##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED JANUARY 2, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 1-10857
 
 THE WARNACO GROUP, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    95-4032739
(I.R.S. Employer
Identification No.)
 501 Seventh Avenue
 New York, New York 10018
(Address of principal executive offices)
 Registrants telephone number, including area code: (212) 287-8000
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $0.01 per share
    
    New York Stock Exchange, Inc.
 Securities registered pursuant to Section 12(g) of the Act: None
 Yes þ No o
 Yes o No þ
 Yes þ No o
 Yes
o No o *
 *
    
    Registrant is not subject to the requirements of Rule 405 of Regulation S-T at this time. þ
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



THE WARNACO GROUP, INC.
2009 ANNUAL REPORT ON FORM 10-K
 TABLE OF CONTENTS
 PAGEPART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    17Item 1B. Unresolved Staff Comments
    
    
    24Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    24Item 4. Reserved
    
    
    25PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    26Item 6. Selected Financial Data
    
    
    27Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    30Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    65Item 8. Financial Statements and Supplementary Data
    
    
    66Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    66Item 9A. Controls and Procedures
    
    
    66Item 9B. Other Information
    
    
    68PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    69Item 11. Executive Compensation
    
    
    69Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    69Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    69Item 14. Principal Accounting Fees and Services
    
    
    69PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    70Exhibit 12.1Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



PART I
 
 Item 1.
    
    Business.
 Introduction
 Calvin Klein ® Speedo ® Chaps ® Warners ® Olga ®
 Calvin Klein Calvin Klein Calvin Klein SpeedoUSA. , Calvin Klein
   Owned Trademarks (a)Calvin
Klein and formatives (beneficially owned for mens/ womens/childrens underwear, loungewear and sleepwear: see Trademarks and Licensing Agreements)WarnersOlgaBody Nancy Ganz®/Bodyslimmers ®
 Trademarks Licensed in PerpetuityTrademark
    
    TerritorySpeedo(a)
    
    United States, Canada, Mexico, Caribbean IslandsFastskin®(secondary Speedo mark)
    
    United States, Canada, Mexico, Caribbean Islands
  1




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##### Table of Contents



Trademarks Licensed for a TermTrademark
    
    Territory
    
    Expires (j)Calvin Klein (for mens/womens/juniors jeans
and certain jeans-related products)(b)
    
    North, South and Central America
    
    12/31/2044CK/Calvin Klein Jeans (for retail stores selling mens/womens/juniors
jeans and certain jeans-related products and ancillary
products bearing the Calvin Klein marks)(b)
    
    Canada, Mexico and Central and South America
    
    12/31/2044CK/Calvin Klein (for bridge apparel, bridge accessories
and retail stores selling bridge apparel and accessories)(c)
    
    All countries constituting European
Union, Norway, Switzerland
Monte Carlo, Vatican City, Liechtenstein,
Iceland and parts of Eastern Europe, Russia,
Middle East and Africa
    
    12/31/2046CK/Calvin Klein (for retail stores selling bridge accessories
and jeans accessories) (d)
    
    Central and South America (excluding Mexico)
Europe and Asia
    
    12/31/2044
12/31/2046Calvin Klein and CK/Calvin Klein (for mens/womens/childrens
jeans and other related apparel as well as retail stores
selling such items and ancillary products)(c)
    
    Western Europe including Ireland,
Great Britain, France, Monte Carlo,
Germany, Spain, Portugal, Andorra, Italy,
San Marino, Vatican City, Benelux, Denmark,
Sweden, Norway, Finland, Austria, Switzerland,
Lichtenstein, Greece, Cyprus, Turkey and Malta
and parts of Eastern Europe, Russia, the Middle East
and Africa, Japan, China, South Korea and
Rest of Asia (Hong Kong, Thailand,
Australia, New Zealand, Philippines, Taiwan,
Singapore, Malaysia, Indonesia, New Guinea,
Vietnam, Cambodia, Laos, Myanmar,
Macau and the Federated State
of Micronesia)
    
    12/31/2046CK/Calvin Klein (for independent or common internet sites
for the sale of jeanswear apparel and jeanswear accessories)(d)
    
    North America, Europe and Asia
    
    12/31/2046CK/Calvin Klein (for independent or common internet sites
for the sale of jeanswear apparel and jeanswear accessories)(d)
    
    Central and South America (excluding Mexico)
    
    12/31/2044Calvin Klein (for jeans accessories)(c)
    
    All countries constituting European
Union, Norway, Switzerland,
Monte Carlo, Vatican City, Liechtenstein,
Iceland and parts of Eastern Europe, Russia,
Middle East, Africa and Asia
    
    12/31/2046Chaps (for mens sportswear, jeanswear,
activewear, sport shirts and mens swimwear)(e)
    
    United States, Canada, Mexico,
Puerto Rico and Caribbean Islands
    
    12/31/2018Calvin Klein and CK/Calvin Klein (for womens
and juniors swimwear)
    
    Worldwide with respect to Calvin
Klein; Worldwide in approved forms with
respect to CK/Calvin Klein
    
    12/31/2014Calvin Klein (for mens swimwear)
    
    Worldwide
    
    12/31/2014Lifeguard® (for wearing apparel excluding
underwear and loungewear)(f)
    
    Worldwide (United States, Canada,
Mexico, Caribbean Islands and all other
countries where trademark filings are or
will be made)
    
    6/30/2030
 
 (a)
    
    Licensed in perpetuity from Speedo International, Ltd. (SIL).(b)
    
    Expiration date reflects a renewal option, which permits the Company to extend for an
additional ten-year term through 12/31/2044 (subject to compliance with certain terms and
conditions).(c)
    
    In January 2006, the Company acquired the companies that operate the license and
related wholesale and retail businesses of Calvin KleinJeans and accessories in Europe and
Asia and the CK/Calvin Kleinbridge line of sportswear and accessories in Europe. In
connection with the acquisition, the Company acquired various exclusive license agreements. In
addition, the Company entered into amendments to certain of its existing license agreements
with Calvin Klein, Inc. (in its capacity as licensor). See -Trademarks and Licensing
Agreements.  2




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##### Table of Contents



(d)
    
    By agreement dated January 31, 2008, the Company acquired the rights to operate CK/Calvin
Kleinretail stores for the sale of bridge and jeans accessories (in countries constituting
Europe, Asia and Central and South America (excluding Mexico)) as well as the rights to
operate CK/Calvin Kleinindependent or common internet sites for the sale of jeanswear apparel
and jeanswear accessories in the Americas (excluding Mexico), Europe and Asia. See Trademarks
and Licensing Agreements(e)
    
    Expiration date reflects a renewal option, which permits the Company to extend for an
additional five-year term beyond the current expiration date of December 31, 2013 (subject to
compliance with certain terms and conditions) for the trademark Chapsand the Chapsmark and
logo.(f)
    
    Expiration date reflects four successive renewal options of five years each (each subject
to compliance with certain terms and conditions).    Acquisitions, Dispositions and Discontinued Operations
 Acquisitions
 Acquisition of Remaining Non-controlling Interest and Retail Stores in Brazil
 Calvin Klein Note 2 to Notes to Consolidated Financial Statements.
  Businesses in Chile and Peru: Calvin Klein
  3




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##### Table of Contents



2008 CK Licenses Calvin Klein CK /Calvin Klein Calvin Klein
 Calvin Klein Calvin Klein Calvin Klein CK/Calvin Klein CK/Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin
Klein Calvin Klein Calvin Klein
 Retail Stores in China:
 Note 2 of Notes to Consolidated Financial Statements
 Dispositions and Discontinued Operations
 Calvin Klein Golf and Calvin Klein Collection Businesses Calvin Klein Calvin Klein Calvin Klein
 Exit of Designer Swimwear Business (except Calvin Klein): Calvin Klein OP OP OP Catalina Anne Cole Cole of California Catalina Anne Cole Cole of California OP Catalina Anne Cole Cole of California
 Nautica Michael Kors Nautica Michael Kors
  4




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Lejaby Sale
 Lejaby   Lejaby Lejaby Lejaby Lejaby Lejaby Lejaby Note 6 of Notes to
Consolidated Financial Statements
 Note 3 of Notes to Consolidated Financial Statements
 Business Groups
   Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007(in thousands of dollars)% of Total
    
    
    
    
    
    
    % of Total
    
    
    
    
    
    
    % of TotalNet revenues:Sportswear Group
    
    $
    1,091,165
    
    
    
    54.0
    %
    
    $
    1,100,597
    
    
    
    53.4
    %
    
    $
    939,147
    
    
    
    51.6
    %Intimate Apparel Group
    
    
    677,315
    
    
    
    33.6
    %
    
    
    702,252
    
    
    
    34.0
    %
    
    
    627,014
    
    
    
    34.5
    %Swimwear Group
    
    
    251,145
    
    
    
    12.4
    %
    
    
    260,000
    
    
    
    12.6
    %
    
    
    253,418
    
    
    
    13.9
    %Net revenues (a), (b), (c)
    
    $
    2,019,625
    
    
    
    100.0
    %
    
    $
    2,062,849
    
    
    
    100.0
    %
    
    $
    1,819,579
    
    
    
    100.0
    %
 (a)
    
    International operations accounted for 54.6%, 54.4% and 49.0% of net revenues in
Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively.(b)
    
    Direct to consumer businesses accounted for 22.5%, 20.6% and 18.3% of net
revenues in Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively.(c)
    
    Sales of products bearing the Calvin Kleinbrand name accounted for 73.5%, 72.7%
and 68.2% of net revenues in Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively. % of Total Net
    
    
    
    
    
    
    % of Total Net
    
    
    
    
    
    
    % of Total NetFiscal 2009
    
    
    Revenues
    
    
    Fiscal 2008
    
    
    Revenues
    
    
    Fiscal 2007
    
    
    Revenues(in thousands of dollars)Operating income (loss):Sportswear Group
    
    $
    124,950
    
    
    
    
    
    
    $
    89,782
    
    
    
    
    
    
    $
    97,946Intimate Apparel Group
    
    
    117,070
    
    
    
    
    
    
    
    126,132
    
    
    
    
    
    
    
    108,343Swimwear Group
    
    
    15,558
    
    
    
    
    
    
    
    11,478
    
    
    
    
    
    
    
    (24,499
    )Unallocated corporate
expenses (a)
    
    
    (64,043
    )
    
    
    
    
    
    
    (85,947
    )
    
    
    
    
    
    
    (38,100
    )Operating income (b)
    
    $
    193,535
    
    
    
    9.6
    %
    
    $
    141,445
    
    
    
    6.9
    %
    
    $
    143,690
    
    
    
    7.9
    %
 (a)
    
    Includes $20.4 million and $31.5 million of pension expense and $9.0 million of pension
income for Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively.(b)
    
    Includes $3.2 million, $4.3 million, $3.0 million and $1.5 million of restructuring expenses
for Fiscal 2009 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and
Unallocated corporate expenses, respectively, $27.8 million, $1.3 million, $3.9 million and
$2.2 million of restructuring expenses for Fiscal 2008 in the Sportswear Group, Intimate
Apparel Group, Swimwear Group and Unallocated corporate expenses, respectively, and $0.1
million, $2.1 million, $29.8 million and $0.3 million of restructuring expenses for Fiscal
2007 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and Unallocated corporate
expenses, respectively.  5




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January 2, 2010
    
    

%
of Total
    
    
    January 3, 2009
    
    

%
of TotalTotal assets:Sportswear Group
    
    $
    875,304
    
    
    
    52.8
    %
    
    $
    801,038
    
    
    
    53.5
    %Intimate Apparel Group
    
    
    390,610
    
    
    
    23.5
    %
    
    
    304,724
    
    
    
    20.4
    %Swimwear Group
    
    
    144,198
    
    
    
    8.7
    %
    
    
    147,685
    
    
    
    9.9
    %Corporate/Other
    
    
    249,682
    
    
    
    15.0
    %
    
    
    242,646
    
    
    
    16.2
    %Total assets
    
    $
    1,659,794
    
    
    
    100.0
    %
    
    $
    1,496,093
    
    
    
    100.0
    %
 Sportswear Group
  Brand Name
    
    Price Range
    
    Type of ApparelCalvin Klein
    
    Better to premium
    
    Mens, womens and childrens (a) designer
jeanswear (bottoms and tops) and bridge
sportswear in Europe; jeans accessories in
Europe and Asia and bridge accessories in
EuropeChaps
    
    Moderate
    
    Mens sportswear, jeanswear, activewear, knit
and woven sports shirts and swimwear (b)
 
 (a)
    
    The Sportswear Group sub-licenses the rights to produce childrens designer jeanswear to a
third party.(b)
    
    The Sportswear Group sub-licenses the rights to produce mens leather outerwear to a third
party. Calvin Klein CK Calvin Klein Calvin Klein
 Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin Klein
 Chaps Chaps Chaps
   6




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Channels of Distribution
    
    Customers
    
    BrandsUnited StatesDepartment Stores
    
    Macys Inc./ Carsons/Bon Ton 

Stage Stores
    
    Calvin KleinJeansChapsIndependent Retailers
    
    Nordstrom/ Dillards 

Belk
    
    Calvin KleinJeansCalvin KleinJeans and ChapsChain Stores
    
    Kohls
    
    ChapsMembership Clubs
    
    Sams Club and BJs
Costco
    
    Calvin KleinJeans and Chaps
 Calvin KleinJeansOther
    
    Military
    
    Calvin KleinJeans and ChapsEurope
    

Company operated retail stores,
stores operated under shop-in-shop
and concession agreements
    
    Calvin KleinJeansE1 Corte InglesCanada
    
    Hudson Bay Company and
Sears 
Costco and Sams Club
    
    Calvin KleinJeans and Chaps
Calvin KleinJeans and ChapsMexico, Central and South America
    

Company operated retail stores 
Liverpool and Sears 
Sams Clubs 
Stores operated under
distributor agreements
    
    Calvin KleinJeans and Chaps
Calvin KleinJeans and Chaps
Calvin KleinJeans and Chaps
Calvin KleinJeansAsia
    

Company operated retail stores,
shop-in-shop/concession locations/stores
under retail licenses or distributor
agreements/direct wholesale distributors
    
    Calvin KleinJeans and Accessories
    Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net
    
    
    % of
    
    
    Net
    
    
    % of
    
    
    Net
    
    
    % ofRevenues
    
    
    Total
    
    
    Revenues
    
    
    Total
    
    
    Revenues
    
    
    Total(in thousands of dollars)Net revenues:United States
    
    $
    412,085
    
    
    
    37.8
    %
    
    $
    420,388
    
    
    
    38.2
    %
    
    $
    405,188
    
    
    
    43.1
    %International
    
    
    679,080
    
    
    
    62.2
    %
    
    
    680,209
    
    
    
    61.8
    %
    
    
    533,959
    
    
    
    56.9
    %$
    1,091,165
    
    
    
    100.0
    %
    
    $
    1,100,597
    
    
    
    100.0
    %
    
    $
    939,147
    
    
    
    100.0
    %
  7




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##### Table of Contents



Intimate Apparel Group
    Brand Name
    
    Price Range
    
    Type of ApparelCalvin KleinUnderwear
    
    Better to premium
    

Womens intimate apparel and
sleepwear and mens underwear
and loungewearWarners
    
    Moderate to better
    
    Womens intimate apparelOlga
    
    Moderate to better
    
    Womens intimate apparelOlgas Christina
    
    Better
    
    Womens intimate apparelBody Nancy Ganz/Bodyslimmers
    
    Better to premium
    
    Womens intimate apparel
 Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin Klein
 CKU.com Calvin Klein
  Channels of Distribution
    
    Customers
    
    BrandsUnited StatesDepartment Stores
    
    Macys Inc. 
Carsons/Bon-Ton
    
    Warners, Olgas Christina,Olga
and Calvin KleinUnderwearIndependent Retailers
    
    Nordstrom, Dillards,
and Belk
    
    Calvin KleinUnderwearChain Stores
    
    Kohls, JCPenney and Sears
    
    Warners, Olga,and private labelMembership Clubs
    
    Costco and Sams Club
    
    Warnersand Calvin KleinUnderwearCanada
    

Hudson Bay Company,
Zellers, Sears and
   Wal-Mart 
Costco 

Company operated retail stores
    

Warners, Olga, Body Nancy
   Ganz/Bodyslimmers and Calvin Klein
   UnderwearCalvin KleinUnderwearCalvin KleinUnderwearMexico, Central
and South America
    

Liverpool, Palacio de
Hierro, Suburbia and   Sears 
Sams Clubs 
Costco 
Company operated retail stores
    

Warners, Olga, Body Nancy
   Ganz/Bodyslimmersand Calvin
KleinUnderwearWarners
Calvin KleinUnderwearCalvin KleinUnderwear
  8




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Channels of Distribution
    
    Customers
    
    BrandsEurope
    
    Harrods, House of Fraser,
Galeries Lafayette, Selfridges
Debenhams, Au Printemps,
Karstadt, Kaufhof and El Corte
Ingles
    
    Calvin KleinUnderwearCompany operated retail stores,
shop-in-shop/concession locations
and stores under retail licenses or
distributor agreements
    
    Calvin KleinUnderwearAsia
    
    Company operated retail stores,
shop-in-shop/concession locations
and stores under retail licenses or
distributor agreements
    
    Calvin KleinUnderwear
    Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net
    
    
    % of
    
    
    Net
    
    
    % of
    
    
    Net
    
    
    % ofRevenues
    
    
    Total
    
    
    Revenues
    
    
    Total
    
    
    Revenues
    
    
    Total(in thousands of dollars)Net revenues:United States
    
    $
    295,283
    
    
    
    43.6
    %
    
    $
    308,119
    
    
    
    43.9
    %
    
    $
    304,765
    
    
    
    48.6
    %International
    
    
    382,032
    
    
    
    56.4
    %
    
    
    394,133
    
    
    
    56.1
    %
    
    
    322,249
    
    
    
    51.4
    %$
    677,315
    
    
    
    100.0
    %
    
    $
    702,252
    
    
    
    100.0
    %
    
    $
    627,014
    
    
    
    100.0
    %
 Swimwear Group
 Speedo
  Brand Name
    
    Price Range
    
    Type of ApparelSpeedo
    
    Moderate to premium
    

Mens and womens competitive
swimwear, competitive and non-
competitive swim accessories,
mens swimwear and coordinating
T-shirts, womens fitness swimwear,
fashion swimwear, footwear and
childrens swimwearCalvin Klein
    
    Better to premium
    
    Mens and womens swimwearLifeguard
    
    Upper moderate to better
    
    Mens and womens swimwear and
related products
  9




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##### Table of Contents



Speedo Speedo Speedo Speedo
 Speedo SpeedoUSA.com Speedo
 Speedo Speedo Speedo Speedo SpeedoUSA. Speedo
 Speedo Speedo Speedo SpeedoUSA.
 Calvin Klein Calvin Klein Calvin Klein
  Channels of Distribution
    
    Customers
    
    BrandsUnited StatesDepartment Stores
    
    Macys Inc.
    

Speedoswimwear and accessories,
Calvin KleinswimwearIndependent Retailers
    
    Nordstrom, Dillards,
and Belk
    
    Speedoswimwear,Calvin KleinswimwearChain Stores
    
    JCPenney, Kohls and
Sears
    
    Speedoswimwear and accessories,Membership Clubs
    
    Costco and Sams Club
    
    Speedoswimwear, active apparel
and accessoriesMass Merchandisers
    
    Target
    
    SpeedoaccessoriesOther
    
    Military, Victorias Secret
Catalog and The Sports
Authority, team dealers
    
    Speedoswimwear and accessories,
Lifeguard, Calvin KleinswimwearCanada
    

Hudson Bay Company and
Sears
Costco and Sams Clubs
    

Speedoswimwear and accessories,
   Calvin Klein 

Speedoswimwear and accessoriesMexico, Central and South America
    

Liverpool, Palacio De
Hierro, Marti,    Wal-Mart and 
Costco
    

Speedoswimwear and accessories,
   Calvin Klein 

Speedoswimwear and accessoriesEurope
    
    El Corte Ingles, House of Fraser,
La Rinascente and Company-owned
stores/stores operated under
distributor agreements
    
    Calvin Kleinswimwear
  10




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Fiscal 2009
    
    

Fiscal 2008
    
    

Fiscal 2007Net
    
    
    % of
    
    
    Net
    
    
    % of
    
    
    Net
    
    
    % ofRevenues
    
    
    Total
    
    
    Revenues
    
    
    Total
    
    
    Revenues
    
    
    Total(in thousands of dollars)Net revenues:United States
    
    $
    209,317
    
    
    
    83.3
    %
    
    $
    213,696
    
    
    
    82.2
    %
    
    $
    217,199
    
    
    
    85.7
    %International
    
    
    41,828
    
    
    
    16.7
    %
    
    
    46,304
    
    
    
    17.8
    %
    
    
    36,219
    
    
    
    14.3
    %$
    251,145
    
    
    
    100.0
    %
    
    $
    260,000
    
    
    
    100.0
    %
    
    $
    253,418
    
    
    
    100.0
    %
 Customers
   Advertising, Marketing, and Promotion
  Speedo
 Calvin Klein Chaps
  11




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##### Table of Contents



Sales
   Distribution
 Item 2. Properties
 Raw Materials and Sourcing
  Government Regulations.
    Trademarks and Licensing Agreements
 Calvin
Klein Speedo Speedo Warners Olga Calvin Klein Chaps
   12




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Intimate Apparel Group
 Calvin Klein Calvin Klein Calvin Klein
 Sportswear Group
 Calvin Klein
 Calvin Klein Calvin Klein Acquisitions,
Dispositions and Discontinued Operations
 Calvin Klein CK Calvin Klein CK/Calvin Klein
 Calvin Klein CK/Calvin Klein Calvin Klein CK/Calvin Klein
 Calvin Klein Calvin Klein Calvin Klein CK/Calvin Klein CK/Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin
Klein Calvin Klein
  13




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##### Table of Contents



Chaps
 Swimwear Group
 Speedo Speedo Speedo Speedo Speedo
 Calvin Klein CK Calvin Klein Calvin Klein
 Lifeguard Lifeguard Lifeguard
   International Operations
   Item 1A. Risk Factors Managements Discussion
and Analysis of Financial Condition and Results of Operations  Capital Resources and Liquidity
  14




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##### Table of Contents



Competition
  Item 1A. Risk Factors.
 Government Regulations
  Item 1A. Risk Factors
 Employees
 Note 4 to Notes to Consolidated Financial Statements.
 Backlog
   15




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##### Table of Contents



Executive Officers of the Registrant
  Name
    
    Age
    
    PositionJoseph R. Gromek
    
    63
    
    Director, President and Chief Executive OfficerLawrence R. Rutkowski
    
    51
    
    Executive Vice President and Chief Financial OfficerHelen McCluskey
    
    54
    
    PresidentIntimate Apparel and Swimwear GroupsDwight Meyer
    
    57
    
    PresidentGlobal Sourcing, Distribution and LogisticsFrank Tworecke
    
    63
    
    PresidentSportswear GroupStanley P. Silverstein
    
    57
    
    Executive Vice PresidentInternational Strategy and Business DevelopmentJay A. Dubiner
    
    46
    
    Senior Vice President, General Counsel and SecretaryElizabeth Wood
    
    48
    
    Senior Vice PresidentHuman Resources
 Mr. Gromek
 Mr. Rutkowski
 Ms. McCluskey Calvin Klein Warners Olga Body Nancy Ganz Speedo
 Mr. Meyer
 Mr. Tworecke
 Mr. Silverstein
  16




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Mr. Dubiner
 Ms. Wood
 Website Access to Reports
 http://www.warnaco.com
  Item 1 of Part I Note
5 of Notes to Consolidated Financial Statements
 
 Item 1A . Risk Factors
   Recent and future economic conditions, including turmoil in the financial and credit markets, may
adversely affect our business.
   17




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##### Table of Contents



Item 1A.
 The worldwide apparel industry is heavily influenced by general economic conditions.
  We have foreign currency exposures relating to buying, selling and financing in currencies other
than the U.S. dollar, our functional currency.
   The apparel industry is subject to constantly changing fashion trends and if we misjudge consumer
preferences, the image of one or more of our brands may suffer and the demand for our products may
decrease.
   18




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##### Table of Contents



The apparel industry is subject to pricing pressures that may require us to lower the prices we
charge for our products.
   The markets in which we operate are highly competitive and we may not be able to compete
effectively.
  
    
    product quality;
    
    brand recognition;
    
    price;
    
    product differentiation (including product innovation);
    
    sourcing and distribution expertise and efficiency;
    
    marketing and advertising; and
    
    customer service.
  Increases in the prices of raw materials used to manufacture our products or increases in costs to
transport our products could materially increase our costs and decrease our profitability.
   19




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##### Table of Contents



Shortages in the supply of sourced goods, difficulties encountered by the third parties that source
certain of our products , or interruptions in production facilities owned by our third party
contractors or in our distribution operations could result in difficulty in procuring, producing
and distributing our products.
   The failure of our suppliers or contractors to adhere to quality and production standards and the
failure of our inspections to identify and correct such quality or production problems could have a
material adverse effect on our business, financial condition and results of operations.
  We depend on a limited number of customers for a significant portion of our sales, and our
financial success is linked to the success of our customers, our customers commitment to our
products and our ability to satisfy and/or maintain our customers.
    Our success depends upon the continued protection of our trademarks and other intellectual property
rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our
intellectual property rights.
   20




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##### Table of Contents



A significant portion of our operations is dependent on license agreements with third parties that
allow us to design, produce, source and market our products.
   Our success depends on the reputation of our owned and licensed brand names, including, in
particular, Calvin Klein.
  Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin Klein
 We are subject to local laws and regulations in the U.S. and abroad.
  We may have additional tax liabilities .
  Changing international trade regulation may increase our costs and limit the amount of products or
raw materials that we may import from or export to a given country.
   21




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##### Table of Contents



Our business outside of the U.S. exposes us to uncertain conditions in overseas markets.
  
    
    currency fluctuations;
    
    import and export license requirements;
    
    trade restrictions;
    
    changes in quotas, tariffs, taxes and duties;
    
    restrictions on repatriating foreign profits back to the U.S.;
    
    foreign laws and regulations;
    
    international trade agreements;
    
    difficulties in staffing and managing international operations;
    
    economic conditions overseas;
    
    political or social unrest; and
    
    disruptions or delays in shipments.
  We are subject to certain risks as a result of our indebtedness.
 Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  Capital Resources and Liquidity  Financing
Arrangements Item 1A.
 7 8 Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Capital Resources and Liquidity
 Financing Arrangements
 Our business depends on our senior management team and other key personnel.
   22




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##### Table of Contents



We rely significantly on information technology. Any inadequacy, interruption, integration failure
or security failure of that technology could harm our ability to effectively operate our business.
  Fluctuations in the valuation of our pension plans investments can have a negative effect on our
financial condition and results of operations.
  Businesses that we may acquire may fail to perform to expectations. In addition, we may be unable
to successfully integrate acquired businesses with our existing business .
   The restructuring activities that we engage in may not be successfully implemented and may have an
adverse effect on our results of operations or financial condition.
  We have restated certain financial statements in the past and in certain prior periods we have had
insufficient disclosure controls and procedures and internal control over financial reporting, the
recurrence of which could impair our ability to provide timely and reliable financial information
in the future and have a negative effect on our business and stock price.
   23




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##### Table of Contents



Item 1B.
    
    Unresolved Staff Comments.
  
 Item 2.
    
    Properties.
  Lejaby Item 1. Acquisitions, Dispositions and Discontinued
Operations  Dispositions and Discontinued Operations
   
 Item 3.
    
    Legal Proceedings.
 SEC Inquiry: Chaps
   24




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##### Table of Contents



OP Litigation
 Lejaby Claims Lejaby Lejaby
 Tyr Litigation
 Other:
 
 Item 4.
    
    Reserved.
  25




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##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
  High
    
    
    Low2008First Quarter
    
    $
    44.74
    
    
    $
    28.70Second Quarter
    
    $
    51.22
    
    
    $
    40.50Third Quarter
    
    $
    53.89
    
    
    $
    36.38Fourth Quarter
    
    $
    39.76
    
    
    $
    12.222009First Quarter
    
    $
    27.60
    
    
    $
    15.99Second Quarter
    
    $
    36.42
    
    
    $
    24.02Third Quarter
    
    $
    45.75
    
    
    $
    30.17Fourth Quarter
    
    $
    44.97
    
    
    $
    39.452010First Quarter (through February 22, 2010)
    
    $
    47.07
    
    
    $
    37.86
  Note 12 of
Notes to Consolidated Financial Statements Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  Capital Resources and Liquidity  Financing
Arrangements  Senior Notes
 Repurchases of Shares
     26




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##### Table of Contents



Total Number
    
    
    Number of Sharesof Shares
    
    
    that May Yet BeTotal Number
    
    
    Average
    
    
    Purchased as
    
    
    Repurchasedof Shares
    
    
    Price Paid
    
    
    Part of Publicly
    
    
    Under thePeriod
    
    Repurchased
    
    
    per Share
    
    
    Announced Plan
    
    
    Announced PlansOctober 4, 2009 - October 31, 2009
    
    
    429
    
    
    $
    42.17
    
    
    
    
    
    
    
    1,490,131November 1, 2009 - November 28, 2009
    
    
    596
    
    
    $
    42.18
    
    
    
    
    
    
    
    1,490,131November 29, 2009 - January 2, 2010
    
    
    625
    
    
    $
    43.19
    
    
    
    
    
    
    
    1,490,131
 
 Item 6.
    
