basic average common shares outstanding      |                                                       |   | 49,852             |         |      |   | 49,652  |        
|                                             | Dilutive effect of stock options
and stock bonus plan |   |                    |        |      |   |         |        | 
|                                             |                                                       |   |                    |         |      |   |         |        
|Diluted average common shares outstanding    |                                                       |   | 49,852             |         |      |   | 49,652  |        
|                                             |                                                       |   |                    |         |      |   |         |        

See accompanying notes

4



---



##### Table of Contents






WESTPOINT STEVENS INC.Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |        |          |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ------- | ------------------ | -------- | ---- | ------ | ------ | -------- | -
|                                                     |                                                                                                     |                                                           |         | Three Months Ended
|                                                     |                                                                                                     |                                                           |         | March 31,         
|                                                     |                                                                                                     |                                                           |         |                   
|                                                     |                                                                                                     |                                                           |         | 2003               |          | 2002
|                                                     |                                                                                                     |                                                           |         |                    |          |     
|Cash flows from operating activities:                |                                                                                                     |                                                           |         |                    |          |      |        |       
|                                                     | Net income (loss)                                                                                   |                                                           | $       | (16,906            | )        |      | $      | 2,020  |         
|                                                     | Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities: |                                                           |         |                    |          |      |        |        |         
|                                                     |                                                                                                     | Depreciation and other amortization                       |         |                    | 18,885   |      |        |        | 20,746   |  
|                                                     |                                                                                                     | Deferred income taxes                                     |         |                    | (9,474   | )    |        |        | 1,142    |  
|                                                     |                                                                                                     | Changes in working capital                                |         |                    | 11,190   |      |        |        | (32,243  | )
|                                                     |                                                                                                     | Other-net                                                 |         |                    | 12,330   |      |        |        | 532      |  
|                                                     |                                                                                                     | Non-cash component of restructuring and
impairment charge |         |                    | 186      |      |        |        |         |  
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Net cash provided by (used for) operating activities |                                                                                                     |                                                           | 16,211  |                    |          |      | (7,803 | )     
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Cash flows from investing activities:                |                                                                                                     |                                                           |         |                    |          |      |        |       
|                                                     | Capital expenditures                                                                                |                                                           |         | (4,454             | )        |      |        | (4,215 | )       
|                                                     | Net proceeds from sale of assets                                                                    |                                                           |         | 13                 |          |      |        | 225    |         
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Net cash used for investing activities               |                                                                                                     |                                                           | (4,441  | )                  |          |      | (3,990 | )     
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Cash flows from financing activities:                |                                                                                                     |                                                           |         |                    |          |      |        |       
|                                                     | Senior Credit Facility:                                                                             |                                                           |         |                    |          |      |        |        |         
|                                                     |                                                                                                     | Borrowings                                                |         |                    | 338,000  |      |        |        | 200,000  |  
|                                                     |                                                                                                     | Repayments                                                |         |                    | (321,396 | )    |        |        | (182,421 | )
|                                                     | Trade Receivables Program                                                                           |                                                           |         | (26,807            | )        |      |        | (6,700 | )       
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Net cash provided by (used for) financing activities |                                                                                                     |                                                           | (10,203 | )                  |          |      | 10,879 |       
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Net increase (decrease) in cash and cash equivalents |                                                                                                     |                                                           | 1,567   |                    |          |      | (914   | )     
|                                                     |                                                                                                     |                                                           |         |                   
|Cash and cash equivalents at beginning of period     |                                                                                                     |                                                           | 1,096   |                    |          |      | 3,170  |       
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       
|Cash and cash equivalents at end of period           |                                                                                                     | $                                                         | 2,663   |                    |          | $    | 2,256  |       
|                                                     |                                                                                                     |                                                           |         |                    |          |      |        |       

