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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

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(Mark One)

|ý | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2002.

OR

|o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission File Number: 0-20850

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HAGGAR CORP.(Exact name of the registrant as specified in the charter)

Nevada(State or other jurisdiction of
incorporation or organization)

75-2187001(I.R.S. Employer
Identification Number)


6113 Lemmon Avenue
Dallas, Texas 75209(Address of principal executive offices)

Telephone Number (214) 352-8481(Registrant's telephone number including area code)

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Indicate
by a 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
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 ý    No o

As of August 14, 2002, there were 6,418,259 shares of the Registrant's Common Stock outstanding.

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Haggar Corp. and Subsidiaries

Index



|Part I. Financial Information |                                                                                              
|----------------------------- | ---------------------------------------------------------------------------------------------
|                              | Item 1. Financial Statements (unaudited)                                                     
|                              |                                                                                              
|                              |                                                                                              
|                              |                                                                                              
|                              |                                                                                              
|                              | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|Part II. Other Information.   |                                                                                              
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|                              | Signature                                                                                    

2

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Haggar Corp. and Subsidiaries    Consolidated Statements of Operations and Comprehensive Income        (unaudited, in thousands, except per share amounts)

|                                                                                                     |  | Three Months Ended
June 30, |         | Nine Months Ended
June 30, |  
|---------------------------------------------------------------------------------------------------- |  | --------------------------- | ------- | -------------------------- | -
|
|Net sales                                                                                            |  | $                           | 111,215 |                            | $
|Cost of goods sold                                                                                   |  |                             | 81,051  |                            |  
|Reorganization costs                                                                                 |  |                             |        |                            |  
|                                                                                                     |  |                             |         |                            |  
|Gross profit                                                                                         |  |                             | 30,164  |                            |  
|Selling, general and administrative expenses                                                         |  |                             | (29,340 | )                          |  
|Royalty income                                                                                       |  |                             | 178     |                            |  
|Other income, net                                                                                    |  |                             | 506     |                            |  
|Interest expense                                                                                     |  |                             | (702    | )                          |  
|                                                                                                     |  |                             |         |                            |  
|Income (loss) before provision (benefit) for income taxes and cumulative effect of accounting change |  |                             | 806     |                            |  
|Provision (benefit) for income taxes                                                                 |  |                             | 346     |                            |  
|                                                                                                     |  |                             |         |                            |  
|Income (loss) before cumulative effect of accounting change                                          |  | $                           | 460     |                            | $
|Cumulative effect of accounting change                                                               |  |                             |        |                            |  
|                                                                                                     |  |                             |         |                            |  
|Net income (loss)                                                                                    |  | $                           | 460     |                            | $
|                                                                                                     |  |                             |         |                            |  
|Other comprehensive income (loss):                                                                   |  |                             |         |                            |  
|Cumulative translation adjustment                                                                    |  | $                           | 112     |                            | $
|                                                                                                     |  |                             |         |                            |  
|Comprehensive income (loss)                                                                          |  | $                           | 572     |                            | $
|                                                                                                     |  |                             |         |                            |  
|NET INCOME (LOSS) PER COMMON SHARE:                                                                  |  |                             |         |                            |  
|BASIC                                                                                                |  |                             |         |                            |  
|Income (loss) per common share before cumulative effect of accounting change                         |  | $                           | 0.07    |                            | $
|Cumulative effect of accounting change per common share                                              |  |                             |        |                            |  
|                                                                                                     |  |                             |         |                            |  
|Net income (loss) per common share                                                                   |  | $                           | 0.07    |                            | $
|                                                                                                     |  |                             |         |                            |  
|DILUTED                                                                                              |  |                             |         |                            |  
|Income (loss) per common share before cumulative effect of accounting change                         |  | $                           | 0.07    |                            | $
|Cumulative effect of accounting change per common share                                              |  |                             |        |                            |  
|                                                                                                     |  |                             |         |                            |  
|Net income (loss) per common share                                                                   |  | $                           | 0.07    |                            | $
|                                                                                                     |  |                             |         |                            |  
|Weighted average number of common shares outstandingBasic                                           |  |                             | 6,387   |                            |  
|                                                                                                     |  |                             |         |                            |  
|Weighted average number of common shares and common share-equivalents outstandingDiluted            |  |                             | 6,543   |                            |  
|                                                                                                     |  |                             |         |                            |  

The accompanying notes are an integral part of these consolidated financial statements.

3

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Haggar Corp. and Subsidiaries    Consolidated Balance Sheets        (in thousands, except share amounts)

|                                                                                                                                                                  |                                               | June 30,
2002 |                            | September 30,
2001 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------- | -------------------------- | ------------------ | -
|
|Assets                                                                                                                                                            |                                               |               |                            |                    |  
|Current assets:                                                                                                                                                   |                                               |               |                            |                    |  
|                                                                                                                                                                  | Cash and cash equivalents                     |               | $                          | 7,453              |  
|                                                                                                                                                                  | Accounts receivable, net                      |               |                            | 49,502             |  
|                                                                                                                                                                  | Due from factor                               |               |                            | 1,087              |  
|                                                                                                                                                                  | Inventories                                   |               |                            | 95,326             |  
|                                                                                                                                                                  | Property held for sale                        |               |                            | 2,157              |  
|                                                                                                                                                                  | Deferred tax benefit                          |               |                            | 10,254             |  
|                                                                                                                                                                  | Other current assets                          |               |                            | 2,311              |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|                                                                                                                                                                  |                                               |               | Total current assets       |                    |  
|Property, plant, and equipment, net                                                                                                                               |                                               |               | 47,442                     |                    |  
|Goodwill, net                                                                                                                                                     |                                               |               | 9,472                      |                    |  
|Other assets                                                                                                                                                      |                                               |               | 9,467                      |                    |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|Total assets                                                                                                                                                      |                                               | $             | 234,471                    |                    | $
|                                                                                                                                                                  |                                               |               |                            |                    |  
|Liabilities and Stockholders' Equity                                                                                                                              |                                               |               |                            |                    |  
|Current liabilities:                                                                                                                                              |                                               |               |                            |                    |  
|                                                                                                                                                                  | Accounts payable                              |               | $                          | 29,425             |  
|                                                                                                                                                                  | Accrued liabilities                           |               |                            | 24,492             |  
|                                                                                                                                                                  | Accrued wages and other employee compensation |               |                            | 3,247              |  
|                                                                                                                                                                  | Accrued workers' compensation                 |               |                            | 2,745              |  
|                                                                                                                                                                  | Current portion of long-term debt             |               |                            | 3,742              |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|                                                                                                                                                                  |                                               |               | Total current liabilities  |                    |  
|Long-term debt                                                                                                                                                    |                                               |               | 30,343                     |                    |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|Total liabilities                                                                                                                                                 |                                               |               | 93,994                     |                    |  
|Commitments and contingencies                                                                                                                                     |                                               |               |                            |                    |  
|Stockholders' equity:                                                                                                                                             |                                               |               |                            |                    |  
|Common stockpar value $0.10 per share; 25,000,000 shares authorized; 8,659,964 and 8,591,000 shares issued at June 30, 2002 and September 30, 2001, respectively |                                               |               | 866                        |                    |  
|Additional paid-in capital                                                                                                                                        |                                               |               | 42,830                     |                    |  
|Cumulative translation adjustment                                                                                                                                 |                                               |               | (578                       | )                  |  
|Retained earnings                                                                                                                                                 |                                               |               | 122,244                    |                    |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|                                                                                                                                                                  |                                               |               | 165,362                    |                    |  
|LessTreasury stock, 2,235,205 and 2,203,705 shares at cost at June 30, 2002 and September 30, 2001, respectively                                                 |                                               |               | (24,885                    | )                  |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|                                                                                                                                                                  |                                               |               | Total stockholders' equity |                    |  
|                                                                                                                                                                  |                                               |               |                            |                    |  
|Total liabilities and stockholders' equity                                                                                                                        |                                               | $             | 234,471                    |                    | $
|                                                                                                                                                                  |                                               |               |                            |                    |  

