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FORM 10-Q

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

For the quarterly period ended March  31, 2004

OR

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

For the transition period from             to            

Commission File Number 1-15381

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

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

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

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

Yes     X       No            

Common shares outstanding at March 31, 2004:  49,897,409 shares of Common Stock, $.01 par value.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes     X       No            

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2

WESTPOINT STEVENS INC.

Condensed Consolidated Balance Sheets
(In thousands)

See accompanying notes.

3

WESTPOINT STEVENS INC.

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

See accompanying notes.

4

WESTPOINT STEVENS INC.

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

See accompanying notes.

5

WESTPOINT STEVENS INC.

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

See accompanying notes.

6

WESTPOINT STEVENS INC.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three month period ended March 31, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K for We stPoint Stevens Inc. (the "Company") for the year ended December 31, 2003.  

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.

On June 1, 2003 (the "Petition Date"), the Company and several of its subsidiaries (together with the Company, the "Debtors") each commenced a voluntary case under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.  The Debtors are authorized to operate their businesses and manage their properties as debtors in possession pursuant to section 1107(a) and 1108 of the Bankruptcy Code.  A brief chronology of the circumstances that led to such filing is set forth below.

Despite the restructuring initiatives which the Company undertook in 2000 through 2002, during 2003 the Company continued to experience financial difficulty related primarily to restrictive covenants under its Senior Credit Facility and its debt structure.  The Company therefore entered into negotiations with its Senior Credit Facility lenders to amend the Senior Credit Facility to permit certain restructuring, impairment and other charges and to revise certain financial ratios and minimum EBITDA covenants in its Senior Credit Facility.  The Company and such lenders were unable to agree to amend the Senior Credit Facility and the Company continued to experience financial difficulties which led to a default under its Senior Credit Facility and Second-Lien Facility.  Effective March 31, 2003, the Senior Credit Facility lenders and Second-Lien Facility lenders agreed to refrain from exercising any rights or remedies with respect to the Company's failure to comply with financial and other covenants until June 10, 2003.  As the June 10 deadline approached, the Company's Board of Directors determined that, in order to be able to operate successfully in today's market environment and compete with increasing foreign competition, it would be necessary for the Company to reduce its debt burden and de-lever its balance sheet.  Thus, on May 16, 2003, the Board of Directors approved the retention of an independent financial advisor to evaluate alternatives aimed at reducing the existing debt structure and strengthening the balance sheet.  After negotiations with its Senior Lenders regarding various alternatives, the Company concluded it would be in the best interests of its creditors to effect a consensual restructuring under chapter 11 of the Bankruptcy Code and filed its chapter 11 petition on June 1, 2003.

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On or about the Petition Date, the Company announced that it had reached an agreement in principle with the holders of approximately 52% of the aggregate principal amount of its Senior Notes on the terms of a financial restructuring to be implemented through the chapter 11 process.  The agreement in principle was subject to numerous conditions and further agreements, including the entry of an order confirming the plan of reorganization contemplated by the proposal as required by the Bankruptcy Code.  On October 17, 2003, the Company announced that it had determined not to implement the previously announced agreement in principle.  Instead, the Company intends to negotiate new terms for a chapter 11 plan of reorganization with all of its major creditor constituencies.

On June 2, 2003, the Bankruptcy Court entered a number of orders enabling the Company to continue regular operations throughout the reorganization proceeding.  These orders authorized, among other things, normal payment of employee salaries, wages and benefits; continued participation in workers' compensation insurance programs; payment to vendors for post-petition delivery of goods and services; payment of certain pre-petition obligations to customers; and continued payment of utilities.  The Bankruptcy Court also approved, under interim order, access to $175 million in debtor in possession financing and subsequently approved, under final order, access to $300 million of debtor in possession financing for use by the Company, pursuant to a Post-Petition Credit Agreement, dated as of June 2, 2003, among WestPoint Stevens Inc. and certain of its subsidiaries, the financi al institutions named therein and Bank of America, N.A. and Wachovia Bank, National Association (the "DIP Credit Agreement").  