See accompanying notes

5



---



##### 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                                |                                          |   |       |   |         |        |            |   |                |     |              |   |               |       |             |   |          |      | (16,906 | ) |             |   |    |        |        |     |  |   |          |         | (16,906 | )     
|                         |                                                                      | Foreign currency
translation adjustment |                                          |   |       |   |         |        |            |   |                |     |              |   |               |       |             |   |          |      |        |   |             |   | 776 |        |        |     |  |   |          |         | 776     |       
|                         |                                                                      | Cash flow hedges:                       |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          |         |         |       
|                         |                                                                      |                                         | Net derivative gains, net
of tax benefit |   |        |  |         |        |             |  |                |     |               |  |               |       |              |  |          |      |         |  |             |   |     | (1,174 | )      |     |   |  |          |         |         | (1,174 | )
|                         |                                                                      |                                         |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          |        
|                         | Comprehensive income (loss)                                          |                                         |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          | (17,304 | )      
|                         |                                                                      |                                         |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          |        
|                         | 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                                         |                                         |                                          |  |        |   |         | (30    | )           |   |                | 5   |               |   |               | 33    |              |   |          |     |         |   |             |  |     |        |        | (3  | ) |   |          |        |        
|                         | Amortization of
compensation                                         |                                         |                                          |  |        |   |         |       |             |   |                |    |               |   |               |      |              |   |          |     |         |   |             |  |     |        |        | 471 |   |   |          | 471     |        
|                         | Stock dividends pursuant
to Stock Bonus Plan                         |                                         |                                          |  |        |   |         |       |             |   |                |    |               |   |               |      |              |   |          | (106 | )       |   |             |  |     |        |        |    |   |   |          | (106    | )      
|                         |                                                                      |                                         |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          |        
|Balance, March 31, 2003  |                                                                      |                                         | 71,100                                   |   |        | $ | 408,153 |        |             |   | (21,203        | )   |               | $ | (416,137      | )     |              | $ | (710,664 | )    |         | $ | (99,979     | ) |     | $      | (2,973 | )   |   | $ | (821,600 | )      
|                         |                                                                      |                                         |                                          |   |        |   |         |        |             |   |                |     |               |   |               |       |              |   |          |      |         |   |             |   |     |        |        |     |   |   |          |        

See accompanying notes

6



---



##### 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 three month period ended March 31, 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

Subsequent to the end of the Companys quarter ended March 31, 2003, 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.

7



---



##### 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).

8



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

2. Chapter 11 FilingContinued

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, 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.

9



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

2. Chapter 11 FilingContinued

Basis of PresentationContinued

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

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

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 at March 31, 2003 and December 31, 2002
(in thousands of dollars):

|                           |  |           |         |              |  |   |         | 
|-------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                           |  | March 31, |         | December 31,
|                           |  | 2003      |         | 2002        
|                           |  |           |         |             
|Finished goods             |  | $         | 177,924 |              |  | $ | 142,484 | 
|Work in process            |  |           | 185,785 |              |  |   | 174,460 | 
|Raw materials and supplies |  |           | 48,379  |              |  |   | 51,799  | 
|LIFO reserve               |  |           |        |              |  |   |        | 
|                           |  |           |         |              |  |   |         | 
|                           |  | $         | 412,088 |              |  | $ | 368,743 | 
|                           |  |           |         |              |  |   |         | 

10



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

4. Indebtedness and Financial Arrangements

Indebtedness is as follows (in thousands of dollars):

|                        |                              |   |           |         |              |   |           |         | 
|----------------------- | ---------------------------- | - | --------- | ------- | ------------ | - | --------- | ------- | 
|                        |                              |   | March 31, |         | December 31,
|                        |                              |   | 2003      |         | 2002        
|                        |                              |   |           |         |             
|Short-term indebtedness |                              |   |           |         |              |   |           |        
|                        | Senior Credit Facility       |   | $         | 464,399 |              |   | $         | 447,795 | 
|                        | Second-Lien Facility         |   |           | 165,000 |              |   |           | 165,000 | 
|                        | 7-7/8% Senior Notes due 2005 |   |           | 525,000 |              |   |           | 525,000 | 
|                        | 7-7/8% Senior Notes due 2008 |   |           | 475,000 |              |   |           | 475,000 | 
|                        |                              |   |           |         |              |   |           |        
|                        |                              | $ | 1,629,399 |         |              | $ | 1,612,795 |        
|                        |                              |   |           |         |              |   |           |        

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

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

11



---



##### 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 March 31, 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 March 31, 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 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

12



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

4. Indebtedness and Financial
ArrangementsContinued

to selling expense in the accompanying Consolidated Statements of Operations.
At March 31, 2003 and
December 31, 2002, $128.0 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. The
Company currently believes that all outstanding loans under the Receivables
Loan Agreement will be repaid in full from such proceeds. The Company is
currently financing its accounts receivable through borrowings under the DIP
Credit Agreement and expects to continue to do so during the pendency of its
Chapter 11 proceedings.

