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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

Commission file number: 0-20850

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

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        The aggregate market value of the voting and non-voting shares of common stock, held by non-affiliates of the registrant, computed by reference to the price at which the common equity was sold as of the last business day of the registrant's most recently completed second fiscal quarter, March 31, 2003, was $53,047,176.

        As of December 4, 2003 there were 6,642,565 shares of common stock outstanding.

        Documents incorporated by reference

        The information required by Part III is incorporated by reference from the Registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.

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FORWARD LOOKING STATEMENTS

        This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). All statements other than statements of historical facts contained in this report, including statements regarding Haggar Corp.'s (together with its subsidiaries, the "Company") future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions that could affect the results of the Company or the apparel industry generally and could cause the Company's expected results to differ materially from those expressed in this Annual Report on Form 10-K. These risks, uncertainties and assumptions are described in "Item 1. Business" of this Annual Report on Form 10-K and include, among other things:

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changes in general business conditions,



•

changes in the performance of the retail sector in general and the apparel industry in particular,



•

seasonality of the Company's business,



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changes in retailer and consumer acceptance of new products and the success of advertising, marketing, and promotional campaigns,



•

impact of competition in the apparel industry,



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availability and cost of raw materials,



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changes in laws and other regulatory actions,



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changes in labor relations,



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political and economic events and conditions domestically or in foreign jurisdictions in which the Company operates or has apparel products manufactured, including, but not limited to, acts of terrorism, war, or insurrection,



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unexpected judicial decisions,



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changes in interest rates and capital market conditions,



•

acquisitions or dissolution of business enterprises, including the ability to integrate acquired businesses effectively,



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natural disasters, and



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unusual or infrequent items that cannot be foreseen or are not susceptible to estimation.

        In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein, to reflect any change in its expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements.

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Part I

ITEM 1. BUSINESS

Overview

        Haggar Corp., together with its subsidiaries (collectively the "Company"), designs, manufactures, imports and markets casual and dress men's and women's apparel products, including pants, shorts, suits, sportcoats, sweaters, shirts, dresses, skirts and vests in the United States and abroad. Apparel products are offered in a wide variety of styles, fabrics, colors and sizes. The Company's operations are organized into three business units, wholesale, retail and licensing, each of which offers similar products through different distribution channels.

        The Company's wholesale segment is the primary distribution channel through which the Company sells its products. The wholesale segment designs, manufactures, imports and markets casual and dress men's and women's apparel to retailers throughout North America and the United Kingdom. Products are sold through approximately 10,000 retail stores operated by the Company's customers, which include major department stores, specialty stores and mass market retailers throughout North America and the United Kingdom. The Company markets its premium men's apparel products under the Haggar® brand name, and markets more moderately priced lines of men's clothing under a variety of trademarks offered by its mass-market retailer division, The Horizon Group. The Horizon Group also offers to retailers quality men's apparel bearing the retailers' own label. The Company offers its women's apparel products under the Haggar® brand and several other trademarks offered by its women's wear subsidiary, Jerell, Ltd. ("Women's Wear").

        The Company's retail segment markets Haggar® branded products through 70 Company operated retail stores located in the Company's Dallas headquarters and in outlet malls throughout the United States. As of September 30, 2003, the Company operated 66 such stores which market first quality Company products to the general public. These stores also serve as a retail marketing laboratory for the Company. In addition, the Company had 4 retail stores featuring overruns and seconds.

        The Company's licensing segment generates royalty income by licensing the Company's trademarks for use by other manufacturers of specified products in specified geographic regions.

        The Company conducts its foreign operations through Haggar Apparel, Ltd. and Haggar Canada Co., which market the Company's branded products in the United Kingdom and Canada, respectively.

        The Company was established in 1926 by J. M. Haggar, Sr., and has built its reputation by offering high quality, ready-to-wear apparel at affordable prices through innovations in product design, marketing and customer service. Both Haggar Corp. and Haggar Clothing Co., the Company's primary operating subsidiary, are incorporated under Nevada law.

