##### 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, 2002

OR

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

For the transition period from  to

Commission File Number 0-21496

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

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

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

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

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

Yesx      
No
o

Common shares outstanding at May 3, 2002: 49,648,157 shares of Common Stock,
$.01 par value.

1



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TABLE OF CONTENTS



|                                             |                                                                                               |  |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                             | Condensed Consolidated Balance Sheets                                                        
|                                             | Condensed Consolidated Statements of Operations (Unaudited)                                  
|                                             | Condensed Consolidated Statements of Cash Flows (Unaudited)                                  
|                                             | Condensed Consolidated Statements of Stockholders Equity (Deficit)                          
|                                             | Notes to Condensed Consolidated Financial Statements (Unaudited)                             
|                                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II  OTHER INFORMATION                 
|                                             | Item 1. Legal Proceedings                                                                    
|                                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                                   
|First Amendment dated as of January 14, 2002
|Amendment Letter dated February 18, 2002    



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INDEX

|                              |                                                                                                                    |                                                                             |  |          |   | 
|----------------------------- | ------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------- |  | -------- | - | 
|                              |                                                                                                                    |                                                                             |  | Page No.
|                              |                                                                                                                    |                                                                             |  |         
|PART I. FINANCIAL INFORMATION |                                                                                                                    |                                                                             |  |         
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Item 1. Financial Statements                                                                                       |                                                                             |  |          |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Condensed Consolidated Balance Sheets:                                                                             |                                                                             |  |          |  
|                              |                                                                                                                    | March 31, 2002 (Unaudited)
and December 31, 2001                            |  |          | 3 | 
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Condensed Consolidated Statements of                                                                               |                                                                             |  |          |  
|                              |                                                                                                                    | Operations (Unaudited);Three
Months Ended March 31, 2002
and March 31, 2001 |  |          | 4 | 
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Condensed Consolidated Statements of
Cash Flows (Unaudited); Three
Months Ended March 31, 2002
and March 31, 2001  |                                                                             |  | 5        |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Condensed Consolidated Statements of
Stockholders Equity (Deficit) (Unaudited);
Three Months Ended March 31, 2002 |                                                                             |  | 6        |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Notes to Condensed Consolidated Financial
Statements (Unaudited)                                                   |                                                                             |  | 7-14     |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations                      |                                                                             |  | 15-21    |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              |                                                                                                                    |                                                                             |  |          |   | 
|PART II. OTHER INFORMATION    |                                                                                                                    |                                                                             |  |         
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Item 1. Legal Proceedings                                                                                          |                                                                             |  | 22-23    |  
|                              |                                                                                                                    |                                                                             |  |          |   | 
|                              | Item 6. Exhibits and Reports on Form 8-K                                                                           |                                                                             |  | 24       |  

2



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WESTPOINT STEVENS INC.




Condensed Consolidated Balance Sheets

(In thousands)


|                                               |                                           |             |           |         |              |   |           |         | 
|---------------------------------------------- | ----------------------------------------- | ----------- | --------- | ------- | ------------ | - | --------- | ------- | 
|                                               |                                           |             | March 31, |         | December 31,
|                                               |                                           |             | 2002      |         | 2001        
|                                               |                                           |             |           |         |             
|                                               |                                           | (Unaudited)
|Assets                                         |                                           |             |           |         |              |   |           |        
|Current Assets                                 |                                           |             |           |         |              |   |           |        
|                                               | Cash and cash equivalents                 |             | $         | 2,256   |              |   | $         | 3,170   | 
|                                               | Accounts receivable                       |             |           | 159,208 |              |   |           | 105,136 | 
|                                               | Inventories                               |             |           | 418,822 |              |   |           | 397,192 | 
|                                               | Prepaid expenses and other current assets |             |           | 37,360  |              |   |           | 29,613  | 
|                                               |                                           |             |           |         |              |   |           |        
|Total current assets                           |                                           |             | 617,646   |         |              |   | 535,111   |        
|                                              
|Property, Plant and Equipment, net             |                                           |             | 732,683   |         |              |   | 749,326   |        
|                                              
|Other Assets                                   |                                           |             |           |         |              |   |           |        
|                                               | Deferred financing fees                   |             |           | 30,558  |              |   |           | 32,879  | 
|                                               | Other assets                              |             |           | 5,504   |              |   |           | 4,243   | 
|                                               | Goodwill                                  |             |           | 47,288  |              |   |           | 47,288  | 
|                                               |                                           |             |           |         |              |   |           |        
|                                               |                                           | $           | 1,433,679 |         |              | $ | 1,368,847 |        
|                                               |                                           |             |           |         |              |   |           |        
|Liabilities and Stockholders Equity (Deficit) |                                           |             |           |         |              |   |           |        
|Current Liabilities                            |                                           |             |           |         |              |   |           |        
|                                               | Senior Credit Facility                    |             | $         | 125,080 |              |   | $         | 107,501 | 
|                                               | Accrued interest payable                  |             |           | 23,211  |              |   |           | 3,856   | 
|                                               | Accounts payable                          |             |           | 68,164  |              |   |           | 67,218  | 
|                                               | Other accrued liabilities                 |             |           | 135,571 |              |   |           | 114,466 | 
|                                               |                                           |             |           |         |              |   |           |        
|Total current liabilities                      |                                           |             | 352,026   |         |              |   | 293,041   |        
|                                              
|Long-Term Debt                                 |                                           |             | 1,565,000 |         |              |   | 1,565,000 |        
|                                              
|Noncurrent Liabilities                         |                                           |             |           |         |              |   |           |        
|                                               | Deferred income taxes                     |             |           | 185,094 |              |   |           | 182,822 | 
|                                               | Pension and other liabilities             |             |           | 105,069 |              |   |           | 106,351 | 
|                                               |                                           |             |           |         |              |   |           |        
|Total noncurrent liabilities                   |                                           |             | 290,163   |         |              |   | 289,173   |        
|                                              
|Stockholders Equity (Deficit)                 |                                           |             | (773,510  | )       |              |   | (778,367  | )      
|                                               |                                           |             |           |         |              |   |           |        
|                                               |                                           | $           | 1,433,679 |         |              | $ | 1,368,847 |        
|                                               |                                           |             |           |         |              |   |           |        