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.

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

13



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

5. Restructuring, Impairment and
Other ChargesContinued

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 March 31, 2003                 |                | $ |          |      |             | $ | 0.3      |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 

14



---



##### 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 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 six retail stores. Closure of other retail stores and other
facilities may be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002 and a restructuring and
impairment charge of $1.4 million, before taxes, in 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 2003 included $0.2 million for the impairment of fixed
assets and $1.2 million in reserves to cover cash expenses related to severance
benefits of $0.8 million and other exit costs.

15



---



##### Table of Contents



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 | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 
|Total 2003 Charge                         |                |   | 0.2       |     |             |   | 0.8      |     |        |   | 0.4  |     |  |   | 1.4  |    
|                                         
|Writedown Assets to Net Recoverable Value |                |   | (4.6      | )   |             |   |         |     |        |   |     |     |  |   | (4.6 | )  
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |     |     |  |   | (1.5 | )  
|2003 Cash Payments                        |                |   |          |     |             |   | (0.2     | )   |        |   | (0.2 | )   |  |   | (0.4 | )  
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 
|Balance at March 31, 2003                 |                | $ |          |     |             | $ | 1.2      |     |        | $ | 0.3  |     |  | $ | 1.5  |    
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 

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 2003, other costs of the
restructuring initiatives of $2.9 million, before taxes, were recognized
consisting of inventory writedowns of $1.0 million primarily related to the
rationalization of its retail store division and other expenses of $1.9
million, consisting primarily of related unabsorbed overhead, all reflected in
cost of goods sold.

6. Comprehensive Income (Loss)

Comprehensive income (loss) for the three months ended March 31, 2003 and 2002
is as follows (in thousands):

|                                                   |                                                                               |   |                    |        |      |   |       |     | 
|-------------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ----- | --- | 
|                                                   |                                                                               |   | Three Months Ended
|                                                   |                                                                               |   | March 31,         
|                                                   |                                                                               |   |                   
|                                                   |                                                                               |   | 2003               |        | 2002
|                                                   |                                                                               |   |                    |        |     
|Net income (loss)                                  |                                                                               | $ | (16,906            | )      |      | $ | 2,020 |    
|Foreign currency translation adjustment            |                                                                               |   | 776                |        |      |   | 394   |    
|Gain (loss) on derivative instruments, net of tax: |                                                                               |   |                    |        |      |   |       |    
|                                                   | Net changes in fair value of derivatives                                      |   |                    | 646    |      |   |       | 564 | 
|                                                   | Net (gains) losses reclassified from other
comprehensive income into earnings |   |                    | (1,820 | )    |   |       | 23  | 
|                                                   |                                                                               |   |                    |        |      |   |       |    
|Comprehensive income (loss)                        |                                                                               | $ | (17,304            | )      |      | $ | 3,001 |    
|                                                   |                                                                               |   |                    |        |      |   |       |    

16



---



##### Table of Contents



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 months ended March 31, 2003 is the
amortization of deferred financing fees of $2.6 million compared with $2.3
million for the three months ended March 31, 2002.

8. Litigation and Contingent Liabilities

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

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

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

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al.(the Hemmeraction),was filed against Mr.
Green and certain of the Companys other directors including Messrs. Hugh M.
Chapman, John F. Sorte and Ms. M. Katherine Dwyer in the Court of Chancery in
the State of Delaware in and for New Castle County. The Complaint alleges that
the named

17



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

8. Litigation and Contingent
LiabilitiesContinued

individuals breached their fiduciary duties and knowingly or recklessly failed
to exercise oversight responsibilities to ensure the integrity of the Companys
financial reporting. The Complaint also asserts that certain of the named
individuals used proprietary Company information in selling or pledging
Company stock at inflated prices for their benefit. The claims are based on
the same or similar facts as are alleged in the Gelleraction.