        The Company's internet site, www.haggar.com, contains a Milestones/Financials section which provides links to annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, director and officer reports on Forms 3, 4 and 5 and amendments to those documents filed or furnished pursuant to the Securities Exchange Act of 1934 free of charge as soon as reasonably practicable after the Company has filed these documents with the Securities and Exchange Commission ("SEC"). In addition, the Company's filings with the SEC may be read and copied at the SEC Public Reference Room at 450 Fifth Street, NW Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. These filings are also available on the SEC's website at www.sec.gov free of charge as soon as reasonably practicable after the Company has filed the above referenced reports.

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Business Strategies

        The Company has identified the following goals for fiscal 2004:

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enhance Haggar® brand equity;



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increase net sales; and



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increase return on equity to stockholders.

        To achieve these goals, the Company has adopted the following strategies:

        Increase Haggar® Brand Equity.    Since the Company's founding in 1926, the Haggar® brand has meant quality, fit and fashion in men's apparel. The Company is the market leader in sales of men's dress pants, custom-fit suits (separately sized pants and matching jackets which may be purchased together to form a suit requiring little or no alteration) and sportcoats, and holds the number two market share in men's casual pants, as measured by the National Panel Diary. The Company believes that consistent product performance, visible national advertising and marketing support are key elements in maintaining and increasing market share. The Company seeks to continue to enhance the Haggar® brand with products and services that are valued by both retailer customers and value-conscious consumers and to expand Haggar® brand awareness in the women's wear arena. The Company believes that its fundamental values, including innovative products, excellent service and fair prices, have kept its brand popular with retailer customers. The Company further supports the brand with co-operative advertising, point-of-sale signage and in-store fixtures. The Company's comprehensive marketing plan for fiscal 2004 benefits from the Company's long-term presence and leadership as a significant men's wear resource for consumers.

        Introduce New Products.    During fiscal 2003, the Company introduced the Freedom Khaki™ and Freedom Shirt™ lines, an advancement to khakis and shirts which offers stain resistance and liquid repellancy in 100% cotton, wrinkle-free Haggar® fabric. The Company also continued to expand its selection of comfort fit waistband men's pants and began offering women's comfort fit waistband pants at major retailers. During fiscal 2004, the Company plans to develop new men's and women's wear models with a variety of fabrics and styles using the comfort fit waistband.

        Expand Licensing of Trademarks.    The Company plans to strengthen its market position in men's pants by seeking to further utilize license agreements with other recognized apparel brands. During fiscal 2003, the Company entered into license agreements to manufacture and market certain men's pants and shorts under the Kenneth Cole New York® and Reaction Kenneth Cole® trademarks and continued to manufacture and market pants under the Claiborne® license. The Company believes that these arrangements will provide a meaningful channel for sales growth during fiscal 2004.

        Expand Private Label Business.    The Company plans to continue to expand its private label women's wear business by leveraging the Company's expertise gained through the operations of both Women's Wear and The Horizon Group. The Company has developed systems through which to service global customers such as J.C. Penney and Wal-Mart. The Company will continue to identify opportunities to offer Women's Wear labels using this infrastructure.

        Actively Manage Costs and Collections.    The Company has implemented expense control initiatives and identified vendors to provide high-quality, low-cost product sourcing from over 20 foreign countries. The Company's sourcing team seeks to identify, evaluate and take advantage of opportunities to expand and improve the Company's contracted manufacturing resources and to enhance the Company's supply chain performance. The Company continues to seek to realize greater efficiencies by managing its apparel product inventory on an as-needed basis. In addition, the Company seeks to continue to actively monitor and pursue collections on its receivables from retailer customers by continuous follow-ups with customers and monitoring of customer deductions. Bad debts as a

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percentage of net sales were less than 1.0% in each of the Company's last three fiscal years. The Company anticipates that these initiatives will provide the availability of financial resources to facilitate future growth.

        Pursue Strategic Acquisitions.    The Company continues to seek growth through strategic acquisitions. The Company seeks well-run businesses with proven management teams and strong product recognition in categories that

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complement the Company's existing businesses,



•

are expected to be accretive to the Company's earnings per share, and



•

enable the Company to leverage operational efficiencies to create synergies between the Company and the acquired business.