See accompanying notes

3



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WESTPOINT STEVENS INC.




Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


|                                             |                                                       |   |                    |         |      |   |         |         |  
|-------------------------------------------- | ----------------------------------------------------- | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                                             |                                                       |   | Three Months Ended
|                                             |                                                       |   | March 31,         
|                                             |                                                       |   |                   
|                                             |                                                       |   | 2002               |         | 2001
|                                             |                                                       |   |                    |         |     
|Net sales                                    |                                                       | $ | 435,144            |         |      | $ | 418,613 |        
|Cost of goods sold                           |                                                       |   | 327,343            |         |      |   | 328,907 |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Gross earnings                                        |   |                    | 107,801 |      |   |         | 89,706  |  
|
|                                            
|Selling, general and administrative expenses |                                                       |   | 68,900             |         |      |   | 64,075  |        
|Restructuring and impairment charge          |                                                       |   |                   |         |      |   | 5,008   |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Operating earnings                                    |   |                    | 38,901  |      |   |         | 20,623  |  
|
|                                            
|Interest expense                             |                                                       |   | 33,344             |         |      |   | 34,230  |        
|Other expense-net                            |                                                       |   | 2,397              |         |      |   | 3,388   |        
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Income (loss) before income tax
expense (benefit)     |   |                    | 3,160   |      |   |         | (16,995 | )
|
|                                            
|Income tax expense (benefit)                 |                                                       |   | 1,140              |         |      |   | (6,095  | )      
|                                             |                                                       |   |                    |         |      |   |         |        
|                                             | Net income (loss)                                     |   | $                  | 2,020   |      |   | $       | (10,900 | )
|                                             |                                                       |   |                    |         |      |   |         |        
|
|                                            
|Basic net income (loss) per common share     |                                                       | $ | .04                |         |      | $ | (.22    | )      
|                                             |                                                       |   |                    |         |      |   |         |        
|Diluted net income (loss) per common share   |                                                       | $ | .04                |         |      | $ | (.22    | )      
|                                             |                                                       |   |                    |         |      |   |         |        
|
|                                            
|Basic average common shares outstanding      |                                                       |   | 49,652             |         |      |   | 49,559  |        
|                                             | Dilutive effect of stock options
and stock bonus plan |   |                    |        |      |   |         |        |  
|                                             |                                                       |   |                    |         |      |   |         |        
|Diluted average common shares outstanding    |                                                       |   | 49,652             |         |      |   | 49,559  |        
|                                             |                                                       |   |                    |         |      |   |         |        

See accompanying notes

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WESTPOINT STEVENS INC.




Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


|                                                     |                                                                                                     |                                     |        |                    |          |      |         |         |          |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ----------------------------------- | ------ | ------------------ | -------- | ---- | ------- | ------- | -------- | -
|                                                     |                                                                                                     |                                     |        | Three Months Ended
|                                                     |                                                                                                     |                                     |        | March 31,         
|                                                     |                                                                                                     |                                     |        |                   
|                                                     |                                                                                                     |                                     |        | 2002               |          | 2001
|                                                     |                                                                                                     |                                     |        |                    |          |     
|Cash flows from operating activities:                |                                                                                                     |                                     |        |                    |          |      |         |        
|                                                     | Net income (loss)                                                                                   |                                     | $      | 2,020              |          |      | $       | (10,900 | )       
|                                                     | Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities: |                                     |        |                    |          |      |         |         |         
|                                                     |                                                                                                     | Depreciation and other amortization |        |                    | 20,746   |      |         |         | 20,475   |  
|                                                     |                                                                                                     | Deferred income taxes               |        |                    | 1,142    |      |         |         | (6,405   | )
|                                                     |                                                                                                     | Changes in working capital          |        |                    | (32,243  | )    |         |         | (35,547  | )
|                                                     |                                                                                                     | Other-net                           |        |                    | 532      |      |         |         | (3,286   | )
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|Net cash used for operating activities               |                                                                                                     |                                     | (7,803 | )                  |          |      | (35,663 | )      
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|                                                    
|Cash flows from investing activities:                |                                                                                                     |                                     |        |                    |          |      |         |        
|                                                     | Capital expenditures                                                                                |                                     |        | (4,215             | )        |      |         | (13,727 | )       
|                                                     | Net proceeds from sale of assets                                                                    |                                     |        | 225                |          |      |         | 212     |         
|                                                     | Purchase of business                                                                                |                                     |        |                   |          |      |         | (8,363  | )       
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|Net cash used for investing activities               |                                                                                                     |                                     | (3,990 | )                  |          |      | (21,878 | )      
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|                                                    
|Cash flows from financing activities:                |                                                                                                     |                                     |        |                    |          |      |         |        
|                                                     | Senior Credit Facility:                                                                             |                                     |        |                    |          |      |         |         |         
|                                                     |                                                                                                     | Borrowings                          |        |                    | 200,000  |      |         |         | 269,500  |  
|                                                     |                                                                                                     | Repayments                          |        |                    | (182,421 | )    |         |         | (199,299 | )
|                                                     | Proceeds from Trade Receivables Program                                                             |                                     |        | (6,700             | )        |      |         | (11,300 | )       
|                                                     | Cash dividends paid                                                                                 |                                     |        |                   |          |      |         | (1,007  | )       
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|Net cash provided by financing activities            |                                                                                                     |                                     | 10,879 |                    |          |      | 57,894  |        
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|Net increase (decrease) in cash and cash equivalents |                                                                                                     |                                     | (914   | )                  |          |      | 353     |        
|Cash and cash equivalents at beginning of period     |                                                                                                     |                                     | 3,170  |                    |          |      | 167     |        
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        
|Cash and cash equivalents at end of period           |                                                                                                     | $                                   | 2,256  |                    |          | $    | 520     |        
|                                                     |                                                                                                     |                                     |        |                    |          |      |         |        

See accompanying notes

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WESTPOINT STEVENS INC.




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

(In thousands)


|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |       |       |     | 
|------------------------ | -------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------------ | - | ------ | - | ------------ | --- | ------------ |  | -------------- | -- | ------------- | - | ------------- | --- | ------------ | - | -------- | ---- | ----- | - | ----------- | - | --- | --- | ------ | --- | - | - | -------- | ----- | ----- | --- | 
|                         |                                                                      |                                         |                                                  |   |        |   |              |     | Common Stock |  |                |    |               |   |               |     |              |   |          |      |       |   | Accumulated |   |     |     |        |     |   |   |         
|                         |                                                                      |                                         |                                                  |   |        |   |              |     | and Capital  |  | Treasury Stock |    |               |   |               |     | Other        |   |          |      |       |   |             |   |    
|                         |                                                                      |                                         |                                                  |   | Common |   | in Excess of |     |              |  | Accumulated    |    | Comprehensive |   | Unearned      |     |              |   |         
|                         |                                                                      |                                         |                                                  |   | Shares |   | Par Value    |     | Shares       |  | Amount         |    | Deficit       |   | Income (Loss) |     | Compensation |   | Total   
|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |         
|Balance, January 1, 2002 |                                                                      |                                         | 71,100                                           |   |        | $ | 395,903      |     |              |  | (21,529        | )  |               | $ | (418,781      | )   |              | $ | (680,789 | )    |       | $ | (69,386     | ) |     | $   | (5,314 | )   |   | $ | (778,367 | )    
|                         | Comprehensive income (loss):                                         |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |       |      
|                         |                                                                      | Net income                              |                                                  |   |       |   |              |     |             |  |                |    |              |   |               |     |             |   |          |      | 2,020 |   |             |   |    |     |        |     |  |   |          |       | 2,020 |    
|                         |                                                                      | Foreign currency
translation adjustment |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   | 394 |     |        |     |   |   |          |       | 394   |    
|                         |                                                                      | Cash flow hedges:                       |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |       |       |    
|                         |                                                                      |                                         | Net derivative gains, net of
tax benefit of $332 |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     | 587 |        |     |   |   |          |       |       | 587 | 
|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |      
|                         | Comprehensive income                                                 |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          | 3,001 |      
|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |      
|                         | Issuance of stock pursuant
to Stock Bonus Plan
including tax expense |                                         |                                                  |  |        |   |              | 822 |              |  |                | 72 |               |   |               | 765 |              |   |          |     |       |   |             |  |     |     |        |    |   |   |          | 1,587 |      
|                         | Issuance of Restricted Stock                                         |                                         |                                                  |   |        |   |              | (23 | )            |  |                | 5  |               |   |               | 35  |              |   |          |     |       |   |             |  |     |     |        | (12 | ) |   |          |      |      
|                         | Amortization of
compensation                                         |                                         |                                                  |  |        |   |              |    |              |  |                |   |               |   |               |    |              |   |          |     |       |   |             |  |     |     |        | 473 |   |   |          | 473   |      
|                         | Stock dividends pursuant
to Stock Bonus Plan                         |                                         |                                                  |  |        |   |              |    |              |  |                |   |               |   |               |    |              |   |          | (204 | )     |   |             |  |     |     |        |    |   |   |          | (204  | )    
|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |      
|Balance, March 31, 2002  |                                                                      |                                         | 71,100                                           |   |        | $ | 396,702      |     |              |  | (21,452        | )  |               | $ | (417,981      | )   |              | $ | (678,973 | )    |       | $ | (68,405     | ) |     | $   | (4,853 | )   |   | $ | (773,510 | )    
|                         |                                                                      |                                         |                                                  |   |        |   |              |     |              |  |                |    |               |   |               |     |              |   |          |      |       |   |             |   |     |     |        |     |   |   |          |      