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

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

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

The Company has been named as a defendant in three separate purported class
action suits seeking reparation for the historic enslavement of African
Americans in the United States. Eddlee Bankhead v. Lloyds of London, et al.
(the Bankheadaction) was filed on September 3, 2002, in the United States
District Court for the Southern District of New York. Timothy Hurdle and
Chester Hurdle v. FleetBoston Financial Corporation, et al. was initially filed
in the California Superior Court for San Francisco County on September 10,
2002, but has since been removed to the United States District Court California
Northern District (San Francisco). Julie Mae Wyatt-Kerwin v. J.P. Morgan Chase
was 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.

18



---



##### Table of Contents



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 Company believes that the
Complaints are without merit and intends to contest the actions vigorously.

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

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

19



---



##### Table of Contents



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 March 31, 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 of the 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
|                                  |                                                                                                             |          |             |     | March 31,         
|                                  |                                                                                                             |          |             |     |                   
|                                  |                                                                                                             |          |             |     | 2003               |       | 2002 
|                                  |                                                                                                             |          |             |     |                    |       |      
|Net income (loss) as reported     |                                                                                                             | $        | (16,906     | )   |                    | $     | 2,020 |      
|Deduct:                           |                                                                                                             |          |             |     |                    |       |       |      
|                                  | Total stock-based compensation expenses determined under
fair-value based method for all awards, net of tax |          |             | 650 |                    |       |       | 1,158 |  
|                                  |                                                                                                             |          |             |     |                    |       |       |      
|Pro forma net income (loss)       |                                                                                                             | $        | (17,556     | )   |                    | $     | 862   |      
|                                  |                                                                                                             |          |             |     |                    |       |       |      
|Earnings (loss) per common share: |                                                                                                             |          |             |     |                    |       |       |      
|                                  |                                                                                                             | Basic:   |             |     |                    |       |       |       |   |     
|                                  |                                                                                                             |          | As reported |     | $                  | (0.34 | )     |       | $ | 0.04 | 
|                                  |                                                                                                             |          | Pro forma   |     | $                  | (0.35 | )     |       | $ | 0.02 | 
|                                  |                                                                                                             | Diluted: |             |     |                    |       |       |       |   |     
|                                  |                                                                                                             |          | As reported |     | $                  | (0.34 | )     |       | $ | 0.04 | 
|                                  |                                                                                                             |          | Pro forma   |     | $                  | (0.35 | )     |       | $ | 0.02 | 

20



---



##### Table of Contents



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 has
begun performing an interim test of the carrying amount of its goodwill in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets.

21



---



##### Table of Contents



WESTPOINT STEVENS INC.




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

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.

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

22



---



##### 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Continued

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 March 31, 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.

Second-Lien Facility

On June 29, 2001, the Company announced the closing of a $165.0 million
Second-Lien Facility with a maturity date of February 28, 2005. Net proceeds
from the transaction, after payment of approximately $16.3 million of related
transaction fees and expenses, were used to reduce outstanding borrowings under
the Senior Credit Facility as well as provide additional liquidity for working
capital and general corporate purposes. Effective with the closing of the
Second-Lien Facility, the revolving commitment under the Senior Credit Facility
was reduced to $717.5 million from $800.0 million. Interest under the
Second-Lien Facility is payable quarterly at an interest rate of prime plus 8%
increasing each quarter after June 30, 2002 by .375% but in no event less than
15%. Loans under the Second-Lien Facility are secured by a second priority
lien on the assets securing the existing Senior Credit Facility. The
approximately $16.3 million of related transaction fees and expenses were
capitalized as deferred financing fees and are being amortized over the
remaining term of the facility.

DIP Credit Agreement

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

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

23



---



##### 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.

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, 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.

24



---



##### 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 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 March 31, 2003                 |                | $ |          |      |             | $ | 0.3      |     |        | $ | 1.6  |      |   | $ | 1.9   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 

25



---



##### 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 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 six retail stores. Closure of other retail stores and other
facilities may be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $6.6 million, before taxes, in 2002 and a restructuring and
impairment charge of $1.4 million, before taxes, in 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 2003 included $0.2 million for the impairment of fixed
assets and $1.2 million in reserves to cover cash expenses related to severance
benefits of $0.8 million and other exit costs.