    Selected Financial Data.
  Calvin Klein Calvin Klein Nautica,
Michael Kors, Private Label, Lejaby Anne Cole Cole of California Catalina, OP, JLO Lejaby Rose,
Axcelerate Speedo
 Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
  27




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##### Table of Contents



Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2006
    
    
    Fiscal 2005(Dollars in millions, except per share data)Statement of operations data:Net revenues
    
    $
    2,019.6
    
    
    $
    2,062.8
    
    
    $
    1,819.6
    
    
    $
    1,611.2
    
    
    $
    1,259.5Gross profit
    
    
    864.3
    
    
    
    920.8
    
    
    
    749.7
    
    
    
    629.2
    
    
    
    428.7Selling, general and administrative expenses
    
    
    638.9
    
    
    
    738.2
    
    
    
    601.7
    
    
    
    500.0
    
    
    
    335.5Amortization of intangible assets
    
    
    11.0
    
    
    
    9.4
    
    
    
    13.2
    
    
    
    12.3
    
    
    
    4.0Pension expense (income)
    
    
    20.9
    
    
    
    31.6
    
    
    
    (8.8
    )
    
    
    (2.4
    )
    
    
    1.2Operating income
    
    
    193.5
    
    
    
    141.4
    
    
    
    143.7
    
    
    
    119.2
    
    
    
    88.0Other (income) loss
    
    
    1.9
    
    
    
    1.9
    
    
    
    (7.1
    )
    
    
    (2.9
    )
    
    
    0.7Interest expense
    
    
    23.9
    
    
    
    29.5
    
    
    
    37.7
    
    
    
    38.5
    
    
    
    22.4Interest income
    
    
    (1.2
    )
    
    
    (3.1
    )
    
    
    (3.8
    )
    
    
    (2.9
    )
    
    
    (3.6
    )Income from continuing operations
    
    
    102.2
    
    
    
    51.0
    
    
    
    86.9
    
    
    
    66.5
    
    
    
    43.2Income (loss) from discontinued operations,
net of taxes
    
    
    (6.2
    )
    
    
    (3.8
    )
    
    
    (7.8
    )
    
    
    (15.7
    )
    
    
    6.3Net income
    
    
    96.0
    
    
    
    47.3
    
    
    
    79.1
    
    
    
    50.8
    
    
    
    49.5Net income applicable to Common Stock
    
    
    96.0
    
    
    
    47.3
    
    
    
    79.1
    
    
    
    50.8
    
    
    
    49.5Dividends on Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Per share data:Income from continuing operationsBasic
    
    $
    2.22
    
    
    $
    1.11
    
    
    $
    1.90
    
    
    $
    1.45
    
    
    $
    0.94Diluted
    
    
    2.19
    
    
    
    1.08
    
    
    
    1.84
    
    
    
    1.42
    
    
    
    0.92Income (loss) from discontinued operations,
net of taxesBasic
    
    
    (0.13
    )
    
    
    (0.08
    )
    
    
    (0.17
    )
    
    
    (0.34
    )
    
    
    0.14Diluted
    
    
    (0.14
    )
    
    
    (0.08
    )
    
    
    (0.17
    )
    
    
    (0.34
    )
    
    
    0.13Net incomeBasic
    
    
    2.09
    
    
    
    1.03
    
    
    
    1.73
    
    
    
    1.11
    
    
    
    1.08Diluted
    
    
    2.05
    
    
    
    1.00
    
    
    
    1.67
    
    
    
    1.08
    
    
    
    1.06Dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used in computing earnings per shareBasic
    
    
    45,433,874
    
    
    
    45,351,336
    
    
    
    44,908,028
    
    
    
    45,719,910
    
    
    
    45,872,308Diluted
    
    
    46,196,397
    
    
    
    46,595,038
    
    
    
    46,618,307
    
    
    
    46,882,399
    
    
    
    46,804,053
  28




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##### Table of Contents



Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2006
    
    
    Fiscal 2005(Dollars in millions, except per share data)Other data:Cash flows from
operating
activities
    
    $
    264.9
    
    
    $
    125.9
    
    
    $
    160.4
    
    
    $
    86.7
    
    
    $
    138.1Cash flows from
investing
activities
    
    
    (52.6
    )
    
    
    (44.3
    )
    
    
    (20.8
    )
    
    
    (187.1
    )
    
    
    (36.7
    )Cash flows from
financing
activities
    
    
    (40.9
    )
    
    
    (120.7
    )
    
    
    (121.7
    )
    
    
    99.7
    
    
    
    (0.1
    )Depreciation and
amortization
    
    
    46.8
    
    
    
    46.2
    
    
    
    65.3
    
    
    
    47.6
    
    
    
    30.7Capital expenditures
    
    
    42.8
    
    
    
    41.0
    
    
    
    41.8
    
    
    
    30.2
    
    
    
    36.7Ratio of earnings
to fixed charges
(a)
    
    
    3.4
    
    
    
    2.6
    
    
    
    2.6
    
    
    
    2.3
    
    
    
    2.7
 January 2,
    
    
    January 3,
    
    
    December 29,
    
    
    December 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in millions, except per share data)Balance sheet data:Working capital
    
    $
    560.2
    
    
    $
    474.6
    
    
    $
    588.0
    
    
    $
    453.9
    
    
    $
    494.8Total assets
    
    
    1,659.8
    
    
    
    1,496.1
    
    
    
    1,606.5
    
    
    
    1,681.0
    
    
    
    1,220.1Long-term debt (b)
    
    
    112.8
    
    
    
    163.8
    
    
    
    310.5
    
    
    
    332.5
    
    
    
    210.0Stockholders equity
    
    
    916.1
    
    
    
    787.7
    
    
    
    772.9
    
    
    
    682.9
    
    
    
    629.5
 (a)
    
    For the purposes of computing the ratio of earnings of fixed charges, earnings are defined
as income from continuing operations before income taxes, plus fixed charges, less
non-controlling interest in pre-tax income and less capitalized interest. Fixed charges are
defined as the sum of interest expense, including the amortization of deferred financing
costs, capitalized interest and that portion of rental expense which the Company believes to
be representative of an interest factor.(b)
    
    Does not include current maturities of Senior Notes or long-term debt. See Note 12 of Notes
to Consolidated Financial Statements.  29




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Statement Regarding Forward-Looking Disclosure Item 1A. Risk Factors.
 Managements Discussion and Analysis of Financial Condition and Results of
Operations Calvin Klein Warners Olga Body Nancy Ganz /Bodyslimmers
 Overview
 Calvin Klein Calvin Klein
 The Companys mission is to become the premier global, branded apparel company. To accomplish
its mission, the Company has identified the following key strategic objectives:
 
    
    Build and maintain powerful global brands. The Company
believes that one of its strengths is its portfolio of highly recognized brand
names. The Company strives to enhance its brand image through superior design,
product innovation, focused marketing and high quality product construction.
 
    
    Leverage the Companys international platform. The Companys
international design, sales and distribution network allows it to reach consumers
around the world. The Company works to effectively utilize its international
presence to enhance and expand the worldwide reach of its branded apparel
products. In Fiscal 2009 the Company derived over 54% of its net revenue from
its foreign business. The Company believes that there are opportunities for
significant continued growth in Europe, Asia and South America.
 
    
    Grow the Companys direct- to- consumer business. As noted above,
as of January 2, 2010, the Company had (either directly or through licensees)
1,724 direct-to-consumer outlets throughout the world. The Company expects to
continue to expand this aspect of its business, particularly in Europe and Asia.
 The Company notes the following significant highlights with respect to Fiscal 2009:
 
    
    Net revenue decreased $43.2 million, or 2.1%, to $2,019.6 million for Fiscal
2009, reflecting decreases of $9.4 million, $24.9 million, and $8.9 million in the
Sportswear Group, the Intimate Apparel Group and the Swimwear Group, respectively.
Net revenue includes a decrease of $85.0 million due to the adverse effect of
fluctuations in foreign currency exchange rates (see below). In addition, Fiscal
2008 benefitted from one additional week of operating activity as Fiscal 2009
contained fifty-two weeks of operations while Fiscal 2008 contained fifty-three
weeks of operations. Net revenues related to the extra week of operations during
Fiscal 2008 were approximately $23.0 million. Net revenues were favorably affected by
the Companys use of its diversified channels of distribution which helped it to
mitigate the effects of the challenging global economy.
 
    
    Operating income increased $52.1 million, or 36.8%, to $193.5 million for Fiscal
2009 from $141.4 million for Fiscal 2008. Operating income includes a decrease of
$40.5 million due to the adverse effect of fluctuations in foreign currency exchange
rates (see below). Operating income includes restructuring charges of $12.1 million
for Fiscal 2009. Operating income for Fiscal 2008 includes restructuring expenses of
$35.3 million, including a charge of $18.5 million (the Collection License Company
Charge) recorded in the Sportswear segment related to the transfer of the
Collection License Company to PVH. The increase in operating income, despite a
decline in net revenues, for Fiscal 2009 as compared to Fiscal 2008, was primarily
due to a reduction in selling, general and administrative costs of
$99.3 million.
  30




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##### Table of Contents




    
    Both net revenues and operating income for Fiscal 2009 were negatively affected
by fluctuations in foreign currencies. On average, for Fiscal 2009 compared to
Fiscal 2008, the U.S. dollar strengthened relative to the functional currencies of
countries where the Company conducts a majority of its operations overseas
(primarily the Euro, Korean Won, Canadian Dollar and Mexican Peso), as follows: the
U.S. dollar strengthened relative to the Euro by 5%, the Korean Won by 15%, the
Canadian Dollar by 7%, and the Mexican Peso by 19%, respectively. (see Part II Item
7A. Quantitative and Qualitative Disclosure About Market Risk  Foreign Exchange
Risk,below).
 
    
    Income from continuing operations for Fiscal 2009 was $2.19 per diluted share, a
102.8% increase compared to the $1.08 per diluted share for Fiscal 2008. Included
in income from continuing operations for Fiscal 2009 are restructuring charges of
$8.6 million (net of income tax benefits of $3.5 million), or $0.19 per diluted
share and pension expense of $12.7 million (net of income tax benefits of $8.2
million) or $0.27 per diluted share. Income from continuing operations for Fiscal
2008 included an estimated tax charge of approximately $14.6 million, or $0.31 per
diluted share, related to the repatriation, to the U.S., of the proceeds received in
connection with the sale of the Companys Lejabybusiness, net of adjustments for
working capital, as well as restructuring charges of $31.1 million (net of income
tax benefit of $4.2 million), or $0.67 per diluted share and pension expense of
$19.0 million (net of income tax benefits of $12.6 million) or $0.41 per diluted
share.
 
    
    During the third quarter of 2009, the Federation Internationale de Natation
(FINA), the international federation recognized by the International Olympic
Committee for administering swimming competitions, as well as other professional and
academic swimming organizations, banned the use of body-length swimsuits made of
fabrics that were not woven. The Companys SpeedoLZR Racer and other similar racing
swimsuits were among the swimsuits that were banned by FINA. In response to the FINA
ruling, the Company wrote off a total of $3.6 million of inventory of its LZR Racer
and other similar racing swimsuits during the third quarter of 2009. Income from
continuing operations included a charge, related to this inventory write off, of
$2.2 million (net of income tax benefits of $1.4 million), or $0.05 per diluted
share for Fiscal 2009. The Company has developed a new LZR Racer Elite swimsuit,
which meets competitive swimming requirements.
 
    
    During 2009, in order to align its cost structure to match economic conditions,
the Company continued its workforce reduction, which commenced in the fourth quarter
of Fiscal 2008. In addition, the Company reduced its workforce in connection with
the consolidation of its European operations. During Fiscal 2009, these reductions
resulted in the termination of 232 employees (in both the Companys domestic and
foreign operations) at a cost of approximately $8.3 million.
 
    
    At January 2, 2010, the Company had cash and cash equivalents of $320.8 million,
which exceeded its total debt of $210.7 million, by $110.1 million. Inventories at
January 2, 2010 were down $72.9 million, or 22%, from the balance at January 3,
2009, reflecting the Companys initiative to reduce inventories in light of the
downturn in the global economy.
    
    During Fiscal 2009, the Company shut down its Calvin KleinGolf business and
classified as available for sale its Calvin KleinCollection business, both of which
operated in Korea. As a result, those businesses have been classified as
discontinued operations for all periods presented. See Note 3 to Notes to
Consolidated Financial Statements).
 
    
    Pursuant to its strategy of increasing its presence in South America by
purchasing businesses, on June 10, 2009, the Company paid cash consideration of $2.5
million to acquire businesses relating to distribution and sale at wholesale and
retail of jeanswear and underwear products bearing the Calvin Kleintrademarks in
Chile and Peru, including the transfer and assignment to the Company of the right to
operate and conduct business at three retail locations in Chile and one retail
location in Peru.
 
    
    During the fourth quarter of 2009, the Company finalized agreements to acquire
the remaining 49% of the equity of its Brazilian subsidiary and acquired the assets
and assumed the leases of eight retail stores that sell Calvin Kleinproducts
(including jeanswear and underwear) in Brazil, effective October 1, 2009. Prior to
the consummation of the acquisition of the remaining 49% of the equity of the
Brazilian subsidiary, the subsidiary paid a dividend of 7 million Brazilian Real
(approximately $4 million), representing the distribution of the Brazilian partners
accumulated equity in the subsidiary through September 30, 2009. The Company made an
initial payment of 21 million Brazilian Real (approximately $12 million based on the
currency exchange rate on the date of acquisition) to acquire the equity of the
Brazilian subsidiary and the retail stores. The Company may be required to make
three future annual payments totaling up to 43 million Brazilian Real (approximately
$24 million) through March 31, 2012, which are contingent on the operating activity
of the subsidiary through December 31, 2011. Based on the operating income achieved
by the Brazilian subsidiary in the fourth quarter of 2009, the first payment of 6
million Brazilian Real (approximately $3.5 million) will be paid by March 31, 2010.
The consummation of the Brazilian acquisitions continues the Companys strategy of
expansion of its operations in South America. See Note 2 to Notes to Consolidated
Financial Statements.
  31




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##### Table of Contents



Item 1A. Risk Factors Statement Regarding Forward-Looking
Disclosure
 Non-GAAP Measures
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007(Dollars in thousands, except per share amounts)Operating income, as reported
    
    $
    193,535
    
    
    $
    141,445
    
    
    $
    143,690Restructuring charges and pension (a)
    
    
    32,999
    
    
    
    66,904
    
    
    
    23,522Other (b)
    
    
    1,095
    
    
    
    (11
    )
    
    
    (1,084
    )Operating income, as adjusted
    
    $
    227,629
    
    
    $
    208,338
    
    
    $
    166,128Income from continuing operations, as reported
    
    $
    102,225
    
    
    $
    51,046
    
    
    $
    86,909Restructuring charges and pension (a)
    
    
    21,144
    
    
    
    50,046
    
    
    
    23,520Other (b)
    
    
    657
    
    
    
    3,191
    
    
    
    (1,084
    )Taxation (c)
    
    
    7,717
    
    
    
    20,403
    
    
    
    (4,778
    )Income from continuing operations, as adjusted
    
    $
    131,743
    
    
    $
    124,686
    
    
    $
    104,567Diluted earnings per share from continuing operations, as reported
    
    $
    2.19
    
    
    $
    1.08
    
    
    $
    1.84Restructuring charges and pension (a)
    
    
    0.46
    
    
    
    1.05
    
    
    
    0.51Other (b)
    
    
    0.01
    
    
    
    0.07
    
    
    
    (0.01
    )Taxation (c)
    
    
    0.16
    
    
    
    0.44
    
    
    
    (0.10
    )Diluted earnings per share from continuing operations, as adjusted
    
    $
    2.82
    
    
    $
    2.64
    
    
    $
    2.24
 (a)
    
    This adjustment seeks to present the Companys consolidated condensed statement of operations
on a continuing basis without the effects of restructuring charges of $12,126, $35,260 and
$32,360 for Fiscal 2009, Fiscal 2008 and Fiscal 2007, respectively, and pension expense of
$20,873 and $31,644 for Fiscal 2009 and Fiscal 2008, respectively, and pension income of
$8,838 for Fiscal 2007.(b)
    
    For Fiscal 2009, this adjustment seeks to present the Companys consolidated condensed
statement of operations on a continuing basis without the effect of an additional amortization
charge of $1,095 recorded during Fiscal 2009 which amount related to the correction of amounts
recorded in prior periods in connection with the COD income error described in Note 6 of Notes
to Consolidated Financial Statements.For Fiscal 2008, primarily excludes a charge of $5,329
related to the refinancing/repurchase of its debt during Fiscal 2008. For Fiscal 2007, relates
to a charge of $1,084 for depreciation expense recorded in Fiscal 2008 which corrected
depreciation expense for Fiscal 2007.(c)
    
    Adjustment to reflect the Companys income from continuing operations at a tax rate of 33.9%,
32% and 24.9%, which reflects the Companys tax rate for Fiscal 2009, Fiscal 2008 and Fiscal
2007, respectively, excluding the effect of items (a) and (b), above, and for Fiscal 2009, a
non-recurring charge for amortization expense (which amount related to the correction of
amounts recorded in prior periods) and certain other tax related items including, among other
items, the charge related to the correction of the COD income error described in (b) above,
and for Fiscal 2008, a tax charge of approximately $14,600 related to the repatriation to
the United States of the net proceeds received in connection with the sale of the Lejaby
business.  32




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##### Table of Contents



Discussion of Critical Accounting Policies
   Use of Estimates
 Revenue Recognition
 Cost of Goods Sold
  33




---



##### Table of Contents



Accounts Receivable
 Inventories
 Long-Lived Assets
      Goodwill and Other Intangible Assets
  34




---



##### Table of Contents



Warners® Olga ® Body Nancy
Ganz® Bodyslimmers ® Calvin Klein Calvin Klein Chaps ®
   Note 10 of Notes to Consolidated Financial Statements.
 Income Taxes
  35




---



##### Table of Contents



Pension Plans
     Note 7 of Notes to Consolidated Financial Statements
  36




---



##### Table of Contents



Stock-Based Compensation T
 
    
    In determining the stock price volatility assumption used, the Company considers
the historical volatility of the stock prices of selected companies in the apparel
industry, the nature of those companies, the Companys own historical stock price
volatility since its emergence from bankruptcy and other factors. Historical
volatilities are based upon daily quoted market prices of the Companys common stock
on the New York Stock Exchange and, prior to May 15, 2008, on the NASDAQ Stock
Market LLC, over a period equal to the expected term of the related equity
instruments. The Company relies only on historical volatility since it provides the
most reliable indication of future volatility. Future volatility is expected to be
consistent with historical; historical volatility is calculated using a simple
average calculation method; historical data is available for the length of the
options expected term and a sufficient number of price observations are used
consistently. Since the Companys stock options are not traded on a public market,
the Company does not use implied volatility. A higher volatility input to the
Black-Scholes-Merton model increases the resulting compensation expense.
 
    
    During Fiscal 2009, the Company had accumulated sufficient historical data
regarding stock option exercises and forfeitures to be able to rely on that data for
the calculation of expected option life. Accordingly, for options granted during
Fiscal 2009, the Company revised its method of calculating expected option life from
the simplified method as described in the SECs Staff Accounting Bulletin No. 110
(SAB 110) (which yielded an expected term of 6 years) to the use of historical
data (which yielded an expected life of 3.72 years for Fiscal 2009). For the stock
options granted in 2009, the Company estimates that the change from the simplified
to the current method for calculating the expected option life will result in lower
stock-based compensation expense of approximately $0.7 million over the three year
vesting period. Historical data will be used for stock options granted in all future
periods. The Company based its Fiscal 2008 and Fiscal 2007 estimates of the expected
life of a stock option of six years upon the average of the sum of the vesting
period of 36-42 months and the option term of ten years for issued and outstanding
options in accordance with the simplified method as detailed in SAB 110. A shorter
expected term would result in a lower compensation expense.
 
    
    The Companys risk-free rate of return assumption for options granted in Fiscal
2009, Fiscal 2008 and Fiscal 2007 was equal to the quoted yield for U.S. treasury
bonds as of the date of grant.
  Advertising Costs
 Acquisitions
 Note 2 of Notes to Consolidated Financial Statements
 Dispositions and Discontinued Operations
 Note 3 of Notes to Consolidated Financial Statements
  37




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##### Table of Contents



Results of Operations
 Statement of Operations (Selected Data)
  % of Net
    
    
    
    
    
    
    % of Net
    
    
    
    
    
    
    % of NetFiscal 2009
    
    
    Revenues
    
    
    Fiscal 2008
    
    
    Revenues
    
    
    Fiscal 2007
    
    
    Revenues(in thousands of dollars)Net revenues
    
    $
    2,019,625
    
    
    
    100.0
    %
    
    $
    2,062,849
    
    
    
    100.0
    %
    
    $
    1,819,579
    
    
    
    100.0
    %Cost of goods sold
    
    
    1,155,278
    
    
    
    57.2
    %
    
    
    1,142,076
    
    
    
    55.4
    %
    
    
    1,069,904
    
    
    
    58.8
    %Gross profit
    
    
    864,347
    
    
    
    42.8
    %
    
    
    920,773
    
    
    
    44.6
    %
    
    
    749,675
    
    
    
    41.2
    %Selling, general and administrative expenses
    
    
    638,907
    
    
    
    31.6
    %
    
    
    738,238
    
    
    
    35.8
    %
    
    
    601,656
    
    
    
    33.1
    %Amortization of intangible assets
    
    
    11,032
    
    
    
    0.5
    %
    
    
    9,446
    
    
    
    0.5
    %
    
    
    13,167
    
    
    
    0.7
    %Pension expense (income)
    
    
    20,873
    
    
    
    1.0
    %
    
    
    31,644
    
    
    
    1.5
    %
    
    
    (8,838
    )
    
    
    -0.5
    %Operating income
    
    
    193,535
    
    
    
    9.6
    %
    
    
    141,445
    
    
    
    6.9
    %
    
    
    143,690
    
    
    
    7.9
    %Other (income) loss
    
    
    1,889
    
    
    
    
    
    
    
    1,926
    
    
    
    
    
    
    
    (7,063
    )Interest expense
    
    
    23,897
    
    
    
    
    
    
    
    29,519
    
    
    
    
    
    
    
    37,718Interest income
    
    
    (1,248
    )
    
    
    
    
    
    
    (3,120
    )
    
    
    
    
    
    
    (3,766
    )Income from continuing operations before
provision for income taxes and minority interest
    
    
    168,997
    
    
    
    
    
    
    
    113,120
    
    
    
    
    
    
    
    116,801Provision for income taxes
    
    
    64,272
    
    
    
    
    
    
    
    60,727
    
    
    
    
    
    
    
    29,892Income from continuing operations before noncontrolling interest
    
    
    104,725
    
    
    
    
    
    
    
    52,393
    
    
    
    
    
    
    
    86,909Loss from discontinued operations, net of taxes
    
    
    (6,227
    )
    
    
    
    
    
    
    (3,792
    )
    
    
    
    
    
    
    (7,802
    )Net income
    
    
    98,498
    
    
    
    
    
    
    
    48,601
    
    
    
    
    
    
    
    79,107Less: Net income attributable to the noncontrolling interest
    
    
    (2,500
    )
    
    
    
    
    
    
    (1,347
    )
    
    
    
    
    
    
    Net income attributable to Warnaco Group, Inc.
    
    $
    95,998
    
    
    
    
    
    
    $
    47,254
    
    
    
    
    
    
    $
    79,107
 Comparison of Fiscal 2009 to Fiscal 2008
 Net Revenues
  IncreaseFiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % Change
    
    
    % of total(in thousands of dollars)Sportswear Group
    
    $
    1,091,165
    
    
    $
    1,100,597
    
    
    $
    (9,432
    )
    
    
    -0.9
    %
    
    
    54.0
    %Intimate Apparel Group
    
    
    677,315
    
    
    
    702,252
    
    
    
    (24,937
    )
    
    
    -3.6
    %
    
    
    33.5
    %Swimwear Group
    
    
    251,145
    
    
    
    260,000
    
    
    
    (8,855
    )
    
    
    -3.4
    %
    
    
    12.4
    %Net revenues (a)
    
    $
    2,019,625
    
    
    $
    2,062,849
    
    
    $
    (43,224
    )
    
    
    -2.1
    %Total Calvin Kleinproducts
    
    $
    1,484,224
    
    
    $
    1,499,915
    
    
    $
    (15,691
    )
    
    
    -1.0
    %
    
    
    73.5
    %
  
    
    a decrease in domestic net revenues of $25.5 million and a decline in
international net revenues of $17.7 million; the decline in international net
revenues includes an $85.0 million decrease due to the unfavorable effect of
fluctuations
in foreign currency exchange rates in countries where the Company conducts certain of
its operations (primarily the Euro, Korean Won, Canadian Dollar and Mexican Peso);
 
    
    the negative effect of the downturn in the worldwide economy, tightening of
credit and erosion in consumer spending primarily from the fourth quarter of 2008,
which contributed to the decline domestically and limited the
international increase in net revenues expressed in local currency in Fiscal
2009, and;
 
    
    a benefit of $23.0 million for Fiscal 2008 from an extra week of operations
relative to Fiscal 2009.
  38




---



##### Table of Contents



Fiscal 2009
    
    
    Fiscal 2008United States   wholesaleDepartment stores and independent retailers
    
    
    10
    %
    
    
    12
    %Specialty stores
    
    
    8
    %
    
    
    8
    %Chain stores
    
    
    8
    %
    
    
    8
    %Mass merchandisers
    
    
    1
    %
    
    
    1
    %Membership clubs
    
    
    7
    %
    
    
    7
    %Off price and other
    
    
    10
    %
    
    
    8
    %Total United States  wholesale
    
    
    44
    %
    
    
    44
    %International   wholesale
    
    
    33
    %
    
    
    35
    %Retail / other
    
    
    23
    %
    
    
    21
    %Net revenues  consolidated
    
    
    100
    %
    
    
    100
    %
 Net RevenuesIncrease /Fiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % ChangeIn thousands of dollarsUnited States
    
    $
    916,691
    
    
    $
    942,205
    
    
    $
    (25,514
    )
    
    
    -2.7
    %Europe
    
    
    551,595
    
    
    
    576,320
    
    
    
    (24,725
    )
    
    
    -4.3
    %Asia
    
    
    322,890
    
    
    
    319,052
    
    
    
    3,838
    
    
    
    1.2
    %Canada
    
    
    109,300
    
    
    
    115,448
    
    
    
    (6,148
    )
    
    
    -5.3
    %Mexico, Central and South America
    
    
    119,149
    
    
    
    109,824
    
    
    
    9,325
    
    
    
    8.5
    %$
    2,019,625
    
    
    $
    2,062,849
    
    
    $
    (43,224
    )
    
    
    -2.1
    %
 Net RevenuesIncrease /Fiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % ChangeIn thousands of dollarsWholesale
    
    $
    1,564,457
    
    
    $
    1,638,560
    
    
    $
    (74,103
    )
    
    
    -4.5
    %Retail
    
    
    455,168
    
    
    
    424,289
    
    
    
    30,879
    
    
    
    7.3
    %Total
    
    $
    2,019,625
    
    
    $
    2,062,849
    
    
    $
    (43,224
    )
    
    
    -2.1
    %
  39




---



##### Table of Contents



Sportswear Group
  IncreaseFiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)Calvin KleinJeans
    
    $
    646,862
    
    
    $
    663,732
    
    
    $
    (16,870
    )
    
    
    -2.5
    %Chaps
    
    
    168,083
    
    
    
    177,288
    
    
    
    (9,205
    )
    
    
    -5.2
    %Sportswear wholesale
    
    
    814,945
    
    
    
    841,020
    
    
    
    (26,075
    )
    
    
    -3.1
    %Sportswear retail
    
    
    276,220
    
    
    
    259,577
    
    
    
    16,643
    
    
    
    6.4
    %Sportswear Group (a), (b)
    
    $
    1,091,165
    
    
    $
    1,100,597
    
    
    $
    (9,432
    )
    
    
    -0.9
    %
 
 (a)
    
    Includes net revenues of $93.2 million and $86.5 million related to the Calvin Klein
accessories business in Europe and Asia for Fiscal 2009 and Fiscal 2008, respectively.(b)
    
    Includes approximately $47.0 million and $49.8 million for Fiscal 2009 and Fiscal 2008,
respectively, related to certain sales of Calvin Kleinunderwear in regions managed by the
Sportswear Group.   Calvin Klein
 
    
    a decline in net revenues to department stores and membership clubs in
the U.S., Mexico, Canada and Europe, partially offset by:
 
    
    an increase in sales in the U.S. and Europe to the off-price channel;
 
    
    an increase in net revenues in Asia due to increased sales in Korea,
primarily due to the sale of off-season merchandise and promotional events and
discounts and an increase in the number of distributors in China.
 Chaps
 
    
    a decline in the U.S., Mexico and Canada in the department store and
membership club channels, partially offset by:
 
    
    an increase in sales in the U.S. to the off-price and chain store
channels.
  