The DIP Credit Agreement consists of revolving credit loans of up to $300 million (with a sublimit of $75 million for letters of credit) with an initial term of one year and maturity date of June 2, 2004.  At its option, the Company may extend the term for up to two successive periods of six months each.  On April 28, 2004 the Company exercised its first option to extend the DIP Credit Agreement for an additional six month period, revising the maturity date to December 2, 2004.

Initial advances under the DIP Credit Agreement bore interest at a fluctuating rate per annum equal to LIBOR plus a margin of 2.75% or, at the Company's option, prime plus a margin of 0.75%.  Each margin is subject to quarterly adjustments, commencing November 1, 2003, pursuant to a pricing matrix, based on average availability, having a range of 2.25% to 3.00% for LIBOR based loans and 0.25% to 1.00% for prime-based loans.  The DIP Credit Agreement also has an unused line fee of 0.625% per annum, subject to quarterly adjustments as above having a range of 0.375% to 0.75%.  Effective November 1, 2003, as a result of average availability, interest rates under the DIP Credit Agreement decreased to LIBOR plus 2.50% or, at the Company's option, prime plus 0.50% and the unused line fee decreased to 0.50%.  Effective February 1, 2004, as a result of average availability, interest rates under the DIP Credit Agreement i ncreased to LIBOR plus 2.75% or, at the Company's option, prime plus 0.75% and the unused line fee increased to 0.625%.

8

WESTPOINT STEVENS INC.

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

The DIP Credit Agreement contains a number of covenants, including among others, affirmative and negative covenants with respect to certain financial tests and other indebtedness, as well as restrictions against the declaration or payment of dividends, the making of certain intercompany advances and the disposition of assets without consent.  The DIP Credit Agreement also contains Events of Default (as defined in the DIP Credit Agreement) including among others, a failure to pay the principal and interest of the obligations when due, default with respect to any Debt (as defined in the DIP Credit Agreement) and a failure by the Company to comply with any provisions of the Financing Orders (as defined in the DIP Credit Agreement).

During the third quarter of 2003, the Company's DIP Credit Agreement was amended primarily to modify the minimum EBITDA covenant, add a minimum availability covenant, permit certain restructuring, impairment and other charges and modify other miscellaneous provisions.  At March 31, 2004, the Company was in compliance with its covenants under the DIP Credit Agreement.

There can be no assurance, however, that the Company will be able to continue to comply with the debt covenants or that, if it fails to do so, it will be able to obtain amendments to or waivers of such covenants.  Failure of the Company to comply with covenants contained in its DIP Credit Agreement, if not waived, or to adequately service debt obligations, could result in a default under the DIP Credit Agreement.  Any default under the Company's DIP Credit Agreement, particularly any default that results in acceleration of indebtedness or foreclosure on collateral, could have a material adverse effect on the Company.

The Debtors are currently operating their businesses as debtors in possession pursuant to the Bankruptcy Code.  Pre-bankruptcy obligations of the Debtors, including obligations under debt instruments, generally may not be enforced against the Debtors, and any actions to collect such indebtedness are automatically stayed, unless relief from the automatic stay is granted by the Bankruptcy Court. The rights of and ultimate payments by the Company under pre-bankruptcy obligations may be substantially altered. This could result in claims being liquidated in the chapter 11 case at less (and possibly substantially less) than 100% of their face value.  The Debtors cannot presently determine or reasonably estimate the ultimate liability that may result from rejecting contracts or leases or from the filing of claims for any rejected contracts or leases, and no provisions have yet been made for these items. The amount of the claims to be filed by the creditors could be significant ly different than the amount of the liabilities recorded by the Company.

Since the Petition Date, the Debtors have conducted business in the ordinary course. Management is in the process of stabilizing the business of the Debtors and evaluating their operations as part of the development of a chapter 11 plan of reorganization.  The Debtors intend to seek the requisite acceptance of the plan of reorganization by security holders and confirmation of the plan by the Bankruptcy Court, all in accordance with the applicable provisions of the Bankruptcy Code. During the pendency of the chapter 11 case, the Debtors may, with Bankruptcy Court approval, sell assets and settle liabilities, including for amounts other than those reflected in the financial statements.  The

9

WESTPOINT STEVENS INC.

