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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2002

OR

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

For the transition period from  to

Commission File Number 0-21496

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

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

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

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

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

|      |  |   
|----- |  | --
|Yes X |  | No

Common shares outstanding at November 1, 2002: 49,650,657 shares of Common
Stock, $.01 par value.

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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 (Unaudited)                             
|                                             | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | Item 4. Controls and Procedures                                                              
|PART II  OTHER INFORMATION                 
|                                             | Item 1. Legal Proceedings                                                                    
|                                             | Item 6. Exhibits and Reports on Form 8-K                                                     
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



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##### Table of Contents



INDEX

|         |  |                       |  |                                                                                                                                    |  |  |          |  | 
|-------- |  | --------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  |  | -------- |  | 
|         |  |                       |  |                                                                                                                                    |  |  | Page No.
|         |  |                       |  |                                                                                                                                    |  |  |         
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                                    |  | 
|        
|         |  |                       |  | Item 1.   Financial Statements                                                                                                     |  |  |          | 
|        
|         |  |                       |  | Condensed Consolidated Balance Sheets:
September 30, 2002 (Unaudited)
and December 31, 2001                                        |  |  | 3        | 
|        
|         |  |                       |  | Condensed Consolidated Statements of Operations (Unaudited); Three and
Nine Months Ended September 30,
2002 and September 30, 2001 |  |  | 4        | 
|        
|         |  |                       |  | Condensed Consolidated Statements of
Cash Flows (Unaudited); Nine
Months Ended September 30, 2002
and September 30, 2001           |  |  | 5        | 
|        
|         |  |                       |  | Condensed Consolidated Statements of
Stockholders Equity (Deficit) (Unaudited);
Nine Months Ended September 30, 2002              |  |  | 6        | 
|        
|         |  |                       |  | Notes to Condensed Consolidated Financial
Statements (Unaudited)                                                                   |  |  | 7-17     | 
|        
|         |  |                       |  | Item 2.   Managements Discussion and Analysis of
Financial Condition and Results of Operations                                    |  |  | 18-28    | 
|        
|         |  |                       |  | Item 4.   Controls and Procedures                                                                                                  |  |  | 29       | 
|        
|        
|PART II. |  | OTHER INFORMATION     |  |                                                                                                                                    |  | 
|        
|         |  |                       |  | Item 1.   Legal Proceedings                                                                                                        |  |  | 30-32    | 
|        
|         |  |                       |  | Item 6.   Exhibits and Reports on Form 8-K                                                                                         |  |  | 33       | 

2



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PART I.     FINANCIAL
INFORMATION
Item 1.       Financial
Statements

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

|                                               |                                           |   |               |         |              |   |           |         | 
|---------------------------------------------- | ----------------------------------------- | - | ------------- | ------- | ------------ | - | --------- | ------- | 
|                                               |                                           |   | September 30, |         | December 31,
|                                               |                                           |   | 2002          |         | 2001        
|                                               |                                           |   |               |         |             
|                                               |                                           |   | (Unaudited)   |         |              |   |          
|Assets                                         |                                           |   |               |         |              |   |           |        
|Current Assets                                 |                                           |   |               |         |              |   |           |        
|                                               | Cash and cash equivalents                 |   | $             | 3,642   |              |   | $         | 3,170   | 
|                                               | Accounts receivable                       |   |               | 116,389 |              |   |           | 105,136 | 
|                                               | Inventories                               |   |               | 432,584 |              |   |           | 397,192 | 
|                                               | Prepaid expenses and other current assets |   |               | 34,447  |              |   |           | 29,613  | 
|                                               |                                           |   |               |         |              |   |           |        
|Total current assets                           |                                           |   | 587,062       |         |              |   | 535,111   |        
|                                              
|Property, Plant and Equipment, net             |                                           |   | 714,926       |         |              |   | 749,326   |        
|                                              
|Other Assets                                   |                                           |   |               |         |              |   |           |        
|                                               | Deferred financing fees                   |   |               | 27,717  |              |   |           | 32,879  | 
|                                               | Other assets                              |   |               | 4,007   |              |   |           | 4,243   | 
|                                               | Goodwill                                  |   |               | 46,298  |              |   |           | 47,288  | 
|                                               |                                           |   |               |         |              |   |           |        
|                                               |                                           | $ | 1,380,010     |         |              | $ | 1,368,847 |        
|                                               |                                           |   |               |         |              |   |           |        
|Liabilities and Stockholders Equity (Deficit) |                                           |   |               |         |              |   |           |        
|Current Liabilities                            |                                           |   |               |         |              |   |           |        
|                                               | Senior Credit Facility                    |   | $             | 84,895  |              |   | $         | 107,501 | 
|                                               | Accrued interest payable                  |   |               | 31,540  |              |   |           | 3,856   | 
|                                               | Accounts payable                          |   |               | 67,511  |              |   |           | 67,218  | 
|                                               | Other accrued liabilities                 |   |               | 139,323 |              |   |           | 114,466 | 
|                                               |                                           |   |               |         |              |   |           |        
|Total current liabilities                      |                                           |   | 323,269       |         |              |   | 293,041   |        
|                                              
|Long-Term Debt                                 |                                           |   | 1,565,000     |         |              |   | 1,565,000 |        
|                                              
|Noncurrent Liabilities                         |                                           |   |               |         |              |   |           |        
|                                               | Deferred income taxes                     |   |               | 170,749 |              |   |           | 182,822 | 
|                                               | Pension and other liabilities             |   |               | 97,919  |              |   |           | 106,351 | 
|                                               |                                           |   |               |         |              |   |           |        
|Total noncurrent liabilities                   |                                           |   | 268,668       |         |              |   | 289,173   |        
|                                              
|Stockholders Equity (Deficit)                 |                                           |   | (776,927      | )       |              |   | (778,367  | )      
|                                               |                                           |   |               |         |              |   |           |        
|                                               |                                           | $ | 1,380,010     |         |              | $ | 1,368,847 |        
|                                               |                                           |   |               |         |              |   |           |        

See accompanying notes

3



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WESTPOINT STEVENS INC.