See accompanying notes

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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, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. 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, 2001.

Certain amounts in the prior periods condensed consolidated financial
statements have been reclassified to conform to the current period
presentation.

2. 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, 2002 and December 31, 2001
(in thousands of dollars):

|                           |  |           |         |              |  |   |         | 
|-------------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                           |  | March 31, |         | December 31,
|                           |  | 2002      |         | 2001        
|                           |  |           |         |             
|Finished goods             |  | $         | 204,579 |              |  | $ | 176,043 | 
|Work in process            |  |           | 165,800 |              |  |   | 170,854 | 
|Raw materials and supplies |  |           | 48,443  |              |  |   | 50,295  | 
|LIFO reserve               |  |           |        |              |  |   |        | 
|                           |  |           |         |              |  |   |         | 
|                           |  | $         | 418,822 |              |  | $ | 397,192 | 
|                           |  |           |         |              |  |   |         | 

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WESTPOINT STEVENS INC.

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

3. Indebtedness and Financial Arrangements

Indebtedness is as follows (in thousands of dollars):

|                         |                              |   |           |         |              |   |           |         | 
|------------------------ | ---------------------------- | - | --------- | ------- | ------------ | - | --------- | ------- | 
|                         |                              |   | March 31, |         | December 31,
|                         |                              |   | 2002      |         | 2001        
|                         |                              |   |           |         |             
|Short-term indebtedness: |                              |   |           |         |              |   |           |        
|                         | Senior Credit Facility       |   | $         | 125,080 |              |   | $         | 107,501 | 
|                         |                              |   |           |         |              |   |           |        
|Long-term indebtedness:  |                              |   |           |         |              |   |           |        
|                         | Senior Credit Facility       |   | $         | 400,000 |              |   | $         | 400,000 | 
|                         | 7.875% Senior Notes due 2005 |   |           | 525,000 |              |   |           | 525,000 | 
|                         | 7.875% Senior Notes due 2008 |   |           | 475,000 |              |   |           | 475,000 | 
|                         | Second-Lien Facility         |   |           | 165,000 |              |   |           | 165,000 | 
|                         |                              |   |           |         |              |   |           |        
|                         |                              | $ | 1,565,000 |         |              | $ | 1,565,000 |        
|                         |                              |   |           |         |              |   |           |        

The Company has included $400 million of the Senior Credit Facility in
long-term debt at March 31, 2002 because the Company intends that at least that
amount would remain outstanding during the next twelve months.

At March 31, 2002 and December 31, 2001, $145.9 million and $152.6 million,
respectively, of accounts receivable had been sold pursuant to a trade
receivables program (the Trade Receivables Program) and the sale is reflected
as a reduction of accounts receivable in the accompanying Condensed
Consolidated Balance Sheets. 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.

4.     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 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.

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WESTPOINT STEVENS INC.

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

4.     Restructuring, Impairment and Other ChargesContinued

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 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.

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WESTPOINT STEVENS INC.