26



---



##### 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 | 
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 
|Total 2003 Charge                         |                |   | 0.2       |     |             |   | 0.8      |     |        |   | 0.4  |     |  |   | 1.4  |    
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |     
|Writedown Assets to Net Recoverable Value |                |   | (4.6      | )   |             |   |         |     |        |   |     |     |  |   | (4.6 | )  
|2002 Cash Payments                        |                |   |          |     |             |   | (1.5     | )   |        |   |     |     |  |   | (1.5 | )  
|2003 Cash Payments                        |                |   |          |     |             |   | (0.2     | )   |        |   | (0.2 | )   |  |   | (0.4 | )  
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 
|Balance at March 31, 2003                 |                | $ |          |     |             | $ | 1.2      |     |        | $ | 0.3  |     |  | $ | 1.5  |    
|                                          |                |   |           |     |             |   |          |     |        |   |      |     |  |   |      |     | 

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 2003, other costs of the
restructuring initiatives of $2.9 million, before taxes, were recognized
consisting of inventory writedowns of $1.0 million primarily related to the
rationalization of its retail store division and other expenses of $1.9
million, consisting primarily of related unabsorbed overhead, all reflected in
cost of goods sold.

27



---



##### 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
months ended March 31, 2003 and March 31, 2002 (in millions of dollars).

|                                           |  |                    |       |      |  |   |       |  
|------------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                           |  | Three Months Ended
|                                           |  | March 31,         
|                                           |  |                   
|                                           |  | 2003               |       | 2002
|                                           |  |                    |       |     
|Net sales                                  |  | $                  | 379.3 |      |  | $ | 435.1 |  
|                                           |  |                    |       |      |  |   |       |  
|Gross earnings                             |  | $                  | 73.4  |      |  | $ | 107.8 |  
|                                           |  |                    |       |      |  |   |       |  
|Restructuring and impairment charge        |  | $                  | 1.4   |      |  |   |      |  
|                                           |  |                    |       |      |  |   |       |  
|Operating earnings                         |  | $                  | 8.6   |      |  | $ | 38.9  |  
|                                           |  |                    |       |      |  |   |       |  
|Interest expense                           |  | $                  | 32.5  |      |  | $ | 33.3  |  
|                                           |  |                    |       |      |  |   |       |  
|Other expense-net                          |  | $                  | 2.5   |      |  | $ | 2.4   |  
|                                           |  |                    |       |      |  |   |       |  
|Income (loss) from operations before taxes |  | $                  | (26.4 | )    |  | $ | 3.2   |  
|                                           |  |                    |       |      |  |   |       |  
|
|Net income (loss)                          |  | $                  | (16.9 | )    |  | $ | 2.0   |  
|Gross margin                               |  |                    | 19.4  | %    |  |   | 24.8  | %
|Operating margin                           |  |                    | 2.2   | %    |  |   | 8.9   | %

28



---



##### 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 March 31, 2003 Compared to
|                       |  | Three Months Ended March 31, 2002            

Net Sales.Net sales for the three months ended March 31, 2003 decreased $55.9
million, or 12.8 % to $379.3 million compared with net sales of $435.1 million
for the three months ended March 31, 2002. The decline in sales reflected weak
retail demand across all distribution channels and amongst all product
categories with the exception of towels.

For the three months ended March 31, 2003, bed products sales were $214.6
million compared with $266.0 million for the same period in 2002; bath products
sales were $128.0 million compared with $120.9 million for the same period in
2002; and other sales (consisting primarily of sales from the Companys mill
stores and foreign operations) were $36.7 million compared with $48.2 million
for the same period in 2002.

Gross Earnings/Margins.Gross earnings for the three months ended March 31,
2003 decreased $34.4 million, or 31.9%, to $73.4 million compared with $107.8
million for the same period of 2002, and reflect gross margins of 19.4% in 2003
versus 24.8% in 2002. Gross earnings and margins decreased primarily as a
result of lower sales, a less profitable mix of revenues, increased promotional
activity and increased royalties. Included in the cost of goods sold in the
first quarter of 2003 are charges associated with recent restructuring
initiatives of $2.9 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 $5.4 million, or 7.9%, in the first 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 15.8% in the 2002 period. The decrease in selling,
general and administrative expenses in the first quarter of 2003 was due to
lower advertising and bad debt expense and lower selling expense as a result of
lower sales that more than offset increased warehousing expense. 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 expenses relative to sales.