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

|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |         |  
|-------------------------------------------- | ----------------------------------------------------- | - | ------------------ | ------- | ----------------- | - | ------- | ------- | ---- | - | --------- | ------- | - | - | --------- | ------- | -
|                                             |                                                       |   | Three Months Ended |         | Nine Months Ended
|                                             |                                                       |   | September 30,      |         | September 30,    
|                                             |                                                       |   |                    |         |                  
|                                             |                                                       |   | 2002               |         | 2001              |   | 2002    |         | 2001
|                                             |                                                       |   |                    |         |                   |   |         |         |     
|Net sales                                    |                                                       | $ | 460,454            |         |                   | $ | 513,065 |         |      | $ | 1,345,170 |         |   | $ | 1,333,337 |        
|Cost of goods sold                           |                                                       |   | 374,675            |         |                   |   | 395,093 |         |      |   | 1,047,818 |         |   |   | 1,053,949 |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |         |  
|                                             | Gross earnings                                        |   |                    | 85,779  |                   |   |         | 117,972 |      |   |           | 297,352 |   |   |           | 279,388 |  
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |         |  
|Selling, general and administrative expenses |                                                       |   | 70,602             |         |                   |   | 64,962  |         |      |   | 205,115   |         |   |   | 192,838   |        
|Restructuring and impairment charge          |                                                       |   | 5,872              |         |                   |   |        |         |      |   | 5,872     |         |   |   | 5,008     |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|                                             | Operating earnings                                    |   |                    | 9,305   |                   |   |         | 53,010  |      |   |           | 86,365  |   |   |           | 81,542  |  
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |         |  
|Interest expense                             |                                                       |   | 33,735             |         |                   |   | 37,789  |         |      |   | 100,450   |         |   |   | 106,322   |        
|Other expense-net                            |                                                       |   | 1,519              |         |                   |   | 9,513   |         |      |   | 5,598     |         |   |   | 13,804    |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|                                             | Income (loss) before income tax
expense (benefit)     |   |                    | (25,949 | )                 |   |         | 5,708   |      |   |           | (19,683 | ) |   |           | (38,584 | )
|Income tax expense (benefit)                 |                                                       |   | (9,340             | )       |                   |   | 2,080   |         |      |   | (7,085    | )       |   |   | (13,815   | )      
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|                                             | Net income (loss)                                     |   | $                  | (16,609 | )                 |   | $       | 3,628   |      |   | $         | (12,598 | ) |   | $         | (24,769 | )
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|Basic net income (loss) per common share     |                                                       | $ | (.33               | )       |                   | $ | .07     |         |      | $ | (.25      | )       |   | $ | (.50      | )      
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|Diluted net income (loss) per common share   |                                                       | $ | (.33               | )       |                   | $ | .07     |         |      | $ | (.25      | )       |   | $ | (.50      | )      
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|Basic average common shares outstanding      |                                                       |   | 49,671             |         |                   |   | 49,624  |         |      |   | 49,662    |         |   |   | 49,592    |        
|                                             | Dilutive effect of stock options
and stock bonus plan |   |                    |        |                   |   |         |        |      |   |           |        |   |   |           |        |  
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        
|Diluted average common shares outstanding    |                                                       |   | 49,671             |         |                   |   | 49,624  |         |      |   | 49,662    |         |   |   | 49,592    |        
|                                             |                                                       |   |                    |         |                   |   |         |         |      |   |           |         |   |   |           |        

See accompanying notes

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WESTPOINT STEVENS INC.

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

|                                                     |                                                                                            |                                                           |         |                   |          |      |         |         |            |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | --------------------------------------------------------- | ------- | ----------------- | -------- | ---- | ------- | ------- | ---------- | -
|                                                     |                                                                                            |                                                           |         | Nine Months Ended
|                                                     |                                                                                            |                                                           |         | September 30,    
|                                                     |                                                                                            |                                                           |         |                  
|                                                     |                                                                                            |                                                           |         | 2002              |          | 2001
|                                                     |                                                                                            |                                                           |         |                   |          |     
|Cash flows from operating activities:                |                                                                                            |                                                           |         |                   |          |      |         |        
|                                                     | Net loss                                                                                   |                                                           | $       | (12,598           | )        |      | $       | (24,769 | )         
|                                                     | Adjustments to reconcile net loss to net
cash provided by (used for) operating activities: |                                                           |         |                   |          |      |         |         |           
|                                                     |                                                                                            | Depreciation and other amortization                       |         |                   | 61,510   |      |         |         | 62,486     |  
|                                                     |                                                                                            | Deferred income taxes                                     |         |                   | (842     | )    |         |         | (10,142    | )
|                                                     |                                                                                            | Changes in working capital                                |         |                   | (3,113   | )    |         |         | (63,596    | )
|                                                     |                                                                                            | Other-net                                                 |         |                   | (3,093   | )    |         |         | 7,389      |  
|                                                     |                                                                                            | Non-cash component of restructuring and
impairment charge |         |                   | 4,315    |      |         |         |           |  
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Net cash provided by (used for) operating activities |                                                                                            |                                                           | 46,179  |                   |          |      | (28,632 | )      
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Cash flows from investing activities:                |                                                                                            |                                                           |         |                   |          |      |         |        
|                                                     | Capital expenditures                                                                       |                                                           |         | (32,035           | )        |      |         | (47,193 | )         
|                                                     | Net proceeds from sale of assets                                                           |                                                           |         | 1,534             |          |      |         | 1,057   |           
|                                                     | Purchase of business                                                                       |                                                           |         |                  |          |      |         | (8,363  | )         
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Net cash used for investing activities               |                                                                                            |                                                           | (30,501 | )                 |          |      | (54,499 | )      
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Cash flows from financing activities:                |                                                                                            |                                                           |         |                   |          |      |         |        
|                                                     | Senior Credit Facility:                                                                    |                                                           |         |                   |          |      |         |         |           
|                                                     |                                                                                            | Borrowings                                                |         |                   | 614,197  |      |         |         | 967,117    |  
|                                                     |                                                                                            | Repayments                                                |         |                   | (636,803 | )    |         |         | (1,048,090 | )
|                                                     | Trade Receivables Program                                                                  |                                                           |         | 7,400             |          |      |         | 20,000  |           
|                                                     | Cash dividends paid                                                                        |                                                           |         |                  |          |      |         | (2,015  | )         
|                                                     | Proceeds from Second-Lien Facility                                                         |                                                           |         |                  |          |      |         | 165,000 |           
|                                                     | Fees associated with refinancing                                                           |                                                           |         |                  |          |      |         | (15,701 | )         
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Net cash provided by (used for) financing activities |                                                                                            |                                                           | (15,206 | )                 |          |      | 86,311  |        
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Net increase in cash and cash equivalents            |                                                                                            |                                                           | 472     |                   |          |      | 3,180   |        
|Cash and cash equivalents at beginning of period     |                                                                                            |                                                           | 3,170   |                   |          |      | 167     |        
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        
|Cash and cash equivalents at end of period           |                                                                                            | $                                                         | 3,642   |                   |          | $    | 3,347   |        
|                                                     |                                                                                            |                                                           |         |                   |          |      |         |        