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

administrative and reorganization expenses resulting from the chapter 11 case will unfavorably affect the Debtors' results of operations.  Future results of operations may also be adversely affected by other factors related to the chapter 11 case.

On August 28, 2003, one of the Company's foreign subsidiaries, WestPoint Stevens (Europe) Ltd., commenced an insolvency proceeding in the United Kingdom and is in the process of being closed and liquidated.  The losses associated with the closure of the foreign subsidiary are estimated to total approximately $5.3 million consisting of inventory writedowns of $3.9 million and accounts receivable writedowns for claims of $1.4 million.  These charges are reflected in restructuring, impairment and other charges as discussed in Note 5.

The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable on a going concern basis.  Except as otherwise disclosed, these principles assume that assets will be realized and liabilities will be discharged in the ordinary course of business.  The Company is currently operating as a debtor in possession under chapter 11 of the Bankruptcy Code, and its continuation as a going concern is contingent upon, among other things, confirmation by the Bankruptcy Court of a chapter 11 plan of reorganization and its ability to comply with the DIP Credit Agreement, return to profitability, generate sufficient cash flows from operations and obtain financing sources to meet future obligations.   There is no assurance that the Company will be able to achieve any of these results.  The Company's consolidated financial statements do not include any adjustments rel ating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties.

The Company's consolidated financial statements included elsewhere in this Quarterly Report are presented in accordance with AICPA Statement of Position 90-7 ("Financial Reporting by Entities in Reorganization Under the Bankruptcy Code") ("SOP 90-7"). In the chapter 11 case, substantially all unsecured liabilities as of the Petition Date are subject to compromise or other treatment under a plan of reorganization which must be confirmed by the Bankruptcy Court after submission to any required vote by affected parties. For financial reporting purposes, the categories of liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the chapter 11 case and classified as Liabilities Subject to Compromise in the consolidated balance sheets under SOP 90-7 are identified below (in thousands):

10

WESTPOINT STEVENS INC.

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

The ultimate amount of and settlement terms for the Company's pre-bankruptcy liabilities are subject to the ultimate outcome of its chapter 11 case and, accordingly, are not presently determinable. Pursuant to SOP 90-7, professional fees associated with the chapter 11 case are expensed as incurred and reported as reorganization costs (chapter 11 expenses). Also, interest expense will be reported only to the extent that it will be paid during the pendency of the chapter 11 case or that it is probable that it will be an allowed claim.  During 2003, the Company recognized charges of $31.5 million for chapter 11 expenses, consisting of $4.9 million related to the early termination of the Company's Trade Receivables Program, $1.3 million in severance associated with the resignation of the Company's former Chairman and Chief Executive Officer, $7.6 million for performance bonuses under a court approved Key Employee Retention Program, $3.6 million related to the amortization of fees associated with the DI P Credit Agreement and $14.1 million related to fees payable to professionals retained to assist with the chapter 11 case.  During the first three months of 2004, the Company recognized charges of $8.1 million for chapter 11 expenses, consisting of $0.1 million in severance associated with the resignation of the Company's former Chairman and Chief Executive Officer, $3.1 million for performance bonuses under a court approved Key Employee Retention Program, $1.3 million related to the amortization of fees associated with the DIP Credit Agreement and $3.6 million related to fees payable to professionals retained to assist with the chapter 11 case.

Assets of the Company's subsidiaries currently excluded from the bankruptcy case total $9.4 million and $9.8 million as of March 31, 2004 and December 31, 2003, or 0.7% and 0.8% of the Company's consolidated assets, respectively.  Revenues of the subsidiaries totaled $5.1 million for the three months ended March 31, 2004, or 1.3% of the Company's consolidated revenues, and revenues of the subsidiaries totaled $34.6 million for the year ended December 31, 2003, or 2.1% of the Company's consolidated revenues.  

11

The Company uses the last-in, first-out ("LIFO") method of accounting for substantially all inventories for financial reporting purposes.  Interim determinations of LIFO inventories are necessarily based on management's estimates of year-end inventory levels and costs.  Subsequent changes in these estimates, including the final year-end LIFO determination, and the effect of such changes on earnings are recorded in the interim periods in which they occur.  