The accompanying notes are an integral part of these consolidated financial statements.

4

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Haggar Corp. and Subsidiaries    Consolidated Statements of Cash Flows        (unaudited, in thousands)

|                                                                                          |                                                            | Nine Months Ended
June 30,                                        |                                                    
|----------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------------------
|
|Cash Flows from Operating Activities                                                      |                                                            |                                                                   |                                                    
|Net loss                                                                                  |                                                            | $                                                                 | (11,109                                            
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                            |                                                                   |                                                    
|                                                                                          | Cumulative effect of accounting change                     |                                                                   |                                                    
|                                                                                          | Revision of net realizable value on property held for sale |                                                                   |                                                    
|                                                                                          | Depreciation and amortization                              |                                                                   |                                                    
|                                                                                          | Loss (gain) on disposal of property, plant, and equipment  |                                                                   |                                                    
|                                                                                          | Deferred tax expense (benefit)                             |                                                                   |                                                    
|                                                                                          | Changes in assets and liabilities:                         |                                                                   |                                                    
|                                                                                          |                                                            | Accounts receivable, net                                          |                                                    
|                                                                                          |                                                            | Due from factor                                                   |                                                    
|                                                                                          |                                                            | Inventories                                                       |                                                    
|                                                                                          |                                                            | Other current assets                                              |                                                    
|                                                                                          |                                                            | Accounts payable                                                  |                                                    
|                                                                                          |                                                            | Accrued liabilities                                               |                                                    
|                                                                                          |                                                            | Accrued wages, workers' compensation, and other employee benefits |                                                    
|                                                                                          |                                                            |                                                                   |                                                    
|                                                                                          |                                                            |                                                                   | Net cash provided by (used in) operating activities
|                                                                                          |                                                            |                                                                   |                                                    
|Cash Flows from Investing Activities                                                      |                                                            |                                                                   |                                                    
|Purchases of property, plant and equipment                                                |                                                            |                                                                   | (1,859                                             
|Proceeds from the sale of property, plant and equipment, net                              |                                                            |                                                                   | 80                                                 
|Increase in other assets                                                                  |                                                            |                                                                   | (1,274                                             
|                                                                                          |                                                            |                                                                   |                                                    
|                                                                                          |                                                            |                                                                   | Net cash used in investing activities              
|                                                                                          |                                                            |                                                                   |                                                    
|Cash Flows from Financing Activities                                                      |                                                            |                                                                   |                                                    
|Purchase of treasury stock at cost                                                        |                                                            |                                                                   | (351                                               
|Proceeds from issuance of long-term debt                                                  |                                                            |                                                                   | 404,000                                            
|Payments on long-term debt                                                                |                                                            |                                                                   | (423,274                                           
|Proceeds from issuance of common stock                                                    |                                                            |                                                                   | 823                                                
|Payments of cash dividends                                                                |                                                            |                                                                   | (957                                               
|                                                                                          |                                                            |                                                                   |                                                    
|                                                                                          |                                                            |                                                                   | Net cash provided by (used in) financing activities
|                                                                                          |                                                            |                                                                   |                                                    
|Effects of exchange rates on cash and cash equivalents                                    |                                                            |                                                                   | (28                                                
|                                                                                          |                                                            |                                                                   |                                                    
|Increase (decrease) in cash and cash equivalents                                          |                                                            |                                                                   | (347                                               
|Cash and cash equivalents, beginning of period                                            |                                                            |                                                                   | 7,800                                              
|                                                                                          |                                                            |                                                                   |                                                    
|Cash and cash equivalents, end of period                                                  |                                                            | $                                                                 | 7,453                                              
|                                                                                          |                                                            |                                                                   |                                                    
|Non-cash investing activity:                                                              |                                                            |                                                                   |                                                    
|Note receivable from sale of property, plant and equipment                                |                                                            | $                                                                 | 420                                                
|                                                                                          |                                                            |                                                                   |                                                    

The accompanying notes are an integral part of these consolidated financial statements.

5

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Haggar Corp. and Subsidiaries        Notes to Consolidated Financial Statements  (unaudited)

1. Consolidated Financial Statements

The consolidated balance sheet as of June 30, 2002, the consolidated statements of operations and comprehensive income for the three and nine months ended
June 30, 2002 and 2001, and the consolidated statements of cash flows for the nine months ended June 30, 2002 and 2001, have been prepared by Haggar Corp. (the "Company") without audit.
In the opinion of management, all necessary adjustments (which include only normal recurring adjustments) to present fairly the consolidated financial position, results of operations, and cash flows
of the Company at June 30, 2002, and for all other periods presented, have been made. Certain information and footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the financial statements and accompanying footnotes in the
Company's Annual Report on Form 10-K for the year ended September 30, 2001.