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

4. Restructuring, Impairment and Other ChargesContinued

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                        |                |   |          |      |             |   | (0.6     | )   |        |   |     |      |   |   | (0.6  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Balance at March 31, 2002                 |                | $ |          |      |             | $ | 1.4      |     |        | $ | 1.6  |      |   | $ | 3.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

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.

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WESTPOINT STEVENS INC.

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

5. Comprehensive Income (Loss)

Comprehensive income (loss) for the three months ended March 31, 2002 and 2001
is as follows (in thousands):

|                                                   |                                                                               |   |                    |     |      |   |         |         |  
|-------------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------ | --- | ---- | - | ------- | ------- | -
|                                                   |                                                                               |   | Three Months Ended
|                                                   |                                                                               |   | March 31,         
|                                                   |                                                                               |   |                   
|                                                   |                                                                               |   | 2002               |     | 2001
|                                                   |                                                                               |   |                    |     |     
|Net income (loss)                                  |                                                                               | $ | 2,020              |     |      | $ | (10,900 | )      
|Foreign currency translation adjustment            |                                                                               |   | 394                |     |      |   | 305     |        
|Gain (loss) on derivative instruments,
net of tax: |                                                                               |   |                    |     |      |   |         |        
|                                                   | Cumulative effect of adopting Statement No. 133                               |   |                    |    |      |   |         | (968    | )
|                                                   | Net changes in fair value of derivatives                                      |   |                    | 564 |      |   |         | (13,148 | )
|                                                   | Net (gains) losses reclassified from other
comprehensive income into earnings |   |                    | 23  |      |   |         | (1,436  | )
|                                                   |                                                                               |   |                    |     |      |   |         |        
|Comprehensive income (loss)                        |                                                                               | $ | 3,001              |     |      | $ | (26,147 | )      
|                                                   |                                                                               |   |                    |     |      |   |         |        

6. Deferred Financing Fees

Included in Other expense-net in the accompanying Condensed Consolidated
Statements of Operations for the three months ended March 31, 2002 is the
amortization of deferred financing fees of $2.3 million compared with $1.0
million for the three months ended March 31, 2001.

7. Recently Adopted Accounting Standards

Effective January 1, 2002, the Company adopted the requirements of Statements
of Financial Accounting Standards No. 141, Business Combinations,and No. 142,
Goodwill and Other Intangible Assets.Statement 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible assets arising from business
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
During the first quarter of 2001, amortization of goodwill was $0.2 million
after taxes. Excluding the impact of goodwill amortization, the net loss for
the first quarter of 2001 would have been $10.7 million, or $0.22 per share
diluted.

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WESTPOINT STEVENS INC.

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

7. Recently Adopted Accounting StandardsContinued

The Company applied Statement 142 beginning in the first quarter of 2002. The
Company will test goodwill for impairment using the two-step process prescribed
in Statement 142. The first step is a screen for potential impairment, while
the second step measures the amount of the impairment, if any. In accordance
with Statement 142, the Company expects to perform the first of the required
January 1, 2002 impairment tests of goodwill by June 30, 2002. If required,
the second calculation to determine the amount of impairment of goodwill, if
any, will be completed prior to December 31, 2002. Any impairment charge
resulting from these transitional impairment tests will be reflected as the
cumulative effect of a change in accounting principle in 2002. The Company has
not yet determined what the effect of these tests will be on earnings and
financial position of the Company.

Effective January 1, 2002, the Company adopted the requirements of Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets,which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of,and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operationsfor a
disposal of a segment of a business. The Companys adoption of Statement 144
did not have an impact on the Companys financial position and results of
operations.

8. Litigation and Contingent Liabilities

The Company is a defendant in a complaint entitled Pratt v. WestPoint Stevens
Inc., et al,alleging that the Company and other named and unnamed defendants
(including two named employees of the Company) had harmed the six named
plaintiffs and caused property damage under various common law tort claims
including: nuisance, trespass, negligence, wantonness and strict liability.
The claims are based upon routine discharges of wastewater from the Companys
Opelika Finishing Plant and the Plaintiffs seek an unspecified amount in
compensatory and punitive damages. The parties have substantially completed
discovery and the case is to be tried in Macon County, Alabama though a trial
date has not been established. The Company has prevailed in having the
employee defendants dismissed from the case.

The Company believes that the allegations contained in the complaint are
without merit and intends to contest the action vigorously.

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WESTPOINT STEVENS INC.

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

8. Litigation and Contingent LiabilitiesContinued

On October 5, 2001, a purported stockholder class action suit, entitled Norman
Geller v. WestPoint Stevens Inc., et al.,was filed against the Company and
certain of its 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 Complaints allege 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. The Complaints refer 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.

The Complaints assert 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 Green as controlling persons under § 20(a) of the
Exchange Act. The actions were consolidated by Order dated January 25, 2002.
Pursuant to court order the Plaintiffs filed a Consolidated Amended Complaint.
The Company and individual Defendants expect to move for dismissal of that
complaint on or about May 28, 2002.