Inventories consisted of the following (in thousands of dollars):

Indebtedness is as follows (in thousands of dollars):

12

The DIP Credit Agreement consists of revolving credit loans of up to $300 million (with a sublimit of $75 million for letters of credit) with an initial term of one year and maturity date of June 2, 2004.  At its option, the Company may extend the term for up to two successive periods of six months each.  On April 28, 2004 the Company exercised its first option to extend the DIP Credit Agreement for an additional six month period, revising the maturity date to December 2, 2004.  At March 31, 2004, borrowing availability under the DIP Credit Agreement was $133.6 million and consisted of a calculated borrowing base of $313.2 million (limited to the maximum commitment of $300 million) less outstanding loans of $113.1 million, outstanding letters of credit of $48.3 million and other reserves of $5.0 million.  (See Note 2 where the DIP Credit Agreement is discussed further.)

During the third quarter of 2003, the Company's DIP Credit Agreement was amended primarily to modify the minimum EBITDA covenant, add a minimum availability covenant, permit certain restructuring, impairment and other charges and modify other miscellaneous provisions.  At March 31, 2004, the Company was in compliance with its covenants under the DIP Credit Agreement.

At March 31, 2004, the Company's Senior Credit Facility with certain lenders (collectively, the "Banks") consisted of a $599.6 million revolving credit facility ("Revolver") subject to interim facility limitations, with a Revolver maturity date of November 30, 2004.  Effective with the chapter 11 filing, additional borrowings under the Senior Credit Facility are no longer available to the Company.  On February 1, 2004, the revolver commitment decreased $17.5 million as a result of a scheduled commitment reduction.  Under the Senior Credit Facility, there was approximately $2.8 million of outstanding letters of credit at March 31, 2004.

Effective March 31, 2003, the Senior Credit Facility was amended primarily to provide for an interim facility limitation and to add an unused commitment fee.  At the option of the Company and effective with the March 31, 2003 amendment to the Senior Credit Facility, interest under the Senior Credit Facility was payable monthly, either at the prime rate plus 5.25% or LIBOR plus 7.00%, compared to prime rate plus 2.75%, or LIBOR plus 4.50% in effect at December 31, 2002.  Prior to the chapter 11 filing, the Company was obligated to pay a facility fee in an amount equal to 0.50% of each Bank's commitment under the Revolver, and an unused commitment fee in an amount equal to 1.00% of the difference between the revolver commitment and the daily outstanding loans and letters of credit.  Effective with the chapter 11 filing, the Company is no longer obligated to pay a facility fee or an unused commitment fee for the Senior Credit Facility.  The loans under the Senior Credit Facility are secured by the pledge of all the stock of the Company's material subsidiaries and a first priority lien on substantially all of the assets of the Company.

The Company has a $165.0 million Second-Lien Senior Credit Facility ("Second-Lien Facility") with a maturity date of February 28, 2005.  Effective with the Company's chapter 11 filing, interest under the Second-Lien Facility is payable monthly, as opposed to quarterly prior to the filing, at an interest rate of prime plus 8% increasing each quarter after June 30, 2002, by .375% but in no event less than 15%.  Loans under the Second-Lien Facility are secured by a second priority lien on the assets securing the existing Senior Credit Facility.

13

The 7-7/8% Senior Notes due 2005 and 7-7/8% Senior Notes due 2008 (together, the "Senior Notes") are general unsecured obligations of the Company and rank pari passu in right of payment with all existing or future unsecured and unsubordinated indebtedness of the Company and senior in right of payment to all subordinated indebtedness of the Company.  The Senior Notes bear interest at the rate of 7-7/8% per annum, and prior to the Company's chapter 11 filing were payable semi-annually on June 15 and December 15 of each year.  Effective with the Company's chapter 11 filing, interest on the Senior Notes is no longer paid or accrued.  The Senior Notes are redeemable, in whole or in part, at any time at the option of the Company at 100% of the principal amount thereof plus the Make-Whole Premium (as defined) plus accrued and unpaid interest, if any, to the date of purchase.  In addition, in the event of a Change of Control (as defined), the Company wil l be required to make an offer to purchase the notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.  Neither the redemption option nor the Change of Control provisions are relevant in the Company's chapter 11 case.

