##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2002

OR

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

For the transition period from _______ to _______

Commission File Number 0-21496

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

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

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

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

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

Yes  (X BOX)      No  (BOX)

Common shares outstanding at August 2, 2002: 49,649,157 shares of Common
Stock, $.01 par value.

1



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TABLE OF CONTENTS



|                                         |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION           
|                                         | Item 1. Financial Statements                                                                 
|                                         | Condensed Consolidated Balance Sheets                                                        
|                                         | Condensed Consolidated Statements of Operations (Unaudited)                                  
|                                         | Condensed Consolidated Statements of Cash Flows (Unaudited)                                  
|                                         | Condensed Consolidated Statements of Stockholders Equity (Deficit) (Unaudited)              
|                                         | Notes to Condensed Consolidated Financial Statements                                         
|                                         | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II - OTHER INFORMATION             
|                                         | Item 1. Legal Proceedings                                                                    
|                                         | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                         | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURE                               
|EXHIBIT INDEX                           
|SEPARATION AGREEMENT AND GENERAL RELEASE



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##### Table of Contents



INDEX

|         |  |                                                                                                                                          |  |         
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                                                                          |  | Page No.
|         |  |                                                                                                                                          |  |         
|         |  |                                                                                                                                          |  |         
|PART I.  |  | FINANCIAL INFORMATION                                                                                                                    |  |         
|        
|        
|        
|        
|         |  | Item 1. Financial Statements                                                                                                             |  |         
|        
|        
|        
|        
|         |  | Condensed Consolidated Balance Sheets:
      June 30, 2002 (Unaudited)
      and December 31, 2001                                       |  | 3       
|        
|        
|        
|        
|         |  | Condensed Consolidated Statements of
      Operations (Unaudited);Three and
      Six Months Ended June 30, 2002
      and June 30, 2001 |  | 4       
|        
|        
|        
|        
|         |  | Condensed Consolidated Statements of
      Cash Flows (Unaudited); Six
      Months Ended June 30, 2002
      and June 30, 2001          |  | 5       
|        
|        
|        
|        
|         |  | Condensed Consolidated Statements of
      Stockholders Equity
(Deficit) (Unaudited);
      Six Months Ended June 30, 2002              |  | 6       
|        
|        
|        
|        
|         |  | Notes to Condensed Consolidated Financial
      Statements (Unaudited)                                                                   |  | 7-15    
|        
|        
|        
|        
|         |  | Item 2. Managements Discussion and Analysis of
      Financial Condition and Results of Operations                                      |  | 16-23   
|        
|        
|        
|        
|PART II. |  | OTHER INFORMATION                                                                                                                        |  |         
|        
|        
|        
|        
|         |  | Item 1. Legal Proceedings                                                                                                                |  | 24-26   
|        
|        
|        
|        
|         |  | Item 4. Submission of Matters to a Vote of
Security Holders                                                                              |  | 27      
|        
|        
|        
|        
|         |  | Item 6. Exhibits and Reports on Form 8-K                                                                                                 |  | 28      

2



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##### Table of Contents









WESTPOINT STEVENS INC.




Condensed Consolidated Balance Sheets
(In thousands)

|                                               |                                           |   |             |         |              |   |           |         | 
|---------------------------------------------- | ----------------------------------------- | - | ----------- | ------- | ------------ | - | --------- | ------- | 
|                                               |                                           |   | June 30,    |         | December 31,
|                                               |                                           |   | 2002        |         | 2001        
|                                               |                                           |   |             |         |             
|                                               |                                           |   | (Unaudited) |         |              |   |          
|Assets                                         |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|Current Assets                                 |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                 |   | $           | 6,609   |              |   | $         | 3,170   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable                       |   |             | 175,526 |              |   |           | 105,136 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                               |   |             | 452,961 |              |   |           | 397,192 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Prepaid expenses and other current assets |   |             | 28,621  |              |   |           | 29,613  | 
|                                               |                                           |   |             |         |              |   |           |        
|Total current assets                           |                                           |   | 663,717     |         |              |   | 535,111   |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|Property, Plant and Equipment, net             |                                           |   | 729,066     |         |              |   | 749,326   |        
|                                              
|                                              
|                                              
|                                              
|                                               |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|Other Assets                                   |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred financing fees                   |   |             | 28,237  |              |   |           | 32,879  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Other assets                              |   |             | 4,745   |              |   |           | 4,243   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Goodwill                                  |   |             | 47,288  |              |   |           | 47,288  | 
|                                               |                                           |   |             |         |              |   |           |        
|                                               |                                           | $ | 1,473,053   |         |              | $ | 1,368,847 |        
|                                               |                                           |   |             |         |              |   |           |        
|Liabilities and Stockholders Equity (Deficit) |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|Current Liabilities                            |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|                                               | Senior Credit Facility                    |   | $           | 171,036 |              |   | $         | 107,501 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued interest payable                  |   |             | 3,444   |              |   |           | 3,856   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                          |   |             | 68,465  |              |   |           | 67,218  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Other accrued liabilities                 |   |             | 139,304 |              |   |           | 114,466 | 
|                                               |                                           |   |             |         |              |   |           |        
|Total current liabilities                      |                                           |   | 382,249     |         |              |   | 293,041   |        
|                                              
|                                              
|                                              
|                                              
|Long-Term Debt                                 |                                           |   | 1,565,000   |         |              |   | 1,565,000 |        
|                                              
|                                              
|                                              
|                                              
|Noncurrent Liabilities                         |                                           |   |             |         |              |   |           |        
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                     |   |             | 180,283 |              |   |           | 182,822 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Pension and other liabilities             |   |             | 104,287 |              |   |           | 106,351 | 
|                                               |                                           |   |             |         |              |   |           |        
|Total noncurrent liabilities                   |                                           |   | 284,570     |         |              |   | 289,173   |        
|                                              
|                                              
|                                              
|                                              
|Stockholders Equity (Deficit)                 |                                           |   | (758,766    | )       |              |   | (778,367  | )      
|                                               |                                           |   |             |         |              |   |           |        
|                                               |                                           | $ | 1,473,053   |         |              | $ | 1,368,847 |        
|                                               |                                           |   |             |         |              |   |           |        