    
    increases in Europe, primarily related to volume increases in comparable
outlet stores and the effect of new outlet, full price and concession store
openings;
 
    
    an increase in Brazil, due to the addition of sixteen new stores,
including the eight stores acquired in the fourth quarter of Fiscal 2009;
 
    
    increases in comparable store sales and new store openings in China,
Korea and Australia.
 Intimate Apparel Group
  IncreaseFiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)Calvin KleinUnderwear
    
    $
    371,783
    
    
    $
    399,853
    
    
    $
    (28,070
    )
    
    
    -7.0
    %Core Intimates
    
    
    143,006
    
    
    
    156,074
    
    
    
    (13,068
    )
    
    
    -8.4
    %Intimate Apparel wholesale
    
    
    514,789
    
    
    
    555,927
    
    
    
    (41,138
    )
    
    
    -7.4
    %Calvin KleinUnderwear retail
    
    
    162,526
    
    
    
    146,325
    
    
    
    16,201
    
    
    
    11.1
    %Intimate Apparel Group
    
    $
    677,315
    
    
    $
    702,252
    
    
    $
    (24,937
    )
    
    
    -3.6
    %
  40




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##### Table of Contents



Calvin Klein
  Calvin Klein
 
    
    decreases in net revenues in all geographies in the department store
channel;
 
    
    a reduction in the off-price channel in the U.S, which the Company
attributes to lower excess and obsolete inventory in line with its global
initiative to reduce inventory levels, partially offset by:
    
    an increase in net revenues in the U.S., Canada and Mexico to membership clubs;
    
    an increase in net revenues in Asia related to the expansion of the Companys distribution network in China.
  
    
    decreases in net revenues in all geographies in the department store channel, partially offset by:
    
    an increase in sales in the U.S. in the off-price channel;
 
    
    a decline in net revenues of Warnersproducts, primarily related to the
introduction of fewer new styles in 2009 than in 2008 in the chain store channel,
partially offset by:
 
    
    an increase in sales of the Olgaline, primarily related to strong sales
of new styles.
 Calvin Klein
 
    
    the opening of new retail stores and increased net revenues in existing
stores in Canada, Hong Kong, China, Europe, Mexico, Central and South America,
partially offset by:
 
    
    a decrease in the U.S., which reflects a decline in e-commerce sales on
the Companys website and the Soho store.
 Swimwear Group
  IncreaseFiscal 2009
    
    
    Fiscal 2008
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)Speedo
    
    $
    215,135
    
    
    $
    218,043
    
    
    $
    (2,908
    )
    
    
    -1.3
    %Calvin KleinSwim
    
    
    19,588
    
    
    
    23,570
    
    
    
    (3,982
    )
    
    
    -16.9
    %Swimwear wholesale
    
    
    234,723
    
    
    
    241,613
    
    
    
    (6,890
    )
    
    
    -2.9
    %Swimwear retail (a)
    
    
    16,422
    
    
    
    18,387
    
    
    
    (1,965
    )
    
    
    -10.7
    %Swimwear Group
    
    $
    251,145
    
    
    $
    260,000
    
    
    $
    (8,855
    )
    
    
    -3.4
    %
 (a)
    
    Includes $7.3 million and $6.9 million for Fiscal 2009 and Fiscal 2008, respectively,
related to Calvin Kleinretail swimwear.   41




---



##### Table of Contents



Speedo:
 
    
    a decline in sales in the U.S., reflecting decreased net revenues to
specialty and sporting goods stores and discounters, partially offset by increased
sales volume to membership clubs and team dealers;
    
    a decrease in net revenues in specialty stores in Mexico.
 Calvin Klein:
 
    
    a decline in the U.S. and in Europe, due primarily to cancellations of orders related to late deliveries in 2009.
  
    
    volume decreases and price decreases at the online Speedostore in the
U.S. due to promotional sales, partially offset by:
 
    
    an increase in sales volume of Calvin Kleinswimwear at outlet stores in
Europe.
 Gross Profit
  % of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    SegmentNet
    
    
    
    
    
    
    NetFiscal 2009
    
    
    Revenues
    
    
    Fiscal 2008
    
    
    Revenues(in thousands of dollars)Sportswear Group (a)
    
    $
    460,671
    
    
    
    42.2
    %
    
    $
    478,739
    
    
    
    43.5
    %Intimate Apparel Group
    
    
    322,670
    
    
    
    47.6
    %
    
    
    347,773
    
    
    
    49.5
    %Swimwear Group (b)
    
    
    81,006
    
    
    
    32.3
    %
    
    
    94,261
    
    
    
    36.3
    %Total gross profit (c)
    
    $
    864,347
    
    
    
    42.8
    %
    
    $
    920,773
    
    
    
    44.6
    %
 (a)
    
    Sportswear Group gross profit includes approximately $28.1 million and $34.9 million
for Fiscal 2009 and Fiscal 2008, respectively, related to certain sales of Calvin Klein
underwear in regions managed by the Sportswear Group.(b)
    
    Reflects a charge of $3.6 million during Fiscal 2009 related to the write down of
inventory associated with the Companys LZR Racer and other similar racing swimsuits.
The Company recorded the write down as a result of FINAs ruling during Fiscal 2009
which banned the use of these types of suits in competitive swim events.(c)
    
    Includes $0.3 million, $0.8 million and $0.6 million of restructuring expenses
related to the Sportswear, Intimate Apparel and Swimwear groups, respectively, for
Fiscal 2009 and $0.3 million and $1.5 million related to the Sportswear and Swimwear
groups, respectively, for Fiscal 2008.    42




---



##### Table of Contents



Calvin
Klein Calvin Klein
 Speedo Calvin Klein SpeedoUSA
 Selling, General and Administrative Expenses
 Note 4 of Notes to Consolidated Financial Statements
 Amortization of Intangible Assets
 Calvin Klein Calvin Klein
 Pension Income / Expense
 Note 7 of Notes to the Consolidated Condensed Financial
Statements
  43




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##### Table of Contents



Operating Income
  Fiscal 
2009 (a)
    
    
    Fiscal 
2008 (a)(in thousands of dollars)Sportswear Group
    
    $
    124,950
    
    
    $
    89,782Intimate Apparel Group
    
    
    117,070
    
    
    
    126,132Swimwear Group (b)
    
    
    15,558
    
    
    
    11,478Unallocated corporate expenses (c)
    
    
    (64,043
    )
    
    
    (85,947
    )Operating income
    
    $
    193,535
    
    
    $
    141,445Operating income as a percentage of net revenue
    
    
    9.6
    %
    
    
    6.9
    %
 
 (a)
    
    Includes approximately $12.1 million and $35.3 million for Fiscal 2009 and Fiscal 2008,
respectively, related to restructuring expenses. See Note 4 of Notes to Consolidated Financial
Statements.(b)
    
    Reflects a charge of $3.6 million during Fiscal 2009 related to the write down of
inventory associated with the Companys LZR Racer and other similar racing swimsuits. The
Company recorded the write down as a result of FINAs ruling during Fiscal 2009 which banned
the use of these types of suits in competitive swim events.(c)
    
    Includes $20.4 million and $31.5 million of pension expense, $1.5 million, and $2.2
million of restructuring expenses and $2.6 million and $6.1 million of foreign currency
losses (gains) for Fiscal 2009 and Fiscal 2008, respectively. Fiscal
    
    
    Fiscal
    
    
    Increase /2009
    
    
    2008
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)By Region:Domestic
    
    $
    116,913
    
    
    $
    92,190
    
    
    $
    24,723
    
    
    
    26.8
    %International
    
    
    140,665
    
    
    
    135,202
    
    
    
    5,463
    
    
    
    4.0
    %Unallocated corporate expenses
    
    
    (64,043
    )
    
    
    (85,947
    )
    
    
    21,904
    
    
    
    -25.5
    %Total
    
    $
    193,535
    
    
    $
    141,445
    
    
    $
    52,090
    
    
    
    36.8
    %By Channnel:Wholesale
    
    $
    207,965
    
    
    $
    181,519
    
    
    $
    26,446
    
    
    
    14.6
    %Retail
    
    
    49,613
    
    
    
    45,873
    
    
    
    3,740
    
    
    
    8.2
    %Unallocated corporate expenses
    
    
    (64,043
    )
    
    
    (85,947
    )
    
    
    21,904
    
    
    
    -25.5
    %Total
    
    $
    193,535
    
    
    $
    141,445
    
    
    $
    52,090
    
    
    
    36.8
    %TotalCalvin Kleinproducts
    
    $
    208,735
    
    
    $
    186,773
    
    
    $
    21,962
    
    
    
    11.8
    %
   44




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##### Table of Contents



Sportswear Group
  % of
    
    
    
    
    
    
    % ofFiscal
    
    
    Brand Net
    
    
    Fiscal
    
    
    Brand Net2009 (c)
    
    
    Revenues
    
    
    2008 (c)
    
    
    Revenues(in thousands of dollars)Calvin KleinJeans
    
    $
    88,893
    
    
    
    13.7
    %
    
    $
    62,020
    
    
    
    9.3
    %Chaps
    
    
    19,180
    
    
    
    11.4
    %
    
    
    17,426
    
    
    
    9.8
    %Sportswear wholesale
    
    
    108,073
    
    
    
    13.3
    %
    
    
    79,446
    
    
    
    9.4
    %Sportswear retail
    
    
    16,877
    
    
    
    6.1
    %
    
    
    10,336
    
    
    
    4.0
    %Sportswear Group (a) (b)
    
    $
    124,950
    
    
    
    11.5
    %
    
    $
    89,782
    
    
    
    8.2
    %
 
 (a)
    
    Includes restructuring charges of $3.2 million for Fiscal 2009, primarily related to the
reduction in workforce and consolidation of the Companys European operations and $27.8
million for Fiscal 2008, primarily related to the Collection License Company Charge of $18.5
million related to the transfer of the Collection License Company to PVH as well as contract
termination and employee termination costs.(b)
    
    Includes approximately $1.8 million and $1.5 million for Fiscal 2009 and Fiscal 2008,
respectively, related to certain sales of Calvin Kleinunderwear in regions managed by the
Sportswear Group.(c)
    
    Includes an allocation of shared services expenses by brand as detailed below: Fiscal 2009
    
    
    Fiscal 2008Calvin KleinJeans
    
    $
    12,541
    
    
    $
    12,990Chaps
    
    
    7,248
    
    
    
    8,465Sportswear wholesale
    
    
    19,789
    
    
    
    21,455Sportswear retail
    
    
    440
    
    
    
    369Sportswear Group
    
    $
    20,229
    
    
    $
    21,824
 Calvin Klein Chaps Calvin Klein Note 4 of Notes to Consolidated Financial Statements
 Intimate Apparel Group
  % of
    
    
    
    
    
    
    % ofFiscal
    
    
    Brand Net
    
    
    Fiscal
    
    
    Brand Net2009 (b)
    
    
    Revenues
    
    
    2008 (b)
    
    
    Revenues(in thousands of dollars)Calvin KleinUnderwear
    
    $
    75,245
    
    
    
    20.2
    %
    
    $
    81,110
    
    
    
    20.3
    %Core Intimates
    
    
    11,625
    
    
    
    8.1
    %
    
    
    14,142
    
    
    
    9.1
    %Intimate Apparel wholesale
    
    
    86,870
    
    
    
    16.9
    %
    
    
    95,252
    
    
    
    17.1
    %Calvin KleinUnderwear retail
    
    
    30,200
    
    
    
    18.6
    %
    
    
    30,880
    
    
    
    21.1
    %Intimate Apparel Group (a)
    
    $
    117,070
    
    
    
    17.3
    %
    
    $
    126,132
    
    
    
    18.0
    %
 
 (a)
    
    Includes restructuring charges of $4.3 million for Fiscal 2009, primarily related
to the reduction in workforce and $1.3 million for Fiscal 2008, primarily related to contract
termination and employee termination costs.  45




---



##### Table of Contents



(b)
    
    Includes an allocation of shared services expenses by brand as detailed below: Fiscal 2009
    
    
    Fiscal 2008Calvin KleinUnderwear
    
    $
    9,236
    
    
    $
    10,628Core Intimates
    
    
    5,519
    
    
    
    7,100Intimate Apparel wholesale
    
    
    14,755
    
    
    
    17,728Calvin KleinUnderwear retail
    
    
    347
    
    
    
    Intimate Apparel Group
    
    $
    15,102
    
    
    $
    17,728
 Calvin Klein Calvin Klein
 Swimwear Group
  % of
    
    
    
    
    
    
    % ofFiscal
    
    
    Brand Net
    
    
    Fiscal
    
    
    Brand Net2009 (d)
    
    
    Revenues
    
    
    2008 (d)
    
    
    Revenues(in thousands of dollars)Speedo
    
    $
    16,950
    
    
    
    7.9
    %
    
    $
    5,625
    
    
    
    2.6
    %Calvin KleinSwim
    
    
    (3,928
    )
    
    
    -20.1
    %
    
    
    1,196
    
    
    
    5.1
    %Swimwear wholesale
    
    
    13,022
    
    
    
    5.5
    %
    
    
    6,821
    
    
    
    2.8
    %Swimwear retail (a)
    
    
    2,536
    
    
    
    15.4
    %
    
    
    4,657
    
    
    
    25.3
    %Swimwear Group (b) (c)
    
    $
    15,558
    
    
    
    6.2
    %
    
    $
    11,478
    
    
    
    4.4
    %
 
 (a)
    
    Includes $1.4 million and $1.2 million for Fiscal 2009 and Fiscal 2008, respectively, related
to Calvin Kleinretail swimwear.(b)
    
    Reflects a charge of $3.6 million during Fiscal 2009 related to the write down of
inventory associated with the Companys LZR Racer and other similar racing swimsuits. The
Company recorded the write down as a result of FINAs ruling during Fiscal 2009 which banned
the use of these types of suits in competitive swim events.(c)
    
    Includes restructuring charges of $3.0 million for Fiscal 2009, primarily related to the
reduction in workforce and $3.9 million for Fiscal 2008, primarily related to contract
termination and employee termination costs.(d)
    
    Includes an allocation of shared services expenses by brand in the following table: Fiscal 2009
    
    
    Fiscal 2008Speedo
    
    $
    9,682
    
    
    $
    14,842Calvin KleinSwim
    
    
    230
    
    
    
    455Swimwear wholesale
    
    
    9,912
    
    
    
    15,297Swimwear retail
    
    
    600
    
    
    
    Swimwear Group
    
    $
    10,512
    
    
    $
    15,297
 Speedo Calvin Klein Note 4 of Notes to Consolidated Financial Statements
  46




---



##### Table of Contents



Other (Income) Loss
 Note 17 to Notes to
Consolidated Financial Statements Capital
Resources and Liquidity  Financing Arrangements
 Interest Expense
  Interest Income
  Income Taxes
 Lejaby Note 3 to the Consolidated Financial Statements Note 6 of Notes to Consolidated Financial Statements
 Discontinued Operations
 Note 3 of Notes to Consolidated Financial Statements
 Comparison of Fiscal 2008 to Fiscal 2007
 Net Revenues
  IncreaseFiscal 2008
    
    
    Fiscal 2007
    
    
    (Decrease)
    
    

% Change(in thousands of dollars)Sportswear Group
    
    $
    1,100,597
    
    
    $
    939,147
    
    
    $
    161,450
    
    
    
    17.2
    %Intimate Apparel Group
    
    
    702,252
    
    
    
    627,014
    
    
    
    75,238
    
    
    
    12.0
    %Swimwear Group
    
    
    260,000
    
    
    
    253,418
    
    
    
    6,582
    
    
    
    2.6
    %Net revenues (a)
    
    $
    2,062,849
    
    
    $
    1,819,579
    
    
    $
    243,270
    
    
    
    13.4
    %
 
 (a)
    
    Includes $1.50 billion and $1.24 billion related to the Companys total Calvin Klein
businesses for Fiscal 2008 and Fiscal 2007, respectively (an increase of approximately
21%).  47




---



##### Table of Contents



Calvin Klein Calvin Klein Calvin Klein
  Fiscal 2008
    
    

Fiscal 2007United States   wholesaleDepartment stores and independent retailers
    
    
    12
    %
    
    
    15
    %Specialty stores
    
    
    8
    %
    
    
    9
    %Chain stores
    
    
    8
    %
    
    
    8
    %Mass merchandisers
    
    
    1
    %
    
    
    2
    %Membership clubs
    
    
    7
    %
    
    
    7
    %Off price and other
    
    
    8
    %
    
    
    10
    %Total United States  wholesale
    
    
    44
    %
    
    
    51
    %International   wholesale
    
    
    35
    %
    
    
    31
    %Retail / other
    
    
    21
    %
    
    
    18
    %Net revenues  consolidated
    
    
    100
    %
    
    
    100
    %
 Sportswear Group
  IncreaseFiscal 2008
    
    
    Fiscal 2007
    
    
    (Decrease)
    
    

%
Change(in thousands of dollars)Calvin KleinJeans
    
    $
    663,732
    
    
    $
    544,505
    
    
    $
    119,227
    
    
    
    21.9
    %Chaps
    
    
    177,288
    
    
    
    190,741
    
    
    
    (13,453
    )
    
    
    -7.1
    %Mass sportswear licensing (a )
    
    
    
    
    
    
    233
    
    
    
    (233
    )
    
    
    -100.0
    %Sportswear wholesale
    
    
    841,020
    
    
    
    735,479
    
    
    
    105,541
    
    
    
    14.3
    %Sportswear retail
    
    
    259,577
    
    
    
    203,668
    
    
    
    55,909
    
    
    
    27.5
    %Sportswear Group (b), (c)
    
    $
    1,100,597
    
    
    $
    939,147
    
    
    $
    161,450
    
    
    
    17.2
    %
 
 (a)
    
    Relates to design services fees earned in connection with the White Stagwomens sportswear
line which business ceased in January 2007.(b)
    
    Includes net revenues of $86.5 million and $53.6 million related to the Calvin Klein
accessories business in Europe and Asia for Fiscal 2008 and Fiscal 2007, respectively.(c)
    
    Includes approximately $49.8 million and $42.3 million for Fiscal 2008 and Fiscal 2007,
respectively, related to certain sales of Calvin Kleinunderwear in regions managed by the
Sportswear Group.  48




---



##### Table of Contents



Calvin Klein
 Chaps Chaps Chaps
  Intimate Apparel Group
  IncreaseFiscal 2008
    
    
    Fiscal 2007
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)Calvin KleinUnderwear
    
    $
    399,853
    
    
    $
    358,359
    
    
    $
    41,494
    
    
    
    11.6
    %Core Intimates
    
    
    156,074
    
    
    
    154,180
    
    
    
    1,894
    
    
    
    1.2
    %Intimate Apparel wholesale
    
    
    555,927
    
    
    
    512,539
    
    
    
    43,388
    
    
    
    8.5
    %Calvin KleinUnderwear retail
    
    
    146,325
    
    
    
    114,475
    
    
    
    31,850
    
    
    
    27.8
    %Intimate Apparel Group
    
    $
    702,252
    
    
    $
    627,014
    
    
    $
    75,238
    
    
    
    12.0
    %
 Calvin Klein Calvin Klein Calvin Klein
 Warners Olga Warners Warners Olga
  49




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##### Table of Contents



Calvin Klein
 Swimwear Group
  IncreaseFiscal 2008
    
    
    Fiscal 2007
    
    
    (Decrease)
    
    
    % Change(in thousands of dollars)Speedo
    
    $
    218,043
    
    
    $
    219,372
    
    
    $
    (1,329
    )
    
    
    -0.6
    %Calvin KleinSwim
    
    
    23,570
    
    
    
    18,363
    
    
    
    5,207
    
    
    
    28.4
    %Swimwear wholesale
    
    
    241,613
    
    
    
    237,735
    
    
    
    3,878
    
    
    
    1.6
    %Swimwear retail (a)
    
    
    18,387
    
    
    
    15,683
    
    
    
    2,704
    
    
    
    17.2
    %Swimwear Group
    
    $
    260,000
    
    
    $
    253,418
    
    
    $
    6,582
    
    
    
    2.6
    %
 (a)
    
    Includes $6.9 million and $5.0 million for Fiscal 2008 and Fiscal 2007, respectively,
related to Calvin Kleinretail swimwear. Speedo
 Calvin Klein Calvin Klein
 Calvin Klein Speedo
 Gross Profit
  % of
    
    
    
    
    
    
    % ofSegment
    
    
    
    
    
    
    SegmentNet
    
    
    
    
    
    
    NetFiscal 2008
    
    
    Revenues
    
    
    Fiscal 2007
    
    
    Revenues(in thousands of dollars)Sportswear Group (a)
    
    $
    478,739
    
    
    
    43.5
    %
    
    $
    397,075
    
    
    
    42.3
    %Intimate Apparel Group
    
    
    347,773
    
    
    
    49.5
    %
    
    
    286,923
    
    
    
    45.8
    %Swimwear Group
    
    
    94,261
    
    
    
    36.3
    %
    
    
    65,676
    
    
    
    25.9
    %Total gross profit
    
    $
    920,773
    
    
    
    44.6
    %
    
    $
    749,674
    
    
    
    41.2
    %
 (a)
    
    Sportswear Group gross profit includes approximately $34.9 million and $30.7 million
for Fiscal 2008 and Fiscal 2007, respectively, related to certain sales of Calvin Klein
underwear in regions managed by the Sportswear Group.  50




---



##### Table of Contents



Note 4 of Notes to Consolidated Financial Statements
  Calvin Klein Chaps
 Calvin Klein Calvin Klein Calvin Klein
 Note 5 of
Notes to Consolidated Financial Statements)
 Selling, General and Administrative Expenses
 Calvin Klein Speedo Calvin Klein
  51




---



##### Table of Contents



Amortization of Intangible Assets
 Calvin Klein
 Pension Income / Expense
 Note 7 of Notes to Consolidated Financial Statements
 Operating Income
  Fiscal 2008
    
    
    Fiscal 2007(a)
    
    
    (a)(in thousands of dollars)Sportswear Group
    
    $
    89,782
    
    
    $
    97,946Intimate Apparel Group
    
    
    12l6,132
    
    
    
    108,343Swimwear Group
    
    
    11,478
    
    
    
    (24,499
    )Unallocated corporate expenses (b)
    
    
    (85,947
    )
    
    
    (38,100
    )Operating income
    
    $
    141,445
    
    
    $
    143,690Operating income as a percentage of net revenue
    
    
    6.9
    %
    
    
    7.9
    %
 
 (a)
    
    Includes approximately $27.8 million, $1.3 million, $3.9 million and $2.3 million of
restructuring expenses for Fiscal 2008 in the Sportswear Group, Intimate Apparel Group,
Swimwear Group and Unallocated corporate expenses, respectively, and approximately $0.1
million, $2.1 million, $29.8 million and $0.3 million of restructuring expenses for Fiscal
2007 in the Sportswear Group, Intimate Apparel Group, Swimwear Group and Unallocated corporate
expenses, respectively.(b)
    
    Includes approximately $31.5 million of pension expense and approximately $9.0 million of
pension income for Fiscal 2008 and Fiscal 2007, respectively.    52




---



##### Table of Contents



Sportswear Group
  % of
    
    
    
    
    
    
    % ofFiscal 2008
    
    
    Brand Net
    
    
    Fiscal 2007
    
    
    Brand Net(c)
    
    
    Revenues
    
    
    (c)
    
    
    Revenues(in thousands of dollars)Calvin KleinJeans
    
    $
    62,020
    
    
    
    9.3
    %
    
    $
    70,559
    
    
    
    13.0
    %Chaps
    
    
    17,426
    
    
    
    9.8
    %
    
    
    10,920
    
    
    
    5.7
    %Mass sportswear licensing
    
    
    
    
    
    
    0.0
    %
    
    
    (268
    )
    
    
    -115.0
    %Sportswear wholesale
    
    
    79,446
    
    
    
    9.4
    %
    
    
    81,211
    
    
    
    11.0
    %Sportswear retail
    
    
    10,336
    
    
    
    4.0
    %
    
    
    16,735
    
    
    
    8.2
    %Sportswear Group (a) (b)
    
    $
    89,782
    
    
    
    8.2
    %
    
    $
    97,946
    
    
    
    10.4
    %
 
 (a)
    
    Includes the Collection License Company Charge of $18.5 million for Fiscal 2008 related
to the transfer of the Collection License Company to PVH.(b)
    
    Includes approximately $1.5 million and $4.1 million for Fiscal 2008 and 2007,
respectively, related to certain sales of Calvin Kleinunderwear in regions managed by the
Sportswear Group.(c)
    
    Includes an allocation of shared services expenses by brand as detailed below: Fiscal 2008
    
    
    Fiscal 2007Calvin KleinJeans
    
    $
    12,990
    
    
    $
    12,866Chaps
    
    
    8,465
    
    
    
    9,037Mass sportswear licensing
    
    
    
    
    
    
    Sportswear wholesale
    
    
    21,455
    
    
    
    21,903Sportswear retail
    
    
    369
    
    
    
    425Sportswear Group
    
    $
    21,824
    
    
    $
    22,328
 Calvin Klein Calvin Klein Chaps Note 2 of Notes to Consolidated Financial
Statements
 Intimate Apparel Group
  % of
    
    
    
    
    
    
    % ofFiscal 2008
    
    
    Brand Net
    
    
    Fiscal 2007
    
    
    Brand Net(a)
    
    
    Revenues
    
    
    (a)
    
    
    Revenues(in thousands of dollars)Calvin KleinUnderwear
    
    $
    81,110
    
    
    
    20.3
    %
    
    $
    71,124
    
    
    
    19.8
    %Core Intimates
    
    
    14,142
    
    
    
    9.1
    %
    
    
    8,730
    
    
    
    5.7
    %Intimate Apparel wholesale
    
    
    95,252
    
    
    
    17.1
    %
    
    
    79,854
    
    
    
    15.6
    %Calvin KleinUnderwear retail
    
    
    30,880
    
    
    
    21.1
    %
    
    
    28,489
    
    
    
    24.9
    %Intimate Apparel Group
    
    $
    126,132
    
    
    
    18.0
    %
    
    $
    108,343
    
    
    
    17.3
    %
 
 (a)
    
    Includes an allocation of shared services expenses by brand as detailed below: Fiscal 2008
    
    
    Fiscal 2007Calvin KleinUnderwear
    
    $
    10,628
    
    
    $
    10,293Core Intimates
    
    
    7,100
    
    
    
    6,867Intimate Apparel wholesale
    
    
    17,728
    
    
    
    17,160Calvin KleinUnderwear retail
    
    
    
    
    
    
    Intimate Apparel Group
    
    $
    17,728
    
    
    $
    17,160
  53




---



##### Table of Contents



Calvin Klein Calvin Klein Calvin Klein
 Swimwear Group
  % of
    
    
    
    
    
    
    % ofFiscal 2008
    
    
    Brand Net
    
    
    Fiscal 2007
    
    
    Brand Net(a)
    
    
    Revenues
    
    
    (a)
    
    
    Revenues(in thousands of dollars)Speedo
    
    $
    5,625
    
    
    
    2.6
    %
    
    $
    (26,766
    )
    
    
    -12.2
    %Calvin KleinSwim
    
    
    1,196
    
    
    
    5.1
    %
    
    
    (3,079
    )
    
    
    -16.8
    %Swimwear wholesale
    
    
    6,821
    
    
    
    2.8
    %
    
    
    (29,845
    )
    
    
    -12.6
    %Swimwear retail
    
    
    4,657
    
    
    
    25.3
    %
    
    
    5,346
    
    
    
    34.1
    %Swimwear Group
    
    $
    11,478
    
    
    
    4.4
    %
    
    $
    (24,499
    )
    
    
    -9.7
    %
 
 (a)
    
    Includes an allocation of shared services expenses by brand as detailed below: Fiscal 2008
    
    
    Fiscal 2007Speedo
    
    $
    14,842
    
    
    $
    18,725Calvin KleinSwim
    
    
    455
    
    
    
    611Swimwear wholesale
    
    
    15,297
    
    
    
    19,336Swimwear retail
    
    
    
    
    
    
    Swimwear Group
    
    $
    15,297
    
    
    $
    19,336
 Speedo Calvin Klein Speedo Calvin Klein Calvin Klein
 Other (Income) Loss
 Capital Resources and Liquidity  Financing
Arrangements
  54




---



##### Table of Contents



Interest Expense
 Capital
Resources and Liquidity  Financing Arrangements,
 Interest Income
  Income Taxes
 Lejaby Note 4 Note 7 Notes to Consolidated Financial Statements.
 Discontinued Operations
 Note 3 of Notes to Consolidated Financial Statements
 Capital Resources and Liquidity
 Financing Arrangements
 Senior Notes
 7 8 %
   55




---



##### Table of Contents



Interest Rate Swap Agreements
 7 8
   January 3, 2009(in thousands of dollars)Unrealized gain:2003 Swap Agreement
    
    $
    1,9722004 Swap Agreement
    
    
    932Net unrealized gain
    
    $
    2,904
 New Credit Agreements
     56




---



##### Table of Contents



per annum per annum
      Revolving Credit Facility; Amended and Restated New Credit Agreement Foreign Revolving
Credit Facility
   57




---



##### Table of Contents



Euro-Denominated CKJEA Notes Payable and Other
  Liquidity and Capital Resources
 Results of Operations  Net Revenues,
 Capital Resources and Liquidity  Financing Arrangements, Contractual Obligations
       58