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

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark v.
Holcombe T. Green, Jr., et al., 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.

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

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WESTPOINT STEVENS INC.

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

8. Litigation and Contingent LiabilitiesContinued

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.

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WESTPOINT STEVENS INC.




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

Impairment, Restructuring 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.
The Company estimates the implementation of the Eight-Point Plan will generate
annual pretax savings of $38.0 million starting in 2002. The estimated annual
pretax savings of $38.0 million (of which $35.0 million are estimated cash
savings primarily in the form of labor and overhead savings and $3.0 million
are estimated depreciation savings) will be reflected for the most part as a
reduction in cost of goods sold and to a lesser extent as a reduction in
general and administrative expenses.

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 of March 2, 2002, 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.

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##### Table of Contents



WESTPOINT STEVENS INC.

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

Impairment, Restructuring 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.

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                        |                |   |          |      |             |   | (0.6     | )   |        |   |     |      |   |   | (0.6  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Balance at March 31, 2002                 |                | $ |          |      |             | $ | 1.4      |     |        | $ | 1.6  |      |   | $ | 3.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

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##### Table of Contents



WESTPOINT STEVENS INC.

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

Impairment, Restructuring 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 for the
completion 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.

Results of Operations: Three Months Ended March 31, 2002

The table below is a summary of the Companys operating results for the three
months ended March 31, 2002 and March 31, 2001 (in millions of dollars).

|                                           |  |                    |       |      |  |   |       |  
|------------------------------------------ |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                           |  | Three Months Ended
|                                           |  | March 31,         
|                                           |  |                   
|                                           |  | 2002               |       | 2001
|                                           |  |                    |       |     
|Net sales                                  |  | $                  | 435.1 |      |  | $ | 418.6 |  
|                                           |  |                    |       |      |  |   |       |  
|Gross earnings                             |  | $                  | 107.8 |      |  | $ | 89.7  |  
|                                           |  |                    |       |      |  |   |       |  
|Restructuring and impairment charge        |  |                    |      |      |  | $ | 5.0   |  
|                                           |  |                    |       |      |  |   |       |  
|Operating earnings                         |  | $                  | 38.9  |      |  | $ | 20.6  |  
|                                           |  |                    |       |      |  |   |       |  
|Interest expense                           |  | $                  | 33.3  |      |  | $ | 34.2  |  
|                                           |  |                    |       |      |  |   |       |  
|Other expense-net                          |  | $                  | 2.4   |      |  | $ | 3.4   |  
|                                           |  |                    |       |      |  |   |       |  
|Income (loss) from operations before taxes |  | $                  | 3.2   |      |  | $ | (17.0 | )
|                                           |  |                    |       |      |  |   |       |  
|Income (loss) from operations              |  | $                  | 2.0   |      |  | $ | (10.9 | )
|                                           |  |                    |       |      |  |   |       |  
|                                           |  |                    |       |      |  |   |       |  
|Gross margin                               |  |                    | 24.8  | %    |  |   | 21.4  | %
|                                           |  |                    |       |      |  |   |       |  
|Operating margin                           |  |                    | 8.9   | %    |  |   | 4.9   | %

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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended March 31, 2002Continued

Net Sales.Net sales for the three months ended March 31, 2002 increased $16.5
million, or 3.9 % to $435.1 million compared with net sales of $418.6 million
for the three months ended March 31, 2001. Increases in sales across all
distribution channels, coupled with sales of the expanded Ralph Lauren Home
Collection license and new Disney Home license led to the improved sales
performance.

For the three months ended March 31, 2002, bed products sales were $266.0
million compared with $233.0 million last year; bath products sales were $120.9
million compared with $134.5 million last year; and other sales (consisting
primarily of sales from the Companys mill stores and foreign operations) were
$48.2 million compared with $51.1 million last year.

Gross Earnings/Margins.Gross earnings for the three months ended March 31,
2002 increased $14.1 million, or 15.1%, to $107.8 million compared with $93.7
million for the same period of 2001, excluding charges associated with the
Eight-Point Plan, and reflect gross margins of 24.8% in 2002 versus 22.4% in
2001. Gross earnings and margins increased primarily as a result of lower raw
material costs, improved manufacturing efficiencies, a more profitable mix of
revenues and reduced promotional activity. Included in the cost of goods sold
in the first quarter of 2001 are charges associated with the Eight-Point Plan
of $4.0 million, the majority of which reflects costs for equipment relocation
and unabsorbed overhead due to reduced running schedules. Including the
charges, gross earnings for the three months ended March 31, 2002 increased
$18.1 million, or 20.2%, to $107.8 million compared with $89.7 million for the
same period of 2001.