See accompanying notes

3



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##### Table of Contents



WESTPOINT STEVENS INC.




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

|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |         |  
|-------------------------------------------- | ----------------------------------------------------- | - | ------------------ | ------- | ---------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | -
|                                             |                                                       |   | Three Months Ended |         | Six Months Ended
|                                             |                                                       |   | June 30,           |         | June 30,        
|                                             |                                                       |   |                    |         |                 
|                                             |                                                       |   | 2002               |         | 2001             |   | 2002    |         | 2001
|                                             |                                                       |   |                    |         |                  |   |         |         |     
|Net sales                                    |                                                       | $ | 449,572            |         |                  | $ | 401,659 |         |      | $ | 884,716 |         |  | $ | 820,272 |        
|                                            
|                                            
|                                            
|                                            
|Cost of goods sold                           |                                                       |   | 345,800            |         |                  |   | 329,949 |         |      |   | 673,143 |         |  |   | 658,856 |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             | Gross earnings                                        |   |                    | 103,772 |                  |   |         | 71,710  |      |   |         | 211,573 |  |   |         | 161,416 |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |                                                       |   | 65,613             |         |                  |   | 63,801  |         |      |   | 134,513 |         |  |   | 127,876 |        
|                                            
|                                            
|                                            
|                                            
|Restructuring and impairment charge          |                                                       |   |                   |         |                  |   |        |         |      |   |        |         |  |   | 5,008   |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             | Operating earnings                                    |   |                    | 38,159  |                  |   |         | 7,909   |      |   |         | 77,060  |  |   |         | 28,532  |  
|                                            
|                                            
|                                            
|                                            
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|Interest expense                             |                                                       |   | 33,371             |         |                  |   | 34,303  |         |      |   | 66,715  |         |  |   | 68,533  |        
|                                            
|                                            
|                                            
|                                            
|Other expense-net                            |                                                       |   | 1,682              |         |                  |   | 903     |         |      |   | 4,079   |         |  |   | 4,291   |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|                                             | Income (loss) before income tax
expense (benefit)     |   |                    | 3,106   |                  |   |         | (27,297 | )    |   |         | 6,266   |  |   |         | (44,292 | )
|                                            
|                                            
|                                            
|                                            
|Income tax expense (benefit)                 |                                                       |   | 1,115              |         |                  |   | (9,800  | )       |      |   | 2,255   |         |  |   | (15,895 | )      
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Net income (loss)                            |                                                       | $ | 1,991              |         |                  | $ | (17,497 | )       |      | $ | 4,011   |         |  | $ | (28,397 | )      
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|Basic net income (loss) per common share     |                                                       | $ | .04                |         |                  | $ | (.35    | )       |      | $ | .08     |         |  | $ | (.57    | )      
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Diluted net income (loss) per common share   |                                                       | $ | .04                |         |                  | $ | (.35    | )       |      | $ | .08     |         |  | $ | (.57    | )      
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                                            
|                                            
|                                            
|                                            
|Basic average common shares outstanding      |                                                       |   | 49,662             |         |                  |   | 49,593  |         |      |   | 49,657  |         |  |   | 49,576  |        
|                                            
|                                            
|                                            
|                                            
|                                             | Dilutive effect of stock options
and stock bonus plan |   |                    | 1       |                  |   |         |        |      |   |         |        |  |   |         |        |  
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Diluted average common shares outstanding    |                                                       |   | 49,663             |         |                  |   | 49,593  |         |      |   | 49,657  |         |  |   | 49,576  |        
|                                             |                                                       |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        

See accompanying notes

4



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##### Table of Contents



WESTPOINT STEVENS INC.