See accompanying notes

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WESTPOINT STEVENS INC.

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

|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |         |     | 
|--------------------------- | -------------------------------------------------------------------- | --------------------------------------- | ---------------------------------------- | - | ------ | - | ------- | ------ | ----------- |  | -------------- | -- | ------------- | - | ------------- | --- | ------------ | - | -------- | ---- | ------- | - | ----------- | - | ------ | --- | ------ | ----- | - | - | -------- | ------- | ------- | --- | 
|                            |                                                                      |                                         |                                          |   |        |   |         |        | Common      |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |        
|                            |                                                                      |                                         |                                          |   |        |   |         |        | Stock       |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |        
|                            |                                                                      |                                         |                                          |   |        |   |         |        | and Capital |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |        
|                            |                                                                      |                                         |                                          |   |        |   |         |        | in          |  |                |    |               |   |               |     |              |   |          |      |         |   | Accumulated |   |        |     |        |       |   |   |         
|                            |                                                                      |                                         |                                          |   |        |   |         |        | Excess of   |  | Treasury Stock |    |               |   |               |     | Other        |   |          |      |         |   |             |   |       
|                            |                                                                      |                                         |                                          |   | Common |   | Par     |        |             |  | Accumulated    |    | Comprehensive |   | Unearned      |     |              |   |         
|                            |                                                                      |                                         |                                          |   | Shares |   | Value   |        | Shares      |  | Amount         |    | Deficit       |   | Income (Loss) |     | Compensation |   | Total   
|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |         
|Balance, January 1, 2002    |                                                                      |                                         | 71,100                                   |   |        | $ | 395,903 |        |             |  | (21,529        | )  |               | $ | (418,781      | )   |              | $ | (680,789 | )    |         | $ | (69,386     | ) |        | $   | (5,314 | )     |   | $ | (778,367 | )      
|                            | Comprehensive income (loss):                                         |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |        
|                            |                                                                      | Net loss                                |                                          |   |       |   |         |        |            |  |                |    |              |   |               |     |             |   |          |      | (12,598 | ) |             |   |       |     |        |       |  |   |          |         | (12,598 | )  
|                            |                                                                      | Foreign currency
translation adjustment |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   | (1,543 | )   |        |       |   |   |          |         | (1,543  | )  
|                            |                                                                      | Cash flow hedges:                       |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |         |         |    
|                            |                                                                      |                                         | Net derivative gains, net of
tax expense |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        | 480 |        |       |   |   |          |         |         | 480 | 
|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |        
|                            | Comprehensive loss                                                   |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          | (13,661 | )      
|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |        
|                            | 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                                         |                                         |                                          |  |        |   |         |       |             |  |                |   |               |   |               |    |              |   |          |     |         |   |             |  |        |     |        | 1,418 |   |   |          | 1,418   |        
|                            | Net operating loss benefit                                           |                                         |                                          |  |        |   |         | 12,300 |             |  |                |   |               |   |               |    |              |   |          |     |         |   |             |  |        |     |        |      |   |   |          | 12,300  |        
|                            | Stock dividends pursuant
to Stock Bonus Plan                         |                                         |                                          |  |        |   |         |       |             |  |                |   |               |   |               |    |              |   |          | (204 | )       |   |             |  |        |     |        |      |   |   |          | (204    | )      
|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |        
|Balance, September 30, 2002 |                                                                      |                                         | 71,100                                   |   |        | $ | 409,000 |        |             |  | (21,451        | )  |               | $ | (417,974      | )   |              | $ | (693,591 | )    |         | $ | (70,449     | ) |        | $   | (3,913 | )     |   | $ | (776,927 | )      
|                            |                                                                      |                                         |                                          |   |        |   |         |        |             |  |                |    |               |   |               |     |              |   |          |      |         |   |             |   |        |     |        |       |   |   |          |        

See accompanying notes

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WESTPOINT STEVENS INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1.   Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, all adjustments (consisting only of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 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 September 30, 2002 and December 31,
2001 (in thousands of dollars):

|                           |  |               |         |              |  |   |         | 
|-------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                           |  | September 30, |         | December 31,
|                           |  | 2002          |         | 2001        
|                           |  |               |         |             
|Finished goods             |  | $             | 193,126 |              |  | $ | 176,043 | 
|Work in process            |  |               | 186,169 |              |  |   | 170,854 | 
|Raw materials and supplies |  |               | 53,289  |              |  |   | 50,295  | 
|LIFO reserve               |  |               |        |              |  |   |        | 
|                           |  |               |         |              |  |   |         | 
|                           |  | $             | 432,584 |              |  | $ | 397,192 | 
|                           |  |               |         |              |  |   |         | 

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WESTPOINT STEVENS INC.