Operating earnings for the first quarter of 2003 decreased 78.0% to $8.6
million, or 2.3% of sales, compared with operating earnings of $38.9 million,
or 8.9% of sales, for the same period in 2002. Operating earnings for the
three months ended March 31, 2003, included a separate line item for
restructuring and impairment charges to reflect $1.4 million in severance
benefits and other exit costs in addition to charges associated with recent
restructuring initiatives of $2.9 million, the majority of which reflects costs
for unabsorbed overhead and inventory write-offs.

Interest Expense.Interest expense for the three months ended March 31, 2003
of $32.5 million decreased $0.9 million compared with interest expense of $33.3
million for the three months ended March 31, 2002. The decrease was due
primarily to lower interest rates on the Companys variable rate bank debt for
2003 compared with corresponding 2002 average interest rate levels.

29



---



##### 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 March 31, 2003 Compared to
Three Months Ended March 31, 2002Continued

Other Expense, Net.Other expense, net in the first quarter of 2003 consisted
primarily of the amortization of deferred financing fees of $2.6 million, less
certain miscellaneous income items compared with other expense, net in the
first quarter of 2002 of $2.4 million.

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 first quarter of 2003 was $16.9
million or a loss of $0.34 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 March 31, 2003 were costs related to
restructuring initiatives, net of taxes, of $2.7 million, or $0.06 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. For additional information about the DIP Credit
Agreement, see DIP Credit Agreement above.

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

30



---



##### Table of Contents



WESTPOINT STEVENS INC.

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

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.

31



---



##### Table of Contents



WESTPOINT STEVENS INC.




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-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are 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, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

32



---



##### Table of Contents



WESTPOINT STEVENS INC.




PART II - OTHER INFORMATION




Item 1. Legal Proceedings

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

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

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

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

33



---



##### Table of Contents



WESTPOINT STEVENS INC.

PART II - OTHER INFORMATION (Continued)

Item 1. Legal ProceedingsContinued

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

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

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

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

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

34



---



##### Table of Contents



WESTPOINT STEVENS INC.

PART II - OTHER INFORMATION (Continued)

Item 1. Legal ProceedingsContinued

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

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.

35



---



##### Table of Contents



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    |  | Second Amendment to First Amended and Restated Asset Interest Transfer
Agreement dated January 10, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding Corporation, North
American Capacity Insurance Company and Wachovia Bank National
Association, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on January 15, 2003.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.2    |  | Third Amendment to First Amended and Restated Asset Interest Transfer
Agreement dated February 7, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding Corporation, North
American Capacity Insurance Company and Wachovia Bank National
Association, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on February 11,
2003.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.3    |  | Loan and Security Agreement, dated March 28, 2003, by and among
WPS Receivables Corporation, WestPoint Stevens Inc., Congress Financial
Corporation (Southern), The CIT Group/Commercial Services, Inc. and the
Lenders from Time to Time Parties Hereto, incorporated by reference to the
Form 8-K (Commission File No. 0-21496) filed by the Company with the
Commission on April 1, 2003.                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.4    |  | Second Amended and Restated Receivables Purchase Agreement, dated as of
March 28, 2003, by and between WestPoint Stevens Inc. and WPS Receivables
Corporation, incorporated by reference to the Form 8-K (Commission File
No. 0-21496) filed by the Company with the Commission on April 1, 2003.                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.5    |  | Release and Confidentiality Agreement dated February 4, 2003, between
WestPoint Stevens Inc. and Michael J. Velsmid, Jr., incorporated by
reference to the Form 10-K (Commission File No. 0-21496) filed by the
Company with the Commission on June 19, 2003.                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.6    |  | Amendment Letter dated March 20, 2003, between WestPoint Stevens Inc. and
M. L. Fontenot, incorporated by reference to the Form 10-K (Commission
File No. 0-21496) filed by the Company with the Commission on June 19,
2003.                                                                                                                                                                                                    

36



---



##### Table of Contents



WESTPOINT STEVENS INC.