2. Concentrations of Credit Risk

Financial instruments which potentially expose the Company to concentrations of credit risk, as defined by Statement of Financial Accounting Standards ("SFAS")
No. 105, "Disclosure of Information about Financial Instruments with Off-Balance Sheet Risk and Financial Instruments with Concentrations of Credit Risk," consist primarily of trade
accounts receivable. The Company's customers are not concentrated in any specific geographic region but are concentrated in the apparel industry. The Company's largest current customer, J.C. Penney
Company, Inc., accounted for 23.6% and 23.3% of the Company's net sales for the nine months ended June 30, 2002 and 2001, respectively, and 17.5% and 16.8% of the Company's outstanding
trade receivables at June 30, 2002 and 2001, respectively. The Company's second largest current customer, Kohl's Department Stores, Inc., accounted for 17.3% and 12.6% of the Company's
net sales for the nine months ended June 30, 2002 and 2001, respectively, and 16.5% and 12.1% of the Company's outstanding trade receivables at June 30, 2002 and 2001,
respectively. The Company's third largest current customer, Wal-Mart Stores, accounted for 10.9% and 12.7% of the Company's net sales for the nine months ended June 30, 2002 and
2001, respectively, and 13.5% and 8.9% of the Company's outstanding trade receivables at June 30, 2002 and 2001, respectively. No other customer accounted for more than 10% of the Company's net
sales or accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends, and other information.

6

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3. Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following at June 30, 2002, and
September 30, 2001 (in thousands):

June 30,
2002

September 30,
2001Piece goods

$
10,076

$
11,947Trimmings & supplies


2,867


2,781Work-in-process


13,867


14,068Finished garments


68,516


68,930$
95,326

$
97,726


Work-in-process
and finished garments inventories consisted of materials, labor and manufacturing overhead.

4. Asset impairmentGoodwill

On October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
No. 142"), and recorded a $15.6 million impairment of goodwill related to the 1999 acquisition of Jerell, the Company's women's wear subsidiary. Subsequent to the acquisition, pricing
pressures and a weak retail environment for women's apparel have resulted in a revised earnings forecast for Jerell. In order to determine the fair value of goodwill, the Company obtained an
independent appraisal, which considered both prices of comparable businesses and the discounted value of projected cash flows.

The
change in the carrying amount of goodwill for the nine months ended June 30, 2002 is as follows:

Balance as of October 1, 2001

$
25,050Impairment loss under SFAS No. 142


(15,578
)Balance as of June 30, 2002

$
9,472


7

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The
following reflects the Company's net income (loss) and net income (loss) adjusted to exclude goodwill amortization for all periods presented.

|                                                    |  | Three Months Ended
June 30, |      | Nine Months Ended
June 30, |  
|--------------------------------------------------- |  | --------------------------- | ---- | -------------------------- | -
|
|Net income (loss) as reported                       |  | $                           | 460  |                            | $
|Add back: goodwill amortization                     |  |                             |     |                            |  
|                                                    |  |                             |      |                            |  
|Adjusted net income (loss)                          |  | $                           | 460  |                            | $
|                                                    |  |                             |      |                            |  
|Basic income (loss) per common share as reported:   |  |                             |      |                            |  
|Net income (loss)                                   |  | $                           | 0.07 |                            | $
|Add back: goodwill amortization                     |  |                             |     |                            |  
|                                                    |  |                             |      |                            |  
|Basic income (loss) per common share as adjusted    |  | $                           | 0.07 |                            | $
|                                                    |  |                             |      |                            |  
|Diluted income (loss) per common share as reported: |  |                             |      |                            |  
|Net income (loss)                                   |  | $                           | 0.07 |                            | $
|Add back: goodwill amortization                     |  |                             |     |                            |  
|                                                    |  |                             |      |                            |  
|Adjusted net income (loss)Diluted                  |  | $                           | 0.07 |                            | $
|                                                    |  |                             |      |                            |  

5. Long-Term Debt

Long-term debt consisted of the following at June 30, 2002, and September 30, 2001 (in thousands):

June 30,
2002

September 30,
2001Borrowings under revolving credit line

$
21,000

$
36,000Industrial Development RevenueBonds with interest at a rate equal to that of high-quality, short-term, tax-exempt obligations (1.4% at June 30, 2002 and 2.4% at September 30, 2001), payable in annual installments of $100, and a final payment
of $2,000 in 2005, secured by certain buildings and equipment


2,300


2,400Allstate Notes


10,714


14,285Other


71


67434,085


53,359LessCurrent portion


3,742


4,021$
30,343

$
49,338


8

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Net
assets mortgaged or subject to lien under the Industrial Development Revenue Bonds totaled approximately $578,000 at June 30, 2002.

In
June 2002, the Company amended and restated its revolving credit line agreement (the "Agreement") with certain banks primarily to increase the maximum borrowings to
$110.0 million and to extend the maturity date to June 30, 2005. As of June 30, 2002, the Company had additional available borrowing
capacity of approximately $64.6 million. The available borrowings under the Agreement are based on a formula involving a percentage of eligible receivables and inventories adjusted by the
Company's standby letters of credit. The Company incurred approximately $0.1 million in commitment fees related to the available borrowing capacity for the nine month period ended
June 30, 2002. Interest on the revolver varies based upon margins over a bank base rate or a LIBOR rate, as selected by the Company. The applicable margin is dependent upon the ratio of the
Company's total indebtedness at the end of each fiscal quarter to its operating cash flow for the preceding year. The interest rates for the nine month period ended June 30, 2002, ranged from
3.1% to 6.0%. The interest rate at June 30, 2002 was 3.5%. The Agreement prohibits the Company from pledging its accounts receivable and inventories, contains limitations on incurring
additional indebtedness, requires maintaining minimum net worth levels of the Company and the Company's main operating subsidiary, and also requires the maintenance of certain financial ratios. The
Agreement prohibits the payment of any dividend if a default exists after giving effect to such dividend.

Long-term
debt also includes $10.7 million in senior notes. Significant terms of the senior notes include interest payable semi-annually at 8.49% per annum
and annual principal payments through 2005. The terms and conditions of the note purchase agreement governing the senior notes include restriction on the sale of assets, limitations on additional
indebtedness and the maintenance of certain net worth requirements.

6. Reorganization Charges

2002 Reorganization

On January 8, 2002, the Company announced plans to close its cutting facility in Weslaco, Texas. Accordingly, the Company recorded a $1.0 million
charge to operations in reorganization costs for the quarter ended March 31, 2002. All 142 employees at the Weslaco facility were terminated in conjunction with the closure, which was completed
in June 2002. Severance payments of $0.7 million and other employee termination costs of $0.3 million are expected to be paid by the end of fiscal 2002. The Company has
approximately $0.1 million remaining to be paid, which is included in accrued liabilities as of June 30, 2002.

In
conjunction with the Edinburg closure in fiscal 2001, the net book value of the manufacturing facility of $2,157,000 was written off since the net realizable value of the facility was
expected to be
insignificant. Subsequent to marketing this facility nationally, having appraisals completed on the property, and receiving an initial offer during the second quarter (in excess of the
pre-closure net book value) for this facility, the Company reversed the original facility write-down and classified the facility as an asset held for sale. The $2,157,000
reversal was recorded as a credit to reorganization costs in the income statement for the quarter ended March 31, 2002.