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

3.   Indebtedness and Financial Arrangements

Indebtedness is as follows (in thousands of dollars):

|                         |                              |   |               |         |              |   |           |         | 
|------------------------ | ---------------------------- | - | ------------- | ------- | ------------ | - | --------- | ------- | 
|                         |                              |   | September 30, |         | December 31,
|                         |                              |   | 2002          |         | 2001        
|                         |                              |   |               |         |             
|Short-term indebtedness: |                              |   |               |         |              |   |           |        
|                         | Senior Credit Facility       |   | $             | 84,895  |              |   | $         | 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 September 30, 2002 because the Company intends that at least
that amount would remain outstanding during the next twelve months.

In the third quarter of 2002, the Companys Senior Credit Facility and
Second-Lien Facility were amended primarily to permit certain restructuring,
impairment and other charges, and to modify certain financial ratios and the
minimum EBITDA covenant. The Senior Credit Facility amendment also modified
the scheduled $25 million reduction in the revolver commitment date from
November 1, 2002 to September 20, 2002 with no change to the remaining
scheduled commitment reduction dates. At the option of the Company, interest
under the Senior Credit Facility will be payable monthly, either at the prime
rate plus 2.75% or at LIBOR plus 4.5%.

At September 30, 2002 and December 31, 2001, $160.0 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.

8



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WESTPOINT STEVENS INC.

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

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.

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.

9



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WESTPOINT STEVENS INC.

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

4.   Restructuring, Impairment and Other ChargesContinued

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

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

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

|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |      | 
|----------------------------------------- | -------------- | - | --------- | ---- | ----------- | - | -------- | --- | ------ | - | ---- | ---- | - | - | ----- | ---- | 
|                                          |                |   |           |      |             |   | Employee |     | Other  |   |      |      |  
|                                          |                |   | Writedown |      | Termination |   | Exit     |     | Total 
|                                          |                |   | Assets    |      | Benefits    |   | Costs    |     | Charge
|                                          |                |   |           |      |             |   |          |     |       
|2000 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | Second Quarter |   | $         | 87.9 |             |   | $        | 4.6 |        |   | $    | 3.4  |   |   | $     | 95.9 | 
|                                          | Third Quarter  |   |           |     |             |   |          | 5.8 |        |   |      | 0.3  |   |   |       | 6.1  | 
|                                          | Fourth Quarter |   |           | 2.6  |             |   |          | 4.3 |        |   |      | 0.3  |   |   |       | 7.2  | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2000 Charge                         |                |   | 90.5      |      |             |   | 14.7     |     |        |   | 4.0  |      |   |   | 109.2 |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|2001 Restructuring and Impairment Charge: |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|                                          | First Quarter  |   |           |     |             |   |          | 5.0 |        |   |      |     |   |   |       | 5.0  | 
|                                          | Fourth Quarter |   |           |     |             |   |          | 2.0 |        |   |      | (2.0 | ) |   |       |     | 
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Total 2001 Charge                         |                |   |          |      |             |   | 7.0      |     |        |   | (2.0 | )    |   |   | 5.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Writedown Assets to Net Recoverable Value |                |   | (90.5     | )    |             |   |         |     |        |   |     |      |   |   | (90.5 | )   
|2000 Cash Payments                        |                |   |          |      |             |   | (4.7     | )   |        |   | (0.3 | )    |   |   | (5.0  | )   
|2001 Cash Payments                        |                |   |          |      |             |   | (15.0    | )   |        |   | (0.1 | )    |   |   | (15.1 | )   
|2002 Cash Payments                        |                |   |          |      |             |   | (0.6     | )   |        |   |     |      |   |   | (0.6  | )   
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     
|Balance at September 30, 2002             |                | $ |          |      |             | $ | 1.4      |     |        | $ | 1.6  |      |   | $ | 3.0   |     
|                                          |                |   |           |      |             |   |          |     |        |   |      |      |   |   |       |     

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WESTPOINT STEVENS INC.

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

4.   Restructuring, Impairment and Other ChargesContinued

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



---

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of its retail stores division. The Company expects
the restructuring initiatives to result in a $36.5 million pretax charge for
restructuring, impairment and other charges. Approximately $20 million of the
pretax charge is expected to be non-cash items. The charges for the
restructuring initiatives began in the third quarter of 2002 and will continue
throughout 2003.

As a result of the restructuring initiatives in the third quarter of 2002, the
Company announced the closure of its Rosemary (NC) towel finishing facility and
the conversion of its Rosemary (NC) towel fabrication and distribution
facilities to basic bedding facilities. The Company also announced the closure
of two retail stores. Closure of other retail stores and other facilities will
be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $5.9 million, before taxes, in the third quarter of 2002. The
components of the restructuring and impairment charge included $4.3 million for
the impairment of fixed assets and $1.6 million in reserves to cover cash
expenses related to severance benefits.

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WESTPOINT STEVENS INC.