Operating Earnings/Margins.Selling, general and administrative expenses
increased $4.8 million, or 7.5%, in the first quarter of 2002 compared with
the same period of last year, and as a percentage of net sales represent 15.8%
in the 2002 period and 15.3% in the 2001 period. The increase in selling,
general and administrative expenses in the first quarter of 2002 was due to
increased reserves for bad debt expense of $4.5 million the majority of which
was associated with the recent bankruptcy filing of Kmart.

Before charges associated with the Eight-Point Plan, operating earnings for the
first quarter of 2002 increased 31.3% to $38.9 million, or 8.9% of sales,
compared with operating earnings of $29.6 million, or 7.1% of sales, for the
same period in 2001. Including the charges, operating earnings for the three
months ended March 31, 2002 increased $18.3 million to $38.9 million compared
with $20.6 million for the same period of 2001. Operating earnings for the
three months ended March 31, 2001, included a separate line item for
restructuring and impairment charges to reflect $5.0 million in severance
benefits and other exit costs.

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WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended March 31, 2002Continued

Interest Expense.Interest expense for the three months ended March 31, 2002
of $33.3 million decreased $0.9 million compared with interest expense of $34.2
million for the three months ended March 31, 2001. The decrease was due
primarily to lower interest rates on the Companys variable rate bank debt for
2002 compared with corresponding 2001 average interest rate levels.

Other Expense-Net.Other expense-net for the first quarter of 2002 of $2.4
million consisted primarily of the amortization of deferred financing fees of
$2.3 million. Other expense-net in the first quarter of 2001 of $3.4 million
consisted primarily of a $2.4 million charge for cotton derivatives in
accordance with Statement of Financial Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities,and the amortization of deferred
financing fees of $1.0 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.Net income for the first quarter of 2002, before charges
associated with the Eight-Point Plan, increased $7.2 million, to $2.0 million,
or $0.04 per share diluted, from a net loss of $5.1 million, or a loss of $0.10
per share diluted, in the same period of last year. After the charges, net
income for the first quarter of 2002 was $2.0 million, or $0.04 per share
diluted, compared with a loss of $10.9 million, or a loss of $0.22 per share
diluted, for the same period of last year.

Diluted per share amounts are based on 49.7 million and 49.6 million average
shares outstanding for 2002 and 2001, 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.

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WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended March 31, 2002Continued

Liquidity and Capital Resources

The Companys principal sources of liquidity are expected to be cash from its
operations and funds available under the Senior Credit Facility. At May 3,
2002, the maximum commitment under the Senior Credit Facility was $717.5
million and the Company had unused borrowing availability under the Senior
Credit Facility totaling $162.0 million. The Senior Credit Facility contains
covenants, which, among other things, limit indebtedness and require the
maintenance of certain financial ratios, minimum EBITDA and minimum net worth
(as defined). The Senior Credit Facility provides for a $25.0 million
reduction in the revolver commitment on each of the following dates: November
1, 2002, February 1, 2003, 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 $600.0 million. The
Senior Credit Facility further provides that any increase in the Trade
Receivables Program above the current $160.0 million limit, up to a $200.0
million limit, would reduce the revolver commitment under the Senior Credit
Facility by a similar amount.

On January 22, 2002, Kmart Corporation filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United States Code. Kmart
Corporation subsequently received approval of its debtor-in-possession
financing and is currently working towards a restructuring and emergence from
Chapter 11 in 2003. In conjunction with the restructuring, Kmart Corporation
announced the closing of 284 retail store locations. This represents roughly
13% of its total store base. The Company has reviewed its sales and profit
projections for Kmart Corporation for 2002 and believes that the recent Chapter
11 filing for bankruptcy protection by Kmart Corporation will not have a
material adverse effect on the Companys future operations.

At March 31, 2002, the Company was in compliance with all its covenants under
the Senior Credit Facility and Second-Lien Facility, and based on managements
projections of 2002 results expects to remain in compliance with all the
covenants under its credit agreements.

The Companys principal uses of cash for the next several years will be
operating expenses, capital expenditures and debt service requirements related
primarily to interest payments. The Company spent approximately $60.5 million
in 2001 on capital expenditures and intends to invest approximately $40.0 to
$50.0 million in 2002. The Senior Credit Facility does not permit future cash
dividends.

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WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended March 31, 2002Continued

Liquidity and Capital ResourcesContinued

The Board of Directors has approved the purchase of up to 27 million shares of
the Companys common stock, subject to the Companys debt limitations. At
March 31, 2002, approximately 3.6 million shares remained to be purchased under
these programs. The Senior Credit Facility does not permit future stock
repurchases.