---



##### Table of Contents



Rating
    
    CorporateAgency
    
    Rating
    
    OutlookMoodys
    
    Ba2
    
    positiveStandard & Poors
    
    BB+
    
    positive
 (a)
    
    ratings on individual debt issuances can be different from the Companys composite credit
ratings depending on the priority position of creditors holding such debt, collateral related
to such debt and other factors. The Companys secured debt is rated BBB by Standard & Poors.   Note 4 to Consolidated Financial
Statements
 Calvin Klein
 Item 7A. Quantitative and Qualitative
Disclosures About Market Risk  Foreign Exchange Risk Note 17 to Notes to Consolidated
Financial Statements
   59




---



##### Table of Contents



Level 1
    
    Inputs are quoted prices in active markets for identical assets or liabilities.Level 2
    
    Inputs are quoted prices for similar assets or liabilities in an active market,
quoted prices for identical or similar assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable and market-corroborated inputs which are
derived principally from or corroborated by observable market data.Level 3
    
    Inputs are derived from valuation techniques in which one or more significant inputs
or value drivers are unobservable.
   Note 7 to
Notes to Consolidated Financial Statements
   Share Repurchase Program
   60




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##### Table of Contents



Cash Flows
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007(in thousands of dollars)Net cash provided by (used in) operating activities:Continuing operations
    
    $
    263,881
    
    
    $
    153,408
    
    
    $
    124,483Discontinued operations
    
    
    1,033
    
    
    
    (27,521
    )
    
    
    35,940Net cash (used in) investing activities:Continuing operations
    
    
    (52,581
    )
    
    
    (44,263
    )
    
    
    (20,357
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (443
    )Net cash (used in) financing activities:Continuing operations
    
    
    (40,908
    )
    
    
    (120,692
    )
    
    
    (121,688
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Translation adjustments
    
    
    1,702
    
    
    
    (5,223
    )
    
    
    6,993Increase (decrease) in cash and cash equivalents
    
    $
    173,127
    
    
    $
    (44,291
    )
    
    $
    24,928
 Lejaby
 Lejaby
  61




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##### Table of Contents



Note 2 to Notes to Consolidated Financial Statements Note 2 of Notes to the Consolidated
Financial Statements Note 3 of Notes
to the Consolidated Financial Statements
 Note 12 to notes to
Consolidated Financial Statements
  Contractual Obligations
  Payments Due by Year2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    Total(Dollars in thousands)New Credit Agreements (a)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Senior Notes (b)
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    110,890
    
    
    
    
    
    
    
    
    
    
    
    160,890CKJEA short term notes payable (c)
    
    
    47,684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,684Minimum royalties (d)
    
    
    66,331
    
    
    
    64,840
    
    
    
    61,943
    
    
    
    62,116
    
    
    
    67,308
    
    
    
    1,456,951
    
    
    
    1,779,489Operating leases (d)
    
    
    72,246
    
    
    
    62,019
    
    
    
    55,151
    
    
    
    45,286
    
    
    
    35,760
    
    
    
    112,397
    
    
    
    382,859Interest payments (e)
    
    
    12,191
    
    
    
    12,191
    
    
    
    12,191
    
    
    
    6,109
    
    
    
    
    
    
    
    
    
    
    
    42,682Pension plan funding (f)
    
    
    6,300
    
    
    
    6,100
    
    
    
    5,900
    
    
    
    5,700
    
    
    
    5,500
    
    
    
    400
    
    
    
    29,900Post-retirement plan funding (f)
    
    
    390
    
    
    
    400
    
    
    
    370
    
    
    
    360
    
    
    
    340
    
    
    
    1,720
    
    
    
    3,580Employment contracts
    
    
    3,494
    
    
    
    1,453
    
    
    
    
    
    
    
    264
    
    
    
    156
    
    
    
    159
    
    
    
    5,526Purchase obligations (g)
    
    
    32,868
    
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,868IT license and maintenance contracts
    
    
    2,801
    
    
    
    2,146
    
    
    
    1,282
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    6,359Liabilities for uncertain tax positions
    
    
    882
    
    
    
    13,322
    
    
    
    15,985
    
    
    
    5,295
    
    
    
    1,212
    
    
    
    1,950
    
    
    
    38,646Other long-term obligations (h)
    
    
    6,439
    
    
    
    1,849
    
    
    
    1,841
    
    
    
    1,054
    
    
    
    481
    
    
    
    1,070
    
    
    
    12,734Total
    
    $
    374,104
    
    
    $
    171,320
    
    
    $
    154,663
    
    
    $
    237,204
    
    
    $
    110,757
    
    
    $
    1,574,647
    
    
    $
    2,622,695
 
 (a)
    
    The New Credit Agreements mature on August 26, 2013. See Capital Resources and
Liquidity  Financing Arrangementsand Note 12 of Notes to Consolidated Financial Statements.(b)
    
    The Senior Notes mature on June 15, 2013. See-Capital Resources and Liquidity -
Financing Arrangements  Senior Notesand Note 12 of Notes to Consolidated Financial
Statements.(c)
    
    All of the CKJEA Notes were renewed for additional one-year terms during Fiscal 2009.(d)
    
    See Note 15 of Notes to Consolidated Financial Statements.  62




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##### Table of Contents



(e)
    
    Reflects expected interest obligations after considering required minimum repayments
of the related debt. Interest on variable rate debt instruments is estimated based upon rates
in effect at January 2, 2010. See Item 7A. Quantitative and Qualitative Disclosures About
Market Risk  Interest Rate Risk.(f)
    
    Reflects expected contributions to the Companys U.S. pension plan in accordance with
the Pension Protection Act of 2006 and to the Companys post-retirement plan. See Capital
Resources and Liquidity  Liquidity and Note 7 of Notes to Consolidated Financial Statements.(g)
    
    Represents contractual commitments for goods or services not received or recorded on
the Companys consolidated balance sheet. Includes, among other items, purchase obligations of
approximately $20.8 million, during 2010 and 2011, pursuant to a production agreement with the
buyer of the Companys manufacturing facilities in Mexico. See Note 4and Note 15 of Notes
to Consolidated Financial Statements.(h)
    
    Includes contracts with athletes and models and $3.5 million related to the Brazilian
acquisitions in Fiscal 2009, which will be paid by March 31, 2010 (see Note 2 of Notes to
Consolidated Financial Statements).  Seasonality
   For the Three Months Ended
    
    
    For the Three Months EndedApril 4,
    
    
    July 4,
    
    
    October 3,
    
    
    January 2,
    
    
    April 5,
    
    
    July 5,
    
    
    October 4,
    
    
    January 3,2009
    
    
    2009
    
    
    2009
    
    
    2010
    
    
    2008
    
    
    2008
    
    
    2008
    
    
    2009(in millions of dollars)Net revenues
    
    $
    537.8
    
    
    $
    455.4
    
    
    $
    520.9
    
    
    $
    505.5
    
    
    $
    567.2
    
    
    $
    502.8
    
    
    $
    547.6
    
    
    
    445.3Operating income
    
    
    64.3
    
    
    
    41.0
    
    
    
    60.3
    
    
    $
    27.9
    
    
    
    56.1
    
    
    
    49.2
    
    
    
    48.0
    
    
    
    (11.9
    )Cash flow provided by
(used in)
operating
activities
    
    
    (61.2
    )
    
    
    135.3
    
    
    
    73.8
    
    
    
    117.0
    
    
    
    (43.4
    )
    
    
    81.9
    
    
    
    32.4
    
    
    
    55.0
 Inflation
  Deflation of Apparel Selling Prices
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Note 1 to Notes to Consolidated Financial Statements
  63




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##### Table of Contents



Statement Regarding Forward-Looking Disclosure
  Item 1A. Risk Factors Calvin Klein
 Item 1A. Risk Factors Discussion of Critical Accounting
Policies 10-K,
  64




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  Market Risk
  Note 7 of
Notes to Consolidated Financial Statements
 Interest Rate Risk
 7 8 Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Capital Resources and Liquidity 
Financing Arrangements Note 12 of Notes to Consolidated Financial Statements.
  65




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##### Table of Contents



Foreign Exchange Risk
 Note17 of Notes to the Consolidated Financial
Statements
   Weighted
    
    
    Effect of HypotheticalAverage
    
    
    10% Increase in ContractualForeign
    
    
    
    
    
    
    Contractual
    
    
    Exchange Rate or Strike RateCurrency (a)
    
    
    Amount
    
    
    Exchange Rate
    
    
    on EarningsDerivative Instrument
    
    Hedged Transaction

    
    Sell/Buy
    
    
    Hedged
    
    
    or Strike Price
    
    
    Gain (loss) (b)USD thousands
    
    
    
    
    
    
    USD thousandsForeign exchange contracts
    
    Minimum royalty and adverising costs
    
    Euro/USD
    
    
    10,000
    
    
    
    1.373
    
    
    
    (1,000
    )Foreign exchange contracts
    
    Minimum royalty and adverising costs
    
    Euro/USD
    
    
    9,213
    
    
    
    1.408
    
    
    
    (921
    )Foreign exchange contracts
    
    Purchases of inventory
    
    KRW/USD
    
    
    10,625
    
    
    
    1,208
    
    
    
    (1,063
    )Foreign exchange contracts
    
    Purchases of inventory
    
    CAD/USD
    
    
    21,085
    
    
    
    0.8578
    
    
    
    (2,109
    )Foreign exchange contracts
    
    Purchases of inventory
    
    MXN/USD
    
    
    1,082
    
    
    
    0.0601
    
    
    
    (108
    )Foreign exchange contracts
    
    Intercompany purchases of inventory
    
    Euro/GBP
    
    
    11,395
    
    
    
    0.8810
    
    
    
    (1,139
    )Foreign exchange contracts
    
    Intercompany loans
    
    CAD/USD
    
    
    1,500
    
    
    
    0.9537
    
    
    
    (250
    )Foreign exchange contracts
    
    Intercompany payables
    
    Euro/USD
    
    
    12,000
    
    
    
    1.4351
    
    
    
    1,088Zero-cost collars
    
    Intercompany payables
    
    Euro/USD
    
    
    26,000
    
    
    
    1.4230
    
    
    
    1,991Zero-cost collars
    
    Intercompany payables
    
    KRW/USD
    
    
    14,500
    
    
    
    1,224
    
    
    
    (1,654
    )
 (a)
    
    USD = U.S. dollar, KRW = Korean won, CAD = Canadian dollar, GBP =British pound, MXN = Mexican
peso(b)
    
    The Company expects that these hypothetical gains and losses would be offset by gains and
losses on the related underlying transactions. 
 Item 8.
    
    Financial Statements and Supplementary Data.
 Item Item 15.
Exhibits, Financial Statement Schedules
 
 Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   66




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##### Table of Contents



Managements Annual Report on Internal Control Over Financial Reporting
  
    
    pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the Company;
 
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company; and
 
    
    provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the Companys assets that could have a material effect
on the financial statements.
 Internal
Control-Integrated Framework.
   Changes in Internal Control Over Financial Reporting
  Limitations on the Effectiveness of Controls
   67




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control 
Integrated Framework
    Internal Control 
Integrated Framework
  DELOITTE & TOUCHE LLP
   
 Item 9B.
    
    Other Information.
   68




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##### Table of Contents



PART III
 
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
 Item 10 Item 1.
Business Executive Officers of the Registrant
 
 Item 11.
    
    Executive Compensation.
 Item 11
 
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Item 12
 
 Item 13.
    
    Certain Relationships and Related Transactions and Director Independence.
 Item 13
 
 Item 14.
    
    Principal Accountant Fees and Services.
 Item 14
  69




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules.
 PAGE(a) 1. The Consolidated Financial Statements of The Warnaco Group, Inc.Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets as of January 2, 2010 and January 3, 2009
    
    
    F-2Consolidated Statements of Operations for the years ended January 2, 2010, January 3, 2009 and
December 29, 2007
    
    
    F-3Consolidated Statements of Stockholders Equity and Comprehensive
Income for the years ended January 2, 2010, January 3, 2009 and December 29, 2007
    
    
    F-4Consolidated Statements of Cash Flows for the years ended January 2, 2010, January 3, 2009
and December 29, 2007
    
    
    F-5  F-6Notes to Consolidated Financial Statements
    
    
    F-7  F-552. Financial Statement ScheduleSchedule II. Valuation and Qualifying Accounts and Reserves
    
    
    A-1
   70




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##### Table of Contents




    
    were not intended to be treated as categorical statements of fact, but rather as a
way of allocating the risk to one of the parties if those statements prove to be
inaccurate;
 
    
    may have been qualified in such agreements by disclosures that were made to the
other party in connection with the negotiation of the applicable agreement;
 
    
    may apply contract standards of materiality that are different from materiality
under the applicable security laws; and
 
    
    were made only as of the date of the applicable agreement or such other date or
dates as may be specified in the agreement.
 Item 1 Part I
 Exhibit No.
    
    Description of Exhibit2.1
    
    
    First Amended Joint Plan of Reorganization of The Warnaco Group, Inc. and its
Affiliated Debtors in Possession Under Chapter 11 of the Bankruptcy Code
(incorporated by reference to Exhibit 99.2 to The Warnaco Group, Inc.s Form
10-Q filed on November 18, 2002).*2.2
    
    
    Disclosure Statement with respect to the First Amended Joint Plan of
Reorganization of The Warnaco Group, Inc. and its Affiliated Debtors and
Debtors in Possession Under Chapter 11 of the Bankruptcy Code (incorporated
by reference to Exhibit 99.3 to The Warnaco Group, Inc.s Form 10-Q filed
November 18, 2002).*2.3
    
    
    Stock Purchase Agreement, dated as of August 3, 2004, by and among Warnaco
Inc., Ocean Pacific Apparel Corp. and Doyle & Boissiere Fund I, LLC, Anders
Brag, Leo Isotolo and Richard A. Baker (incorporated by reference to Exhibit
2.1 to The Warnaco Group, Inc.s Form 10-Q filed November 10, 2004).* ## **2.4
    
    
    Stock Purchase Agreement, dated as of December 20, 2005, by and among Warnaco
Inc., Fingen Apparel N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin
Klein, Inc. (incorporated by reference to Exhibit 10.1 to The Warnaco Group,
Inc.s Form 8-K filed December 23, 2005).* **2.5
    
    
    Amendment, dated as of January 30, 2006, to the Stock Purchase Agreement,
dated as of December 20, 2005, by and among Warnaco Inc., Fingen Apparel
N.V., Fingen S.p.A., Euro Cormar S.p.A., and Calvin Klein, Inc. (incorporated
by reference to Exhibit 10.1 to The Warnaco Group, Inc.s Form 8-K filed
February 3, 2006).*2.6
    
    
    Asset Purchase Agreement, dated as of October 31, 2006, by and among The
Warnaco Group, Inc., Ocean Pacific Apparel Corp. and Iconix Brand Group, Inc.
(incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.s Form
8-K filed November 6, 2006).* **2.7
    
    
    Stock and Asset Purchase Agreement, dated as of February 14, 2008, between
Warnaco Netherlands BV and Palmers Textil AG (incorporated by reference to
Exhibit 2.1 to The Warnaco Group, Inc.s Form 8-K filed February 19, 2008).*
**3.1
    
    
    Amended and Restated Certificate of Incorporation of The Warnaco Group, Inc.
(incorporated by reference to Exhibit 1 to the Form 8-A/A filed by The
Warnaco Group, Inc. on February 4, 2003).*3.2
    
    
    Second Amended and Restated Bylaws of The Warnaco Group, Inc. (incorporated
by reference to Exhibit 3.1 to the Form 8-K filed by The Warnaco Group, Inc.
on January 11, 2008).*4.1
    
    
    Registration Rights Agreement, dated as of June 12, 2003, among Warnaco Inc.,
the Guarantors (as defined therein) and the Initial Purchasers (as defined
therein) (incorporated by reference to Exhibit 4.1 to the Registration
Statement on Form S-4 (File No. 333-107788) filed by The Warnaco Group, Inc.
and certain of its subsidiaries on August 8, 2003).*4.2
    
    
    Indenture, dated as of June 12, 2003, among Warnaco Inc., the Guarantors (as
defined therein) and the Trustee (as defined therein) (incorporated by
reference to Exhibit 4.2 to the Registration Statement on Form S-4 (File No.
333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries
on August 8, 2003).*
  71




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit4.3
    
    
    Registration Rights Agreement, dated as of February 4, 2003, among The
Warnaco Group, Inc. and certain creditors thereof (as described in the
Registration Rights Agreement) (incorporated by reference to Exhibit 4.5 to
The Warnaco Group, Inc.s Form 8-K filed February 10, 2003).*10.1
    
    
    Credit Agreement, dated as of August 26, 2008, among Warnaco Inc., The
Warnaco Group, Inc., the Lenders (as defined therein) and Issuers (as defined
therein) party thereto, Bank of America, N.A., as administrative agent for
the revolving credit facility and as collateral agent for the Lenders and the
Issuers party thereto, Banc of America Securities LLC and Deutsche Bank
Securities Inc., as joint lead arrangers, Banc of America Securities LLC,
Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as joint
bookrunners, Deutsche Bank Securities Inc., as sole syndication agent for the
Lenders and the Issuers party thereto, and HSBC Business Credit (USA) Inc.,
JPMorgan Chase Bank, N.A. and RBS Business Capital, a division of RBS Asset
Finance Inc., each as a co-documentation agent for the Lenders and Issuers
(incorporated by reference to Exhibit 10.1 to The Warnaco Group Inc.s Form
8-K filed August 28, 2008).*10.2
    
    
    Guaranty, dated as of August 26, 2008, by The Warnaco Group, Inc. and each of
the other entities listed on the signature pages thereof or that becomes a
party thereto, in favor of Bank of America, N.A., as administrative agent for
the revolving credit facility and as collateral agent for the Lenders (as
defined therein) and Issuers (as defined therein) party thereto, and the
Issuers and Lenders party thereto (incorporated by reference to Exhibit 10.2
to The Warnaco Group Inc.s Form 8-K filed August 28, 2008).*10.3
    
    
    Pledge and Security Agreement, dated as of August 26, 2008, by The Warnaco
Group, Inc., Warnaco Inc., and each of the other entities listed on the
signature pages thereto or that becomes a party thereto, in favor of Bank of
America, N.A., as collateral agent for the secured parties thereunder
(incorporated by reference to Exhibit 10.3 to The Warnaco Group Inc.s Form
8-K filed August 28, 2008).*10.4
    
    
    Canadian Credit Agreement, dated as of August 26, 2008, among Warnaco of
Canada Company, The Warnaco Group, Inc., the Lenders (as defined therein) and
Issuers (as defined therein) party thereto, Bank of America, N.A., as
administrative agent for the revolving credit facility and as collateral
agent for the Lenders and the Issuers party thereto, Banc of America
Securities LLC and Deutsche Bank Securities Inc., as joint lead arrangers and
joint book managers, and Deutsche Bank Securities Inc., as sole syndication
agent for the Lenders and the Issuers party thereto (incorporated by
reference to Exhibit 10.4 to The Warnaco Group Inc.s Form 8-K filed August
28, 2008).*10.5
    
    
    U.S. Loan Party Canadian Facility Guaranty, dated as of August 26, 2008, by
The Warnaco Group, Inc., Warnaco Inc., and each of the other entities listed
on the signature pages thereto or that becomes a party thereto, in favor of,
Bank of America, N.A. as administrative agent for the revolving credit
facility and as collateral agent for the Lenders (as defined therein) and
Issuers (as defined therein) party thereto, and the Issuers and Lenders party
thereto (incorporated by reference to Exhibit 10.5 to The Warnaco Group
Inc.s Form 8-K filed August 28, 2008).*10.6
    
    
    Guaranty, dated as of August 26, 2008 by 4278941 Canada Inc., in favor of
Bank of America, N.A. as lender (acting through its Canada branch) and as
collateral agent, for itself and on behalf of the secured parties
(incorporated by reference to Exhibit 10.6 to The Warnaco Group Inc.s Form
8-K filed August 28, 2008).*10.7
    
    
    General Security Agreement, dated as of August 26, 2008, granted by Warnaco
of Canada Company to Bank of America, N.A. (incorporated by reference to
Exhibit 10.7 to The Warnaco Group Inc.s Form 8-K filed August 28, 2008).*10.8
    
    
    General Security Agreement, dated as of August 26, 2008, granted by 4278941
Canada Inc. to Bank of America, N.A. (incorporated by reference to Exhibit
10.8 to The Warnaco Group Inc.s Form 8-K filed August 28, 2008).*10.9
    
    
    Securities Pledge Agreement, dated as of August 26, 2008 made by Warnaco of
Canada Company to and in favour of Bank of America, N.A. as collateral agent
(incorporated by reference to Exhibit 10.9 to The Warnaco Group Inc.s Form
8-K filed August 28, 2008).*10.10
    
    
    Deed of Hypothec, dated as of August 26, 2008, between Warnaco of Canada
Company and Bank of America, N.A. (incorporated by reference to Exhibit 10.10
to The Warnaco Group Inc.s Form 8-K filed August 28, 2008).*10.11
    
    
    Deed of Hypothec, dated as of August 26, 2008, between 4278941 Canada Inc.and
Bank of America, N.A. (incorporated by reference to Exhibit 10.11 to The
Warnaco Group Inc.s Form 8-K filed August 28, 2008).*10.12
    
    
    Warnaco Employee Retirement Plan (incorporated by reference to Exhibit 10.11
to The Warnaco Group, Inc.s Registration Statement on Form S-1 (File No.
33-4587)).*10.13
    
    
    The Warnaco Group, Inc. 2003 Stock Incentive Plan (incorporated by reference
to Appendix D to The Warnaco Group, Inc.s Proxy Statement filed April 29,
2003).*10.14
    
    
    The Warnaco Group, Inc. Incentive Compensation Plan (incorporated by
reference to Appendix E to The Warnaco Group, Inc.s Proxy Statement filed
April 29, 2003).*10.15
    
    
    The Warnaco Group, Inc. 2005 Stock Incentive Plan (incorporated by reference
to Annex A to The Warnaco Group, Inc.s 2005 Proxy Statement on Schedule 14A
filed on April 12, 2005).*
  72




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.16
    
    
    The Warnaco Group, Inc. Amended and Restated 2005 Stock Incentive Plan
(incorporated by reference to Appendix A to The Warnaco Group, Inc.s 2008
Proxy Statement on Schedule 14A filed on April 11, 2008).*10.17
    
    
    The Warnaco Group, Inc. 2008 Incentive Compensation Plan (incorporated by
reference to Appendix B to The Warnaco Group, Inc.s 2008 Proxy Statement on
Schedule 14A filed on April 11, 2008).*10.18
    
    
    The Warnaco Group, Inc. Amended and Restated Deferred Compensation Plan (incorporated by
reference to Exhibit 10.18 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.19
    
    
    2007 Non-Employee Directors Deferred Compensation Plan (incorporated by
reference to Exhibit 10.17 to The Warnaco Group, Inc.s Form 10-K filed March
7, 2007).*10.20
    
    
    Amended and Restated 2007 Non-Employee Directors Deferred Compensation Plan (incorporated by
reference to Exhibit 10.20 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.21
    
    
    Form of Restricted Stock Award Agreement (incorporated by reference to
Exhibit 10.2 to The Warnaco Group, Inc.s Form 8-K filed May 25, 2005).*10.22
    
    
    Form of Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.3 to The Warnaco Group, Inc.s Form 8-K filed May 25, 2005).*10.23
    
    
    Form of Restricted Stock Unit Award Agreement for Joseph R. Gromek
(incorporated by reference to Exhibit 10.4 to The Warnaco Group, Inc.s Form
8-K filed May 25, 2005).*10.24
    
    
    Form of The Warnaco Group, Inc. 2005 Stock Incentive Plan Notice of Grant of
Restricted Stock (incorporated by reference to Exhibit 10.8 to The Warnaco
Group, Inc.s Form 8-K filed August 12, 2005).*10.25
    
    
    Offer Letter and Employee Waiver, Release and Discharge of Claims pursuant to
the Key Domestic Employee Retention Plan for Stanley P. Silverstein, dated
November 26, 2001 (incorporated by reference to Exhibit 10.41 to The Warnaco
Group, Inc.s Form 10-K filed July 31, 2002).*10.26
    
    
    Amended and Restated Employment Agreement, dated as of December 19, 2007,
between The Warnaco Group, Inc. and Joseph R. Gromek (incorporated by
reference to Exhibit 10.1 to The Warnaco Group, Inc.s Form 8-K filed
December 20, 2007).*10.27
    
    
    Amended and Restated Letter Agreement, dated as of December 31, 2008, by and
between The Warnaco Group, Inc. and Lawrence R. Rutkowski (incorporated by
reference to Exhibit 10.27 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.28
    
    
    Amended and Restated Letter Agreement, dated as of December 31, 2008, by and
between The Warnaco Group, Inc. and Frank Tworecke (incorporated by
reference to Exhibit 10.28 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.29
    
    
    Amended and Restated Letter Agreement, dated as of December 31, 2008, by and
between The Warnaco Group, Inc. and Helen McCluskey (incorporated by
reference to Exhibit 10.29 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.30
    
    
    Amended and Restated Employment Agreement, dated as of December 31, 2008, by
and between The Warnaco Group, Inc. and Stanley P. Silverstein (incorporated by
reference to Exhibit 10.30 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.31
    
    
    Employment Agreement, dated as of August 11, 2008, by and between The Warnaco
Group, Inc. and Jay L. Dubiner (incorporated by
reference to Exhibit 10.31 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.32
    
    
    Amended and Restated Letter Agreement, dated as of December 31, 2008, by and
between The Warnaco Group, Inc. and Dwight Meyer (incorporated by
reference to Exhibit 10.32 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.33
    
    
    Amended and Restated Employment Agreement, dated as of December 31, 2008 by
and between The Warnaco Group, Inc. and Elizabeth Wood (incorporated by
reference to Exhibit 10.33 to The Warnaco Group, Inc.s Form 10-K filed March 2, 2009).*10.34
    
    
    Amended and Restated License Agreement, dated as of January 1, 1996, between
Polo Ralph Lauren, L.P. and Warnaco Inc. (incorporated by reference to
Exhibit 10.4 to The Warnaco Group, Inc.s Form 10-Q filed November 14,
1997).*10.35
    
    
    Amended and Restated Design Services Agreement, dated as of January 1, 1996,
between Polo Ralph Lauren Enterprises, L.P. and Warnaco Inc. (incorporated by
reference to Exhibit 10.5 to The Warnaco Group, Inc.s Form 10-Q filed
November 14, 1997).*10.36
    
    
    License Agreement and Design Services Agreement Amendment and Extension,
dated as of September 19, 2003, by and among PRL USA, Inc., as successor to
Polo Ralph Lauren L.P., The Polo/Lauren Company, L.P., Polo Ralph Lauren
Corporation, as successor to Polo Ralph Lauren L.P., and Warnaco Inc. and
Warnaco of Canada Company (incorporated by reference to Exhibit 10.2 to The
Warnaco Group, Inc.s Form 10-Q filed November 18, 2003).* #10.37
    
    
    License Agreement, dated as of August 4, 1994, between Calvin Klein, Inc. and
Calvin Klein Jeanswear Company (incorporated by reference to Exhibit 10.20 to
Designer Holdings, Ltd.s Registration Statement on Form S-1 (File No.
333-02236)).*10.38
    
    
    Amendment to the Calvin Klein License Agreement, dated as of December 7, 1994
(incorporated by reference to Exhibit 10.21 to Designer Holdings, Ltd.s
Registration Statement on Form S-1 (File No. 333-02236)).*10.39
    
    
    Amendment to the Calvin Klein License Agreement, dated as of January 10, 1995
(incorporated by reference to Exhibit 10.22 to Designer Holdings, Ltd.s
Registration Statement on Form S-1 (File No. 333-02236)).*10.40
    
    
    Amendment to the Calvin Klein License Agreement, dated as of February 28,
1995 (incorporated by reference to Exhibit 10.23 to Designer Holdings, Ltd.s
Registration Statement on Form S-1 (File No. 333-02236)).*10.41
    
    
    Amendment to the Calvin Klein License Agreement, dated as of April 22, 1996
(incorporated by reference to Exhibit 10.38 to Designer Holdings, Ltd.s
Registration Statement on Form S-1 (File No. 333-02236)).*
  73




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.42
    
    
    Amendment and Agreement, dated June 5, 2003, by and among Calvin Klein, Inc.,
Phillips-Van Heusen Corporation, Warnaco Inc., Calvin Klein Jeanswear
Company, and CKJ Holdings Inc. (incorporated by reference to Exhibit 10.25 to
Amendment No. 2 to the Registration Statement on Form S-4/A (File No.
333-107788) filed by The Warnaco Group, Inc. and certain of its subsidiaries
on December 18, 2003).*##10.43
    
    
    Consent and Amendment No. 1 to the Facility Agreement, dated as of February
5, 2002 (incorporated by reference to Exhibit 10.49 to The Warnaco Group,
Inc.s Form 10-K filed July 31, 2002).*10.44
    
    
    Speedo Settlement Agreement, dated November 25, 2002, by and between Speedo
International Limited and Authentic Fitness Corporation, Authentic Fitness
Products, Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by
reference to Exhibit 10.28 to The Warnaco Group, Inc.s Form 10-K filed April
4, 2003).*10.45
    