The Company's credit agreements contain a number of customary covenants including, among others, restrictions on the incurrence of indebtedness, transactions with affiliates, and certain asset dispositions as well as limitations on restricted debt and equity payments and capital expenditures.  Certain provisions require the Company to maintain certain financial ratios, a minimum interest coverage ratio, a minimum debt to EBITDA ratio, a minimum EBITDA, a minimum consolidated net worth (as defined) and a minimum availability.  The Company can no longer make restricted debt and equity payments.  At March 31, 2004, the Company was in compliance with its covenants under the DIP Credit Agreement but was not in compliance with the covenants under its various other credit agreements, primarily as a result of the chapter 11 filing and failure to meet certain financial covenants.

At March 31, 2003, and prior to the petition date, the Company was not in compliance with certain of its covenants under the Senior Credit Facility and Second-Lien Facility during which time the Company engaged in active discussions with its senior lenders to obtain an amendment or waiver of such non-compliance (See Note 2 where the chronology of the circumstances causing the Company to file voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy Code is discussed).  

14

In 2000, the Company announced that its Board of Directors had approved the new Eight-Point Plan, which was created to be the guiding discipline for the Company in a global economy.  The Board also approved a pretax charge for restructuring, impairment and other charges to cover the initial cost of implementing the Eight-Point Plan that is designed to streamline operations and improve profitability.  The Eight-Point Plan addresses the following points: 1) expand brands; 2) explore new licensing opportunities; 3) rationalize manufacturing; 4) reduce overhead; 5) increase global sourcing; 6) improve inventory utilization; 7) enhance supply chain and logistics; and 8) improve capital structure.

On September 20, 2002, the Company announced that its Board of Directors had approved additional restructuring initiatives to increase asset utilization, lower manufacturing costs and increase cash flow and profitability through reallocation of production assets from bath products to basic bedding products and through rationalization of its retail stores division.  The Company initially expected the restructuring initiatives to result in a $36.5 million pretax charge for restructuring, impairment and other charges, with approximately $20 million of the pretax charge expected to be non-cash items.  As a result of modifications to the initial restructuring initiatives, the Company now expects the restructuring initiatives to result in a $47.7 million pretax charge for restructuring, impairment and other charges, with approximately $31.7 million of the pretax charge expected to be non-cash items.  All charges have been recorded in accordance with Statement of Fin ancial Accounting Standard No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  The charges for the restructuring initiatives began in the third quarter of 2002 and will continue through the second quarter of 2004.

As a result of the restructuring initiatives begun in 2002, the Company announced the closure of its Rosemary (NC) towel finishing facility, the conversion of its Rosemary (NC) towel fabrication and distribution facilities to basic bedding facilities and the closure of its Dalton (GA) utility bedding facility.  The Company announced on April 25, 2003 that the Rosemary (NC) towel fabrication and distribution facilities that were previously disclosed as being converted to basic bedding facilities would now be closed.  The Company also announced the closure of twenty-two retail stores and the closure of its WestPoint Stevens (Europe) Ltd. foreign subsidiary.

The cost of the manufacturing and retail store rationalization and certain overhead reduction costs were reflected in a restructuring and impairment charge of $6.6 million, before taxes, in 2002, a restructuring and impairment charge of $12.6 million, before taxes, in 2003 and a restructuring and impairment charge of $0.2 million, before taxes, in the first three months of 2004.  The components of the restructuring and impairment charge in 2002 included $4.4 million for the impairment of fixed assets and $2.2 million in reserves to cover cash expenses related primarily to severance benefits.  The components of the restructuring and impairment charge in 2003 included $7.0 million for the impairment of fixed assets and $5.6 million in reserves to cover cash expenses related to severance benefits of $5.2 million and other exit costs.  The components of the restructuring and impairment charge in the first three months of 2004 included $0.2 million in reserves to c over cash expenses related to severance benefits.

15

During 2002 and 2003 as a result of restructuring initiatives, the Company has terminated and agreed to pay severance (including continuing termination benefits) to approximately 500 employees.