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

|                                                 |                                                                                                     |                                     |         |                  |          |      |         |         |          |  
|------------------------------------------------ | --------------------------------------------------------------------------------------------------- | ----------------------------------- | ------- | ---------------- | -------- | ---- | ------- | ------- | -------- | -
|                                                 |                                                                                                     |                                     |         | Six Months Ended
|                                                 |                                                                                                     |                                     |         | June 30,        
|                                                 |                                                                                                     |                                     |         |                 
|                                                 |                                                                                                     |                                     |         | 2002             |          | 2001
|                                                 |                                                                                                     |                                     |         |                  |          |     
|Cash flows from operating activities:            |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income (loss)                                                                                   |                                     | $       | 4,011            |          |      | $       | (28,397 | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities: |                                     |         |                  |          |      |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Depreciation and other amortization |         |                  | 41,617   |      |         |         | 40,941   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Deferred income taxes               |         |                  | 7,821    |      |         |         | (12,130  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Changes in working capital          |         |                  | (72,144  | )    |         |         | (57,197  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Other-net                           |         |                  | 1,766    |      |         |         | (4,332   | )
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|Net cash used for operating activities           |                                                                                                     |                                     | (16,929 | )                |          |      | (61,115 | )      
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Capital expenditures                                                                                |                                     |         | (21,895          | )        |      |         | (33,991 | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net proceeds from sale of assets                                                                    |                                     |         | 728              |          |      |         | 651     |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of business                                                                                |                                     |         |                 |          |      |         | (8,363  | )       
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|Net cash used for investing activities           |                                                                                                     |                                     | (21,167 | )                |          |      | (41,703 | )      
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                                                     |                                     |         |                  |          |      |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Senior Credit Facility:                                                                             |                                     |         |                  |          |      |         |         |         
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Borrowings                          |         |                  | 426,197  |      |         |         | 719,712  |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                                     | Repayments                          |         |                  | (362,662 | )    |         |         | (746,613 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Trade Receivables Program                                                                           |                                     |         | (22,000          | )        |      |         | (12,600 | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash dividends paid                                                                                 |                                     |         |                 |          |      |         | (2,015  | )       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from Second-Lien Facility                                                                  |                                     |         |                 |          |      |         | 165,000 |         
|                                                
|                                                
|                                                
|                                                
|                                                 | Fees associated with refinancing                                                                    |                                     |         |                 |          |      |         | (14,761 | )       
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|Net cash provided by financing activities        |                                                                                                     |                                     | 41,535  |                  |          |      | 108,723 |        
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|Net increase in cash and cash equivalents        |                                                                                                     |                                     | 3,439   |                  |          |      | 5,905   |        
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                                     |                                     | 3,170   |                  |          |      | 167     |        
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        
|Cash and cash equivalents at end of period       |                                                                                                     | $                                   | 6,609   |                  |          | $    | 6,072   |        
|                                                 |                                                                                                     |                                     |         |                  |          |      |         |        

See accompanying notes

5



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##### Table of Contents



WESTPOINT STEVENS INC.




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

|                         |                                                                      |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |        |        |       | 
|------------------------ | -------------------------------------------------------------------- | --------------------------------------- | -------------------------------------------------- | - | ------ | - | ------- | ------ | -------------- |  | ----------- | -- | ------------- | - | ------------- | --- | ------------ | - | -------- | ---- | ----- | - | ----------- | - | ------ | ----- | ------ | --- | - | - | -------- | ------ | ------ | ----- | 
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Common         |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |        |       
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Stock          |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |        |       
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | and Capital    |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |        |       
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | in             |  |             |    |               |   |               |     |              |   |          |      |       |   | Accumulated |   |        |       |        |     |   |   |         
|                         |                                                                      |                                         |                                                    |   |        |   |         |        | Excess of      |  |             |    |               |   |               |     |              |   |          |      |       |   | Other       |   |        |       |        |     |   |   |         
|                         |                                                                      |                                         |                                                    |   | Common |   | Par     |        | Treasury Stock |  | Accumulated |    | Comprehensive |   | Unearned      |     |              |   |         
|                         |                                                                      |                                         |                                                    |   | Shares |   | 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                              |                                                    |   |       |   |         |        |               |  |             |    |              |   |               |     |             |   |          |      | 4,011 |   |             |   |       |       |        |     |  |   |          |        | 4,011  |      
|                        
|                        
|                        
|                        
|                         |                                                                      | Foreign currency
translation adjustment |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   | (1,065 | )     |        |     |   |   |          |        | (1,065 | )    
|                        
|                        
|                        
|                        
|                         |                                                                      | Cash flow hedges:                       |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |        |        |      
|                        
|                        
|                        
|                        
|                         |                                                                      |                                         | Net derivative gains, net of
tax expense of $1,142 |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        | 2,027 |        |     |   |   |          |        |        | 2,027 | 
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |       
|                         | Comprehensive income                                                 |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          | 4,973  |       
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |       
|                         | Issuance of stock pursuant
to Stock Bonus Plan
including tax expense |                                         |                                                    |  |        |   |         | 822    |                |  |             | 72 |               |   |               | 765 |              |   |          |     |       |   |             |  |        |       |        |    |   |   |          | 1,587  |       
|                        
|                        
|                        
|                        
|                         | Issuance of Restricted Stock                                         |                                         |                                                    |   |        |   |         | (25    | )              |  |             | 6  |               |   |               | 42  |              |   |          |     |       |   |             |  |        |       |        | (17 | ) |   |          |       |       
|                        
|                        
|                        
|                        
|                         | Amortization of
compensation                                         |                                         |                                                    |  |        |   |         |       |                |  |             |   |               |   |               |    |              |   |          |     |       |   |             |  |        |       |        | 945 |   |   |          | 945    |       
|                        
|                        
|                        
|                        
|                         | Net operating loss benefit                                           |                                         |                                                    |  |        |   |         | 12,300 |                |  |             |   |               |   |               |    |              |   |          |     |       |   |             |  |        |       |        |    |   |   |          | 12,300 |       
|                        
|                        
|                        
|                        
|                         | Stock dividends pursuant
to Stock Bonus Plan                         |                                         |                                                    |  |        |   |         |       |                |  |             |   |               |   |               |    |              |   |          | (204 | )     |   |             |  |        |       |        |    |   |   |          | (204   | )     
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |       
|Balance, June 30, 2002   |                                                                      |                                         | 71,100                                             |   |        | $ | 409,000 |        |                |  | (21,451     | )  |               | $ | (417,974      | )   |              | $ | (676,982 | )    |       | $ | (68,424     | ) |        | $     | (4,386 | )   |   | $ | (758,766 | )     
|                         |                                                                      |                                         |                                                    |   |        |   |         |        |                |  |             |    |               |   |               |     |              |   |          |      |       |   |             |   |        |       |        |     |   |   |          |       