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

4.   Restructuring, Impairment and Other ChargesContinued

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

|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |     | 
|----------------------------------------- | ------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ |  | - | - |  | - | ---- | --- | 
|                                          |               |   |           |     |             |   | Employee |     | Other  |  |   |   | 
|                                          |               |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |               |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |               |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|                                          | Third Quarter |   | $         | 4.3 |             |   | $        | 1.6 |        |  |   |  |  |   | $    | 5.9 | 
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|Writedown Assets to Net Recoverable Value |               |   | (4.3      | )   |             |   |         |     |        |  |  |   |  |   | (4.3 | )  
|2002 Cash Payments                        |               |   |          |     |             |   | (1.0     | )   |        |  |  |   |  |   | (1.0 | )  
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|Balance at September 30, 2002             |               | $ |          |     |             | $ | 0.6      |     |        |  |  |   |  | $ | 0.6  |    
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    

During the third quarter of 2002, other costs of the restructuring initiatives
of $10.2 million, before taxes, were recognized consisting of inventory
writedowns primarily related to the rationalization of its retail store
division, all reflected in cost of goods sold.

5.   Comprehensive Income (Loss)

Comprehensive income (loss) for the three and nine months ended September 30,
2002 and 2001 is as follows (in thousands):

|                                                   |                                                                               |   |                    |        |                   |   |        |        |      |   |         |     |   |   |         |         |  
|-------------------------------------------------- | ----------------------------------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | --- | - | - | ------- | ------- | -
|                                                   |                                                                               |   | Three Months Ended |        | Nine Months Ended
|                                                   |                                                                               |   | September 30,      |        | September 30,    
|                                                   |                                                                               |   |                    |        |                  
|                                                   |                                                                               |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                                   |                                                                               |   |                    |        |                   |   |        |        |     
|Net income (loss)                                  |                                                                               | $ | (16,609            | )      |                   | $ | 3,628  |        |      | $ | (12,598 | )   |   | $ | (24,769 | )      
|Foreign currency translation adjustment            |                                                                               |   | (478               | )      |                   |   | (1,103 | )      |      |   | (1,543  | )   |   |   | (376    | )      
|Gain (loss) on derivative instruments,
net of tax: |                                                                               |   |                    |        |                   |   |        |        |      |   |         |     |   |   |         |        
|                                                   | Cumulative effect of adopting
Statement No. 133                               |   |                    |       |                   |   |        |       |      |   |         |    |   |   |         | (968    | )
|                                                   | Net changes in fair value of derivatives                                      |   |                    | (1,757 | )                 |   |        | (2,342 | )    |   |         | (29 | ) |   |         | (18,035 | )
|                                                   | Net (gains) losses reclassified from other
comprehensive income into earnings |   |                    | 210    |                   |   |        | 7,340  |      |   |         | 509 |   |   |         | 11,548  |  
|                                                   |                                                                               |   |                    |        |                   |   |        |        |      |   |         |     |   |   |         |        
|Comprehensive income (loss)                        |                                                                               | $ | (18,634            | )      |                   | $ | 7,523  |        |      | $ | (13,661 | )   |   | $ | (32,600 | )      
|                                                   |                                                                               |   |                    |        |                   |   |        |        |      |   |         |     |   |   |         |        

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WESTPOINT STEVENS INC.

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

6.   Deferred Financing Fees

Included in Other expense-net in the accompanying Condensed Consolidated
Statements of Operations for the three and nine months ended September 30, 2002
is the amortization of deferred financing fees of $2.3 million and $6.9
million, respectively, compared with $2.2 million and $4.4 million,
respectively, for the three and nine months ended September 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
and intangible assets with indefinite useful lives. During the third quarter
and first nine months of 2001, amortization of goodwill was $0.2 million and
$0.6 million after taxes, respectively. Excluding the impact of goodwill
amortization, the net income (loss) for the third quarter and first nine months
of 2001 would have been $3.8 million, or $0.08 per share diluted, and $(24.1)
million, or $(0.49) 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 step 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. The Company will perform the required annual goodwill
impairment test during the fourth quarter.

In September 2002, the Company adopted the requirements of Statements of
Financial Accounting Standards No. 146, Costs Associated with Disposal
Activities. Statement 146 requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred. An
entitys commitment to a plan does not, by itself, create an obligation that
meets the definition of a liability.

The adoption of Statement 146 did not have a material impact on the Companys
financial statements.

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WESTPOINT STEVENS INC.

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

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.

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.

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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 Gelleraction, 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 Geller
action. By agreement of the parties the answers to the Complaint will not be
due until Defendants Motion to Dismiss, filed in the Gelleraction, 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.

15



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WESTPOINT STEVENS INC.

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

9.   Litigation and Contingent LiabilitiesContinued

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

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

The Company has not yet been served in either action but believes that the
Complaints are without merit and intends to contest the actions 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.

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.

16



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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 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.

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

Senior Credit Facility and Second-Lien Facility

In the third quarter of 2002, the Companys Senior Credit Facility and
Second-Lien Facility were amended primarily to permit certain restructuring,
impairment and other charges, and to modify certain financial ratios and the
minimum EBITDA covenant. The Senior Credit Facility amendment also modified
the scheduled $25 million reduction in the revolver commitment date from
November 1, 2002 to September 20, 2002 with no change to the remaining
scheduled commitment reduction dates. At the option of the Company,
interest under the Senior Credit Facility will be payable monthly, either at
the prime rate plus 2.75% or at LIBOR plus 4.5%.

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.

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

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)

Impairment, Restructuring and Other ChargesContinued

finishing and fabricating facilities at the Rosemary complex was announced on
February 5, 2001. These plant closings will enable the Company to consolidate
its manufacturing in locations that allow the most efficient work flow.