    
    Amendment to the Speedo Licenses, dated as of November 25, 2002, by and among
Speedo International Limited, Authentic Fitness Corporation and Authentic
Fitness Products, Inc. (incorporated by reference to Exhibit 10.29 to The
Warnaco Group, Inc.s Form 10-K filed April 4, 2003).* ##10.46
    
    
    Settlement Agreement, dated January 22, 2001, by and between Calvin Klein
Trademark Trust, Calvin Klein, Inc. and Calvin Klein and Linda Wachner, The
Warnaco Group, Inc., Warnaco Inc., Designer Holdings, Ltd, CKJ Holdings,
Inc., Jeanswear Holdings Inc., Calvin Klein Jeanswear Company and Outlet
Holdings, Inc. (incorporated by reference to Exhibit 10.57 to The Warnaco
Group, Inc.s Form 10-K filed July 31, 2002).* ##10.47
    
    
    Settlement Agreement, dated November 15, 2002, by and among Linda J. Wachner,
the Debtors, the Bank of Nova Scotia and Citibank, N.A. in their capacity as
Debt Coordinators for the Debtors Prepetition Secured Lenders and the
Official Committee of Unsecured Creditors of the Debtors (incorporated by
reference to Exhibit 10.38 to The Warnaco Group, Inc.s Form 10-K filed April
4, 2003).*10.48
    
    
    Acquisition Agreement, dated as of March 14, 1994, by and among Calvin Klein,
Inc., The Warnaco Group, Inc. and Warnaco Inc. (incorporated by reference to
Exhibit 10.6 to The Warnaco Group, Inc.s Form 10-Q filed on May 24, 1994).*10.49
    
    
    License Agreement, dated as of June 21, 2004, by and between The Warnaco
Group, Inc. and Michael Kors (USA), Inc. (incorporated by reference to
Exhibit 10.3 to The Warnaco Group, Inc.s Form 10-Q filed August 6, 2004).*
##10.50
    
    
    License Agreement, dated as of July 26, 2004, by and between Calvin Klein,
Inc. and Warnaco Swimwear Inc. (incorporated by reference to Exhibit 10.1 to
The Warnaco Group, Inc.s Form 10-Q filed November 10, 2004).* ##10.51
    
    
    License Agreement, dated as of December 1, 2004, by and between The Warnaco
Group, Inc. and SAP America, Inc. (incorporated by reference to Exhibit 10.46
to The Warnaco Group, Inc.s Form 10-K filed March 17, 2005) * #10.52
    
    
    Amended and Restated License Agreement, dated as of January 1, 1997, by and
between Calvin Klein, Inc. and Calvin Klein Jeanswear Asia Ltd. (incorporated
by reference to Exhibit 10.62 to The Warnaco Group, Inc.s Form 10-K filed
March 3, 2006).* ##10.53
    
    
    Amendment and Agreement, dated as of January 31, 2006, by and among Calvin
Klein, Inc., WF Overseas Fashion C.V. and the CKJ Entities (as defined
therein), with respect to the Amended and Restated License Agreement, dated
as of January 1, 1997, by and between Calvin Klein, Inc. and Calvin Klein
Jeanswear Asia Ltd. (incorporated by reference to Exhibit 10.63 to The
Warnaco Group, Inc.s Form 10-K filed March 3, 2006).*#10.54
    
    
    Amended and Restated Letter Agreement, dated as of March 6, 2002, by and
among Calvin Klein, Inc., CK Jeanswear N.V., CK Jeanswear Asia Limited and CK
Jeanswear Europe S.p.A. (incorporated by reference to Exhibit 10.64 to The
Warnaco Group, Inc.s Form 10-K filed March 3, 2006).* ##10.55
    
    
    Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein,
Inc., WF Overseas Fashion C.V., CK Jeanswear N.V., CK Jeanswear Asia Limited
and CK Jeanswear Europe S.p.A., with respect to the Amended and Restated
Letter Agreement, dated as of March 6, 2002, by and among Calvin Klein, Inc.,
CK Jeanswear N.V., CK Jeanswear Asia Limited and CK Jeanswear Europe S.p.A.
(incorporated by reference to Exhibit 10.65 to The Warnaco Group, Inc.s Form
10-K filed March 3, 2006).* #10.56
    
    
    Amended and Restated License Agreement. dated January 1, 1997, by and between
Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A. (incorporated by reference
to Exhibit 10.66 to The Warnaco Group, Inc.s Form 10-K filed March 3,
2006).* ##10.57
    
    
    Letter Agreement, dated as of January 31, 2006, by and among Calvin Klein,
Inc., WF Overseas Fashion C.V. and CK Jeanswear Europe, S.p.A., with respect
to the Amended and Restated License Agreement. dated January 1, 1997, by and
between Calvin Klein, Inc. and CK Jeanswear Europe, S.p.A. (incorporated by
reference to Exhibit 10.67 to The Warnaco Group, Inc.s Form 10-K filed March
3, 2006).* #10.58
    
    
    License Agreement, dated as of January 31, 2006, by and among Calvin Klein,
Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge
Apparel) (incorporated by reference to Exhibit 10.68 to The Warnaco Group,
Inc.s Form 10-K filed March 3, 2006).* ##
  74




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.59
    
    
    License Agreement, dated as of January 31, 2006, by and among Calvin, Klein,
Inc., CK Jeanswear Europe S.p.A and WF Overseas Fashion C.V. (re: Bridge
Accessories) (incorporated by reference to Exhibit 10.69 to The Warnaco
Group, Inc.s Form 10-K filed March 3, 2006).* ##10.60
    
    
    License Agreement, dated as of January 31, 2006, by and among Calvin, Klein,
Inc., CK Jeanswear Europe S.p.A, CK Jeanswear Asia Limited and WF Overseas
Fashion C.V. (re: Jean Accessories) (incorporated by reference to Exhibit
10.70 to The Warnaco Group, Inc.s Form 10-K filed March 3, 2006).* ##10.61
    
    
    Letter Agreement, dated January 31, 2006, by and among Calvin Klein, Inc., CK
Jeanswear N.V., CK Jeanswear Europe S.p.A., CK Jeanswear Asia Limited and WF
Overseas Fashion C.V. (re: Bridge Store) (incorporated by reference to
Exhibit 10.71 to The Warnaco Group, Inc.s Form 10-K filed March 3, 2006).*
##10.62
    
    
    License Agreement, dated as of January 31, 2008, between Calvin Klein, Inc.,
WF Overseas Fashion C.V. and CK Jeanswear Europe S.r.l. (re: Bridge
Accessories) (incorporated by reference to Exhibit 10.68 to The Warnaco
Group, Inc.s Form 10-K filed February 27, 2008). * ##10.63
    
    
    License Agreement  Central and South America, dated as of January 31, 2008,
between Calvin Klein, Inc. and WF Overseas Fashion C.V. (re: Bridge
Accessories) (incorporated by reference to Exhibit 10.69 to The Warnaco
Group, Inc.s Form 10-K filed February 27, 2008). * ##10.64
    
    
    License Agreement, dated as of January 31, 2008, between Calvin Klein, Inc.,
WF Overseas Fashion C.V., CK Jeanswear Asia Limited and CK Jeanswear Europe
S.r.l. (re: Jean Accessories) (incorporated by reference to Exhibit 10.70 to
The Warnaco Group, Inc.s Form 10-K filed February 27, 2008). * ##10.65
    
    
    License Agreement  Central and South America, dated as of January 31, 2008,
between Calvin Klein, Inc. and WF Overseas Fashion C.V. (re: Jean
Accessories) (incorporated by reference to Exhibit 10.71 to The Warnaco
Group, Inc.s Form 10-K filed February 27, 2008). * ##10.66
    
    
    E-Commerce Agreement, dated as of January 31, 2008, Calvin Klein, Inc., WF
Overseas Fashion C.V., CK Jeanswear N.V., CK Jeanswear Asia Limited, CK
Jeanswear Europe S.r.l., Calvin Klein Jeanswear Company and CKJ Holdings,
Inc. (incorporated by reference to Exhibit 10.72 to The Warnaco Group, Inc.s
Form 10-K filed February 27, 2008). * ##12.1
    
    
    Computation of Ratio of Earnings to Fixed Charges.21.1
    
    
    Subsidiaries of The Warnaco Group, Inc. 23.1
    
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    
    Certification of Chief Executive Officer of The Warnaco Group, Inc. pursuant
to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.31.2
    
    
    Certification of Chief Financial Officer of The Warnaco Group, Inc. pursuant
to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.32.1
    
    
    Certifications of Chief Executive Officer and Chief Financial Officer of The
Warnaco Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)
 
 *
    
    Previously filed.**
    
    The schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation
S-K. The Company will furnish copies of any of the schedules to the Securities and Exchange
Commission upon request.
    
    Filed herewith.#
    
    Certain portions of this exhibit omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for
confidential treatment.##
    
    Certain portions of this exhibit omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment, which request was
granted.  75




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##### Table of Contents



SIGNATURES
  THE WARNACO GROUP, INC.By:
    /s/ JOSEPH R. GROMEKName:
    Joseph R. GromekTitle:
    President and Chief Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ JOSEPH R. GROMEK
    
    Director, President and Chief Executive Officer
    
    March 1, 2010(Joseph R. Gromek)
    
    (Principal Executive Officer)/s/ LAWRENCE R. RUTKOWSKI
    
    Executive Vice President and Chief Financial Officer
    
    March 1, 2010(Lawrence R. Rutkowski)
    
    (Principal Financial and Accounting Officer)/s/ CHARLES R. PERRIN
    
    Non-Executive Chairman of the
    
    March 1, 2010(Charles R. Perrin)
    
    Board of Directors/s/ DAVID A. BELL
    
    Director
    
    March 1, 2010(David A. Bell)/s/ ROBERT A. BOWMAN
    
    Director
    
    March 1, 2010(Robert A. Bowman)/s/ RICHARD KARL GOELTZ
    
    Director
    
    March 1, 2010(Richard Karl Goeltz)/s/ SHEILA A. HOPKINS
    
    Director
    
    March 1, 2010(Sheila A. Hopkins)/s/ NANCY A. REARDON
    
    Director
    
    March 1, 2010(Nancy A. Reardon)/s/ DONALD SEELEY
    
    Director
    
    March 1, 2010(Donald Seeley)/s/ CHERYL NIDO TURPIN
    
    Director
    
    March 1, 2010(Cheryl Nido Turpin)
  76




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated Framework
 DELOITTE & TOUCHE LLP
    F-1




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##### Table of Contents



THE WARNACO GROUP, INC.
 
 CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, excluding per share data)
 January 2, 2010
    
    
    January 3, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    320,754
    
    
    $
    147,627Accounts receivable, less reserves of $89,982 and $87,375
as of January 2, 2010 and January 3, 2009, respectively
    
    
    290,737
    
    
    
    251,886Inventories
    
    
    253,362
    
    
    
    326,297Assets of discontinued operations
    
    
    2,172
    
    
    
    6,279Prepaid expenses and other current assets
    
    
    84,227
    
    
    
    91,727Deferred income taxes
    
    
    51,605
    
    
    
    65,050Total current assets
    
    
    1,002,857
    
    
    
    888,866Property, plant and equipment, net
    
    
    120,491
    
    
    
    109,563Other assets:Licenses, trademarks and other intangible assets, net
    
    
    376,831
    
    
    
    282,656Deferred financing costs, net
    
    
    6,063
    
    
    
    7,758Deferred income taxes
    
    
    12,957
    
    
    
    76,196Other assets
    
    
    29,874
    
    
    
    30,918Goodwill
    
    
    110,721
    
    
    
    100,136Total assets
    
    $
    1,659,794
    
    
    $
    1,496,093LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term debt
    
    $
    97,873
    
    
    $
    79,888Accounts payable
    
    
    127,636
    
    
    
    146,030Accrued liabilities
    
    
    184,438
    
    
    
    168,892Liabilities of discontinued operations
    
    
    8,018
    
    
    
    12,055Accrued income taxes payable
    
    
    24,577
    
    
    
    6,041Deferred income taxes
    
    
    146
    
    
    
    1,406Total current liabilities
    
    
    442,688
    
    
    
    414,312Long-term debt
    
    
    112,835
    
    
    
    163,794Deferred income taxes
    
    
    65,219
    
    
    
    51,192Other long-term liabilities
    
    
    122,942
    
    
    
    78,054Commitments and contingenciesStockholders equity:Preferred stock (See Note 13)
    
    
    
    
    
    
    Common stock: $0.01 par value, 112,500,000 shares authorized,
50,617,795 and 50,122,614 issued as of January 2, 2010
and January 3, 2009, respectively
    
    
    506
    
    
    
    501Additional paid-in capital
    
    
    633,378
    
    
    
    631,891Accumulated other comprehensive income
    
    
    46,473
    
    
    
    12,841Retained earnings
    
    
    362,813
    
    
    
    268,016Treasury stock, at cost 4,939,729 and 4,865,401 shares as of January 2, 2010 and
January 3, 2009, respectively
    
    
    (127,060
    )
    
    
    (125,562
    )Total Warnaco Group Inc. stockholders equity
    
    
    916,110
    
    
    
    787,687Noncontrolling interest
    
    
    
    
    
    
    1,054Total stockholders equity
    
    
    916,110
    
    
    
    788,741Total liabilities and stockholders equity
    
    $
    1,659,794
    
    
    $
    1,496,093
   F-2




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##### Table of Contents



THE WARNACO GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, excluding per share amounts)
 Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net revenues
    
    $
    2,019,625
    
    
    $
    2,062,849
    
    
    $
    1,819,579Cost of goods sold
    
    
    1,155,278
    
    
    
    1,142,076
    
    
    
    1,069,904Gross profit
    
    
    864,347
    
    
    
    920,773
    
    
    
    749,675Selling, general and administrative expenses
    
    
    638,907
    
    
    
    738,238
    
    
    
    601,656Amortization of intangible assets
    
    
    11,032
    
    
    
    9,446
    
    
    
    13,167Pension expense (income)
    
    
    20,873
    
    
    
    31,644
    
    
    
    (8,838
    )Operating income
    
    
    193,535
    
    
    
    141,445
    
    
    
    143,690Other loss (income)
    
    
    1,889
    
    
    
    1,926
    
    
    
    (7,063
    )Interest expense
    
    
    23,897
    
    
    
    29,519
    
    
    
    37,718Interest income
    
    
    (1,248
    )
    
    
    (3,120
    )
    
    
    (3,766
    )Income from continuing operations before provision
for income taxes and noncontrolling interest
    
    
    168,997
    
    
    
    113,120
    
    
    
    116,801Provision for income taxes
    
    
    64,272
    
    
    
    60,727
    
    
    
    29,892Income from continuing operations before noncontrolling interest
    
    
    104,725
    
    
    
    52,393
    
    
    
    86,909Loss from discontinued operations, net of taxes
    
    
    (6,227
    )
    
    
    (3,792
    )
    
    
    (7,802
    )Net income
    
    
    98,498
    
    
    
    48,601
    
    
    
    79,107Less: Net income
attributable to the
noncontrolling
interest
    
    
    (2,500
    )
    
    
    (1,347
    )
    
    
    Net income attributable to Warnaco Group, Inc.
    
    $
    95,998
    
    
    $
    47,254
    
    
    $
    79,107Amounts attributable to Warnaco Group, Inc. common shareholders:Income from continuing operations, net of tax
    
    $
    102,225
    
    
    $
    51,046
    
    
    $
    86,909Discontinued operations, net of tax
    
    
    (6,227
    )
    
    
    (3,792
    )
    
    
    (7,802
    )Net income
    
    $
    95,998
    
    
    $
    47,254
    
    
    $
    79,107Basic income per common share:Income from continuing operations
    
    $
    2.22
    
    
    $
    1.11
    
    
    $
    1.90Loss from discontinued operations
    
    
    (0.13
    )
    
    
    (0.08
    )
    
    
    (0.17
    )Net income
    
    $
    2.09
    
    
    $
    1.03
    
    
    $
    1.73Diluted income per common share:Income from continuing operations
    
    $
    2.19
    
    
    $
    1.08
    
    
    $
    1.84Loss from discontinued operations
    
    
    (0.14
    )
    
    
    (0.08
    )
    
    
    (0.17
    )Net income
    
    $
    2.05
    
    
    $
    1.00
    
    
    $
    1.67Weighted average number of shares outstanding used in
computing income per common share:Basic
    
    
    45,433,874
    
    
    
    45,351,336
    
    
    
    44,908,028Diluted
    
    
    46,196,397
    
    
    
    46,595,038
    
    
    
    46,506,319
   F-3




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##### Table of Contents



THE WARNACO GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands)
 Warnaco Group, Inc.AccumulatedAdditional
    
    
    OtherCommon
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    Noncontrolling
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    Stock
    
    
    Interest
    
    
    Income
    
    
    TotalBalance at December 30, 2006
    
    $
    470
    
    
    $
    555,734
    
    
    $
    31,453
    
    
    $
    142,596
    
    
    $
    (47,339
    )
    
    $
    
    
    
    $
    
    
    
    $
    682,914Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,107
    
    
    
    
    
    
    
    
    
    
    
    79,107
    
    
    
    79,107Other comprehensive income, net of taxForeign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    36,533
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,533
    
    
    
    36,533Change in post retirement plans
    
    
    
    
    
    
    
    
    
    
    1,752
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,752
    
    
    
    1,752Other
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155
    )
    
    
    (155
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,130
    
    
    
    38,130Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    117,237
    
    
    
    117,237Adjustment to initially adopt FASB ASC 740-10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (941
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (941
    )Stock issued in connection with
stock compensation plans
    
    
    12
    
    
    
    16,787
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,799Compensation expense in connection with
employee stock compensation plans
    
    
    
    
    
    
    14,578
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,578Purchase of treasury stock related to
stock compensation plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,488
    )
    
    
    
    
    
    
    
    
    
    
    (2,488
    )Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,203
    )
    
    
    
    
    
    
    
    
    
    
    (55,203
    )Balance at December 29, 2007
    
    
    482
    
    
    
    587,099
    
    
    
    69,583
    
    
    
    220,762
    
    
    
    (105,030
    )
    
    
    
    
    
    
    
    
    
    
    772,896Comprehensive (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,254
    
    
    
    
    
    
    
    1,347
    
    
    
    48,601
    
    
    
    48,601Other comprehensive income, net of taxForeign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    (57,412
    )
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    (57,652
    )
    
    
    (57,652
    )Change in post retirement plans
    
    
    
    
    
    
    
    
    
    
    764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764
    
    
    
    764(Loss) on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    (328
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (328
    )
    
    
    (328
    )Other
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    234Other comprehensive (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    (56,982
    )
    
    
    (56,982
    )Comprehensive (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,107
    
    
    $
    (8,381
    )
    
    
    (8,381
    )Effect of consolidation of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (53
    )Stock issued in connection with
stock compensation plans
    
    
    19
    
    
    
    28,477
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,496Compensation expense in connection with
employee stock compensation plans
    
    
    
    
    
    
    15,496
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,496Other
    
    
    
    
    
    
    819
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    819Purchase of treasury stock related to
stock compensation plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,667
    )
    
    
    
    
    
    
    
    
    
    
    (4,667
    )Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,865
    )
    
    
    
    
    
    
    
    
    
    
    (15,865
    )Balance at January 3, 2009
    
    
    501
    
    
    
    631,891
    
    
    
    12,841
    
    
    
    268,016
    
    
    
    (125,562
    )
    
    
    1,054
    
    
    
    
    
    
    
    788,741Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,998
    
    
    
    
    
    
    
    2,500
    
    
    
    98,498
    
    
    
    98,498Other comprehensive income, net of taxForeign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    35,360
    
    
    
    
    
    
    
    
    
    
    
    213
    
    
    
    35,573
    
    
    
    35,573Change in post retirement plans
    
    
    
    
    
    
    
    
    
    
    (1,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,029
    )
    
    
    (1,029
    )(Loss) on cash flow hedges
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    (699
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16
    
    
    
    16Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    33,861
    
    
    
    33,861Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,729
    
    
    $
    132,359
    
    
    
    132,359Correction of adjustment to initially adopt FASB ASC 740-10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,201
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,201
    )Purchase of 49% of non-controlling interest
    
    
    
    
    
    
    (17,645
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    
    
    
    
    (17,410
    )Dividend paid to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,018
    )
    
    
    
    
    
    
    (4,018
    )Stock issued in connection with
stock compensation plans
    
    
    5
    
    
    
    4,679
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,684Compensation expense in connection with
employee stock compensation plans
    
    
    
    
    
    
    14,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,453Purchase of treasury stock related to
stock compensation plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,498
    )
    
    
    
    
    
    
    
    
    
    
    (1,498
    )Balance at January 2, 2010
    
    $
    506
    
    
    $
    633,378
    
    
    $
    46,473
    
    
    $
    362,813
    
    
    $
    (127,060
    )
    
    $
    
    
    
    
    
    
    
    $
    916,110
   F-4




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##### Table of Contents



THE WARNACO GROUP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Cash flows from operating activities:Net income
    
    $
    98,498
    
    
    $
    48,601
    
    
    $
    79,107Adjustments to reconcile net income to net cash provided by operating activities:Loss from discontinued operations
    
    
    6,227
    
    
    
    3,792
    
    
    
    7,802Depreciation and amortization
    
    
    46,843
    
    
    
    46,154
    
    
    
    65,332Stock compensation
    
    
    14,453
    
    
    
    15,189
    
    
    
    14,286Amortization of deferred financing costs
    
    
    1,683
    
    
    
    2,636
    
    
    
    2,793Provision for trade and other bad debts
    
    
    4,775
    
    
    
    6,028
    
    
    
    4,555Inventory writedown
    
    
    18,623
    
    
    
    23,870
    
    
    
    33,315Loss on repurchase of Senior Notes/refinancing of debt facilities
    
    
    
    
    
    
    5,329
    
    
    
    Provision (benefit) for deferred income tax
    
    
    17,477
    
    
    
    12,093
    
    
    
    (11,202
    )Foreign exchange loss (gain)
    
    
    (5,477
    )
    
    
    1,024
    
    
    
    (9,456
    )Other
    
    
    (675
    )
    
    
    (552
    )
    
    
    6Change in operating assets and liabilities:Accounts receivable
    
    
    (27,947
    )
    
    
    (6,545
    )
    
    
    3,413Inventories
    
    
    67,470
    
    
    
    (42,400
    )
    
    
    (17,494
    )Prepaid expenses and other assets
    
    
    9,906
    
    
    
    (33,837
    )
    
    
    (993
    )Accounts payable, accrued expenses and other liabilities
    
    
    (5,090
    )
    
    
    67,151
    
    
    
    (35,704
    )Accrued income taxes
    
    
    17,115
    
    
    
    4,875
    
    
    
    (11,277
    )Net cash provided by operating activities from continuing operations
    
    
    263,881
    
    
    
    153,408
    
    
    
    124,483Net cash provided by (used in) operating activities from
discontinued operations
    
    
    1,033
    
    
    
    (27,521
    )
    
    
    35,940Net cash provided by operating activities
    
    
    264,914
    
    
    
    125,887
    
    
    
    160,423Cash flows from investing activities:Proceeds on disposal of assets and collection of notes receivable
    
    
    373
    
    
    
    354
    
    
    
    2,709Purchase of property, plant and equipment
    
    
    (43,443
    )
    
    
    (42,314
    )
    
    
    (40,516
    )Business acquisitions, net of cash acquired
    
    
    (9,511
    )
    
    
    (2,356
    )
    
    
    (2,069
    )Proceeds from the sale of businesses, net
    
    
    
    
    
    
    26,780
    
    
    
    19,519Purchase of intangible asset
    
    
    
    
    
    
    (26,727
    )
    
    
    Net cash (used in) investing activities from continuing operations
    
    
    (52,581
    )
    
    
    (44,263
    )
    
    
    (20,357
    )Net cash (used in) investing activities from discontinued operations
    
    
    
    
    
    
    
    
    
    
    (443
    )Net cash (used in) investing activities
    
    
    (52,581
    )
    
    
    (44,263
    )
    
    
    (20,800
    )
   F-5




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##### Table of Contents



THE WARNACO GROUP, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
 Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Cash flows from financing activities:Payment of deferred financing costs
    
    $
    (515
    )
    
    $
    (3,934
    )
    
    $
    (480
    )Repayments of Senior Note due 2013
    
    
    
    
    
    
    (46,185
    )
    
    
    Repayments of Term B Note
    
    
    
    
    
    
    (107,300
    )
    
    
    (61,800
    )Proceeds from the exercise of employee stock options
    
    
    4,034
    
    
    
    28,496
    
    
    
    16,149Purchase of treasury stock
    
    
    (1,498
    )
    
    
    (20,532
    )
    
    
    (57,691
    )Premium on cancellation of interest rate swaps
    
    
    2,218
    
    
    
    
    
    
    
    Increase (decrease) in short-term notes payable
    
    
    (23,985
    )
    
    
    16,593
    
    
    
    (17,493
    )Borrowings (repayments) under revolving credit facility
    
    
    (11,805
    )
    
    
    12,000
    
    
    
    Payment of dividend to non-controlling interest
    
    
    (4,018
    )
    
    
    
    
    
    
    Cost to purchase non-controlling interest in an equity
transaction
    
    
    (5,339
    )
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    170
    
    
    
    (373
    )Net cash (used in) financing activities from continuing operations
    
    
    (40,908
    )
    
    
    (120,692
    )
    
    
    (121,688
    )Net cash (used in) financing activities from discontinued
operations
    
    
    
    
    
    
    
    
    
    
    Net cash (used in) financing activities
    
    
    (40,908
    )
    
    
    (120,692
    )
    
    
    (121,688
    )Effect of foreign exchange rates on cash and cash equivalents
    
    
    1,702
    
    
    
    (5,223
    )
    
    
    6,993Increase (decrease) in cash and cash equivalents
    
    
    173,127
    
    
    
    (44,291
    )
    
    
    24,928Cash and cash equivalents at beginning of period
    
    
    147,627
    
    
    
    191,918
    
    
    
    166,990Cash and cash equivalents at end of period
    
    $
    320,754
    
    
    $
    147,627
    
    
    $
    191,918
   F-6




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##### Table of Contents



THE WARNACO GROUP, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands, excluding share and per share amounts)
 Note 1Nature of Operations and Summary of Significant Accounting Policies
 Organization
 Nature of Operations Calvin Klein SpeedoUSA , Calvin Klein
  Basis of Consolidation and Presentation Note 2 to Notes to
Consolidated Financial Statements
  Reclassifications: Note 3 of Notes to Consolidated Financial Statements) see Note 14 of Notes to Consolidated Financial Statements).
  Use of Estimates
 Concentration of Credit Risk:
  F-7




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Revenue Recognition
 Cost of Goods Sold
 Cash and Cash Equivalents
 Accounts Receivable
 Inventories
 Long-Lived Assets
  F-8




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
      Goodwill and Other Intangible Assets
 Warners® Olga ® Body Nancy
Ganz® Bodyslimmers ® Calvin Klein Calvin Klein Chaps ®
   F-9




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Note 10 of Notes to Consolidated Financial Statements.
 Property, Plant and Equipment
 Buildings
    
    40 yearsBuilding Improvements (including leasehold improvements)
    
    4-15 yearsMachinery and equipment
    
    2-10 yearsFurniture and fixtures (including store fixtures)
    
    1-10 yearsComputer hardware
    
    3-5 yearsComputer software
    
    3-7 years
  Computer Software Costs
 Income Taxes
  F-10




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Pension Plans
       F-11




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 7 of
Notes to Consolidated Financial Statements
 Stock-Based Compensation:
 
    
    In determining the stock price volatility assumption used, the Company considers
the historical volatility of the stock prices of selected companies in the apparel
industry, the nature of those companies, the Companys own historical stock price
volatility since its emergence from bankruptcy and other factors. Historical
volatilities are based upon daily quoted market prices of the Companys common stock
on the New York Stock Exchange and, prior to May 15, 2008, on the NASDAQ Stock
Market LLC, over a period equal to the expected term of the related equity
instruments. The Company relies only on historical volatility since it provides the
most reliable indication of future volatility. Future volatility is expected to be
consistent with historical; historical volatility is calculated using a simple
average calculation method; historical data is available for the length of the
options expected term and a sufficient number of price observations are used
consistently. Since the Companys stock options are not traded on a public market,
the Company does not use implied volatility. A higher volatility input to the
Black-Scholes-Merton model increases the resulting compensation expense.
 
    
    During Fiscal 2009, the Company had accumulated sufficient historical data
regarding stock option exercises and
forfeitures to be able to rely on that data for the calculation of expected option
life. Accordingly, for options granted during Fiscal 2009, the Company revised its
method of calculating expected option life from the simplified method as described in
the SECs Staff Accounting Bulletin No. 110 (SAB 110) (which yielded an expected
term of six years) to the use of historical data (which yielded an expected life of
3.72 years). Historical data will be used for stock options granted in all future
periods. The Company based its Fiscal 2008 and Fiscal 2007 estimates of the expected
life of a stock option of six years upon the average of the sum of the vesting period
of 36-42 months and the option term of ten years for issued and outstanding options in
accordance with the simplified method as detailed in SAB 110. A shorter expected term
would result in a lower compensation expense.
 