9

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The
following summarizes the reorganization costs for the nine months ended June 30, 2002 (in thousands):

Weslaco, Texas cutting facility closing

$
1,000Edinburg, Texas facility write-down reversal


(2,157
)Total reorganization costs

$
(1,157
)


2001 Reorganization

On March 26, 2001, the Company announced plans to close its manufacturing facility in Edinburg, Texas, and its operations in Japan. Accordingly, the
Company recorded a $20.8 million charge to operations ($14.3 million after taxes) in the quarter ended March 31, 2001. Severance and other employee related payments of
$5.7 million have been made as of June 30, 2002, and all other employee termination costs are expected to be paid by the end of fiscal 2003. A $0.7 million pretax reduction of the
charges for the 2001 reorganization was credited to operations in the fourth quarter of fiscal 2001 as a result of lower than expected costs related to terminated employees and better than expected
recoveries on equipment, offset by lower than anticipated recoveries on inventories and receivables in Japan.

During
the second quarter of fiscal 2001, the Company recorded an $8.6 million charge for legal expenses, of which $1.6 million was due to a cash settlement for certain
claims and the remaining $7.0 million was due to management's estimate of the expected loss for unsettled claims against the Company, including two jury verdicts totaling $5.2 million
which have been returned against subsidiaries of the Company and are currently on appeal. Many of the legal claims against the Company relate to claims for wrongful discharge and common law tort by
former employees of the Company's sewing
facilities in south Texas that were closed in previous years. Due to the closure of the Company's last manufacturing facility in south Texas, management believes that the likelihood of adverse
outcomes related to such claims has increased significantly. Accordingly, the Company has recorded its best estimate of future costs for such claims.

The
reorganization costs before tax are summarized as follows (in millions):

|                                       |  | Balance
March 31, 2001 |      | Payments and
Write-offs |   | Adjustments |   | Balance
June 30, 2002
|-------------------------------------- |  | ---------------------- | ---- | ----------------------- | - | ----------- | - | ---------------------
|Employee termination and related costs |  | $                      | 8.1  |                         | $ | (5.7        | ) | $                    
|Plant and equipment impairment         |  |                        | 3.1  |                         |   | (2.8        | ) |                      
|Other asset write-downs                |  |                        | 1.0  |                         |   | (1.8        | ) |                      
|Legal costs                            |  |                        | 8.6  |                         |   | (2.5        | ) |                      
|                                       |  |                        |      |                         |   |             |   |                      
|Total Reorganization Costs             |  | $                      | 20.8 |                         | $ | (12.8       | ) | $                    
|                                       |  |                        |      |                         |   |             |   |                      

7. Commitments and Contingencies

The Company had approximately $36.2 million in outstanding letters of credit at June 30, 2002, primarily in connection with certain
self-insurance agreements and certain inventory purchases of the Company.

Two
jury verdicts totaling $5.2 million have been returned against subsidiaries of the Company related to claims by former employees for wrongful discharge and common law tort.
Management and legal counsel believe the verdicts in these lawsuits are both legally and factually incorrect, and the

10

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Company has appealed the original jury verdicts (see Note 6). Management does not believe that the outcome of these appeals will have a material adverse impact on its financial position,
results of operations or cash flows for future periods.

The
Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse
effect on the Company's financial position or the results of operations for future periods.

8. 2002 Asset Sale

In June 2002, the Company sold a manufacturing facility for net cash proceeds of $80,000 and a four-year note receivable bearing interest at
8.0% and payable in monthly installments with a balloon payment for the outstanding balance at the end of the fourth year. The sale resulted in a pretax gain of approximately $479,000 ($291,000 after
tax) or $0.05 per diluted share after tax. The gain on sale was recorded in other income.

9. Shipping and Handling Fees

The Company records shipping and handling fees as selling, general and administrative expense. For the three months and nine months ended June 30, 2002,
such costs were $3.6 million and $9.2 million, respectively. For the three months and nine months ended June 30, 2001, such costs were $3.4 million and $9.1 million,
respectively.

10. Net Income Per Common ShareBasic and Diluted

Basic earnings per share excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period.
Diluted earnings per share is computed by dividing net income by the sum of the weighted-average number of common shares outstanding for the period and the number of equivalent shares assumed
outstanding under the Company's stock based compensation plans using the treasury stock method.

Options
to purchase 158,000, 842,551 and 750,610 shares, respectively, were excluded from the diluted earnings per share calculations for the three months ended June 30, 2002 and
2001, and the nine months ended June 30, 2002 because the options' exercise prices were greater than the average market price of the common shares during the respective periods. Additionally,
options to purchase 821,084 shares were excluded from the diluted earnings per share calculation for the nine months ended June 30, 2001 as the Company reported a loss before cumulative effect
of accounting change for this period.

Common
shares and common share equivalents used to calculate diluted net income (loss) per common share are as follows:

|                                           |  | Three Months Ended
June 30, |  | Nine Months Ended
June 30,
|------------------------------------------ |  | --------------------------- |  | --------------------------
|
|Weighted average common shares outstanding |  | 6,387                       |  | 6,504                     
|Shares equivalents, due to stock options   |  | 156                         |  | 294                       
|                                           |  |                             |  |                           
|                                           |  | 6,543                       |  | 6,798                     
|                                           |  |                             |  |                           

11

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11. New Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
No. 143.") This Standard addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or
normal use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate
of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, a gain or loss on settlement is
recognized. SFAS No. 143 is effective for fiscal years beginning after December 15, 2001 or the first quarter of fiscal 2003 for the Company. Management is still studying this Standard
to determine, among other things, whether the Company has any asset retirement obligations which are covered under the scope of SFAS No. 143, and the effect, if any, to the Company of adopting
SFAS No. 143 has not yet been determined.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144.") This Standard provides
a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held for sale. Classification as
held for sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value and carrying amount. This standard also requires expected future operating
losses from discontinued operations to be displayed in the period(s) in which losses are incurred, rather than as of the measurement date as presently required. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001 or the first quarter of fiscal 2003 for the Company. Management does not expect the adoption of SFAS No. 144 to have a material impact on
the Company's financial statements.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS No. 146.") SFAS No. 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance
that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also includes (1) costs related to terminating a contract that is not a capital lease and
(2) certain termination benefits to employees who are involuntarily terminated. SFAS No. 146 will be effective for exit or disposal activities that are initiated after
December 31, 2002. Management is still evaluating the impact of the adoption of SFAS No. 146.