See accompanying notes

6



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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 six month period ended June 30, 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 June 30, 2002 and December 31, 2001
(in thousands of dollars):

|                           |  |          |         |              |  |   |         | 
|-------------------------- |  | -------- | ------- | ------------ |  | - | ------- | 
|                           |  | June 30, |         | December 31,
|                           |  | 2002     |         | 2001        
|                           |  |          |         |             
|Finished goods             |  | $        | 222,884 |              |  | $ | 176,043 | 
|                          
|                          
|                          
|                          
|Work in process            |  |          | 178,636 |              |  |   | 170,854 | 
|                          
|                          
|                          
|                          
|Raw materials and supplies |  |          | 51,441  |              |  |   | 50,295  | 
|                          
|                          
|                          
|                          
|LIFO reserve               |  |          |        |              |  |   |        | 
|                           |  |          |         |              |  |   |         | 
|                           |  | $        | 452,961 |              |  | $ | 397,192 | 
|                           |  |          |         |              |  |   |         | 

7



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##### Table of Contents



WESTPOINT STEVENS INC.

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



|3. |  | Indebtedness and Financial Arrangements
|-- |  | ---------------------------------------

Indebtedness is as follows (in thousands of dollars):

|                         |                              |   |           |         |              |   |           |         | 
|------------------------ | ---------------------------- | - | --------- | ------- | ------------ | - | --------- | ------- | 
|                         |                              |   | June 30,  |         | December 31,
|                         |                              |   | 2002      |         | 2001        
|                         |                              |   |           |         |             
|Short-term indebtedness: |                              |   |           |         |              |   |           |        
|                        
|                        
|                        
|                        
|                         | Senior Credit Facility       |   | $         | 171,036 |              |   | $         | 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 June 30, 2002 because the Company intends that at least that
amount would remain outstanding during the next twelve months.

At June 30, 2002 and December 31, 2001, $130.6 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.

8



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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.

9



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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 June 30, 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.

10



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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 and six months ended June 30, 2002
and 2001 is as follows (in thousands):