    
    The Companys risk-free rate of return assumption for options granted in Fiscal
2009, Fiscal 2008 and Fiscal 2007 was equal to the quoted yield for U.S. treasury
bonds as of the date of grant.
   Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Weighted average risk free rate of return
    
    
    1.84
    %
    
    
    3.19
    %
    
    
    4.43
    %Dividend yield (a)
    
    
    
    
    
    
    
    
    
    
    Expected volatility of the market price
of the Companys common stock
    
    
    59.3
    %
    
    
    36.1
    %
    
    
    31.3
    %Expected option life
    
    3.72 years
    
    
    6 years
    
    
    6 years
 (a)
    
    The terms of the Companys New Credit Agreements, Amended and Restated Credit Agreement and
the indenture governing its 87/8% Senior Notes due 2013 (each as defined below) limit the
Companys ability to make certain payments, including dividends, and require the Company to
meet certain financial covenants. The Company has not paid dividends on its common stock in
any of the last five fiscal years. See Note 12.  F-12




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Stock-based compensation expense before income
taxes:Stock options
    
    $
    5,721
    
    
    $
    5,585
    
    
    $
    6,854Restricted stock grants
    
    
    8,732
    
    
    
    9,911
    
    
    
    7,724Total (a)
    
    
    14,453
    
    
    
    15,496
    
    
    
    14,578Income tax benefit:Stock options
    
    
    2,048
    
    
    
    1,949
    
    
    
    2,428Restricted stock grants
    
    
    3,126
    
    
    
    1,556
    
    
    
    2,737Total
    
    
    5,174
    
    
    
    3,505
    
    
    
    5,165Stock-based compensation expense after income taxes:Stock options
    
    
    3,673
    
    
    
    3,636
    
    
    
    4,426Restricted stock grants
    
    
    5,606
    
    
    
    8,355
    
    
    
    4,987Total
    
    $
    9,279
    
    
    $
    11,991
    
    
    $
    9,413
 (a)
    
    Stock-based compensation has been reflected in the Companys Consolidated Statement of
Operations as follows: Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Included in income from continuing operations
before
provision for income taxes
    
    $
    14,453
    
    
    $
    15,189
    
    
    $
    14,286Included in loss from discontinued operations,
net of income taxes
    
    
    
    
    
    
    307
    
    
    
    292$
    14,453
    
    
    $
    15,496
    
    
    $
    14,578
  Advertising Costs
 Shipping and Handling Costs
 Leases
  F-13




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Deferred Financing Costs
 Derivative Financial Instruments
        F-14




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 12 of Notes to
Consolidated Financial Statements
 Translation of Foreign Currencies
 Subsequent Events: Note 12 of Notes to
Consolidated Financial Statements
 Recent Accounting Pronouncements
    F-15




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Note 17 of Notes to the Consolidated Financial Statements Item 7A. Qualitative and Quantitative Disclosures About Market Risk  Foreign Exchange Risk.
 .
 Note 7 of Notes to Consolidated Financial Statements
 Notes 16 and 17 of
Notes to Consolidated Financial Statements
   F-16




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Investments in
Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) Fair Value Measurements and Disclosures  Overall
  Note 2Acquisitions
 Acquisition of Remaining Non-controlling Interest and Retail Stores in Brazil
 Calvin Klein
    F-17




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 10 of Notes to Consolidated Financial Statements
   Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net income attributable to Warnaco Group, Inc.
    
    $
    95,998
    
    
    $
    47,254
    
    
    $
    79,107Transfer to the noncontrolling interestDecrease in Warnaco Group Inc.s paid in
capital for purchase of 49% equity interest
in WBR (a)
    
    
    (17,645
    )
    
    
    
    
    
    
    Net transfers to noncontrolling interest
    
    
    (17,645
    )
    
    
    
    
    
    
    Change from net income attributable to Warnaco
Group, Inc. and transfer to noncontrolling
interest
    
    $
    78,353
    
    
    $
    47,254
    
    
    $
    79,107
 (a)
    
    includes $451 of transaction costs related to the acquisition of WBR. Businesses in Chile and Peru: Calvin Klein
 2008 CK Licenses Calvin Klein CK /Calvin Klein Calvin Klein
 Calvin Klein Calvin Klein Calvin Klein CK/Calvin Klein CK/Calvin Klein Calvin Klein Calvin Klein Calvin Klein Calvin
Klein Calvin Klein Calvin Klein Note 3 of Notes to Consolidated Financial Statements).
  F-18




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Retail Stores
 Note 3Dispositions and Discontinued Operations
 Calvin Klein Golf and Calvin Klein Collection businesses Calvin Klein Calvin Klein Calvin Klein
 Designer Swimwear brands (except for Calvin Klein) OP Catalina Anne Cole Cole of California OP Catalina Anne Cole Cole of California OP OP Catalina Anne Cole Cole of California Catalina Anne Cole Cole of California Nautica Michael
Kors Nautica Michael Kors
 Lejaby Sale: Lejaby   Lejaby Lejaby Lejaby Lejaby Lejaby Lejaby
  F-19




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Net revenues
    
    $
    3,083
    
    
    $
    44,780
    
    
    $
    210,956Loss before provision for income
taxes
    
    
    (6,079
    )(a)
    
    
    (8,636
    )
    
    
    (13,901
    )Provision (benefit) for income taxes
    
    
    148
    
    
    
    (4,844
    )
    
    
    (6,099
    )Loss from discontinued operations
    
    $
    (6,227
    )
    
    $
    (3,792
    )
    
    $
    (7,802
    )
 (a)
    
    includes a charge of $3,423 related to the correction of an error in amounts
recorded in prior periods. See Note 6 of Notes to Consolidated Financial Statements.  January 2, 2010 (a)
    
    
    January 3, 2009 (a)Accounts receivable, net
    
    $
    366
    
    
    $
    5,396Inventories, net
    
    
    1,684
    
    
    
    23Prepaid expenses and other current
assets
    
    
    122
    
    
    
    778Deferred tax assets
    
    
    
    
    
    
    82Assets of discontinued operations
    
    $
    2,172
    
    
    $
    6,279Accounts payable
    
    $
    104
    
    
    $
    356Accrued liabilities
    
    
    7,902
    
    
    
    9,735Deferred tax liabilities
    
    
    
    
    
    
    104Other
    
    
    12
    
    
    
    1,860Liabilities of discontinued operations
    
    $
    8,018
    
    
    $
    12,055
 (a)
    
    Includes assets and liabilities related to the businesses that were discontinued in
2009, 2008 and 2007. Note 4Restructuring Expense
     The rationalization and consolidation of the Companys European operations:
  F-20




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Workforce reduction
 The Collection License Company Charge Note 2 of Notes to  Consolidated Financial Statements
 Activities associated with managements initiatives to increase productivity and profitability
in the Swimwear Group: Calvin Klein
  January 1, 2010 through December 31, 2010
    
    $
    13,800January 1, 2011 through June 30, 2011
    
    $
    7,000
  Other
  F-21




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Cost of goods sold
    
    $
    1,764
    
    
    $
    1,878
    
    
    $
    21,589Selling, general and
administrative expenses
    
    
    10,362
    
    
    
    33,382
    
    
    
    10,771$
    12,126
    
    
    $
    35,260
    
    
    $
    32,360Cash portion of restructuring items
    
    $
    11,921
    
    
    $
    33,471
    
    
    $
    17,479Non-cash portion of restructuring
items
    
    $
    205
    
    
    $
    1,789
    
    
    $
    14,881
  Balance at December 29, 2007
    
    $
    4,718Charges for Fiscal 2008
    
    
    33,471Cash reductions for Fiscal 2008
    
    
    (32,777
    )Non-cash changes and foreign currency effects
    
    
    513Balance at January 3, 2009
    
    
    5,925Charges for Fiscal 2009
    
    
    11,921Cash reductions for Fiscal 2009
    
    
    (14,402
    )Non-cash changes and foreign currency effects
    
    
    128Balance at January 2, 2010 (a)
    
    $
    3,572
 (a)
    
    Includes approximately $1,824 recorded in accrued liabilities (part of current
liabilities) which amounts are expected to be settled over the next 12 months and includes
approximately $1,748 recorded in other long term liabilities which amounts are expected to be
settled over the next four years. Note 5Business Segments and Geographic Information
 Business Segments
 Calvin Klein Chaps ® Calvin Klein Calvin Klein
 Calvin Klein, Warners ® ,Olga ® Body Nancy Ganz/Bodyslimmers ® Calvin Klein Calvin
Klein
 Speedo ® Lifeguard® Calvin Klein
  F-22




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Sportswear
    
    
    Intimate
    
    
    Swimwear
    
    
    
    
    
    
    Corporate / OtherGroup
    
    
    Apparel Group
    
    
    Group
    
    
    Group Total
    
    
    Items
    
    
    TotalFiscal 2009Net revenues
    
    $
    1,091,165
    
    
    $
    677,315
    
    
    $
    251,145
    
    
    $
    2,019,625
    
    
    $
    
    
    
    $
    2,019,625Operating income (loss) (b)
    
    
    124,950
    
    
    
    117,070
    
    
    
    15,558
    
    
    
    257,578
    
    
    
    (64,043
    )
    
    
    193,535Depreciation and amortization
    
    
    28,973
    
    
    
    12,600
    
    
    
    2,200
    
    
    
    43,773
    
    
    
    3,070
    
    
    
    46,843Restructuring expense
    
    
    3,242
    
    
    
    4,314
    
    
    
    3,019
    
    
    
    10,575
    
    
    
    1,551
    
    
    
    12,126Capital expenditures
    
    
    15,912
    
    
    
    22,112
    
    
    
    616
    
    
    
    38,640
    
    
    
    4,116
    
    
    
    42,756Fiscal 2008Net revenues
    
    $
    1,100,597
    
    
    $
    702,252
    
    
    $
    260,000
    
    
    $
    2,062,849
    
    
    $
    
    
    
    $
    2,062,849Operating income (loss)
    
    
    89,782
    
    
    
    126,132
    
    
    
    11,478
    
    
    
    227,392
    
    
    
    (85,947
    )
    
    
    141,445Depreciation and
amortization (a)
    
    
    30,142
    
    
    
    11,696
    
    
    
    2,441
    
    
    
    44,279
    
    
    
    1,875
    
    
    
    46,154Restructuring expense
    
    
    27,820
    
    
    
    1,267
    
    
    
    3,944
    
    
    
    33,031
    
    
    
    2,229
    
    
    
    35,260Capital expenditures
    
    
    13,296
    
    
    
    20,192
    
    
    
    959
    
    
    
    34,447
    
    
    
    6,584
    
    
    
    41,031Fiscal 2007Net revenues
    
    $
    939,147
    
    
    $
    627,014
    
    
    $
    253,418
    
    
    $
    1,819,579
    
    
    $
    
    
    
    $
    1,819,579Operating income (loss)
    
    
    97,946
    
    
    
    108,343
    
    
    
    (24,499
    )
    
    
    181,790
    
    
    
    (38,100
    )
    
    
    143,690Depreciation and amortization
    
    
    29,309
    
    
    
    13,130
    
    
    
    19,459
    
    
    
    61,898
    
    
    
    3,434
    
    
    
    65,332Restructuring expense
    
    
    118
    
    
    
    2,142
    
    
    
    29,821
    
    
    
    32,081
    
    
    
    279
    
    
    
    32,360Capital expenditures
    
    
    17,275
    
    
    
    16,119
    
    
    
    2,051
    
    
    
    35,445
    
    
    
    6,310
    
    
    
    41,755Balance SheetTotal Assets:January 2, 2010
    
    $
    875,304
    
    
    $
    390,610
    
    
    $
    144,198
    
    
    $
    1,410,112
    
    
    $
    249,682
    
    
    $
    1,659,794January 3, 2009
    
    
    801,038
    
    
    
    304,724
    
    
    
    147,685
    
    
    
    1,253,447
    
    
    
    242,646
    
    
    
    1,496,093Property, Plant and Equipment:January 2, 2010
    
    $
    30,909
    
    
    $
    45,882
    
    
    $
    3,555
    
    
    $
    80,346
    
    
    $
    40,145
    
    
    $
    120,491January 3, 2009
    
    
    26,525
    
    
    
    33,921
    
    
    
    4,091
    
    
    
    64,537
    
    
    
    45,026
    
    
    
    109,563
 (a)
    
    In connection with its estimate of depreciation expense, the Company recorded an
additional depreciation charge of $1,084 during Fiscal 2008, which amount related to the
correction of amounts recorded in prior periods. The amount was not material to any prior
period.(b)
    
    Reflects a charge of $3,552 recorded during Fiscal 2009 related to the write down
of inventory associated with the Companys LZR Racer and other similar racing swimsuits.
The Company recorded the write down as a result of the Federation Internationale de
Natations ruling during Fiscal 2009 which banned the use of these types of suits in
competitive swim events.   Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Unallocated corporate expenses
    
    $
    36,371
    
    
    $
    44,295
    
    
    $
    43,348Foreign exchange losses
    
    
    2,627
    
    
    
    6,108
    
    
    
    64Pension expense (income)
    
    
    20,424
    
    
    
    31,440
    
    
    
    (9,025
    )Restructuring expense
    
    
    1,551
    
    
    
    2,229
    
    
    
    279Depreciation and amortization
of corporate assets
    
    
    3,070
    
    
    
    1,875
    
    
    
    3,434Corporate/other expenses
    
    $
    64,043
    
    
    $
    85,947
    
    
    $
    38,100
  F-23




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Operating income by operating group
    
    $
    257,578
    
    
    $
    227,392
    
    
    $
    181,790Corporate/other items
    
    
    (64,043
    )
    
    
    (85,947
    )
    
    
    (38,100
    )Operating income
    
    
    193,535
    
    
    
    141,445
    
    
    
    143,690Other (income) loss
    
    
    1,889
    
    
    
    1,926
    
    
    
    (7,063
    )Interest expense
    
    
    23,897
    
    
    
    29,519
    
    
    
    37,718Interest income
    
    
    (1,248
    )
    
    
    (3,120
    )
    
    
    (3,766
    )Income from continuing operations
before
provision for income taxes and non-controlling interest
    
    $
    168,997
    
    
    $
    113,120
    
    
    $
    116,801
 Geographic Information
 Fiscal 2009
    
    
    %
    
    
    Fiscal 2008
    
    
    %
    
    
    Fiscal 2007
    
    
    %Net revenues:United States
    
    $
    916,691
    
    
    
    45.4
    %
    
    $
    942,205
    
    
    
    45.7
    %
    
    $
    927,152
    
    
    
    50.9
    %Europe
    
    
    551,595
    
    
    
    27.3
    %
    
    
    576,320
    
    
    
    27.9
    %
    
    
    470,560
    
    
    
    25.9
    %Asia
    
    
    322,890
    
    
    
    16.0
    %
    
    
    319,052
    
    
    
    15.5
    %
    
    
    249,680
    
    
    
    13.7
    %Canada
    
    
    109,300
    
    
    
    5.4
    %
    
    
    115,448
    
    
    
    5.6
    %
    
    
    102,972
    
    
    
    5.7
    %Mexico, Central and
South America
    
    
    119,149
    
    
    
    5.9
    %
    
    
    109,824
    
    
    
    5.3
    %
    
    
    69,215
    
    
    
    3.8
    %$
    2,019,625
    
    
    
    100.0
    %
    
    $
    2,062,849
    
    
    
    100.0
    %
    
    $
    1,819,579
    
    
    
    100.0
    %
 January 2, 2010
    
    
    January 3, 2009Property, plant and
equipment, net:United States
    
    $
    49,874
    
    
    
    41.4
    %
    
    $
    57,265
    
    
    
    52.3
    %All other
    
    
    70,617
    
    
    
    58.6
    %
    
    
    52,298
    
    
    
    47.7
    %$
    120,491
    
    
    
    100.0
    %
    
    $
    109,563
    
    
    
    100.0
    %
 Information about Major Customers
 Note 6Income Taxes
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Income from continuing operations before
provision (benefit) for income
taxes and non-controlling interest:Domestic
    
    $
    53,405
    
    
    $
    6,675
    
    
    $
    (11,218
    )Foreign
    
    
    115,592
    
    
    
    106,445
    
    
    
    128,019Total
    
    $
    168,997
    
    
    $
    113,120
    
    
    $
    116,801
  F-24




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Current:Federal
    
    $
    2,784
    
    
    $
    120
    
    
    $
    428State and local
    
    
    13,348
    
    
    
    3,163
    
    
    
    5,141Foreign
    
    
    30,663
    
    
    
    45,351
    
    
    
    35,461Total current tax provision
    
    $
    46,795
    
    
    $
    48,634
    
    
    $
    41,030Deferred:Federal
    
    $
    21,241
    
    
    $
    26,614
    (b)
    
    $
    4,535State and local
    
    
    (7,585
    )
    
    
    (5,335
    )
    
    
    592Foreign
    
    
    (671
    )
    
    
    (11,207
    )
    
    
    (9,064
    )Increase (decrease)
in valuation
allowance
    
    
    4,492
    
    
    
    2,021
    
    
    
    (7,201
    )Total deferred tax provision (benefit)
    
    
    17,477
    
    
    
    12,093
    
    
    
    (11,138
    )Provision for income taxes (a)
    
    $
    64,272
    
    
    $
    60,727
    
    
    $
    29,892
 (a)
    
    Includes a charge of approximately $3,600 in Fiscal 2009 in order to correct an error
in prior period income tax provisions related to the recapture of cancellation of
indebtedness income, which had been deferred in connection with the Companys bankruptcy
proceedings in 2003.(b)
    
    Includes, among other items, approximately $14,600 related to the repatriation to
the U.S. of net proceeds received in connection with the sale of the Lejabybusiness.  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Income from continuing operations before provision
for income taxes and non-controlling interest
    
    $
    168,997
    
    
    $
    113,120
    
    
    $
    116,801Income tax expense computed at U.S. statutory rate
    
    $
    59,149
    
    
    $
    39,592
    
    
    $
    40,880State income taxes, net of federal benefit
    
    
    3,647
    
    
    
    (1,438
    )
    
    
    3,728Foreign taxes less than the U.S. statutory rate
    
    
    (10,465
    )
    
    
    (3,112
    )
    
    
    (18,472
    )Foreign income taxed in the U.S.
    
    
    2,428
    
    
    
    19,370
    (a)
    
    
    5,607Non-deductible expenses related to foreign operations
    
    
    
    
    
    
    
    
    
    
    3,500Cancellation of indebtedness recapture
    
    
    3,606
    
    
    
    
    
    
    
    Increase (decrease) in valuation allowance
    
    
    4,492
    
    
    
    2,021
    
    
    
    (7,201
    )Other, net
    
    
    1,415
    
    
    
    4,294
    
    
    
    1,850Provision for income taxes
    
    $
    64,272
    
    
    $
    60,727
    
    
    $
    29,892
 (a)
    
    Includes, among other items, approximately $14,600 related to the repatriation to the
U.S. of net proceeds received in connection with the sale of the Lejabybusiness.  F-25




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  January 2, 2010
    
    
    January 3, 2009Deferred tax assets:Inventory
    
    $
    5,014
    
    
    $
    6,441Pension and post-retirement benefits
    
    
    15,343
    
    
    
    12,337Advertising credits
    
    
    13,373
    
    
    
    13,368Reserves and accruals
    
    
    41,110
    
    
    
    44,256Net operating losses
    
    
    15,426
    
    
    
    64,893Other
    
    
    24,371
    
    
    
    24,321114,637
    
    
    
    165,616Valuation allowance
    
    
    (17,455
    )
    
    
    (15,030
    )Subtotal
    
    
    97,182
    
    
    
    150,586Gross deferred tax liabilities:Depreciation and amortization
    
    
    97,984
    
    
    
    61,938Subtotal
    
    
    97,984
    
    
    
    61,938Deferred tax asset (liability)  net
    
    $
    (802
    )
    
    $
    88,648
 Realization of Deferred Tax Assets
    Attribute Reduction and Limitations
    F-26




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
   
    
    an increase of $84,354 in the carrying amount of Licenses, trademarks and other intangible assets, net
    
    a reduction in non-current deferred income tax assets of $67,321
  
    
    an increase in the liability for non-current Deferred income taxes and other
non-current tax liabilities of $15,273
    
    an increase in Accrued income taxes payable of $10,707
 Uncertainty in Income Taxes
  
    
    an increase of $724 in Amortization of intangible assets (net of tax benefits of approximately $371)
    
    a $3,423 charge to Loss from discontinued operations, net of taxes
     Permanent Reinvestment of Foreign Earnings
  Accounting for Uncertainty in Income Taxes
   F-27




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Tax Years Subject to Examination
 Classification of Interest and Penalties
 Tabular Reconciliation of Unrecognized Tax Benefit
 Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Balance at beginning of fiscal year
    
    $
    85,968
    
    
    $
    81,705
    
    
    $
    72,564Increases:Tax Positions Taken  Current Year
    
    
    8,210
    
    
    
    9,037
    
    
    
    5,301Tax Positions Taken  Prior Year
    
    
    6,495
    
    
    
    10,575
    
    
    
    6,774Decreases:Tax Positions Taken  Prior Year
    
    
    (10,578
    )
    
    
    (13,211
    )
    
    
    (1,632
    )Settlement with Tax Authorities
    
    
    (1,909
    )
    
    
    (2,138
    )
    
    
    (1,302
    )Lapse of Statute of Limitations
    
    
    (15
    )
    
    
    
    
    
    
    Balance at end of fiscal year
    
    $
    88,171
    
    
    $
    85,968
    
    
    $
    81,705
 Anticipated Changes within Twelve Months
 Note 7Employee Retirement Plans
     F-28




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
    Pension Plans
    
    
    Postretirement PlansJanuary 2,
    
    
    January 3,
    
    
    January 2,
    
    
    January 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Change in projected benefit obligations:Benefit obligation at beginning of
period
    
    $
    127,617
    
    
    $
    141,870
    
    
    $
    3,118
    
    
    $
    4,769Service cost
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    71Interest cost
    
    
    9,988
    
    
    
    9,498
    
    
    
    290
    
    
    
    267Actuarial loss (gain) (a)
    
    
    28,733
    
    
    
    (13,227
    )
    
    
    1,441
    
    
    
    (1,635
    )Benefits paid
    
    
    (11,005
    )
    
    
    (10,524
    )
    
    
    (353
    )
    
    
    (354
    )Benefit obligation at end of period
    
    $
    155,333
    
    
    $
    127,617
    
    
    $
    4,574
    
    
    $
    3,118
 (a)
    
    The Pension Plans actuarial loss in Fiscal 2009 is due primarily to the loss related to
the change in the discount rate ($26,800) and other actuarial losses ($1,900) during Fiscal
2009. The Pension Plans actuarial gain in Fiscal 2008 is due primarily to the gain related
to the change in the discount rate ($16,200), partially offset by other actuarial losses
($3,000) during Fiscal 2008. The Postretirement Plans actuarial gain in Fiscal 2009 is
primarily related to the change in the discount rate ($800) and other actuarial gains ($641).
The Postretirement Plans actuarial gain in Fiscal 2008 is primarily related to the change in
the discount rate ($400) and other actuarial gains ($1,235).  Pension Plans
    
    
    Postretirement PlansJanuary 2,
    
    
    January 3,
    
    
    January 2,
    
    
    January 3,2010
    
    
    2009
    
    
    2010
    
    
    2009Fair value of plan assets at beginning of period
    
    $
    100,587
    
    
    $
    138,147
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    18,226
    
    
    
    (35,169
    )
    
    
    
    
    
    
    Employers contributions
    
    
    10,526
    
    
    
    8,133
    
    
    
    353
    
    
    
    354Benefits paid
    
    
    (11,005
    )
    
    
    (10,524
    )
    
    
    (353
    )
    
    
    (354
    )Fair value of plan assets at end of period
    
    $
    118,334
    
    
    $
    100,587
    
    
    $
    
    
    
    $
    Unfunded status
    
    $
    (36,999
    )
    
    $
    (27,030
    )
    
    $
    (4,574
    )
    
    $
    (3,118
    )Unrecognized net actuarial (gain)
    
    
    
    
    
    
    
    
    
    
    (263
    )
    
    
    (1,869
    )Net amount recognized / Retirement obligations
(a)
    
    $
    (36,999
    )
    
    $
    (27,030
    )
    
    $
    (4,837
    )
    
    $
    (4,987
    )
 (a)
    
    The net amount recognized for the Pension Plan as of January 2, 2010 is included in
the Companys Consolidated Balance Sheets in accrued pension obligations, within Other
long-term liabilities.  F-29




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Pension Plans
    
    
    Postretirement PlansFiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    78
    
    
    $
    71
    
    
    $
    166Interest cost
    
    
    9,987
    
    
    
    9,498
    
    
    
    8,997
    
    
    
    290
    
    
    
    267
    
    
    
    409Expected return on plan assets
    
    
    (7,867
    )
    
    
    (10,942
    )
    
    
    (10,184
    )
    
    
    
    
    
    
    
    
    
    
    (Gain) loss on plan assets in
excess of expected return
    
    
    (9,164
    )
    
    
    46,111
    
    
    
    507
    
    
    
    
    
    
    
    
    
    
    
    Net actuarial (gain) loss (a)
    
    
    28,733
    
    
    
    (13,227
    )
    
    
    (8,345
    )
    
    
    (166
    )
    
    
    (166
    )
    
    
    Amortization of loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    28
    
    
    
    112Net (benefit) cost (b)
    
    $
    21,689
    
    
    $
    31,440
    
    
    $
    (9,025
    )
    
    $
    204
    
    
    $
    200
    
    
    $
    687
 (a)
    
    The Pension Plans actuarial loss in Fiscal 2009 is due primarily to the loss related to
the change in the discount rate ($26,800) and other actuarial losses ($1,900) during Fiscal
2009. The Pension Plans actuarial gain in Fiscal 2008 is due primarily to the gain
related to the change in the discount rate ($16,200), partially offset by other actuarial
losses ($3,000) during Fiscal 2008. The Pension Plans net actuarial gain in Fiscal 2007
is primarily related to the change in the discount rate ($11,800), partially offset by
other actuarial losses ($3,500, including a $500 loss on plan assets).(b)
    
    The Pension Plans net benefit (income) cost does not include (income) costs related to
certain foreign defined benefit plans of ($816), $204 and $187 in Fiscal 2009, Fiscal 2008
and Fiscal 2007, respectively.  Pension
    
    
    PostretirementPlans
    
    
    PlansInitial net asset (obligation)
    
    $
    
    
    
    $
    Prior service (credit) cost
    
    
    
    
    
    
    (166
    )Net loss
    
    
    
    
    
    
    63Total estimated amortization from
Accumulated
Other Comprehensive Income for fiscal
2010
    
    $
    
    
    
    $
    (103
    )
   F-30




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Note 16 to Notes to Consolidated Financial Statements
 Quoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAsset Category
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Cash and cash equivalents
    
    $
    11,083
    
    
    $
    11,083Equity securities:Capital equipment
    
    
    12,957
    
    
    
    12,957Consumer goods
    
    
    9,645
    
    
    
    9,645Energy
    
    
    8,962
    
    
    
    8,962Finance
    
    
    6,695
    
    
    
    6,695Gold Mines
    
    
    1,223
    
    
    
    1,223Materials
    
    
    2,171
    
    
    
    2,171Real Estate
    
    
    7,157
    
    
    
    7,157Services
    
    
    9,056
    
    
    
    9,056Miscellaneous
    
    
    7,866
    
    
    
    7,866Fixed income securities:U.S. government bonds
    
    
    12,697
    
    
    
    12,697Corporate bonds (a)
    
    
    12,103
    
    
    
    
    
    
    $
    12,103Mortgage-backed securities
    
    
    5,930
    
    
    
    
    
    
    
    5,930Other types of investments:Limited partnerships (b)
    
    
    12,925
    
    
    
    
    
    
    
    
    
    
    $
    12,925Other
    
    
    591
    
    
    
    
    
    
    
    591$
    121,061
    
    
    $
    89,512
    
    
    $
    18,624
    
    
    $
    12,925
 (a)
    
    this category represents investment grade bonds of U.S. issuers from diverse
industries.(b)
    
    this category represents limited partnerships that invest capital in a
diversified group of investment entities, generally hedge funds, private investment
companies, portfolio funds and pooled investment vehicles which engage in a variety of
investment strategies, managed by investment managers.   F-31




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  LimitedPartnerships(in thousands)Beginning balance  January 3, 2009
    
    $
    14,334Actual return on Plan assets:Relating to assets still held at the reporting date
    
    
    1,579Purchases, sales and settlements
    
    
    (2,988
    )Ending balance  January 2, 2010
    
    $
    12,925
   Pension
    
    
    PostretirementPlans
    
    
    Plans2010
    
    $
    10,900
    
    
    $
    3902011
    
    
    10,900
    
    
    
    4002012
    
    
    11,000
    
    
    
    3702013
    
    
    11,000
    
    
    
    3602014
    
    
    11,200
    
    
    
    3402015-2019
    
    
    56,300
    
    
    
    1,720
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Discount rate used for determining
projected benefit obligation
    
    
    6.10
    %
    
    
    8.00
    %
    
    
    6.75
    %Discount rate used for determining
net benefit (income) cost
    
    
    8.00
    %
    
    
    6.75
    %
    
    
    6.00
    %Long-term rate of return on plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %Average rate of compensation increase
for determining projected benefit
obligation
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAverage rate of compensation increase
for determining net benefit (income) cost
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
   F-32