12. Subsequent Event

The Company declared a cash dividend of $0.05 per share payable to the stockholders of record on August 5, 2002. The dividend of approximately $321,000
will be paid on August 19, 2002.

12

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

The following discussion should be read in conjunction with the attached consolidated financial statements and the notes thereto and with the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2001.

Results of Operations:

Operations

The Company's third quarter of fiscal 2002 net income of $0.5 million compares to net income of $1.0 million in the third quarter of fiscal 2001.
The net loss for the nine months ended June 30, 2002, was $11.1 million compared to net loss of $11.4 million for the nine months ended June 30, 2001. The Company's fiscal
2002 net loss includes the $15.6 million cumulative effect of the accounting change recorded as a result of adopting SFAS No. 142 and a $1.2 million pretax credit for
reorganization costs. The Company's net loss for the nine month period ended June 30, 2001, includes the $20.8 million pretax charge to operations for the reorganization of the Company's
manufacturing operations and termination of its operations in Japan.

Net
sales for the quarter ended June 30, 2002, increased 2.8% to $111.2 million from $108.2 million for the third quarter of fiscal 2001. The increase in net sales
for the third quarter of fiscal 2002 is the combined result of a 18.9% increase in unit sales and a 16.1% decrease in the average sales price. Net sales increased 7.7% to $348.6 million for the
nine months ended June 30, 2002, from $323.8 million in the prior fiscal year. The increase in net sales for the nine months ended June 30, 2002, is the combined result of a 23.9%
increase in unit sales and a 16.2% decrease in the average sales price. The average sales price decreases for the three and nine months period ended June 30, 2002, relate primarily to the mix
of products sold and the intense price pressure in a tough retail environment.

Gross
profit as a percentage of net sales for the third quarter of fiscal 2002 decreased to 27.1% compared to 29.3% for the third quarter of fiscal 2001. Before reorganization costs,
gross profit as a percentage of net sales for the first nine months of fiscal 2002 decreased to 28.1% compared to 30.9% in the first nine months of fiscal 2001. The decreases in gross profit for the
three and nine month periods ended June 30, 2002, are primarily the result of more competitive customer pricing as a result of a tough retail environment and inventory markdowns.

Selling,
general and administrative expenses as a percentage of net sales decreased to 26.4% for the three month period ended June 30, 2002, as compared to 26.7% for the same
period ended June 30, 2001. Actual selling, general and administrative expenses increased to $29.3 million in the third quarter of fiscal 2002 compared to $28.9 million in the
same quarter in fiscal 2001. The $0.4 million increase in selling, general and administrative expenses for the third quarter of fiscal 2002 compared to the third quarter of fiscal 2001 relates
to a $0.2 million decrease in selling and administrative expenses, a $0.4 million decrease in women's division expenses principally related to goodwill amortization, and a
$0.2 million decrease in international expenses due to exiting Japan, offset by a $0.7 million increase in new licensing expenses mainly related to Claiborne and a $0.5 million
increase in retail expenses related to new store expenses.

Selling,
general and administrative expenses as a percentage of net sales decreased to 26.0% for the nine month period ended June 30, 2002, as compared to 28.6% for the same
period ended June 30, 2001. Actual selling, general and administrative expenses decreased to $90.5 million for the nine months ended June 30, 2002, compared to
$92.7 million in the first nine months of the prior fiscal year. The decrease of $2.2 million in selling, general and administrative expenses for the first nine months of fiscal 2002
compared to fiscal 2001 primarily related to a $5.3 million decrease in selling, marketing and advertising expenses, a $1.2 million decrease in international expenses due to exiting
Japan, and a

13

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$1.5 million decrease in women's division expenses mainly related to goodwill amortization, offset by a $1.2 million increase in administrative expenses, a $1.7 million increase
in store expenses related to new stores and in-store advertising, and a $2.9 million increase in licensing expenses mainly related to Claiborne.

Royalty
income for fiscal 2002 decreased from fiscal 2001, primarily due to reduced domestic licensee sales.

In
June 2002, the Company sold a manufacturing facility for net cash proceeds of $80,000 and a note receivable bearing interest at 8.0% and payable in monthly installments with a
balloon payment for the outstanding balance at the end of the fourth year. The sale resulted in a pretax gain of approximately $479,000 ($291,000 after tax) or $0.05 per diluted share after tax. The
gain on sale was recorded in other income.

In
the third quarter of fiscal 2002, the provision for income taxes as a percentage of income before taxes was 42.9% compared to 46.8% for the same quarter last year. For the nine months
ended June 30,
2002, the provision (benefit) for income taxes as a percentage of income before taxes and cumulative effect of accounting change was 39.3% compared to (26.3%) for the same period last year. The
effective tax rates differ from the federal statutory rate primarily due to foreign and state taxes and non-deductible goodwill amortization in fiscal 2001.

Critical Accounting Policies

On December 12, 2001, the SEC issued FR-60 "Cautionary Advice Regarding Disclosure About Critical Accounting Policies." FR-60 is an
intermediate step to alert companies to prepare adequate disclosure that will facilitate an understanding of their financial status and the possibility, likelihood and implications of changes in their
financial and operating status. FR-60 encourages companies to aid awareness in their "critical accounting policies, the judgments and uncertainties affecting the application of those
policies, and the likelihood that materially different amounts would be reported under different conditions or using different assumptions." The Company's accounting policies are disclosed in its 2001
Report on Form 10-K. There have been no material changes to these policies except for the adoption of SFAS No. 142 during fiscal 2002.

Management's
Discussion and Analysis discusses the results of operations and financial condition as reflected in the Company's consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to accounts
receivable; inventory valuation; amortization and recoverability of long-lived assets, including goodwill; litigation accruals, the calculation of workers' compensation liabilities;
revenue recognition; and reorganization charges. Management bases its estimates and judgments on the Company's substantial historical experience and other relevant factors, the results of which form
the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

While
the Company believes that the historical experience and other factors considered provide a meaningful basis for the accounting policies applied in the preparation of the
consolidated financial statements, the Company cannot guarantee that its estimates and assumptions will be accurate, which could require the Company to make adjustments to these estimates in future
periods.

14

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Accounts Receivable

The Company maintains an allowance for doubtful receivables for estimated losses resulting from the inability of our trade customers to make required payments. We
provide a general allowance for other accounts based on historical collection and write-off experience. Judgment is critical because some retail customers have experienced financial
difficulties. If their financial condition were to worsen, additional allowances might be required.

Inventories

The Company's inventories are valued at the lower of cost or market value. All stock-keeping units (SKUs) in inventory are evaluated to determine excess or slow
moving SKUs based on orders on hand and projections of future demand and market conditions. For those units in inventory that are so identified, the Company estimates their market value or net sales
value based on current realization trends. If the projected net sales value is less than cost, on an individual SKU basis, an allowance is provided to reflect the lower value of that inventory. This
methodology recognizes projected inventory losses at the time such losses are evident rather than at the time goods are actually sold.