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

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

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

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)

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 of the
Eight-Point Plan of $13.7 million, before taxes, were recognized consisting
primarily of $10.0 million for the relocation of machinery, $3.0 million of
related unabsorbed overhead and other expenses of $0.7 million all reflected in
cost of goods sold.



---

On September 20, 2002, the Company announced that its Board of Directors had
approved additional restructuring initiatives to increase asset utilization,
lower manufacturing costs and increase cash flow and profitability through
reallocation of production assets from bath products to basic bedding products
and through rationalization of its retail stores division. The Company expects
the restructuring initiatives to result in a $36.5 million pretax charge for
restructuring, impairment and other charges. Approximately $20 million of the
pretax charge is expected to be non-cash items with annual pretax savings
estimated at $10 million once the restructuring initiatives are fully
implemented. The charges for the restructuring initiatives began in the third
quarter of 2002 and will continue throughout 2003.

As a result of the restructuring initiatives in the third quarter of 2002, the
Company announced the closure of its Rosemary (NC) towel finishing facility and
the conversion of its Rosemary (NC) towel fabrication and distribution
facilities to basic bedding facilities. The Company also announced the closure
of two retail stores. Closure of other retail stores and other facilities will
be announced in future periods.

The cost of the manufacturing and retail store rationalization and certain
overhead reduction costs were reflected in a restructuring and impairment
charge of $5.9 million, before taxes, in the third quarter of 2002. The
components of the restructuring and impairment charge included $4.3 million for
the impairment of fixed assets and $1.6 million in reserves to cover cash
expenses related to severance benefits.

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)

Impairment, Restructuring and Other ChargesContinued

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

|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |     | 
|----------------------------------------- | ------------- | - | --------- | --- | ----------- | - | -------- | --- | ------ |  | - | - |  | - | ---- | --- | 
|                                          |               |   |           |     |             |   | Employee |     | Other  |  |   |   | 
|                                          |               |   | Writedown |     | Termination |   | Exit     |     | Total 
|                                          |               |   | Assets    |     | Benefits    |   | Costs    |     | Charge
|                                          |               |   |           |     |             |   |          |     |       
|2002 Restructuring and Impairment Charge: |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|                                          | Third Quarter |   | $         | 4.3 |             |   | $        | 1.6 |        |  |   |  |  |   | $    | 5.9 | 
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|Writedown Assets to Net Recoverable Value |               |   | (4.3      | )   |             |   |         |     |        |  |  |   |  |   | (4.3 | )  
|2002 Cash Payments                        |               |   |          |     |             |   | (1.0     | )   |        |  |  |   |  |   | (1.0 | )  
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    
|Balance at September 30, 2002             |               | $ |          |     |             | $ | 0.6      |     |        |  |  |   |  | $ | 0.6  |    
|                                          |               |   |           |     |             |   |          |     |        |  |   |   |  |   |      |    

During the third quarter of 2002, other costs of the restructuring initiatives
of $10.2 million, before taxes, were recognized consisting of inventory
writedowns primarily related to the rationalization of its retail store
division, all reflected in cost of goods sold.

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 Nine Months Ended September 30, 2002

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

|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|------------------------------------------ |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ------- | - |  | - | ------- | -
|                                           |  | Three Months Ended |       | Nine Months Ended
|                                           |  | September 30,      |       | September 30,    
|                                           |  |                    |       |                  
|                                           |  | 2002               |       | 2001              |  | 2002 |       | 2001
|                                           |  |                    |       |                   |  |      |       |     
|Net sales                                  |  | $                  | 460.5 |                   |  | $    | 513.1 |      |  | $ | 1,345.2 |   |  | $ | 1,333.3 |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Gross earnings                             |  | $                  | 85.8  |                   |  | $    | 118.0 |      |  | $ | 297.4   |   |  | $ | 279.4   |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Restructuring and impairment charge        |  | $                  | 5.9   |                   |  |      |      |      |  | $ | 5.9     |   |  | $ | 5.0     |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Operating earnings                         |  | $                  | 9.3   |                   |  | $    | 53.0  |      |  | $ | 86.4    |   |  | $ | 81.5    |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Interest expense                           |  | $                  | 33.7  |                   |  | $    | 37.8  |      |  | $ | 100.5   |   |  | $ | 106.3   |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Other expense-net                          |  | $                  | 1.5   |                   |  | $    | 9.5   |      |  | $ | 5.6     |   |  | $ | 13.8    |  
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Income (loss) from operations before taxes |  | $                  | (26.0 | )                 |  | $    | 5.7   |      |  | $ | (19.7   | ) |  | $ | (38.6   | )
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|Income (loss) from operations              |  | $                  | (16.6 | )                 |  | $    | 3.6   |      |  | $ | (12.6   | ) |  | $ | (24.8   | )
|                                           |  |                    |       |                   |  |      |       |      |  |   |         |   |  |   |         |  
|                                          
|Gross margin                               |  |                    | 18.6  | %                 |  |      | 23.0  | %    |  |   | 22.1    | % |  |   | 21.0    | %
|                                          
|Operating margin                           |  |                    | 2.0   | %                 |  |      | 10.3  | %    |  |   | 6.4     | % |  |   | 6.1     | %

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 Months Ended September 30, 2002

Net Sales.Net sales for the three months ended September 30, 2002 decreased
$52.6 million, or 10.3% to $460.5 million compared with net sales of $513.1
million for the three months ended September 30, 2001. Decreases in sales
across all product categories led to the reduced sales performance.

For the three months ended September 30, 2002, bed products sales were $266.5
million compared with $315.4 million last year; bath products sales were $137.7
million compared with $141.3 million last year; and other sales (consisting
primarily of sales from the Companys retail stores and foreign operations)
were $56.3 million compared with $56.4 million last year.