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
    January 2, 2010
    
    
    January 3, 2009Health care cost trend rate assumed next year:Pre-65
    
    
    7.8
    %
    
    
    8.0
    %Post-65
    
    
    7.8
    %
    
    
    7.0
    %Rate at which the trend rate is assumed to
decline
(the ultimate trend rate)
    
    
    4.5
    %
    
    
    4.5
    %Year trend rate reaches the ultimate rate
    
    
    2027
    
    
    
    2027
  One
    
    
    OnePercentage
    
    
    PercentagePoint
    
    
    PointIncrease
    
    
    DecreaseEffect on total of service and interest cost
components
    
    $
    39
    
    
    $
    (33
    )Effect on health care component of the accumulated
post-retirement benefit obligation
    
    $
    502
    
    
    $
    (416
    )
   F-33




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
   Note 8Inventories
 January 2, 2010
    
    
    January 3, 2009Finished goods
    
    $
    251,540
    
    
    $
    322,095Raw materials
    
    
    1,822
    
    
    
    4,202$
    253,362
    
    
    $
    326,297
 Note 17 of Notes to Consolidated Financial Statements
 Note 9Property, Plant and Equipment
 January 2, 2010
    
    
    January 3, 2009Land and land improvements
    
    $
    440
    
    
    $
    493Building, building improvements and leasehold
improvements
    
    
    89,899
    
    
    
    55,992Furniture and fixtures
    
    
    70,147
    
    
    
    61,369Machinery and equipment
    
    
    14,332
    
    
    
    26,680Computer hardware and software
    
    
    113,305
    
    
    
    101,193Construction in progress
    
    
    6,339
    
    
    
    7,027$
    294,462
    
    
    $
    252,754Less: Accumulated depreciation and
amortization
    
    
    (173,971
    )
    
    
    (143,191
    )Property, plant and equipment, net
    
    $
    120,491
    
    
    $
    109,563
   F-34




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 10Intangible Assets and Goodwill
  January 2, 2010
    
    
    January 3, 2009Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net
    
    
    Amount
    
    
    Amortization
    
    
    NetFinite-lived intangible assets:Licenses for a term
(Company as licensee)
    
    $
    330,389
    
    
    $
    46,268
    
    
    $
    284,121
    
    
    $
    281,800
    
    
    $
    36,894
    
    
    $
    244,906Other
    
    
    20,427
    
    
    
    8,387
    
    
    
    12,040
    
    
    
    16,204
    
    
    
    6,729
    
    
    
    9,475350,816
    
    
    
    54,655
    
    
    
    296,161
    
    
    
    298,004
    
    
    
    43,623
    
    
    
    254,381Indefinite lived intangible assets:Trademarks
    
    
    56,719
    
    
    
    
    
    
    
    56,719
    
    
    
    19,366
    
    
    
    
    
    
    
    19,366Licenses in perpetuity
    
    
    23,951
    
    
    
    
    
    
    
    23,951
    
    
    
    8,909
    
    
    
    
    
    
    
    8,90980,670
    
    
    
    
    
    
    
    80,670
    
    
    
    28,275
    
    
    
    
    
    
    
    28,275Intangible Assets
    
    $
    431,486
    
    
    $
    54,655
    
    
    $
    376,831
    
    
    $
    326,279
    
    
    $
    43,623
    
    
    $
    282,656
 Licenses
    
    
    Finite-livedin
    
    
    IntangibleTrademarks
    
    
    Perpetuity
    
    
    Assets
    
    
    Other
    
    
    TotalBalance at December 29, 2007
    
    $
    19,366
    
    
    $
    8,909
    
    
    $
    242,109
    
    
    $
    12,443
    
    
    $
    282,827Amortization expense
    
    
    
    
    
    
    
    
    
    
    (7,369
    )
    
    
    (2,260
    )
    
    
    (9,629
    )Acquisition of CK licenses (a)
    
    
    
    
    
    
    
    
    
    
    24,700
    
    
    
    
    
    
    
    24,700Renewal of Chaps license (b)
    
    
    
    
    
    
    
    
    
    
    2,027
    
    
    
    
    
    
    
    2,027Translation adjustments
    
    
    
    
    
    
    
    
    
    
    (16,561
    )
    
    
    (708
    )
    
    
    (17,269
    )Balance at January 3, 2009
    
    
    19,366
    
    
    
    8,909
    
    
    
    244,906
    
    
    
    9,475
    
    
    
    282,656Amortization expense
    
    
    
    
    
    
    
    
    
    
    (9,374
    )
    
    
    (1,658
    )
    
    
    (11,032
    )Recapture of tax basis (c)
    
    
    37,353
    
    
    
    15,042
    
    
    
    33,054
    
    
    
    
    
    
    
    85,449Write off of Calvin Klein
Golf license (d)
    
    
    
    
    
    
    
    
    
    
    (792
    )
    
    
    
    
    
    
    (792
    )Acquisitions (e)
    
    
    
    
    
    
    
    
    
    
    846
    
    
    
    3,592
    
    
    
    4,438Translation adjustments
    
    
    
    
    
    
    
    
    
    
    15,481
    
    
    
    631
    
    
    
    16,112Balance at January 2, 2010
    
    $
    56,719
    
    
    $
    23,951
    
    
    $
    284,121
    
    
    $
    12,040
    
    
    $
    376,831
 
 (a)
    
    In connection with the purchase of the 2008 CK Licenses, the Company recorded intangible
assets of $24,700 during Fiscal 2008 related to licenses for a term. See Note 2 of Notes to
Consolidated Financial Statements. The Company expects to amortize the 2008 CK Licenses over a
weighted average period of approximately 37 years.(b)
    
    During Fiscal 2008, the Company paid $2,027 to renew its Chapslicense through December 31,
2013. The Company expects to amortize the rights associated with the Chaps renewal payment
over a period of approximately five years.(c)
    
    Relates to the correction of errors in prior period deferred tax balances associated with the
recapture of cancellation of indebtedness income which had been deferred in connection with
the Companys bankruptcy proceedings in 2003. See Note 6 to Notes to Consolidated Financial
Statements.(d)
    
    Represents amount reclassified to assets of discontinued operations and subsequently written
off to Income (loss) from discontinued operations, net of taxes. See Note 3 to Notes to
Consolidated Financial Statements.(e)
    
    Relates to the acquisition of eight retail stores in Brazil during the fourth quarter of
Fiscal 2009, including an indefinite lived intangible asset of $3,592 and
an intangible asset arising from favorability of acquired leases of $846, with a weighted
average amortization period of 2.8 years. See Note 2 to Notes to Consolidated Financial Statements.  2010
    
    $
    10,2452011
    
    
    9,6082012
    
    
    9,4212013
    
    
    9,3232014
    
    
    8,172
  F-35




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Sportswear
    
    
    Intimate
    
    
    SwimwearGroup
    
    
    Apparel Group
    
    
    Group
    
    
    TotalGoodwill balance at December 29, 2007
    
    
    105,906
    
    
    
    400
    
    
    
    642
    
    
    
    106,948Adjustment:Translation adjustments
    
    
    (6,620
    )
    
    
    (24
    )
    
    
    
    
    
    
    (6,644
    )Other (a)
    
    
    (168
    )
    
    
    
    
    
    
    
    
    
    
    (168
    )Goodwill balance at January 3, 2009
    
    $
    99,118
    
    
    $
    376
    
    
    $
    642
    
    
    $
    100,136Adjustment:Translation adjustments
    
    
    4,889
    
    
    
    66
    
    
    
    
    
    
    
    4,955Other (b)
    
    
    4,626
    
    
    
    1,004
    
    
    
    
    
    
    
    5,630Goodwill balance at January 2, 2010
    
    $
    108,633
    
    
    $
    1,446
    
    
    $
    642
    
    
    $
    110,721
 
 (a)
    
    Primarily related to the reduction of certain reserves in the Companys CKJEA businesses that
were in existence on the date of acquisition of the CKJEA business.(b)
    
    Relates to (i) the acquisition of businesses in Chile, and Peru ($698 in Intimate Apparel)
and Brazil ($1,083 in Sportswear and $306 in Intimate Apparel), allocated based upon the
relative operating income generated from sales of Calvin KleinJeans and Calvin Klein
Underwear by the eight acquired retail stores during the fourth quarter of Fiscal 2009 and
(ii) an adjustment of $3,543 related to the recapture of certain reserves in the Companys
CKJEA businesses that were in existence on the date of acquisition of the CKJEA business. None
of the goodwill is deductible for income tax purposes. (see Notes 2 and 6 of Notes to
Consolidated Financial Statements). Calvin Klein Note 1 of Notes
to Consolidated Financial Statements  Significant Accounting Policies- Goodwill and Other
Intangible Assets.
 Note 11Accumulated Other Comprehensive Income
  January 2, 2010
    
    
    January 3, 2009Foreign currency translation adjustments (a)
    
    $
    48,558
    
    
    $
    13,198Actuarial (losses), net related to post
retirement medical plans, net of $607 tax
    
    
    (1,058
    )
    
    
    (29
    )(Loss) on cash flow hedges, net of $387 tax
    
    
    (1,027
    )
    
    
    (328
    )Total accumulated other comprehensive income
    
    $
    46,473
    
    
    $
    12,841
 (a)
    
    The foreign currency translation adjustments reflect the change in the U.S. dollar
relative to functional currencies where the Company conducts certain of its operations.
The increase of $35,360 in the gain related to foreign currency translation adjustments for
Fiscal 2009 compared to Fiscal 2008 reflects the weakening of the U.S. dollar relative to
foreign currencies, coupled with the fact that approximately 60% of the Companys assets
are based outside of the U.S.  F-36




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 12Debt
  January 2, 2010
    
    
    January 3, 2009Short-term debtCKJEA notes payable and other
    
    $
    47,684
    
    
    $
    67,893Revolving credit facilities
    
    
    189
    
    
    
    11,995Current portion of 8 7/8% Senior Notes
    
    
    50,000
    
    
    
    97,873
    
    
    
    79,888Long-term debt8 7/8% Senior Notes due 2013
    
    
    110,890
    
    
    
    160,890Debt premium on 2003 and 2004 swaps
    
    
    1,945
    
    
    
    Unrealized gain on swap agreements
    
    
    
    
    
    
    2,904112,835
    
    
    
    163,794Total Debt
    
    $
    210,708
    
    
    $
    243,682
 Financing Agreements
 Senior Notes
 7 8 7 8
    F-37




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Interest Rate Swap Agreements
 7 8
   January 3, 2009Unrealized gain:2003 Swap Agreement
    
    $
    1,9722004 Swap Agreement
    
    
    932Net unrealized gain
    
    $
    2,904
 New Credit Agreements
    per annum per annum
  F-38




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
        F-39




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Revolving Credit Facility; Amended and Restated Credit Agreement and Foreign Revolving Credit
Facility
  Euro-Denominated CKJEA Notes Payable and Other
  Debt Covenants
  Interest
 7 8
 Note 13Stockholders Equity
 Preferred Stock
  Share Repurchase Program
    F-40




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 2005 Stock Incentive Plan
  2003 Stock Incentive Plan
 1 4 1 4
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Life (Years)
    
    
    ValueOutstanding as of January 3, 2009
    
    
    2,148,812
    
    
    $
    25.50Granted
    
    
    635,650
    
    
    
    27.31Exercised
    
    
    (265,867
    )
    
    
    15.17Forfeited / Expired
    
    
    (56,249
    )
    
    
    38.57Outstanding as of January 2, 2010
    
    
    2,462,346
    
    
    $
    26.79
    
    
    
    6.8
    
    
    $
    41,128Options exercisable as of
January 2, 2010
    
    
    1,487,767
    
    
    $
    22.27
    
    
    
    5.4
    
    
    $
    30,709
  F-41




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  WeightedRestricted
    
    
    Average GrantShares/Units
    
    
    Date Fair ValueUnvested as of
January 3, 2009
    
    
    664,956
    
    
    $
    34.30Granted
    
    
    356,269
    
    
    
    26.27Vested
    
    
    (221,272
    )
    
    
    26.04Forfeited
    
    
    (48,845
    )
    
    
    36.56Unvested as of
January 2, 2010
    
    
    751,108
    
    
    $
    32.78
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Weighted-average grant date fair value of options
granted
    
    $
    12.37
    
    
    $
    20.21
    
    
    $
    10.78Intrinsic value of options exercised
    
    
    26.77
    
    
    
    28.35
    
    
    
    14.23Total fair value of restricted shares/units vested
    
    
    20.24
    
    
    
    37.15
    
    
    
    28.13
  January 2, 2010
    
    
    January 3, 2009Common Stock:Balance at beginning of year
    
    
    50,122,614
    
    
    
    48,202,442Shares issued upon exercise of stock options
    
    
    265,867
    
    
    
    1,582,071Shares issued upon vesting of restricted
stock grants
    
    
    221,272
    
    
    
    347,013Shares issued to directors / other
    
    
    8,042
    
    
    
    (8,912
    )Balance at end of year
    
    
    50,617,795
    
    
    
    50,122,614Treasury Stock:Balance at beginning of year
    
    
    4,865,401
    
    
    
    3,796,302Purchases of Common Stock (a)
    
    
    74,328
    
    
    
    1,069,099Balance at end of year
    
    
    4,939,729
    
    
    
    4,865,401
 
 (a)
    
    Represents zero and 943,000 shares for Fiscal 2009 and Fiscal 2008, respectively,
purchased under the Companys share repurchase programs and 74,328 and 126,099 shares
for Fiscal 2009 and Fiscal 2008, respectively, surrendered by employees in satisfaction
of certain payroll tax obligations associated with the vesting of restricted stock. Note 1 of the Notes to
Consolidated Financial Statements  Stock-Based Compensation.
  F-42




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 14Income per Common Share
 Note1 of Notes to Consolidated Financial Statements
 Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Numerator for basic and diluted income per common share:Income from continuing operations attributable to Warnaco Group, Inc. common shareholders and participating securities
    
    $
    102,225
    
    
    $
    51,046
    
    
    $
    86,909Less: allocation to participating securities
    
    
    (1,262
    )
    
    
    (658
    )
    
    
    (1,395
    )Income from continuing operations attributable to Warnaco Group, Inc. common shareholders
    
    $
    100,963
    
    
    $
    50,388
    
    
    $
    85,514Income (loss) from discontinued operations, net of tax, attributable to Warnaco Group, Inc. common shareholders and
participating securities
    
    $
    (6,227
    )
    
    $
    (3,792
    )
    
    $
    (7,802
    )Less: allocation to participating securities
    
    
    77
    
    
    
    49
    
    
    
    125Income (loss) from discontinued operations attributable to Warnaco Group, Inc. common shareholders
    
    $
    (6,150
    )
    
    $
    (3,743
    )
    
    $
    (7,677
    )Net income attributable to Warnaco Group, Inc. common shareholders and participating securities
    
    $
    95,998
    
    
    $
    47,254
    
    
    $
    79,107Less: allocation to participating securities
    
    
    (1,185
    )
    
    
    (609
    )
    
    
    (1,270
    )Net income attributable to Warnaco Group, Inc. common shareholders
    
    $
    94,813
    
    
    $
    46,645
    
    
    $
    77,837Basic income per common share attributable to Warnaco Group, Inc. common shareholders:Weighted average number of common shares outstanding used in computing income per common share
    
    
    45,433,874
    
    
    
    45,351,336
    
    
    
    44,908,028Income per common share from continuing operations
    
    $
    2.22
    
    
    $
    1.11
    
    
    $
    1.90Income per common share from discontinued operations
    
    
    (0.13
    )
    
    
    (0.08
    )
    
    
    (0.17
    )Net income per common share
    
    $
    2.09
    
    
    $
    1.03
    
    
    $
    1.73Diluted income per share attributable to Warnaco Group, Inc. common shareholders:Weighted average number of common shares outstanding used in computing basic income per common share
    
    
    45,433,874
    
    
    
    45,351,336
    
    
    
    44,908,028Effect of dilutive securities:Stock options and restricted stock units
    
    
    762,523
    
    
    
    1,243,702
    
    
    
    1,598,291Weighted average number of shares and share equivalents used in computing income per common share
    
    
    46,196,397
    
    
    
    46,595,038
    
    
    
    46,506,319Income per common share from continuing operations
    
    $
    2.19
    
    
    $
    1.08
    
    
    $
    1.84Income per common share from discontinued operations
    
    
    (0.14
    )
    
    
    (0.08
    )
    
    
    (0.17
    )Net income per common share
    
    $
    2.05
    
    
    $
    1.00
    
    
    $
    1.67Number of anti-dilutive out-of-the-money stock options outstanding (a)
    
    
    436,034
    
    
    
    441,700
    
    
    
    4,400
 (a)
    
    Options to purchase shares of common stock at an exercise price greater than the
average market price for each period presented are anti-dilutive and therefore not included in the
computation of diluted income per common share from continuing operations.  F-43




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 15Lease and Other Commitments
  Rental paymentsYear
    
    Real Estate
    
    
    Equipment2010
    
    $
    65,341
    
    
    $
    6,9052011
    
    
    56,778
    
    
    
    5,2412012
    
    
    51,954
    
    
    
    3,1972013
    
    
    43,400
    
    
    
    1,8862014
    
    
    35,519
    
    
    
    2412015 and thereafter
    
    
    112,397
    
    
    
    
   MinimumYear
    
    Royalty (a)2010
    
    $
    66,3312011
    
    
    64,8402012
    
    
    61,9432013
    
    
    62,1162014
    
    
    67,3082015 and thereafter
    
    
    1,456,951
 
 (a)
    
    Includes all minimum royalty obligations. Some of the Companys license agreements have no
expiration date or extend to 2044 or 2046. License agreements with no expiration date are
assumed to end in 2044 for purposes of this table. Variable based minimum royalty obligations
are based upon payments for the most recent fiscal year. Certain of the Companys license
agreements also require the Company to pay a specified percentage of net revenue (ranging from
1-4%) to the licensor for advertising and promotion of the licensed products (which amount is
not included in minimum royalty obligations for purposes of this item). Note 4 of Notes to Consolidated Financial Statements
 Note 4 of Notes to
Consolidated Financial Statements
 Notes 1
and 17 of Notes to Consolidated Financial Statements
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Contractual Obligations,
  F-44




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 16Fair Value Measurement
  Level 1 
    
    Inputs are quoted prices in active markets for identical assets or liabilities.Level 2 
    
    Inputs are quoted prices for similar assets or liabilities in an active market,
quoted prices for identical or similar assets or liabilities in markets that are not active,
inputs other than quoted prices that are observable and market-corroborated inputs which are
derived principally from or corroborated by observable market data.Level 3 
    
    Inputs are derived from valuation techniques in which one or more significant inputs
or value drivers are unobservable.
   7 8
  January 2, 2010
    
    
    January 3, 2009(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)AssetsInterest rate swaps
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,904
    
    
    $
    Foreign currency
exchange contracts
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    2,345
    
    
    
    LiabilitiesForeign currency
exchange contracts
    
    $
    
    
    
    $
    (3,400
    )
    
    $
    
    
    
    $
    
    
    
    $
    5,484
    
    
    $
    
 Note 17Financial Instruments
  Accounts Receivable
 Accounts Payable
 Short-term Revolving Credit Facilities
  F-45




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Senior Notes 7 8
 Interest Rate Swaps
 Foreign Currency Exchange Forward Contracts
  January 2, 2010
    
    
    January 3, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairBalance Sheet Location
    
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Accounts receivable
    
    Accounts receivable, net of reserves
    
    $
    290,737
    
    
    $
    290,737
    
    
    $
    251,886
    
    
    $
    251,886Open foreign currency exchange contracts
    
    Prepaid expenses and other current assets
    
    
    79
    
    
    
    79
    
    
    
    5,249
    
    
    
    5,249Liabilities:Accounts payable
    
    Accounts payable
    
    
    127,636
    
    
    
    127,636
    
    
    
    146,030
    
    
    
    146,030Short-term revolving credit facilities
    
    Short-term debt
    
    
    47,873
    
    
    
    47,873
    
    
    
    79,888
    
    
    
    79,888Senior Notes, current portion
    
    Short-term debt
    
    
    50,000
    
    
    
    51,479
    
    
    
    
    
    
    
    Senior Notes
    
    Long-term debt
    
    
    110,890
    
    
    
    114,170
    
    
    
    160,890
    
    
    
    152,846Interest rate swaps  net loss
    
    Other liabilities
    
    
    
    
    
    
    
    
    
    
    2,904
    
    
    
    2,904Open foreign currency exchange
contracts
    
    Accrued liabilities
    
    
    (3,400
    )
    
    
    (3,400
    )
    
    
    (5,484
    )
    
    
    (5,484
    )
 Derivative Financial Instruments
     F-46




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
   Asset Derivatives
    
    
    Liability DerivativesDerivatives designated as
    
    
    
    
    
    

    
    Fair Value
    
    
    
    
    
    


    Fair Valuehedging instruments under
FASB ASC 815-20
    
    Type (a)

    
    

    Balance Sheet 
Location
    
    
    January 2, 
2010
    
    
    January 3, 2009
    
    
    Balance Sheet
Location
    
    
    January 2, 
2010
    
    
    January 3, 2009Foreign exchange contracts
    
    CF
    
    Prepaid expenses and other current assets
    
    $
    
    
    
    $
    
    
    
    Accrued liabilities
    
    $
    (1,119
    )
    
    $
    (328
    )Interest rate swaps
    
    FV
    
    Other assets
    
    
    
    
    
    
    2,904
    
    
    Long-term debt
    
    
    
    
    
    
    Total derivatives designated as
hedging instruments under
FASB ASC 815-20
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    2,904
    
    
    
    
    
    
    $
    (1,119
    )
    
    $
    (328
    )Derivatives not designated as
hedging instruments under
FASB ASC 815-20Foreign exchange contracts
    
    
    
    
    
    Prepaid expenses and other current assets
    
    $
    79
    
    
    $
    2,345
    
    
    Accrued liabilities
    
    $
    (2,281
    )
    
    $
    (5,156
    )Total derivatives not
designated as
hedging instruments under
FASB ASC 815-20
    
    
    
    
    
    
    
    
    
    $
    79
    
    
    $
    2,345
    
    
    
    
    
    
    $
    (2,281
    )
    
    $
    (5,156
    )Total derivatives
    
    
    
    
    
    
    
    
    
    $
    79
    
    
    $
    5,249
    
    
    
    
    
    
    $
    (3,400
    )
    
    $
    (5,484
    )
 (a)
    
    CF = cash flow hedge; FV = fair value hedge  F-47




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Amount of
    
    
    Location of
    
    Amount of
    
    
    
    
    Amount ofGain (Loss)
    
    
    Gain (Loss)
    
    Gain (Loss)
    
    
    
    
    Gain (Loss)Recognized
    
    
    Reclassified
    
    Reclassified
    
    
    Location of
    
    Recognizedin OCI on
    
    
    from
    
    from
    
    
    Gain (Loss)
    
    in Income onDerivatives
    
    
    Accumulated
    
    Accumulated
    
    
    Recognized
    
    Derivative(Effective
    
    
    OCI into
    
    OCI into Income
    
    
    in Income
    
    (IneffectiveDerivatives in FASB
    
    
    
    Portion)
    
    
    Income
    
    (Effective Portion)
    
    
    on Derivative
    
    Portion)ASC 815-20 Cash Flow
    
    Nature of Hedged
    
    Fiscal
    
    
    Fiscal
    
    
    (Effective
    
    Fiscal
    
    
    Fiscal
    
    
    (Ineffective
    
    Fiscal
    
    
    FiscalHedging Relationships
    
    Transaction
    
    2009
    
    
    2008
    
    
    Portion)
    
    2009
    
    
    2008
    
    
    Portion) (c)
    
    2009
    
    
    2008Foreign exchangecontracts
    
    Minimum royalty and advertising costs (a)
    
    $
    (450
    )
    
    $
    330
    
    
    cost of goods sold
    
    $
    (314
    )
    
    $
    394
    
    
    other loss/income
    
    $
    (1
    )
    
    $
    Foreign exchange contracts
    
    Purchases of inventory (b)
    
    
    (1,868
    )
    
    
    (264
    )
    
    cost of goods sold
    
    
    (918
    )
    
    
    
    
    
    other loss/income
    
    
    (23
    )
    
    
    Total
    
    
    
    $
    (2,318
    )
    
    $
    66
    
    
    
    
    $
    (1,232
    )
    
    $
    394
    
    
    
    
    $
    (24
    )
    
    $
    
 (a)
    
    At January 2, 2010, the amount hedged was 9,213; contracts expire September 2010. At
January 3, 2009, the amount hedged was $8,866; contracts expire September 2009.(b)
    
    At January 2, 2010, the amount hedged was $26,760; contracts expire April 2011. At January 3,
2009, the amount hedged was $5,340; contracts expire October 2009.(c)
    
    No amounts were excluded from effectiveness testing Amount ofGain (Loss)Location of
    
    
    RecognizedDerivatives not
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (Loss)
    
    
    in Incomedesignated as hedging
    
    
    
    
    
    
    
    
    
    Amount Hedged
    
    
    Maturity Date
    
    
    Recognized
    
    
    on Derivativeinstruments under
    
    Nature of Hedged
    
    
    
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    Fiscal
    
    
    in Income
    
    
    Fiscal
    
    
    FiscalFASB ASC 815-20
    
    Transaction
    
    
    Instrument
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    on Derivative
    
    
    2009
    
    
    2008Foreign exchange contracts (d)
    
    Purchases of inventory
    
    Forward contracts
    
    $
    6,032
    
    
    $
    34,373
    
    
    August 2010
    
    November 2009 - 
December 2009
    
    other loss/income
    
    $
    (2,865
    )
    
    $
    1,711Foreign exchange contracts (e)
    
    Intercompany purchases of inventory
    
    Forward contracts
    
    
    11,395
    
    
    
    3,487
    
    
    December 2010
    
    August 2009
    
    other loss/income
    
    
    (387
    )
    
    
    467Foreign exchange contracts (f)
    
    Minimum royalty and advertising costs
    
    Forward contracts
    
    
    10,000
    
    
    
    10,000
    
    
    October 2010
    
    October 2009
    
    other loss/income
    
    
    (505
    )
    
    
    63Foreign exchange contracts
    
    Intercompany payables
    
    Forward contracts
    
    
    12,000
    
    
    
    8,400
    
    
    January 2010
    
    April 2010
    
    other loss/income
    
    
    8
    
    
    
    (318
    )Foreign exchange contracts
    
    Intercompany loans
    
    Zero-cost collars
    
    
    1,500
    
    
    
    12,700
    
    
    June 2010
    
    November 2009
    
    other loss/income
    
    
    258
    
    
    
    60Foreign exchange contracts
    
    Intercompany payables
    
    Zero-cost collars
    
    
    26,000
    
    
    
    25,000
    
    
    
    January 2010 -
June 2010
    
    
    May 2009
    
    other loss/income
    
    
    1,420
    
    
    
    (1,591
    )Foreign exchange contracts
    
    Intercompany payables
    
    Zero-cost collars
    
    
    14,500
    
    
    
    25,000
    
    
    
    January 2010 - May 2010
    
    
    September 2009
    
    selling, general and administrative
    
    
    2,688
    
    
    
    (3,100
    )Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    617
    
    
    $
    (2,708
    )
 (d)
    
    Forward contracts used to offset 50% of U.S. dollar-denominated purchases of inventory by the
Companys foreign subsidiaries whose functional currencies were the Euro, Canadian dollar and
Mexican peso, entered into by Warnaco Inc. on behalf of foreign subsidiaries and the British
pound, entered into by a European subsidiary.(e)
    
    Forward contracts used to offset 50% of Euro-denominated intercompany purchases by a
subsidiary whose functional currency is the British pound.(f)
    
    Forward contracts used to offset payment of minimum royalty and advertising costs related to
sales of inventory by the Companys foreign subsidiary whose functional currency was the Euro,
entered into by Warnaco Inc. on behalf of a foreign subsidiary.  F-48




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
  Balance December 29, 2007
    
    $
    Derivative gains recognized
    
    
    66Amount amortized to earnings
    
    
    (394
    )Balance January 3, 2009
    
    $
    (328
    )Derivative gains recognized
    
    
    (2,342
    )Amount amortized to earnings
    
    
    1,256Balance before tax effect
    
    
    (1,414
    )Tax effect
    
    
    387Balance January 2, 2010, net of tax
    
    $
    (1,027
    )
  Note 18Cash Flow Information
  Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Cash paid (received) during the year for:Interest expense
    
    $
    22,792
    
    
    $
    28,114
    
    
    $
    33,810Interest income
    
    
    (1,964
    )
    
    
    (2,535
    )
    
    
    (2,910
    )Income taxes, net of refunds received
    
    
    29,680
    
    
    
    43,331
    
    
    
    49,641Supplemental non-cash investing and financing activities:Accounts payable for purchase of fixed assets
    
    
    3,020
    
    
    
    3,707
    
    
    
    4,990
 Note 19Legal Matters
 SEC Inquiry: Chaps
  OP Litigation
  F-49




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Lejaby Claims: Lejaby Lejaby
 Tyr Litigation
 Other
 Note 20Supplemental Consolidating Condensed Financial Information
 Note 12 of
Notes to Consolidated Financial Statements
 January 2, 2010The Warnaco
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    

Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    123,243
    
    
    $
    (2
    )
    
    $
    197,513
    
    
    $
    
    
    
    $
    320,754Accounts receivable, net
    
    
    
    
    
    
    24,283
    
    
    
    69,377
    
    
    
    197,077
    
    
    
    
    
    
    
    290,737Inventories
    
    
    
    
    
    
    54,097
    
    
    
    60,646
    
    
    
    138,619
    
    
    
    
    
    
    
    253,362Prepaid expenses and other current assets
    
    
    
    
    
    
    49,857
    
    
    
    15,881
    
    
    
    70,094
    
    
    
    
    
    
    
    135,832Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    2,046
    
    
    
    
    
    
    
    2,172Total current assets
    
    
    
    
    
    
    251,480
    
    
    
    146,028
    
    
    
    605,349
    
    
    
    
    
    
    
    1,002,857Property, plant and equipment, net
    
    
    
    
    
    
    44,783
    
    
    
    5,093
    
    
    
    70,615
    
    
    
    
    
    
    
    120,491Investment in subsidiaries
    
    
    1,165,775
    
    
    
    551,617
    
    
    
    
    
    
    
    
    
    
    
    (1,717,392
    )
    
    
    Other assets
    
    
    
    
    
    
    47,709
    
    
    
    92,269
    
    
    
    396,468
    
    
    
    
    
    
    
    536,446Total assets
    
    $
    1,165,775
    
    
    $
    895,589
    
    
    $
    243,390
    
    
    $
    1,072,432
    
    
    $
    (1,717,392
    )
    
    $
    1,659,794LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Liabilities of discontinued operations
    
    $
    
    
    
    $
    4
    
    
    $
    7,490
    
    
    $
    524
    
    
    $
    
    
    
    $
    8,018Accounts payable, accrued liabilities,
short-term debt and accrued taxes
    
    
    
    
    
    
    145,968
    
    
    
    35,116
    
    
    
    253,586
    
    
    
    
    
    
    
    434,670Total current liabilities
    
    
    
    
    
    
    145,972
    
    
    
    42,606
    
    
    
    254,110
    
    
    
    
    
    
    
    442,688Intercompany accounts
    
    
    249,665
    
    
    
    98,512
    
    
    
    (492,069
    )
    
    
    143,892
    
    
    
    
    
    
    
    Long-term debt
    
    
    
    
    
    
    112,835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,835Other long-term liabilities
    
    
    
    
    
    
    75,593
    
    
    
    2,309
    
    
    
    110,259
    
    
    
    
    
    
    
    188,161Stockholders equity
    
    
    916,110
    
    
    
    462,677
    
    
    
    690,544
    
    
    
    564,171
    
    
    
    (1,717,392
    )
    
    
    916,110Total liabilities and stockholders equity
    
    $
    1,165,775
    
    
    $
    895,589
    
    
    $
    243,390
    
    
    $
    1,072,432
    
    
    $
    (1,717,392
    )
    
    $
    1,659,794
  F-50




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 January 3, 2009The Warnaco
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    

Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    30,771
    
    
    $
    (2
    )
    
    $
    116,858
    
    
    $
    
    
    
    $
    147,627Accounts receivable, net
    
    
    
    
    
    
    22,755
    
    
    
    57,709
    
    
    
    171,422
    
    
    
    
    
    
    
    251,886Inventories
    
    
    
    
    
    
    67,251
    
    
    
    83,205
    
    
    
    175,841
    
    
    
    
    
    
    
    326,297Prepaid expenses and other current assets
    
    
    
    
    
    
    59,586
    
    
    
    23,786
    
    
    
    73,405
    
    
    
    
    
    
    
    156,777Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    5,381
    
    
    
    898
    
    
    
    
    
    
    
    6,279Total current assets
    
    
    
    
    
    
    180,363
    
    
    
    170,079
    
    
    
    538,424
    
    
    
    
    
    
    
    888,866Property, plant and equipment, net
    
    
    
    
    
    
    51,220
    
    
    
    6,045
    
    
    
    52,298
    
    
    
    
    
    
    
    109,563Investment in subsidiaries
    
    
    1,036,139
    
    
    
    551,617
    
    
    
    
    
    
    
    
    
    
    
    (1,587,756
    )
    
    
    Other assets
    
    
    
    
    
    
    80,644
    
    
    
    51,408
    
    
    
    365,612
    
    
    
    
    
    
    
    497,664Total assets
    
    $
    1,036,139
    
    
    $
    863,844
    
    
    $
    227,532
    
    
    $
    956,334
    
    
    $
    (1,587,756
    )
    
    $
    1,496,093LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Liabilities of discontinued operations
    
    $
    
    
    
    $
    
    
    
    $
    7,445
    
    
    $
    4,610
    
    
    $
    
    
    
    $
    12,055Accounts payable, accrued liabilities,
short-term debt and accrued taxes
    
    
    
    
    
    
    84,286
    
    
    
    47,619
    
    
    
    270,352
    
    
    
    
    
    
    
    402,257Total current liabilities
    
    
    
    
    
    
    84,286
    
    
    
    55,064
    
    
    
    274,962
    
    
    
    
    
    
    
    414,312Intercompany accounts
    
    
    247,398
    
    
    
    97,543
    
    
    
    (480,490
    )
    
    
    135,549
    
    
    
    
    
    
    
    Long-term debt
    
    
    
    
    
    
    163,794
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    163,794Other long-term liabilities
    
    
    
    
    
    
    45,814
    
    
    
    2,648
    
    
    
    80,784
    
    
    
    
    
    
    
    129,246Stockholders equity
    
    
    788,741
    
    
    
    472,407
    
    
    
    650,310
    
    
    
    465,039
    
    
    
    (1,587,756
    )
    
    
    788,741Total liabilities and stockholders equity
    
    $
    1,036,139
    
    
    $
    863,844
    
    
    $
    227,532
    
    
    $
    956,334
    
    
    $
    (1,587,756
    )
    
    $
    1,496,093
 Fiscal 2009The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet revenues
    
    $
    
    
    
    $
    445,830
    
    
    $
    470,864
    
    
    $
    1,102,931
    
    
    $
    
    
    
    $
    2,019,625Cost of goods sold
    
    
    
    
    
    
    296,495
    
    
    
    315,876
    
    
    
    542,907
    
    
    
    
    
    
    
    1,155,278Gross profit
    
    
    
    
    
    
    149,335
    
    
    
    154,988
    
    
    
    560,024
    
    
    
    
    
    
    
    864,347SG&A expenses (including amortization of intangible assets)
    
    
    
    
    
    
    129,397
    
    
    
    98,439
    
    
    
    422,103
    
    
    
    
    
    
    
    649,939Pension income
    
    
    
    
    
    
    20,424
    
    
    
    
    
    
    
    449
    
    
    
    
    
    
    
    20,873Operating income (loss)
    
    
    
    
    
    
    (486
    )
    
    
    56,549
    
    
    
    137,472
    
    
    
    
    
    
    
    193,535Equity in income of subsidiaries
    
    
    (95,998
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95,998
    
    
    
    Intercompany
    
    
    
    
    
    
    (9,508
    )
    
    
    (10,287
    )
    
    
    19,795
    
    
    
    
    
    
    
    Other (income) loss
    
    
    
    
    
    
    5,565
    
    
    
    
    
    
    
    (3,676
    )
    
    
    
    
    
    
    1,889Interest (income) expense, net
    
    
    
    
    
    
    17,016
    
    
    
    (122
    )
    
    
    5,755
    
    
    
    
    
    
    
    22,649Income (loss) from continuing operations before provision for income taxes and noncontrolling interest
    
    
    95,998
    
    
    
    (13,559
    )
    
    
    66,958
    
    
    
    115,598
    
    
    
    (95,998
    )
    
    
    168,997Provision (benefit) for income taxes
    
    
    
    
    
    
    (5,157
    )
    
    
    25,465
    
    
    
    43,964
    
    
    
    
    
    
    
    64,272Income (loss) from continuing operations before noncontrolling interest
    
    
    95,998
    
    
    
    (8,402
    )
    
    
    41,493
    
    
    
    71,634
    
    
    
    (95,998
    )
    
    
    104,725Income (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    (299
    )
    
    
    (1,259
    )
    
    
    (4,669
    )
    
    
    
    
    
    
    (6,227
    )Net income (loss)
    
    
    95,998
    
    
    
    (8,701
    )
    
    
    40,234
    
    
    
    66,965
    
    
    
    (95,998
    )
    
    
    98,498Less: Net income attributable to the noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,500
    )
    
    
    
    
    
    
    (2,500
    )Net income (loss) attributable to Warnaco Group, Inc.
    
    $
    95,998
    
    
    $
    (8,701
    )
    
    $
    40,234
    
    
    $
    64,465
    
    
    $
    (95,998
    )
    
    $
    95,998
  F-51




---



##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Fiscal 2008The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet revenues
    
    $
    
    
    
    $
    462,852
    
    
    $
    461,415
    
    
    $
    1,138,582
    
    
    $
    
    
    
    $
    2,062,849Cost of goods sold
    
    
    
    
    
    
    292,486
    
    
    
    316,566
    
    
    
    533,024
    
    
    
    
    
    
    
    1,142,076Gross profit
    
    
    
    
    
    
    170,366
    
    
    
    144,849
    
    
    
    605,558
    
    
    
    
    
    
    
    920,773SG&A expenses (including amortization of intangible assets)
    
    
    
    
    
    
    153,147
    
    
    
    117,786
    
    
    
    476,751
    
    
    
    
    
    
    
    747,684Pension income
    
    
    
    
    
    
    31,510
    
    
    
    
    
    
    
    134
    
    
    
    
    
    
    
    31,644Operating income (loss)
    
    
    
    
    
    
    (14,291
    )
    
    
    27,063
    
    
    
    128,673
    
    
    
    
    
    
    
    141,445Equity in income of subsidiaries
    
    
    (47,254
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,254
    
    
    
    Intercompany
    
    
    
    
    
    
    (14,661
    )
    
    
    (7,463
    )
    
    
    22,124
    
    
    
    
    
    
    
    Other (income) loss
    
    
    
    
    
    
    (7,344
    )
    
    
    (274
    )
    
    
    9,544
    
    
    
    
    
    
    
    1,926Interest (income) expense, net
    
    
    
    
    
    
    23,692
    
    
    
    (2
    )
    
    
    2,709
    
    
    
    
    
    
    
    26,399Income (loss) from continuing operations before provision for income taxes and noncontrolling interest
    
    
    47,254
    
    
    
    (15,978
    )
    
    
    34,802
    
    
    
    94,296
    
    
    
    (47,254
    )
    
    
    113,120Provision (benefit) for income taxes
    
    
    
    
    
    
    (8,627
    )
    
    
    18,791
    
    
    
    50,563
    
    
    
    
    
    
    
    60,727Income (loss) from continuing operations before noncontrolling interest
    
    
    47,254
    
    
    
    (7,351
    )
    
    
    16,011
    
    
    
    43,733
    
    
    
    (47,254
    )
    
    
    52,393Income (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    (274
    )
    
    
    (8,933
    )
    
    
    5,415
    
    
    
    
    
    
    
    (3,792
    )Net income (loss)
    
    
    47,254
    
    
    
    (7,625
    )
    
    
    7,078
    
    
    
    49,148
    
    
    
    (47,254
    )
    
    
    48,601Less: Net income attributable to the noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,347
    )
    
    
    
    
    
    
    (1,347
    )Net income (loss) attributable to Warnaco Group, Inc.
    
    $
    47,254
    
    
    $
    (7,625
    )
    
    $
    7,078
    
    
    $
    47,801
    
    
    $
    (47,254
    )
    
    $
    47,254
 Fiscal 2007The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet revenues
    
    $
    
    
    
    $
    456,039
    
    
    $
    459,776
    
    
    $
    903,764
    
    
    $
    
    
    
    $
    1,819,579Cost of goods sold
    
    
    
    
    
    
    322,889
    
    
    
    323,302
    
    
    
    423,713
    
    
    
    
    
    
    
    1,069,904Gross profit
    
    
    
    
    
    
    133,150
    
    
    
    136,474
    
    
    
    480,051
    
    
    
    
    
    
    
    749,675SG&A expenses (including amortization of intangible assets)
    
    
    
    
    
    
    119,569
    
    
    
    157,709
    
    
    
    337,545
    
    
    
    
    
    
    
    614,823Pension income
    
    
    
    
    
    
    (9,024
    )
    
    
    
    
    
    
    186
    
    
    
    
    
    
    
    (8,838
    )Operating income (loss)
    
    
    
    
    
    
    22,605
    
    
    
    (21,235
    )
    
    
    142,320
    
    
    
    
    
    
    
    143,690Equity in income of subsidiaries
    
    
    (79,107
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,107
    
    
    
    Intercompany
    
    
    
    
    
    
    (11,777
    )
    
    
    (5,827
    )
    
    
    17,604
    
    
    
    
    
    
    
    Other (income) loss
    
    
    
    
    
    
    (95
    )
    
    
    (6
    )
    
    
    (6,962
    )
    
    
    
    
    
    
    (7,063
    )Interest (income) expense, net
    
    
    
    
    
    
    29,933
    
    
    
    (8
    )
    
    
    4,027
    
    
    
    
    
    
    
    33,952Income (loss) from continuing operations before provision for income taxes and noncontrolling interest
    
    
    79,107
    
    
    
    4,544
    
    
    
    (15,394
    )
    
    
    127,651
    
    
    
    (79,107
    )
    
    
    116,801Provision (benefit) for income taxes
    
    
    
    
    
    
    1,044
    
    
    
    (2,672
    )
    
    
    31,520
    
    
    
    
    
    
    
    29,892Income (loss) from continuing operations before noncontrolling interest
    
    
    79,107
    
    
    
    3,500
    
    
    
    (12,722
    )
    
    
    96,131
    
    
    
    (79,107
    )
    
    
    86,909Income (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    (157
    )
    
    
    (14,828
    )
    
    
    7,183
    
    
    
    
    
    
    
    (7,802
    )Net income (loss)
    
    
    79,107
    
    
    
    3,343
    
    
    
    (27,550
    )
    
    
    103,314
    
    
    
    (79,107
    )
    
    
    79,107Less: Net income attributable to the noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) attributable to Warnaco Group, Inc.
    
    $
    79,107
    
    
    $
    3,343
    
    
    $
    (27,550
    )
    
    $
    103,314
    
    
    $
    (79,107
    )
    
    $
    79,107
  F-52




---



##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Fiscal 2009The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in) operating activities
from continuing operations
    
    $
    (2,536
    )
    
    $
    94,553
    
    
    $
    (2,901
    )
    
    $
    174,765
    
    
    $
    
    
    
    $
    263,881Net cash used in operating activities
from discontinued operations
    
    
    
    
    
    
    2,343
    
    
    
    4,080
    
    
    
    (5,390
    )
    
    
    
    
    
    
    1,033Net cash provided by (used in) operating activities
    
    
    (2,536
    )
    
    
    96,896
    
    
    
    1,179
    
    
    
    169,375
    
    
    
    
    
    
    
    264,914Cash flows from investing activities:Proceeds on disposal of assets and collection of notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    373
    
    
    
    
    
    
    
    373Purchase of property, plant and equipment
    
    
    
    
    
    
    (6,167
    )
    
    
    (1,179
    )
    
    
    (36,097
    )
    
    
    
    
    
    
    (43,443
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,511
    )
    
    
    
    
    
    
    (9,511
    )Net cash used in investing activities
    
    
    
    
    
    
    (6,167
    )
    
    
    (1,179
    )
    
    
    (45,235
    )
    
    
    
    
    
    
    (52,581
    )Cash flows from financing activities:Payment of deferred financing costs
    
    
    
    
    
    
    (515
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (515
    )Proceeds from the exercise of employee stock options
    
    
    4,034
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,034Purchase of treasury stock
    
    
    (1,498
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,498
    )Premium on cencellation of interest rate swaps
    
    
    
    
    
    
    2,218
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,218Increase (decrease) in short-term notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,985
    )
    
    
    
    
    
    
    (23,985
    )Borrowings (repayments) under revolving credit facility
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    (11,845
    )
    
    
    
    
    
    
    (11,805
    )Payment of dividend in connection with Brazil acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,018
    )
    
    
    
    
    
    
    (4,018
    )Cost to purchase non-controlling interest in an equity transaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,339
    )
    
    
    
    
    
    
    (5,339
    )Net cash provided by (used in) financing activities
    
    
    2,536
    
    
    
    1,743
    
    
    
    
    
    
    
    (45,187
    )
    
    
    
    
    
    
    (40,908
    )Effect of foreign exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,702
    
    
    
    
    
    
    
    1,702Increase in cash and cash equivalents
    
    
    
    
    
    
    92,472
    
    
    
    
    
    
    
    80,655
    
    
    
    
    
    
    
    173,127Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    30,771
    
    
    
    (2
    )
    
    
    116,858
    
    
    
    
    
    
    
    147,627Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    123,243
    
    
    $
    (2
    )
    
    $
    197,513
    
    
    $
    
    
    
    $
    320,754
 Fiscal 2008The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in) operating activities
from continuing operations
    
    $
    (8,134
    )
    
    $
    125,406
    
    
    $
    18,875
    
    
    $
    17,261
    
    
    $
    
    
    
    $
    153,408Net cash used in operating activities
from discontinued operations
    
    
    
    
    
    
    (1,553
    )
    
    
    (14,769
    )
    
    
    (11,199
    )
    
    
    
    
    
    
    (27,521
    )Net cash provided by (used in) operating activities
    
    
    (8,134
    )
    
    
    123,853
    
    
    
    4,106
    
    
    
    6,062
    
    
    
    
    
    
    
    125,887Cash flows from investing activities:Proceeds on disposal of assets and collection of
notes receivable
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    348
    
    
    
    
    
    
    
    354Purchase of property, plant and equipment
    
    
    
    
    
    
    (9,971
    )
    
    
    (1,875
    )
    
    
    (30,468
    )
    
    
    
    
    
    
    (42,314
    )Proceeds from the sale of businesses, net
    
    
    
    
    
    
    
    
    
    
    (2,430
    )
    
    
    29,210
    
    
    
    
    
    
    
    26,780Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,356
    )
    
    
    
    
    
    
    (2,356
    )Purchase of intangible assets
    
    
    
    
    
    
    (2,027
    )
    
    
    
    
    
    
    (24,700
    )
    
    
    
    
    
    
    (26,727
    )Net cash used in investing activities
    
    
    
    
    
    
    (11,992
    )
    
    
    (4,305
    )
    
    
    (27,966
    )
    
    
    
    
    
    
    (44,263
    )Cash flows from financing activities:Repayment of Term B Note
    
    
    
    
    
    
    (107,300
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107,300
    )Borrowings under revolving credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    12,000Repurchase of Senior Notes due 2013
    
    
    
    
    
    
    (46,185
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,185
    )Increase in short-term notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,593
    
    
    
    
    
    
    
    16,593Proceeds from the exercise of employee stock options
    
    
    28,496
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,496Purchase of treasury stock
    
    
    (20,532
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,532
    )Payment of deferred financing costs
    
    
    
    
    
    
    (3,934
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,934
    )Other
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170Net cash provided by (used in) financing activities
    
    
    8,134
    
    
    
    (157,419
    )
    
    
    
    
    
    
    28,593
    
    
    
    
    
    
    
    (120,692
    )Effect of foreign exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,223
    )
    
    
    
    
    
    
    (5,223
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (45,558
    )
    
    
    (199
    )
    
    
    1,466
    
    
    
    
    
    
    
    (44,291
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    76,174
    
    
    
    197
    
    
    
    115,547
    
    
    
    
    
    
    
    191,918Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    30,616
    
    
    $
    (2
    )
    
    $
    117,013
    
    
    $
    
    
    
    $
    147,627
  F-53




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Fiscal 2007The Warnaco
    
    
    
    
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    EliminationGroup, Inc.
    
    
    Warnaco Inc.
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Entries
    
    
    ConsolidatedNet cash provided by (used in) operating activities
from continuing operations
    
    $
    41,542
    
    
    $
    55,439
    
    
    $
    (25,965
    )
    
    $
    53,467
    
    
    $
    
    
    
    $
    124,483Net cash provided by (used) in operating activities
from discontinued operations
    
    
    
    
    
    
    3,834
    
    
    
    29,948
    
    
    
    2,158
    
    
    
    
    
    
    
    35,940Net cash provided by (used in) operating activities
    
    
    41,542
    
    
    
    59,273
    
    
    
    3,983
    
    
    
    55,625
    
    
    
    
    
    
    
    160,423Cash flows from investing activities:Proceeds on disposal of assets and collection of notes receivable
    
    
    
    
    
    
    2,318
    
    
    
    
    
    
    
    391
    
    
    
    
    
    
    
    2,709Purchase of property, plant and equipment
    
    
    
    
    
    
    (11,319
    )
    
    
    (2,862
    )
    
    
    (26,335
    )
    
    
    
    
    
    
    (40,516
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (677
    )
    
    
    
    
    
    
    (1,392
    )
    
    
    
    
    
    
    (2,069
    )Proceeds from the sale of businesses, net
    
    
    
    
    
    
    20,547
    
    
    
    (1,028
    )
    
    
    
    
    
    
    
    
    
    
    19,519Net cash provided by (used in) investing activities from continuing
operations
    
    
    
    
    
    
    10,869
    
    
    
    (3,890
    )
    
    
    (27,336
    )
    
    
    
    
    
    
    (20,357
    )Net cash used in investing activities from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (443
    )
    
    
    
    
    
    
    (443
    )Net cash provided by (used in) investing activities
    
    
    
    
    
    
    10,869
    
    
    
    (3,890
    )
    
    
    (27,779
    )
    
    
    
    
    
    
    (20,800
    )Cash flows from financing activities:Debt issued with business acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of debt assumed on business acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payment of deferred financing costs
    
    
    
    
    
    
    (480
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (480
    )Payment of Senior Notes due 2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of Term B Note
    
    
    
    
    
    
    (61,800
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,800
    )Proceeds from the exercise of employee stock options
    
    
    16,149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,149Purchase of treasury stock
    
    
    (57,691
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,691
    )Increase in short term CKJEA notes payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,493
    )
    
    
    
    
    
    
    (17,493
    )Proceeds from the sale and leaseback of store fixtures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    (430
    )
    
    
    
    
    
    
    (373
    )Net cash provided by (used in) financing activities
    
    
    (41,542
    )
    
    
    (62,223
    )
    
    
    
    
    
    
    (17,923
    )
    
    
    
    
    
    
    (121,688
    )Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,993
    
    
    
    
    
    
    
    6,993Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    7,919
    
    
    
    93
    
    
    
    16,916
    
    
    
    
    
    
    
    24,928Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    68,255
    
    
    
    104
    
    
    
    98,631
    
    
    
    
    
    
    
    166,990Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    76,174
    
    
    $
    197
    
    
    $
    115,547
    
    
    $
    
    
    
    $
    191,918
  F-54




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##### Table of Contents



THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
 Note 21Quarterly Results of Operations (Unaudited)
  Fiscal 2009First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter (a)
    
    
    Quarter
    
    
    Quarter (a)Net revenues
    
    $
    537,843
    
    
    $
    455,432
    
    
    $
    520,905
    
    
    $
    505,445Gross profit
    
    
    225,284
    
    
    
    188,999
    
    
    
    228,822
    
    
    
    221,242Income from continuing operations before non-controlling interest
    
    
    38,849
    
    
    
    19,555
    
    
    
    32,548
    
    
    
    13,773Loss from discontinued operations, net of taxes
    
    
    (1,020
    )
    
    
    (878
    )
    
    
    (1,562
    )
    
    
    (2,767
    )Net income
    
    
    37,571
    
    
    
    17,760
    
    
    
    29,656
    
    
    
    11,011Basic income per common share:Income from continuing operations
    
    $
    0.84
    
    
    $
    0.41
    
    
    $
    0.68
    
    
    $
    0.29Loss from discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.04
    )
    
    
    (0.05
    )Net income
    
    $
    0.82
    
    
    $
    0.39
    
    
    $
    0.64
    
    
    $
    0.24Diluted income per common share:Income from continuing operations
    
    $
    0.84
    
    
    $
    0.40
    
    
    $
    0.66
    
    
    $
    0.29Loss from discontinued operations
    
    
    (0.03
    )
    
    
    (0.02
    )
    
    
    (0.03
    )
    
    
    (0.06
    )Net income
    
    $
    0.81
    
    
    $
    0.38
    
    
    $
    0.63
    
    
    $
    0.23
 (a)
    
    During the second quarter of Fiscal 2009, the Company recorded a tax charge in
continuing operations of approximately $2,500, and a charge of approximately $400 in
discontinued operations, to correct prior periods associated with income taxes. During the
fourth quarter of Fiscal 2009, the Company recorded a tax charge in continuing operations of
approximately $1,100, and a charge of approximately $3,000 in discontinued operations, to
correct prior periods associated with income taxes. See Note 6 of Notes to Consolidated
Financial Statements. Fiscal 2008First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter (a)
    
    
    Quarter (a)
    
    
    Quarter (a)
    
    
    Quarter (a)Net revenues
    
    $
    567,155
    
    
    $
    502,790
    
    
    $
    547,626
    
    
    $
    445,278Gross profit
    
    
    253,785
    
    
    
    224,514
    
    
    
    254,638
    
    
    
    187,836Income (loss) from continuing operations before non-controlling interest
    
    
    7,314
    
    
    
    26,670
    
    
    
    29,408
    
    
    
    (12,346
    )Income (loss) from discontinued operations, net of taxes
    
    
    10,395
    
    
    
    (7,306
    )
    
    
    (2,897
    )
    
    
    (3,984
    )Net income (loss)
    
    
    17,709
    
    
    
    19,364
    
    
    
    26,511
    
    
    
    (16,330
    )Basic income per common share:Income (loss) from continuing operations
    
    $
    0.16
    
    
    $
    0.58
    
    
    $
    0.63
    
    
    $
    (0.26
    )Income (loss) from discontinued operations
    
    
    0.23
    
    
    
    (0.16
    )
    
    
    (0.06
    )
    
    
    (0.09
    )Net income (loss)
    
    $
    0.39
    
    
    $
    0.42
    
    
    $
    0.57
    
    
    $
    (0.35
    )Diluted income per common share:Income (loss) from continuing operations
    
    $
    0.16
    
    
    $
    0.56
    
    
    $
    0.62
    
    
    $
    (0.26
    )Income (loss) from discontinued operations
    
    
    0.22
    
    
    
    (0.15
    )
    
    
    (0.06
    )
    
    
    (0.09
    )Net income (loss)
    
    $
    0.38
    
    
    $
    0.41
    
    
    $
    0.56
    
    
    $
    (0.35
    )
 (a)
    
    During the first and second quarters of Fiscal 2008, the Company recorded expenses to
correct prior periods of approximately $3,800 and $1,000, respectively, primarily associated
with income taxes. During the third and fourth quarters of Fiscal 2008, the Company recorded
income to correct prior periods of approximately $900 and $2,600, respectively, primarily
associated with income taxes.  F-55




---



##### Table of Contents



SCHEDULE II
 THE WARNACO GROUP, INC.
VALUATION & QUALIFYING ACCOUNTS & RESERVES
(Dollars in thousands)
 AdditionsCharges toBalance at
    
    
    Cost and
    
    
    
    
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Expenses
    
    
    Other Additions /
    
    
    
    
    
    
    End ofDescription
    
    Period
    
    
    (1)
    
    
    Reclassification
    
    
    Deductions
    
    
    PeriodFiscal 2007Receivable allowances
    
    $
    87,064
    
    
    $
    181,551
    
    
    $
    (1,458
    )(4)
    
    $
    (180,454
    )(2)
    
    $
    86,703Tax valuation allowance
    
    $
    150,762
    
    
    $
    1,146
    
    
    $
    (131,711
    )(3)
    
    $
    (8,347
    )
    
    $
    11,850Fiscal 2008Receivable allowances
    
    $
    86,703
    
    
    $
    215,135
    
    
    $
    (1,963
    )(4)
    
    $
    (212,500
    )(2)
    
    $
    87,375Tax valuation allowance
    
    $
    11,850
    
    
    $
    2,021
    
    
    $
    1,159
    (3)
    
    $
    
    
    
    $
    15,030Fiscal 2009Receivable allowances
    
    $
    87,375
    
    
    $
    242,755
    
    
    $
    
    (4)
    
    $
    (240,148
    )(2)
    
    $
    89,982Tax valuation allowance
    
    $
    15,030
    
    
    $
    3,552
    
    
    $
    (1,127
    )(3)
    
    $
    
    
    
    $
    17,455
 (1)
    
    With respect to receivable allowances, includes bad debts, cash discounts, customer
allowances and sales returns.(2)
    
    Credits issued and amounts written-off, net of recoveries.(3)
    
    Relates primarily to adjustments to the Companys valuation allowance resulting from changes
in its deferred taxes due to: (a) basis differences resulting from the filing of the Companys U.S. corporate income tax
return, (b) finalized assessments of the Companys foreign tax returns by local taxing
authorities, (c) the realization of certain deferred tax assets that existed as of the date of
the Companys emergence from bankruptcy and (d) currency translation adjustments.(4)
    
    Amounts include reserve balances for discontinued operations.  A-1