Asset ImpairmentGoodwill

In assessing the recoverability of the Company's fixed assets, goodwill and other non-current assets, the Company considers changes in economic
conditions and makes assumptions regarding estimated future cash flows and other factors. If these estimates or their related assumptions change in the future, the Company may be required to record
impairment charges.

Litigation Accruals

From time to time, the Company is subject to proceedings, lawsuits and other claims primarily related to employees. The Company assesses the likelihood of any
adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful
analysis of each matter. The required accrual may change in the future due to new developments in any matter or changes in approach (such as a change in settlement strategy) in dealing with these
matters. The Company does not believe that any such matter will have a material adverse effect on its financial condition or results of operations.

Healthcare and Workers' Compensation Liabilities

The Company records estimates for certain healthcare and workers' compensation costs that are self-insured programs. These reserves and the related
benefit expenses are developed using actuarial principles and assumptions which consider a number of factors, including historical claim experiences. Each period, the Company estimates the relevant
factors, based primarily on historical data and uses this information to determine the assumptions underlying its reserve calculations. An extensive degree of judgment is used in this estimation
process. Should a greater amount of claims occur than what was estimated or costs of medical care increase beyond what was anticipated, reserves recorded may not be sufficient and additional charges
to the consolidated financial statements could be required.

Revenue Recognition

Revenue from the sale of products is generally recognized upon shipment of products to customers. Allowances for estimated returns, discounts and retailer
promotions and incentives are recognized when sales are recorded and are based on historical trends. Significant management judgments and estimates must be made and used in connection with
establishing the sales returns and other allowances in any accounting period. Material differences may result in the amount and timing of our revenues for any period if management makes different
judgments or utilizes different estimates.

15

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Reorganization Charges

The Company has provided reorganization charges in 2001 and 2002 to reduce the manufacturing and administrative cost structure and to exit underperforming
businesses. These charges were based on judgments about the future net realizable value of assets of closed facilities, net realizable value of other assets to be disposed of, and exit costs to be
incurred for severance and other liabilities. If actual amounts differ from the estimates, adjustments will be required in future consolidated statements of income.

Goodwill

On October 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
No. 142") and recorded a $15.6 million impairment of goodwill related to the 1999 acquisition of Jerell, the Company's women's wear subsidiary. Subsequent to the acquisition, pricing
pressures and a weak retail environment for women's apparel have resulted in a revised earnings forecast for Jerell. In order to determine the fair value of goodwill, the Company
obtained an independent appraisal, which considered both prices of comparable businesses and the discounted value of projected cash flows.

The
change in the carrying amount of goodwill for the six months ended June 30, 2002 is as follows:

Balance as of October 1, 2001

$
25,050Impairment loss under SFAS No. 142


(15,578
)Balance as of June 30, 2002

$
9,472


2002 Reorganization

On January 8, 2002, the Company announced plans to close its cutting facility in Weslaco, Texas as part of the implementation of its strategy to source
production internationally. Accordingly, the Company recorded a $1.0 million charge to operations in reorganization costs for the quarter ended March 31, 2002. All 142 employees at the
Weslaco facility were terminated in conjunction with the closure, which was completed in June 2002. Severance payments of $0.7 million and other employee termination costs of
$0.3 million are expected to be paid by the end of fiscal 2002. The Company has approximately $0.1 million remaining to be paid, which is included in accrued liabilities as of
June 30, 2002. The impact of closing this facility will result in approximately $0.3 to $0.6 million annually in cost savings, depending on production volumes.

In
conjunction with the Edinburg closure in fiscal 2001, the net book value of the manufacturing facility of $2,157,000 was written off since the net realizable value of the facility was
expected to be insignificant. Subsequent to marketing this facility nationally, having appraisals completed on the property, and receiving an initial offer during the second quarter (in excess of the
pre-closure net book value) for this facility, the Company reversed the original facility write-down and classified the facility as an asset held for sale. The $2,157,000
reversal was recorded as a credit to reorganization costs in the income statement for the quarter ended March 31, 2002.

The
following summarizes the reorganization costs for the nine months ended June 30, 2002 (in thousands):

Weslaco, Texas cutting facility closing

$
1,000Edinburg, Texas facility write-down reversal


(2,157
)Total reorganization costs

$
(1,157
)


16

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2001 Reorganization

On March 26, 2001, the Company announced plans to close its manufacturing facility in Edinburg, Texas, and its operations in Japan. Closure of the Edinburg
facility was part of the implementation of the Company's strategy to source its production internationally. The Company recorded a $20.8 million charge to operations ($14.3 million after
taxes) in the quarter ended March 31, 2001. Severance and other employee related payments of $5.7 million have been made as of June 30, 2002, and all other employee termination
costs are expected to be paid by the end of fiscal 2003. A $0.7 million pretax reduction of the charges for the 2001 reorganization was credited to operations in the fourth quarter of fiscal
2001 as a result of lower than expected costs related to terminated employees and better than expected recoveries on equipment, offset by lower than anticipated recoveries on inventories and
receivables in Japan.

During
the second quarter of fiscal 2001, the Company recorded an $8.6 million charge for legal expenses, of which $1.6 million was due to a cash settlement for certain
claims and the remaining $7.0 million was due to management's estimate of the expected loss for unsettled claims against the Company, including two jury verdicts totaling $5.2 million,
which have been returned against subsidiaries of the Company and are currently on appeal. Many of the legal claims against the Company relate to claims for wrongful discharge and common law tort by
former employees of the Company's sewing facilities in south Texas that were closed in previous years. Due to the closure of the Company's last manufacturing facility in south Texas, management
believes that the likelihood of adverse outcomes related to such claims has increased significantly. Accordingly, the Company has recorded its best estimate of future costs for such claims.

The
reorganization costs before tax are summarized as follows (in millions):

|                                       |  | Balance
March 31, 2001 |      | Payments and
Write-offs |   | Adjustments |   | Balance
June 30, 2002
|-------------------------------------- |  | ---------------------- | ---- | ----------------------- | - | ----------- | - | ---------------------
|Employee termination and related costs |  | $                      | 8.1  |                         | $ | (5.7        | ) | $                    
|Plant and equipment impairment         |  |                        | 3.1  |                         |   | (2.8        | ) |                      
|Other asset write-downs                |  |                        | 1.0  |                         |   | (1.8        | ) |                      
|Legal costs                            |  |                        | 8.6  |                         |   | (2.5        | ) |                      
|                                       |  |                        |      |                         |   |             |   |                      
|Total Reorganization Costs             |  | $                      | 20.8 |                         | $ | (12.8       | ) | $                    
|                                       |  |                        |      |                         |   |             |   |                      

Commitments and Contingencies

The Company had approximately $36.2 million in outstanding letters of credit at June 30, 2002, primarily in connection with certain
self-insurance agreements and certain inventory purchases of the Company.