|                                                   |                                                                               |   |                    |       |                  |   |         |        |      |   |        |       |  |   |         |         |  
|-------------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------ | ----- | ---------------- | - | ------- | ------ | ---- | - | ------ | ----- |  | - | ------- | ------- | -
|                                                   |                                                                               |   | Three Months Ended |       | Six Months Ended
|                                                   |                                                                               |   | June 30,           |       | June 30,        
|                                                   |                                                                               |   |                    |       |                 
|                                                   |                                                                               |   | 2002               |       | 2001             |   | 2002    |        | 2001
|                                                   |                                                                               |   |                    |       |                  |   |         |        |     
|Net income (loss)                                  |                                                                               | $ | 1,991              |       |                  | $ | (17,497 | )      |      | $ | 4,011  |       |  | $ | (28,397 | )      
|                                                  
|                                                  
|                                                  
|                                                  
|Foreign currency translation adjustment            |                                                                               |   | (1,459             | )     |                  |   | 422     |        |      |   | (1,065 | )     |  |   | 727     |        
|                                                  
|                                                  
|                                                  
|                                                  
|Gain (loss) on derivative instruments,
net of tax: |                                                                               |   |                    |       |                  |   |         |        |      |   |        |       |  |   |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cumulative effect of adopting
Statement No. 133                               |   |                    |      |                  |   |         |       |      |   |        |      |  |   |         | (968    | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net changes in fair value of derivatives                                      |   |                    | 1,164 |                  |   |         | (2,545 | )    |   |        | 1,728 |  |   |         | (15,693 | )
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net (gains) losses reclassified from other
comprehensive income into earnings |   |                    | 276   |                  |   |         | 5,644  |      |   |        | 299   |  |   |         | 4,208   |  
|                                                   |                                                                               |   |                    |       |                  |   |         |        |      |   |        |       |  |   |         |        
|Comprehensive income (loss)                        |                                                                               | $ | 1,972              |       |                  | $ | (13,976 | )      |      | $ | 4,973  |       |  | $ | (40,123 | )      
|                                                   |                                                                               |   |                    |       |                  |   |         |        |      |   |        |       |  |   |         |        





|6. |  | Deferred Financing Fees
|-- |  | -----------------------

Included in Other expense-net in the accompanying Condensed Consolidated
Statements of Operations for the three and six months ended June 30, 2002 is
the amortization of deferred financing fees of $2.3 million and $4.6 million,
respectively, compared with $1.2 million and $2.2 million, respectively, for
the three and six months ended June 30, 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

11



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WESTPOINT STEVENS INC.

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



|7. |  | Recently Adopted Accounting StandardsContinued
|-- |  | -----------------------------------------------

and intangible assets with indefinite useful lives. During the second quarter
and first six months of 2001, amortization of goodwill was $0.2 million and
$0.4 million after taxes, respectively. Excluding the impact of goodwill
amortization, the net loss for the second quarter and first six months of 2001
would have been $17.3 million, or $0.35 per share diluted, and $28.0 million,
or $0.56 per share diluted, respectively.

The Company applied Statement 142 beginning in the first quarter of 2002. The
Company is required to 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 was required to perform the
first of the required January 1, 2002 impairment test of goodwill by June 30,
2002. The Company has completed the transitional goodwill impairment test
required and determined that there currently is no impairment to its recorded
goodwill balances.





|8. |  | Income Taxes
|-- |  | ------------

The Company has federal and state net operating loss carryovers (NOLs), a
portion of which were generated prior to an ownership change that took place in
1992. Because of the complex tax rules related to these carryforwards and the
uncertainty of ultimately realizing benefit from the losses, the Company did
not record full benefit for these NOLs.

12



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WESTPOINT STEVENS INC.

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



|8. |  | Income TaxesContinued
|-- |  | ----------------------

During the second quarter of 2002, certain contingencies
related to the NOLs were resolved and the Company reevaluated its position on
the tax benefits associated with these carryforwards. As a result of this
analysis, the Company recorded a $12.3 million benefit in the second quarter.
Because the NOLs involved were generated prior to emergence from bankruptcy,
the accounting rules of Statement of Position 90-7 (Financial Reporting by
Entities in Reorganization under the Bankruptcy Code) require that the benefit
be recorded in equity rather than in the income statement.





|9. |  | Litigation and Contingent Liabilities
|-- |  | -------------------------------------

The Company was 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 were based upon routine discharges of wastewater from the Companys
Opelika Finishing Plant and the Plaintiffs sought an unspecified amount in
compensatory and punitive damages. The parties settled the case for an
immaterial amount in the third quarter of 2002.

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.

13



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WESTPOINT STEVENS INC.

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



|9. |  | Litigation and Contingent LiabilitiesContinued
|-- |  | -----------------------------------------------

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 moved for dismissal of that
complaint on June 4, 2002.

The Company believes that the allegations are without merit and intends to
contest the action vigorously, on behalf of itself and 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 Geller
action. By agreement of the
parties the answers to the Complaint will not be due until
Defendants Motion to Dismiss, filed in the Geller
action, is resolved by the United States District Court.

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al.,was filed against Mr. Green and certain of the
Companys other directors in the Court of Chancery in the State of Delaware in
and for New Castle County. The Complaint alleges that the named individuals
breached their fiduciary duties and knowingly or recklessly failed to exercise
oversight responsibilities to ensure the integrity of the Companys financial
reporting. The Complaint also asserts that certain of the named individuals
used proprietary Company information in selling or pledging Company stock at
inflated prices for their benefit. The claims are based on the same or similar
facts as are alleged in the Gelleraction. By agreement of the
parties the answers to the Complaint will not be due until
Defendants Motion to Dismiss, filed in the Geller
action, is resolved by the United States District Court.

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

14



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##### Table of Contents



WESTPOINT STEVENS INC.

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



|9. |  | Litigation and Contingent LiabilitiesContinued
|-- |  | -----------------------------------------------

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.