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

During 2002, other costs of the restructuring initiatives of $11.6 million, before taxes, were recognized consisting of inventory writedowns of $10.5 million primarily related to the rationalization of its retail stores division and other expenses of $1.1 million, consisting primarily of related unabsorbed overhead, all reflected in cost of goods sold.  During 2003, other costs of the restructuring initiatives of $16.0 million, before taxes, were recognized consisting of inventory writedowns of $8.4 million primarily related to the closure of its foreign subsidiary and the rationalization of its retail stores division, accounts receivable writedowns for claims of $1.4 million related to the closure of its foreign subsidiary and other expenses of $6.2 million, consisting primarily of $4.1 million of related unabsorbed overhead, $1.2 million for the relocation of machinery and other expenses of $0.9 million, all reflected in cost of goods sold.  During the first three mon ths of 2004, other costs of the restructuring initiatives of $0.2 million, before taxes, were recognized for relocation of machinery, all reflected in cost of goods sold.

16

During the third quarter of 2003, the Company's Board of Directors approved further additional restructuring initiatives to increase asset utilization, lower manufacturing costs and increase cash flow and profitability through a further realignment of manufacturing capacity.  The Company expects the restructuring initiatives to result in an $84.3 million pretax charge for restructuring, impairment and other charges.  Approximately $55.6 million of the pretax charge is expected to be non-cash items.  All charges have been recorded in accordance with Statement of Financial Accounting Standard No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  The charges for the restructuring initiatives began in the fourth quarter of 2003 and will continue throughout 2004.

As a result of the restructuring initiatives begun in 2003, the Company announced the closure of its Dunson (GA) sheeting facility, its Dixie (GA) towel facility, its Coushatta (LA) utility bedding facility and its Fairfax (AL) towel greige facility.  The Company also announced the conversion of its Lanier (AL) sheeting facility to towel production and the conversion of its Greenville (AL) blanket facility to a utility bedding facility.  These plant closings and conversions will provide the Company with greater production efficiency and better-aligned capacity to compete more effectively in a global economy.

The cost of the manufacturing rationalization was reflected in a restructuring and impairment charge of $37.0 million, before taxes, in 2003 and a restructuring and impairment charge of $4.6 million, before taxes, in the first three months of 2004.  The restructuring and impairment charge in 2003 reflected the impairment of fixed assets.  The components of the restructuring and impairment charge in the first three months of 2004 included $4.6 million in reserves to cover cash expenses related to severance benefits.

During 2004 and as a result of restructuring initiatives, the Company has terminated and agreed to pay severance (including continuing termination benefits) to approximately 500 employees.

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

17

WESTPOINT STEVENS INC.

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

During 2003, other costs of the restructuring initiatives of $1.4 million, before taxes, were recognized consisting of inventory writedowns of $1.0 million and other expenses of $0.4 million, consisting of related unabsorbed overhead.  During the first three months of 2004, other costs of the restructuring initiatives of $2.8 million, before taxes, were recognized consisting primarily of $2.6 million of related unabsorbed overhead and $0.2 million for the relocation of machinery.

Comprehensive income (loss) is as follows (in thousands):

Amendment fees and transaction fees related to the Company's various credit agreements are capitalized in the period incurred and amortized over the remaining term of the facility.  Included in Other expense-net in the accompanying Consolidated Statements of Operations for the three months ended March 31, 2004, is the amortization of deferred financing fees of $3.2 million compared with $2.6 million for the three months ended March 31, 2003, related to the Company's credit facilities other than the DIP Credit Agreement.  Deferred financing fees related to the DIP Credit Agreement are included in chapter 11 expenses and totaled $1.3 million for the three months ended March 31, 2004.

18

WESTPOINT STEVENS INC.

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

The Company has defined benefit pension plans covering essentially all employees.  Benefits are based on years of service and compensation, and the Company's practice is to fund amounts that are required by the Employee Retirement Income Security Act of 1974.  The Company uses December 31 as the measurement date of its defined benefit pension plans.

The following table sets forth data for the Company's pension plans (in thousands of dollars):