Gross Earnings/Margins.Gross earnings for the three months ended September
30, 2002 excluding restructuring initiative charges decreased $24.7 million, or
20.5%, to $96.0 million compared with $120.7 million for the same period of
2001, and reflect gross margins of 20.8% in 2002 versus 23.5% in 2001. Gross
earnings and margins decreased primarily as a result of reduced sales,
increased promotional activity, reduced production efficiencies and
under-absorbed overhead due to production curtailment that more than offset
lower raw material costs. Included in the cost of goods sold in the third
quarter of 2002 are restructuring initiative charges of $10.2 million, the
majority of which reflects inventory adjustments for planned retail store
closings. In the third quarter of 2001 cost of goods sold included $2.7
million in costs associated with the Eight-Point Plan primarily for equipment
relocation. Including the charges, gross earnings for the three months ended
September 30, 2002 decreased $32.2 million, or 27.3%, to $85.8 million compared
with $118.0 million for the same period of 2001.

Operating Earnings/Margins.Selling, general and administrative expenses
increased $5.6 million, or 8.7%, in the third quarter of 2002 compared with the
same period of last year, and as a percentage of net sales increased to 15.3%
in the 2002 period compared with 12.7% in the 2001 period. The increase in
selling, general and administrative expenses in the third quarter of 2002
reflected increased bad debt expense of $5.1 million associated with the Kmart
Corporation Bankruptcy filing.

Before charges associated with recent restructuring initiatives and the
Eight-Point Plan, operating earnings for the third quarter of 2002 decreased
54.5% to $25.4 million, or 5.5% of sales, compared with operating earnings of
$55.7 million, or 10.9% of sales, for the same period in 2001. Including the
charges, operating earnings for the three months ended September 30, 2002
decreased $43.7 million to $9.3 million compared with $53.0 million for the
same period of 2001.

Interest Expense.Interest expense for the three months ended September 30,
2002 of $33.7 million decreased $4.1 million compared with interest expense of
$37.8 million for the three months ended September 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.

23



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##### Table of Contents



WESTPOINT STEVENS INC.

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

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

Other Expense-Net.Other expense-net in the third quarter of 2002 of $1.5
million consisted primarily of the amortization of deferred financing fees of
$2.3 million, less certain miscellaneous income items. Other
expense-net in
the third quarter of 2001 of $9.5 million consisted primarily of a $7.5 million
non-cash charge to adjust to market value its basis in an unconsolidated
limited liability corporation and 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 recent restructuring
initiatives and the Eight-Point Plan, decreased $11.7 million, to a loss of
$6.3 million, or $0.13 per share diluted, from net income of $5.4 million, or
$0.11 per share diluted, in the same period of last year. After the charges,
net income for the third quarter of 2002 was a loss of $16.6 million, or $0.33
per share diluted, compared with net income of $3.6 million, or $0.07 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: Nine Months Ended September 30, 2002

Net Sales.Net sales for the nine months ended September 30, 2002, increased
0.9% or $11.8 million to $1,345.2 million compared with $1,333.3 million a year
ago. Sales increased in all product categories except for sheets and more than
offset declines in the Companys retail stores division and international
sales.

For the nine months ended September 30, 2002, bed products sales were $783.8
million compared with $766.8 million last year, bath products sales were $409.2
million compared with $408.7 million last year and other sales (consisting
primarily of sales from the Companys retail stores and foreign operations)
were $152.2 million compared with $157.8 million last year.

24



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations: Nine Months Ended September 30, 2002Continued

Gross Earnings/Margins.Excluding charges associated with recent restructuring
initiatives and the Eight-Point Plan, gross earnings for the nine months ended
September 30, 2002 increased $15.7 million or 5.4%, to $307.6 million compared
with $291.8 million for the same period of 2001 and reflect gross margins of
22.9% for the 2002 period versus 21.9% for the 2001 period. Gross earnings and
margins increased as a result of increased sales, lower raw material costs, and
a more profitable mix of revenues. Included in the cost of goods sold in 2002
are charges associated with recent restructuring initiatives of $10.2 million,
the majority of which reflects inventory adjustments for planned retail store
closings. In the third quarter of 2001 cost of goods sold included charges
associated with the Eight-Point Plan of $12.5 million, the majority of which
reflected equipment relocation costs, severance and unabsorbed overhead.
Including the charges, gross earnings for the nine months ended September 30,
2002 increased $18.0 million, or 6.4% to $297.4 million compared with $279.4
million for the same period of 2001.

Operating Earnings/Margins.Selling, general and administrative expenses
increased $12.3 million or 6.4%, in the first nine 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 14.5% in the 2001 period. The increase in selling,
general and administrative expenses in the first nine months of 2002 reflected
increased bad debt expense of $10.6 million associated with the Kmart
Corporation Bankruptcy filing.

Before charges associated with recent restructuring initiatives and the
Eight-Point Plan, operating earnings for the first nine months of 2002
increased 3.5% to $102.4 million or 7.6% of sales, compared with operating
earnings of $99.0 million, or 7.4% of sales for the same period in 2001. This
increase reflected increased sales, decreased raw material costs, and a more
profitable mix of revenues. Including the charges, operating earnings for the
nine months ended September 30, 2002 increased $4.8 million, or 5.9%, to $86.4
million compared with $81.5 million for the same period of 2001.

Interest Expense.Interest expense for the nine months ended September 30,
2002 of $100.5 million decreased $5.9 million compared with interest expense of
$106.3 million for the nine months ended September 30, 2001. The decrease was
due primarily to lower interest rates on the Companys variable rate bank debt
in the first nine months of 2002 compared with 2001.