15



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##### Table of Contents



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.

16



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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 June 30, 2002                  |                | $ |          |      |             | $ | 1.4      |     |        | $ | 1.6  |      |   | $ | 3.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

17



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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 and Six Months Ended June 30, 2002

The table below is a summary of the Companys operating results for the three
and six months ended June 30, 2002 and June 30, 2001 (in millions of dollars).

|                                           |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|------------------------------------------ |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                           |  | Three Months Ended |       | Six Months Ended
|                                           |  | June 30,           |       | June 30,        
|                                           |  |                    |       |                 
|                                           |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                                           |  |                    |       |                  |  |      |       |     
|Net sales                                  |  | $                  | 449.6 |                  |  | $    | 401.7 |      |  | $ | 884.7 |   |  | $ | 820.3 |  
|                                          
|                                          
|                                          
|                                          
|Gross earnings                             |  | $                  | 103.8 |                  |  | $    | 71.7  |      |  | $ | 211.6 |   |  | $ | 161.4 |  
|                                          
|                                          
|                                          
|                                          
|Restructuring and impairment charge        |  |                    |      |                  |  |      |      |      |  |   |      |   |  | $ | 5.0   |  
|                                          
|                                          
|                                          
|                                          
|Operating earnings                         |  | $                  | 38.2  |                  |  | $    | 7.9   |      |  | $ | 77.1  |   |  | $ | 28.5  |  
|                                          
|                                          
|                                          
|                                          
|Interest expense                           |  | $                  | 33.4  |                  |  | $    | 34.3  |      |  | $ | 66.7  |   |  | $ | 68.5  |  
|                                          
|                                          
|                                          
|                                          
|Other expense-net                          |  | $                  | 1.7   |                  |  | $    | 0.9   |      |  | $ | 4.1   |   |  | $ | 4.3   |  
|                                          
|                                          
|                                          
|                                          
|Income (loss) from operations before taxes |  | $                  | 3.1   |                  |  | $    | (27.3 | )    |  | $ | 6.3   |   |  | $ | (44.3 | )
|                                          
|                                          
|                                          
|                                          
|Income (loss) from operations              |  | $                  | 2.0   |                  |  | $    | (17.5 | )    |  | $ | 4.0   |   |  | $ | (28.4 | )
|                                          
|                                          
|                                          
|                                          
|                                           |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|                                          
|                                          
|                                          
|                                          
|Gross margin                               |  |                    | 23.1  | %                |  |      | 17.9  | %    |  |   | 23.9  | % |  |   | 19.7  | %
|                                          
|                                          
|                                          
|                                          
|Operating margin                           |  |                    | 8.5   | %                |  |      | 2.0   | %    |  |   | 8.7   | % |  |   | 3.5   | %

18



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended June 30, 2002

Net Sales.Net sales for the three months ended June 30, 2002 increased $47.9
million, or 11.9% to $449.6 million compared with net sales of $401.7 million
for the three months ended June 30, 2001. Increases in sales across all
product categories, especially basic bedding products and other bedding
accessories and towels, led to the improved sales performance.

For the three months ended June 30, 2002, bed products sales were $251.3
million compared with $218.4 million last year; bath products sales were $150.5
million compared with $133.0 million last year; and other sales (consisting
primarily of sales from the Companys retail stores and foreign operations)
were $47.7 million compared with $50.3 million last year.

Gross Earnings/Margins.Gross earnings for the three months ended June 30,
2002 increased $26.3 million, or 34.0%, to $103.8 million compared with $77.5
million for the same period of 2001, excluding charges associated with the
Eight-Point Plan, and reflect gross margins of 23.1% in 2002 versus 19.3% in
2001. Gross earnings and margins increased primarily as a result of lower raw
material costs, improved manufacturing efficiencies, and a more profitable mix
of revenues. Included in the cost of goods sold in the second quarter of 2001
are charges associated with the Eight- Point Plan of $5.7 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 June 30, 2002 increased $32.1 million, or 44.7%, to $103.8
million compared with $71.7 million for the same period of 2001.

Operating Earnings/Margins.Selling, general and administrative expenses
increased $1.8 million, or 2.8%, in the second quarter of 2002 compared with
the same period of last year, but as a percentage of net sales decreased to
14.6% in the 2002 period compared with 15.9% in the 2001 period. The increase
in selling, general and administrative expenses in the second quarter of 2002
reflected higher revenues for the period.

Before charges associated with the Eight-Point Plan, operating earnings for the
second quarter of 2002 increased 179.5% to $38.2 million, or 8.5% of sales,
compared with operating earnings of $13.7 million, or 3.4% of sales, for the
same period in 2001. Including the charges, operating earnings for the three
months ended June 30, 2002 increased $30.3 million to $38.2 million compared
with $7.9 million for the same period of 2001.

Interest Expense.Interest expense for the three months ended June 30, 2002 of
$33.4 million decreased $0.9 million compared with interest expense of $34.3
million for the three months ended June 30, 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.