PART II - OTHER INFORMATION (Continued)

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

a.)

|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.7    |  | The First Amendment Agreement, dated as of March 31, 2003, among the
Company, certain of its subsidiaries, Deutsche Bank Trust Company Americas
(f/k/a Bankers Trust Company), as Administrative Agent and the Lenders
party thereto, incorporated by reference to the Form 10-K (Commission File
No. 0-21496) filed by the Company with the Commission on June 19, 2003.                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.8    |  | Waiver Agreement dated as of March 31, 2003, among the Company, certain
of its subsidiaries, Deutsche Bank Trust Company Americas (f/k/a Bankers
Trust Company), as Administrative Agent and the Lenders party thereto,
incorporated by reference to the Form 10-K (Commission File No. 0-21496)
filed by the Company with the Commission on June 19, 2003.                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.9    |  | Eight Amendment and Temporary Waiver Agreement, dated as of March 31,
2003, among the Company, WestPoint Stevens (UK) Limited, WestPoint Stevens
(Europe) Limited, Bank of America, N.A., as Agent and the other financial
institutions party thereto, incorporated by reference to the Form 10-K
(Commission File No. 0-21496) filed by the Company with the Commission on
June 19, 2003.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|10.10   |  | Post-Petition Credit Agreement, dated as of June 2, 2003, among
WestPoint Stevens Inc. and certain of its subsidiaries, the financial
institutions named therein and Bank of America, N.A. and Wachovia Bank,
National Association, incorporated by reference to the Form 8-K
(Commission File No. 0-21496) filed by the Company with the Commission on
June 5, 2003.                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|99.1    |  | Certification of the Chief Executive Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                           
|99.2    |  | Certification of the Chief Financial Officer pursuant to U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                       

37



---



##### Table of Contents



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 January 15,
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 From 8-K on January 30,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures and Item 7. Financial Statement, Proforma Financial
Statements and Exhibits.   
|      |  |                                                                                                                                                                                                                                   
|b.3.) |  | The Company filed a Current Report on Form 8-K on February 11,
2003. The items reported were Item 5. Other Events and Regulation
FD Disclosures and Item 7. Financial Statements, Proforma
Financial Information and Exhibits.

38



---



##### Table of Contents



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 Sears

L. Dupuy Sears
|Senior Vice President-Finance     
|and Chief Financial Officer       

Date: June 26, 2003

39



---



##### Table of Contents



CERTIFICATIONS

I, Holcombe T. Green, Jr., certify that:

1.        I have reviewed this quarterly report on Form 10-Q of WestPoint Stevens
Inc.;

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

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

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

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

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

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

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

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

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

40



---



##### Table of Contents



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

Date: June 26, 2003

|                          
|--------------------------
|/s/ Holcombe T. Green, Jr.
|Holcombe T. Green, Jr.    
|Chief Executive Officer   

41



---



##### Table of Contents



CERTIFICATIONS

I, Lester D. Sears, certify that:

1.        I have reviewed this quarterly report on Form 10-Q of WestPoint Stevens
Inc.;

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

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

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

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

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

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

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

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

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

42



---



##### Table of Contents



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

Date: June 26, 2003

|                       
|-----------------------
|/s/ Lester D. Sears    
|Lester D. Sears        
|Chief Financial Officer

43



---



##### Table of Contents



WESTPOINT STEVENS INC.

EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   | PAGE  
|NUMBER  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   | NUMBER
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|10.1    |  | Second Amendment to First Amended and Restated
Asset Interest Transfer Agreement dated January
10, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding
Corporation, North American Capacity Insurance
Company and Wachovia Bank National Association,
incorporated by reference to the Form 8-K (Commission
File No. 0-21496) filed by the Company with the
Commission on January 15, 2003. |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|10.2    |  | Third Amendment to First Amended and Restated
Asset Interest Transfer Agreement dated February
7, 2003, among WPS Receivables Corporation,
WestPoint Stevens Inc., Blue Ridge Asset Funding
Corporation, North American Capacity Insurance
Company and Wachovia Bank National Association,
incorporated by reference to the Form 8-K (Commission
File No. 0-21496) filed by the Company with the
Commission on February 11, 2003. |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|10.3    |  | Loan and Security Agreement, dated March 28, 2003,
by and among WPS Receivables Corporation, WestPoint
Stevens Inc., Congress Financial Corporation (Southern),
The CIT Group/Commercial Services, Inc. and the Lenders
from Time to Time Parties Hereto, incorporated by reference
to the Form 8-K (Commission File No. 0-21496) filed by the
Company with the Commission on April 1, 2003.                                      |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|10.4    |  | Second Amended and Restated Receivables Purchase
Agreement, dated as of March 28, 2003, by and between
WestPoint Stevens Inc. and WPS Receivables Corporation,
incorporated by reference to the Form 8-K (Commission
File No. 0-21496) filed by the Company with the Commission
on April 1, 2003.                                                                                                                                 |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   |       
|10.5    |  | Release and Confidentiality Agreement dated February
4, 2003, between WestPoint Stevens Inc. and Michael
J. Velsmid, Jr., incorporated by reference to the Form 10-K
(Commission File No. 0-21496) filed by the Company with
the Commission on June 19, 2003.                                                                                                                                                                     |       

44



---



##### Table of Contents



WESTPOINT STEVENS INC.

EXHIBIT INDEX (Continued)

|        |  |                                                                                                                                                                                                                                                                                                                                                                                            |       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                            | PAGE  
|NUMBER  |  |                                                                                                                                                                                                                                                                                                                                                                                            | NUMBER
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            |       
|10.6    |  | Amendment Letter dated March 20, 2003, between
WestPoint Stevens Inc. and M. L. Fontenot, incorporated
by reference to the Form 10-K (Commission File No.
0-21496) filed by the Company with the Commission on
June 19, 2003.                                                                                                                                                              |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            |       
|10.7    |  | The First Amendment Agreement, dated as of March
31, 2003, among the Company, certain of its subsidiaries,
Deutsche Bank Trust Company Americas (f/k/a Bankers
Trust Company), as Administrative Agent and the Lenders
party thereto, incorporated by reference to the Form 10-K
(Commission File No. 0-21496) filed by the Company with
the Commission on June 19, 2003.                  |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            |       
|10.8    |  | Waiver Agreement dated as of March 31, 2003, among
the Company, certain of its subsidiaries, Deutsche Bank
Trust Company Americas (f/k/a Bankers Trust Company),
as Administrative Agent and the Lenders party thereto,
incorporated by reference to the Form 10-K (Commission
File No. 0-21496) filed by the Company with the Commission
on June 19, 2003.                                |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                            |       
|10.9    |  | Eight Amendment and Temporary Waiver Agreement, dated
as of March 31, 2003, among the Company, WestPoint Stevens
(UK) Limited, WestPoint Stevens (Europe) Limited, Bank of
America, N.A., as Agent and the other financial institutions
party thereto, incorporated by reference to the Form 10-K
(Commission File No. 0-21496) filed by the Company with
the Commission on June 19, 2003. |       

45



---



##### Table of Contents



WESTPOINT STEVENS INC.

EXHIBIT INDEX (Continued)

|        |  |                                                                                                                                                                                                                                                                                                                                                                       |       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                       | PAGE  
|NUMBER  |  |                                                                                                                                                                                                                                                                                                                                                                       | NUMBER
|        |  |                                                                                                                                                                                                                                                                                                                                                                       |       
|10.10   |  | Post-Petition Credit Agreement, dated as of June 2,
2003, among WestPoint Stevens Inc. and certain of its
subsidiaries, the financial institutions named therein
and Bank of America, N.A. and Wachovia Bank,
National Association, incorporated by reference to the
Form 8-K (Commission File No. 0-21496) filed by the
Company with the Commission on June 5, 2003. |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                       |       
|99.1    |  | Certification of the Chief Executive Officer pursuant
to U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                   |       
|        |  |                                                                                                                                                                                                                                                                                                                                                                       |       
|99.2    |  | Certification of the Chief Financial Officer pursuant
to U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                   |       

46