Two
jury verdicts totaling $5.2 million have been returned against subsidiaries of the Company related to claims by former employees for wrongful discharge and common law tort.
Management and legal counsel believe the verdicts in these lawsuits are both legally and factually incorrect, and the Company has appealed the original jury verdicts. Management does not believe that
the outcome of these appeals will have a material adverse impact on its financial position, results of operations or cash flows for future periods.

The
Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse
effect on the Company's financial position or the results of operations for future periods.

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Liquidity and Capital Resources

The Company's trade accounts receivable potentially expose the Company to concentrations of credit risk because most of its customers are in the retail apparel
industry. The Company performs ongoing credit evaluations of its customers' financial condition and establishes an allowance for doubtful accounts based upon the factors related to the credit risk of
specific customers, historical trends and other information. The Company's trade accounts receivable, including amounts due from the factor, decreased approximately $20.7 million to
$50.6 million at June 30, 2002, from $71.3 million at September 30, 2001. This decrease is primarily the result of decreased sales in the third quarter of fiscal 2002 as
compared to the fourth quarter of fiscal 2001.

Inventories
as of June 30, 2002, decreased to $95.3 million from $97.7 million at September 30, 2001. Inventory levels at September 30, 2001 were
higher in anticipation of increased seasonal sales during the Company's first quarter of fiscal 2002.

In
June 2002, the Company amended and restated its revolving credit line agreement with certain banks primarily to increase the maximum borrowings to $110.0 million and to
extend the maturity date to June 30, 2005. As of June 30, 2002, the Company had $21.0 million outstanding on the revolver and had additional available borrowing capacity of
approximately $64.6 million. The available borrowings under the facility are based on a formula involving a percentage of eligible receivables and inventories adjusted by the Company's standby
letters of credit. Interest on the outstanding debt varies based upon margins over a bank base rate or a LIBOR rate, as selected by the Company. The applicable margin is dependent upon the ratio of
the Company's total indebtedness at the end of each fiscal quarter to its operating cash flow for the preceding year. In addition, the Company is required to maintain certain financial ratios. The
Company's failure to satisfy these ratios could adversely affect the Company's ability to acquire future capital to meet its needs.

The
Company incurred approximately $0.1 million in commitment fees related to the available borrowing capacity for the nine months ended June 30, 2002. The interest rates
for the quarter ended June 30, 2002, ranged from 3.1% to 4.8% and were based on floating market rates (LIBOR or prime rate). The interest rate at June 30, 2002 was 3.5% for the revolving
credit facility.

For
the nine months ended June 30, 2002, cash flows provided by operating activities were approximately $22.5 million. The cash provided from operations was primarily the
result of income as
adjusted for non-cash items, a $20.7 million decrease in accounts receivable, including receivables due from factor, and a $2.4 million decrease in inventories, offset by a
$6.2 million decrease in accounts payable and a $3.7 million decrease in accrued wages, workers' compensation, other employee benefits and other accrued liabilities. For the nine months
ended June 30, 2001, the cash used of $4.4 million was primarily the result of an $11.3 million increase in inventories and a $3.1 million decrease in accrued wages,
workers compensation, other employee benefits and other accrued liabilities, offset by a $10.3 million decrease in accounts receivable and due from factor and a $2.3 million increase in
accounts payable.

The
Company used approximately $3.1 million in investing activities for the nine months ended June 30, 2002, primarily due to purchases of property, plant and equipment of
$1.9 million principally related to fixtures and leasehold improvements for new retail stores as well as an increase in other assets of $1.3 million due to additional premium payments
primarily related to executive variable life insurance policies. For the nine months ended June 30, 2001, the Company used approximately $6.2 million in investing activities, primarily
related to the purchase of property, plant and equipment of $3.9 million, and a $2.3 million increase in other assets.

Cash
flows used in financing activities of $19.8 million for the nine months ended June 30, 2002, were primarily the result of a net decrease in long-term debt
of $19.3 million and dividend payments of $1.0 million. Comparatively, cash flows provided from financing activities of $15.4 million for the same

18

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period last year were primarily the result of a net increase in long-term debt of $17.0 million, offset by a $1.0 million payment of cash dividends and the purchase of
$0.7 million in treasury stock.

The
Company believes that the cash flow generated from operations and the funds available under the aforementioned credit facilities will be adequate to meet its working capital and
related financing needs for the foreseeable future.

Disclosures Concerning Liquidity and Capital Resources, Including "Off-balance Sheet" Arrangements"

On January 22, 2002, the SEC issued FR-61, "Commission Statement about Management's Discussion and Analysis of Financial Condition and Results
of Operations." The SEC has indicated that, while it intends to consider rulemaking regarding these topics and other topics covered by the MD&A requirements, the purpose of its statement is to suggest
steps that issuers should consider in meeting their current disclosure obligations with respect to the topics addressed.

The
Company is currently evaluating FR-61 and the effects it may have, if any, on this and future filings. The Company has responded to each of the areas addressed by
FR-61. Any statements in this section, which discuss or are related to future dates or periods, are "forward-looking statements."

FR-61
requires management to identify any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the Company's
liquidity increasing or decreasing in any material way. FR-61 also requires management to identify any known material trends, favorable or unfavorable, in the Company's capital resources
including any expected material changes in the mix and relative cost of such resources.

The
Company's primary source of liquidity over the past nine months has been cash flows from operations. The Company's future cash flows from operations may be impacted by factors
including, but not limited to:



The
Company is dependent upon its ability to retain existing customers. The Company's failure to retain existing customers could significantly affect future profitability of the Company.
The timing and volume of customer purchases can vary significantly from period to period. There is no assurance that the volume from any particular customer will continue beyond the current period.
The loss of business of one or more principal customers or a change in the number or character of projects for a particular customer could have a material adverse effect on the Company's sales volume,
profitability, financial position and cash flows.

Due
to the range of products that the Company provides, the product sales mix can produce a range of profit margins. Some businesses in which the Company operates produce lower profit
margins than others.

Deteriorating
or weak economic conditions, including slowdowns at either the national or regional levels, or future terrorist attacks or related actions in the war against terrorism,
could affect future sales and profitability of the Company. The Company is not in a position to determine how it will be

19

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affected by these circumstances, how extensive the effects may be, or for how long it may be impacted by these circumstances.