19



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations: Three Months Ended June 30, 2002Continued

Other Expense - Net.Other expense - net in the second quarter of 2002 consisted
primarily of the amortization of deferred financing fees of $2.3 million, less
certain miscellaneous income items. Other expense - net in the second quarter
of 2001 of $0.9 million consisted primarily of the amortization of deferred
financing fees of $1.2 million, less certain miscellaneous income items.

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, before charges associated with the Eight-Point Plan,
increased $15.8 million, to $2.0 million, or $0.04 per share diluted, from a
net loss of $13.8 million, or a loss of $0.28 per share diluted, in the same
period of last year. After the charges, net income for the second quarter of
2002 was $2.0 million, or $0.04 per share diluted, compared with a loss of
$17.5 million, or a loss of $0.35 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.



Results of Operations: Six Months Ended June 30, 2002

Net Sales.Net sales for the six months ended June 30, 2002, increased 7.9% or
$64.4 million to $884.7 million compared with $820.3 million a year ago. Sales
increased in all product categories and more than offset declines in the
Companys retail stores division and international sales.

For the six months ended June 30, 2002, bed products sales were $517.4 million
compared with $451.4 million last year, bath products sales were $271.4 million
compared with $267.4 million last year and other sales (consisting primarily of
sales from the Companys retail stores and foreign operations) were $95.9
million compared with $101.4 million last year.

Gross Earnings/Margins.Excluding charges associated with the Eight-Point
Plan, gross earnings for the six months ended June 30, 2002 increased $40.4
million or 23.6%, to $211.6 million compared with $171.2 million for the same
period of 2001 and reflect gross margins of 23.9% for the 2002 period versus
20.9% for the 2001 period. Gross earnings and margins increased as a result of
lower raw material costs, improved manufacturing efficiencies, and a more
profitable mix of revenues. Included in the cost of goods sold in the first
six months of 2001 are charges associated with the Eight-Point Plan of $9.7
million, the majority of which reflected equipment relocation costs. Including
the charges, gross earnings for the six months ended June 30, 2002 increased
$50.2 million, or 31.1% to $211.6 million compared with $161.4 million for the
same period of 2001.

20



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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: Six Months Ended June 30, 2002Continued

Operating Earnings/Margins.Selling, general and administrative expenses
increased $6.6 million or 5.2%, in the first six months of 2002 compared with
the same period of last year, and as a percentage of net sales represent 15.2%
in the 2002 period versus 15.6% in the 2001 period. The increase in selling,
general and administrative expenses in the first six months of 2002 was
primarily due to increased reserves for bad debt expense of $5.0
million the majority of which was associated with the bankruptcy
filing of Kmart.

Before charges associated with the Eight-Point Plan, operating earnings for the
first six months of 2002 increased 78.1% to $77.1 million or 8.7% of sales,
compared with operating earnings of $43.3 million, or 5.3% of sales for the
same period in 2001. This increase reflected increased sales, decreased raw
material costs, improved manufacturing efficiencies, and a more profitable mix
of revenues. Including the charges, operating earnings for the six months
ended June 30, 2002 increased $48.5 million, or 170.1%, to $77.1 million
compared with $28.5 million for the same period of 2001.

Interest Expense.Interest expense for the six months ended June 30, 2002 of
$66.7 million decreased $1.8 million compared with interest expense of $68.5
million for the six months ended June 30, 2001. The decrease was due primarily
to lower interest rates on the Companys variable rate bank debt in the first
six months of 2002 compared with 2001.

Other Expense - Net.Other expense - net in the first six months of 2002
consisted primarily of the amortization of deferred financing fees of $4.6
million, less certain miscellaneous income items. For the first six months of
2001, other expense - net of $4.3 million includes a
$2.3 million charge for
cotton derivatives in accordance with Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, and also includes the
amortization of deferred financing fees of $2.2 million, less
certain miscellaneous income items.

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, before charges associated with the Eight-Point Plan,
increased $23.0 million to $4.0 million, or $0.08 per share diluted, from a net
loss of $19.0 million, or a loss of $0.38 per share diluted, in the same period
of last year. After the charges, the net loss for the first six months of 2001
was $28.4 million, or a loss of $0.57 per share diluted.

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

21



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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 and Six Months Ended June 30, 2002Continued

Effects of Inflation

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



Liquidity and Capital Resources

The Companys principal sources of liquidity are expected to be cash from its
operations and funds available under the Senior Credit Facility. At August 2,
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 $153.6 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. If
Kmarts financial condition should deteriorate further, the impact to the
Company could become more significant.

At June 30, 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. If market conditions should
deteriorate resulting in a lowering of managements projections for 2002,
issues could arise as to compliance with covenants under its credit agreements.

22



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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 and Six Months Ended June 30, 2002Continued

Liquidity and Capital ResourcesContinued

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 $50.0
million in 2002. The Senior Credit Facility does not permit cash
dividends.