Other Expense-Net.Other expense-net in the first nine months of 2002
consisted primarily of the amortization of deferred financing fees of $6.9
million, less certain miscellaneous income items. For the first nine months of
2001, other expense-net of $13.8 million includes a $7.5 million non-cash
charge to adjust to market value its basis in an unconsolidated limited
liability corporation, a $2.3 million charge for cotton derivatives
and the amortization of deferred financing fees of $4.4 million, less
certain miscellaneous income items.

25



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Results of Operations: Nine Months Ended September 30, 2002Continued

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 recent
restructuring initiatives and the Eight-Point Plan, increased $11.3 million to
a loss of $2.3 million, or $0.05 per share diluted, from a net loss of $13.6
million, or a loss of $0.27 per share diluted, in the same period of last year.
After the charges, the net loss for the first nine months of 2002 was $12.6
million, or a loss of $0.25 per share diluted compared with a loss of $24.8
million, or a loss of $0.50 per diluted share for the year ago period.

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

Effects of Inflation

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

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 November
1, 2002, the maximum commitment under the Senior Credit Facility was $692.5
million and the Company had unused borrowing availability under the Senior
Credit Facility totaling $208.2 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: 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.

26



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##### Table of Contents



WESTPOINT STEVENS INC.

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

Liquidity and Capital ResourcesContinued

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. 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. The Company
continues to monitor the Kmart situation, and during 2002 has increased its bad
debt reserves related to Kmart pre-petition receivables by $10.6 million. If
Kmarts financial condition should deteriorate further, the impact to the
Company could become more significant.

At September 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.

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
September 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. The current independent issuer of
receivables backed commercial paper under the Companys Trade Receivables
Program has indicated that it will not extend the maturity date of its current
agreement for another year but has indicated a willingness to work with the
Company through an orderly transition, and therefore the Company has initiated
discussions with other securitization providers and intends to maintain a Trade
Receivables Program.

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WESTPOINT STEVENS INC.

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

Liquidity and Capital ResourcesContinued

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 September 30,
2002 and December 31, 2001, $160.0 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 $136.0 million (excluding amounts related to the Trade
Receivables Program) compared with interest payments of $143.0 million in 2001.
The Companys long-term indebtedness has no scheduled principal reduction
requirements during 2002.

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

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WESTPOINT STEVENS INC.

Item 4.   Controls and Procedures

Company management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this quarterly report has been
made known to them in a timely fashion. There have been no significant changes
in internal controls, or in factors that could significantly affect internal
controls, subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation.

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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 Gelleraction, 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 Gelleraction, 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 has been named as a defendant in two separate purported class
action suits seeking reparation for the historic enslavement of African
Americans in the United States. Eddlee Bankhead vs. Lloyds of London, et al.
was filed on September 3, 2002, in the United States District Court for the
Southern District of New York. Timothy Hurdle and Chester Hurdle vs.
FleetBoston Financial Corporation, et al. was initially filed in the California
Superior Court for San Francisco County on September 10, 2002, but has since
been removed to the United States District Court California Northern District
(San Francisco). The factual basis for both suits is the claim that the
defendants
profited from the slave labor of the plaintiff classes ancestors prior to 1865
and, specifically, that Pepperell Manufacturing, predecessor to WestPoint
Stevens Inc., utilized cotton from southern planters who in turn purchased
finished product to clothe their slaves. The California suit alleges that such
practices amount to an unfair business practice in violation of the
California Business and Professional Code.

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATIONContinued

Item 1.   Legal ProceedingsContinued

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

The Company has not yet been served in either action but believes that the
Complaints are without merit and intends to contest the actions 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.

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

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

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WESTPOINT STEVENS INC.

PART II  OTHER INFORMATIONContinued




Item 6.   Exhibits and Reports on Form 8-K

a.)

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|10.1    |  | Seventh Amendment Agreement dated September 19, 2002, among WestPoint
Stevens Inc., WestPoint Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, Bank of America, N.A. (formerly NationsBank N.A.), as agent and
the other financial institutions party thereto, incorporated by reference
to the Form 8-K (Commission File No. 0-21496) filed by the Company with
the Commission on September 20, 2002.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|99.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|99.2    |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                        

b.)

| |       |  |                                                                                                                                                                                                               
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b.1.) |  | The Company filed a Current Report on Form 8-K on August 14,
2002. The items reported were Item 7. Financial Statements,
Proforma Financial Statements and Exhibits and Item 9. Regulation
FD Disclosures.
| |       | 
| | b.2.) |  | The Company filed a Current Report on Form 8-K on September
20, 2002. The items reported were Item 5. Other Events and Item
7. Financial Statements and Exhibits.                                         

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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: November 14, 2002

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CERTIFICATIONS

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

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

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

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

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

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

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

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

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

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

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and
35Table of Contents

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

Date: November 14, 2002







/s/ Holcombe T. Green, Jr.

Holcombe T. Green, Jr.
Chief Executive Officer


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##### Table of Contents



CERTIFICATIONS

I, Lester D. Sears, certify that:

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

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

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

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

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

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

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

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

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

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and
37Table of Contents

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

Date: November 14, 2002



/s/
Lester D. Sears

Lester D. Sears
Chief Financial Officer


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WESTPOINT STEVENS INC.

EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|NUMBER  |  | DESCRIPTION OF EXHIBIT                                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|10.1    |  | Seventh Amendment Agreement dated September
19, 2002, among WestPoint Stevens Inc., WestPoint
Stevens (UK) Limited, WestPoint Stevens (Europe)
Limited, Bank of America, N.A. (formerly NationsBank
N.A.), as agent and the other financial institutions party
thereto, incorporated by reference to the Form 8-K
(Commission File No. 0-21496) filed by the Company
with the Commission on September 20, 2002.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|99.1    |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                
|99.2    |  | Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.                                                                                                                                                                                                                                                                                        

39