Management's
effectiveness in managing its manufacturing processes will have a direct impact on its future profitability. The Company regularly makes decisions that affect production
schedules, shipping schedules, and inventory levels. The Company's effectiveness in managing these areas could impact future profitability.

The
Company has significant accounts receivable due from its customers. From time to time, certain of these accounts receivable have become unusually large and/or overdue, and on
occasion, the Company has written off significant accounts receivable balances. The failure of the Company's customers to pay in full amounts due to the Company could affect future profitability.

From
time to time, the Company will sell or dispose of assets which it feels are under-performing or are no longer needed in the businesses in which the Company operates. There can be no
assurance that the Company will be able to sell or dispose of the assets in a manner which is profitable to the Company. In addition, the Company will make investments in assets that management
believes are needed to acquire and maintain the businesses in which the Company operates. Again, there can be no assurance that the Company can obtain a reasonable return on the investments.

The
Company declared a cash dividend of $0.05 per share payable to the stockholders of record on August 5, 2002. The dividend of approximately $321,000 will be paid on
August 19, 2002.

Disclosures About Contractual Obligations And Commercial Commitments

FR-61 encourages companies to identify obligations and commitments to make future payments under contracts, such as debt and lease agreements, and
under contingent commitments, such as debt guarantees. It also suggests that the disclosure reference the various parts of a registrant's filings, which discuss these commitments. The SEC believes
that investors would find it beneficial if aggregated information about contractual obligations and commercial commitments were provided in a single location such that a total picture of obligations
would be readily available.

The
Company has disclosed information pertaining to these transactions in its 2001 Report on Form 10-K. In addition, the Company has prepared schedules suggested by
the SEC in FR-61 for the period ended June 30, 2002.

Payments Due By Fiscal Years (In thousands)

|Contractual
Obligations              |  | 2002 |       | 2003-2004 |   | 2005-2006 |  | Thereafter |        | Total
|------------------------------------ |  | ---- | ----- | --------- | - | --------- |  | ---------- | ------ | -----
|Long-Term Debt (1)                   |  | $    | 4     |           | $ | 7,409     |  | $          | 26,672 |      
|Operating Leases                     |  |      | 2,105 |           |   | 12,980    |  |            | 6,497  |      
|Minimum royalties under licenses (2) |  |      | 550   |           |   | 3,800     |  |            | 3,000  |      
|Other Long-Term Obligations          |  |      |      |           |   |          |  |            |       |      
|                                     |  |      |       |           |   |           |  |            |        |      
|Total Contractual Cash Obligations   |  | $    | 2,659 |           | $ | 24,189    |  | $          | 36,169 |      
|                                     |  |      |       |           |   |           |  |            |        |      

---

20

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The
Company has other financial commitments as of June 30, 2002, that may require the use of funds under certain circumstances. The Company has outstanding $28.9 million of
trade letters of credit for the purchase of inventory from foreign suppliers in the ordinary course of business. These letters of credit, generally for periods of less than six months, will only be
paid upon satisfactory receipt of the inventory by the Company. The Company has entered into $7.3 million of standby letters of credit representing contingent guarantees of performance under
self-insurance and other programs. These commitments would only be drawn upon if the Company were to fail to meet its claims obligations.

New Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset Retirement Obligations" ("SFAS
No. 143.") This Standard addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset
retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal
use of the asset. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, a gain or loss on settlement is
recognized. SFAS No. 143 is effective for fiscal years beginning after December 15, 2001 or the first quarter of our fiscal 2003. Management is still studying this Standard to determine,
among other things, whether the Company has any asset retirement obligations which are covered under the scope of SFAS No. 143, and the effect, if any, to the Company of adopting SFAS
No. 143 has not yet been determined.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." ("SFAS No. 144."). This Standard
provides a single accounting model for long-lived assets to be disposed of and significantly changes the criteria that would have to be met to classify an asset as held for sale.
Classification as held for sale is an important distinction since such assets are not depreciated and are stated at the lower of fair value and carrying amount. This standard also requires
expected future operating losses from discontinued operations to be displayed in the period(s) in which losses are incurred, rather than as of the measurement date as presently required. SFAS
No. 144 is effective for fiscal years beginning after December 15, 2001 or the first quarter of our fiscal 2003. Management does not expect the adoption of SFAS No. 144 to have a
material impact on the Company's financial statements.

In
June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS No. 146.") SFAS No. 146 addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance
that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The scope of SFAS No. 146 also includes (1) costs related to terminating a contract that is not a capital lease and
(2) certain termination benefits to employees who are involuntarily terminated. SFAS No. 146 will be effective for exit or disposal activities that are initiated after
December 31, 2002. Management is still evaluating the impact of the adoption of SFAS No. 146.

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Forward Looking Statements

Certain statements used in the preceding discussion and elsewhere in this Quarterly Report on Form 10-Q, including statements regarding the
future financial position and results of operations of the Company, business strategy and plans and objectives of management for future operations and statements containing the words "believe", "may",
"will", "estimate", "continue", "anticipate", "intend", "expect" and similar expressions, as they relate to the company, are forward-looking statements within the meaning of the federal securities
laws. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions which may cause the Company's actual results, performance or achievements to differ
materially from those anticipated or implied by the forward-looking statements. In addition, from time to time the Company may issue press releases and other written communications, and
representatives of the Company may make oral statements, which contain forward-looking information. Except for historical information, matters discussed in such oral and written communications are
forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially from those in such forward-looking statements.

Although
the Company believes that any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will in fact occur and cautions that
actual results may differ materially from those in any forward-looking statements. A number of factors could affect the results of the Company or the apparel industry generally and could cause the
Company's expected results to differ materially from those expressed in this filing. These factors include, among other things:



The
Company undertakes no obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any
change in the Company's expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company is exposed to market risk from changes in foreign currency exchange risk and interest rate risk, which may adversely affect its financial position,
results of operations and cash flows. The Company does not use financial instruments for trading or other speculative purposes and is not party to any derivative financial instruments.

The
Company is exposed to interest rate risk primarily through its borrowing activities. As of June 30, 2002, the Company had $23.3 million outstanding under its revolving
credit line agreement and other variable rate debt. See Item 1.Notes to Consolidated Financial StatementsLong-term Debt for additional discussion of the terms of
the Company's credit facility.

A
one percentage point increase in the variable interest rate based on debt amounts outstanding at June 30, 2002, would result in an approximately $0.2 million reduction in
annual pretax earnings.

Part II. Other Information.

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



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

|                      |  | Haggar Corp.,
|--------------------- |  | -------------
|Date: August 14, 2002 |  | By:          
|                      |  |              

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