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
June 30, 2002, approximately 3.6 million shares remained to be purchased under
these programs. The Senior Credit Facility does not permit 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 $5.0 million
in 2002, compared with $6.5 million in 2001. At June 30, 2002 and December 31,
2001, $130.6 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 $135.0 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.

23



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##### Table of Contents



WESTPOINT STEVENS INC.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

The Company was 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 were based upon routine discharges of wastewater from the Companys
Opelika Finishing Plant and the Plaintiffs sought an unspecified amount in
compensatory and punitive damages. The parties settled the case for an
immaterial amount in the third quarter of 2002.

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 moved for dismissal of that complaint on June 4, 2002.

The Company believes that the allegations are without merit and intends to
contest the action vigorously, on behalf of itself and 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 Geller
action. By agreement of the parties the answers to the Complaint will
not be due until Defendants Motion to Dismiss, filed in the
Geller action, is resolved by the United States District Court.

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WESTPOINT STEVENS INC.

PART II - OTHER INFORMATION -
Continued

Item 1. Legal ProceedingsContinued

On July 1, 2002, a shareholder derivative action, entitled John Hemmer v.
Holcombe T. Green, Jr., et al.,was filed against Mr. Green and certain of the
Companys other directors in the Court of Chancery in the State of Delaware in
and for New Castle County. The Complaint alleges that the named individuals
breached their fiduciary duties and knowingly or recklessly failed to exercise
oversight responsibilities to ensure the integrity of the Companys financial
reporting. The Complaint also asserts that certain of the named individuals
used proprietary Company information in selling or pledging Company stock at
inflated prices for their benefit. The claims are based on the same or similar
facts as are alleged in the Gelleraction. By agreement of the parties the answers to the Complaint will not
be due until Defendants Motion to Dismiss, filed in the
Geller action, is resolved by the United States District Court.

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

The Company 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.

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WESTPOINT STEVENS INC.

PART II - OTHER INFORMATION - Continued

Item 1. Legal ProceedingsContinued

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 4. Submission of Matters to a Vote of Security Holders

The Companys 2002 Annual Meeting of Stockholders was held on May 8, 2002. At
the 2002 Annual Meeting, the following matters were voted upon by the
stockholders:

1.     Election of two directors to serve for a term of three years.

2.     Ratification of appointment of Ernst & Young LLP, independent certified
public accountants, as auditors of the Company for fiscal 2002.

3.     Stockholder proposal regarding actions to ensure that the Company does not
do business with suppliers who manufacture items or harvest raw materials using
child labor.

The following is a table setting forth the number of votes cast for, against or
withheld, as well as the number of abstentions and broker non-votes, as to each
of the above matters.

1.     Election of Director

|                       |  |     |            |          |  |           |         | 
|---------------------- |  | --- | ---------- | -------- |  | --------- | ------- | 
|                       |  |     |            |          |  | Authority
|Nominee                |  | For |            | Withheld
|                       |  |     |            |         
|M. L. Chip Fontenot  |  |     | 37,473,310 |          |  |           | 241,094 | 
|                      
|                      
|                      
|                      
|Joseph R. Gladden, Jr. |  |     | 37,489,850 |          |  |           | 224,554 | 

2.     Appointment of Ernst & Young LLP

|           |  |         |         |         |  |  |        | 
|---------- |  | ------- | ------- | ------- |  |  | ------ | 
|For        |  | Against |         | Abstain
|           |  |         |         |        
|37,487,107 |  |         | 157,357 |         |  |  | 69,940 | 

3.     Stockholder Proposal Concerning Child Labor

|          |  |         |            |         |  |                  |         |  |  |  |           | 
|--------- |  | ------- | ---------- | ------- |  | ---------------- | ------- |  |  |  | --------- | 
|For       |  | Against |            | Abstain |  | Broker Non-Votes
|          |  |         |            |         |  |                 
|2,930,844 |  |         | 27,049,702 |         |  |                  | 304,253 |  |  |  | 7,429,605 | 

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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    |  | Separation Agreement and General Release dated as
of March 20, 2002, between WestPoint Stevens Inc. and
Lanny Bledsoe as ratified and approved by the
Compensation Committee of the Board of Directors of
WestPoint Stevens Inc. on April 3, 2002.

b.) No report on Form 8-K was filed by the Company during the quarter ended
June 30, 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: August 14, 2002

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WESTPOINT STEVENS INC.




EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                     |  |        |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | 
|EXHIBIT |  |                                                                                                                                                                                                                                                     |  | PAGE  
|NUMBER  |  |                                                                                                                                                                                                                                                     |  | NUMBER
|        |  |                                                                                                                                                                                                                                                     |  |       
|10.1    |  | Separation Agreement and General Release dated
As of March 20, 2002, between WestPoint Stevens
Inc. and Lanny Bledsoe as ratified and approved by
the Compensation Committee and the Board of
Directors of WestPoint Stevens Inc. on April 3, 2002.

30