The Company, through a bankruptcy remote receivables subsidiary, has a Trade
Receivables Program that provides for the sale of accounts receivable on a
revolving basis at rates more favorable than the Senior Credit Facility. 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. Under the terms of the Trade
Receivables Program, the Company has agreed to sell on an ongoing basis, and
without recourse, an undivided ownership interest in its accounts receivable
portfolio. The Company maintains the balance in the designated pool of
accounts receivable sold by selling undivided interests in new receivables as
existing receivables are collected. The agreement permits the sale of up to
$160.0 million of accounts receivable. The cost of the Trade Receivables
Program is charged to selling expense in the accompanying Consolidated
Statements of Operations and is estimated to total approximately $4.8 million
in 2002, compared with $6.5 million in 2001. At March 31, 2002 and December
31, 2001, $145.9 million and $152.6 million, respectively, of accounts
receivable had been sold pursuant to the Trade Receivables Programs and the
sale is reflected as a reduction of accounts receivable in the accompanying
Consolidated Balance Sheets.

Debt service requirements for interest payments in 2002 are estimated to total
approximately $138.0 million (excluding amounts related to the Trade
Receivables Program) compared with interest payments of $143.0 million in 2001.
The Companys long-term indebtedness has no scheduled principal reduction
requirements during 2002.

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

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WESTPOINT STEVENS INC.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

The Company is a defendant in a complaint entitled Pratt v. WestPoint Stevens
Inc., et al,alleging that the Company and other named and unnamed defendants
(including two named employees of the Company) had harmed the six named
plaintiffs and caused property damage under various common law tort claims
including: nuisance, trespass, negligence, wantonness and strict liability.
The claims are based upon routine discharges of wastewater from the Companys
Opelika Finishing Plant and the Plaintiffs seek an unspecified amount in
compensatory and punitive damages. The parties have substantially completed
discovery and the case is to be tried in Macon County, Alabama though a trial
date has not been established. The Company has prevailed in having the
employee defendants dismissed from the case.

The Company believes that the allegations contained in the complaint are
without merit and intends to contest the action vigorously.

On October 5, 2001, a purported stockholder class action suit, entitled Norman
Geller v. WestPoint Stevens Inc., et al.,was filed against the Company and
certain of its 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 Complaints allege 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. The Complaints refer 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.

The Complaints assert 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 Green as controlling persons under § 20(a) of the
Exchange Act. The actions were consolidated by Order dated January 25, 2002.
Pursuant to court order the Plaintiffs filed a Consolidated Amended Complaint.
The Company and individual Defendants expect to move for dismissal of that
complaint on or about May 28, 2002.

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

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WESTPOINT STEVENS INC.

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

Item 1. Legal ProceedingsContinued

On March 11, 2002, a shareholder derivative action, entitled Gordon Clark v.
Holcombe T. Green, Jr., et al., 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.

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.

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATIONContinued




Item 6. Exhibits and Reports on Form 8-K

a.)

|        |  |                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                      
|Number  |  | Description of Exhibit                                                                                                                                                                               
|        |  |                                                                                                                                                                                                      
|10.1    |  | First Amendment dated as of January 14, 2002, among WPS
Receivables Corporation, the Company, Blue Ridge Asset
Funding Corporation, North American Capacity Insurance Company and Wachovia Bank, N.A.
|       
|10.2    |  | Amendment Letter dated February 18, 2002, between the
Company and Holcombe T. Green, Jr.                                                                                                             

b.)   No report on Form 8-K was filed by the Company during the quarter ended
March 31, 2002.

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WESTPOINT STEVENS INC.




SIGNATURE

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

|                  |  |                                                          
|----------------- |  | ---------------------------------------------------------
|                  |  | WESTPOINT STEVENS INC.                                   
|                  |  | Registrant                                               
|                 
|                  |  | /s/ L. Dupuy Sears                                       
|                  |  |                                                          
|                  |  | L. Dupuy Sears                                           
|                  |  | Senior Vice President-Finance
and Chief Financial Officer
|Date: May 7, 2002 |  |                                                          

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WESTPOINT STEVENS INC.

EXHIBIT INDEX

|        |      |  |  |                                                                                                                                                                                                                   |  |  |  | 
|------- | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Exhibit |      |  |  | Page                                                                                                                                                                                                             
|Number  |      |  |  | Number                                                                                                                                                                                                           
|        |      |  |  |                                                                                                                                                                                                                  
|        | 10.1 |  |  | First Amendment dated as of January 14, 2002,
    among WPS Receivables Corporation, the Company, Blue Ridge Asset
    Funding Corporation, North American Capacity Insurance Company
    and Wachovia Bank, N.A. |  |  |  | 
|        | 10.2 |  |  | Amendment Letter dated February 18, 2002, between
    the Company and Holcombe T. Green, Jr.                                                                                                                      |  |  |  |