Products and Major Brands

        The Company's apparel products are manufactured with a wide array of fabrics that emphasize style, comfort, fit and performance. The Company is well known for its use of "performance fabrics" that maintain a fresh, neat appearance. The Company's product lines are currently dominated by natural fiber (wool or cotton) and blended (polyester/wool or polyester/rayon) fabrics, although the Company also produces some apparel using a single synthetic (polyester or rayon) fabric.

        A significant portion of the Company's apparel lines consists of basic, recurring styles, which the Company believes are less susceptible to "fashion markdowns," as compared with higher fashion apparel lines. Thus, while the Company strives to offer current fashions and styles, the bulk of its product lines changes relatively little from year to year. This consistency in product lines helps the Company to operate on a cost-efficient basis and to forecast the demand for particular products.

        Haggar®.    The Company's Haggar® brand represented 71.6% of its total apparel sales in fiscal 2003. This brand receives widespread recognition among United States consumers for high quality, affordable men's and women's apparel. The full range of men's products offered by the Company is marketed under the Haggar® brand, including dress and casual pants, sportcoats, suits, shirts, sweaters and shorts. The Company has developed specific product lines under this brand, intended to keep the Company in the forefront of the trend among men toward more casual clothing, while maintaining the Company's traditional strength in men's dress apparel. These product lines include Haggar Black Label®, American Generations®, Collections™, City Casuals® and Heritage™. In addition, the Company markets a line of men's activewear under the Haggar Golf™ brand. The Haggar® brand is also licensed to manufacturers of related apparel and accessories in categories outside the core product lines of the Company.

        The Haggar Black Label® line comprises the Company's premium quality khakis and dress pants, custom-fit suits and sport coats, sweaters, outerwear, shoes and socks, dress shirts and ties, belts and wallets, and woven and knit casual shirts. American Generations® is a line composed of 100% cotton khakis and casual pants, shorts, socks, belts, wallets, sweaters and outerwear. The Collections™ line comprises dress pants, sport coats, dress shirts and ties, socks, and outerwear. City Casuals® is an urban dweller and office casual line including knit and woven shirts, pants and jackets, sweaters and sweater vests and outerwear. The Heritage™ line represents the Company's foundation label consisting of its historical mainstay products, casual and dress pants and sportcoats. Haggar Golf™ is a line of men's activewear including shirts, shorts, sweater vests and pants in a variety of colors and fabrics.

        Haggar® branded women's wear products, including dress and casual pants, shirts, sweaters, vests and skirts, were introduced in fiscal 2000. These products expand on the Company's reputation for affordable quality and style.

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        Haggar® branded products are sold nationwide primarily in major department stores, including J.C. Penney Company, Inc., May Company Department Stores, Federated Department Stores, Mervyn's California and Kohl's Department Stores. The Company also markets its Haggar® branded clothing through its own retail stores located in the Company's Dallas headquarters and in outlet malls throughout the United States.

        The Horizon Group.    The Company's mass retailer division, The Horizon Group, markets men's apparel products including dress pants, casual pants, shorts, suits, sportcoats and shirts. These products, which are offered at lower price points than Haggar® brand products, are primarily sold to Wal-Mart Stores, Inc.

        In addition to manufacturing products under its own labels, the Company also manufactures men's apparel for certain of its customers under the individual store's proprietary label. The Company's specialty label products are primarily sold to department stores such as J.C. Penney Company, Inc.

        Women's Wear.    The Company's women's wear subsidiary markets women's sportswear including dresses, skirts, pants, and vests. These product lines are primarily sold to major department stores, including Dillards and J.C. Penney Company, Inc., and catalog suppliers, such as Coldwater Creek.

Introduction of New Products

        The Company emphasizes the introduction of new products in order to capitalize on its brand recognition and retailer relationships. During fiscal 2003, the Company introduced the Freedom Khaki™ and Freedom Shirt™ line, an advancement to khakis and shirts which offers stain resistance and liquid repellancy in 100% cotton, wrinkle-free Haggar® khaki fabric. The Company has also expanded its selection of comfort fit waistband men's and women's pants. While there is substantial competition in these markets, the Company believes that it is well positioned to take advantage of market opportunities.

Advertising and Marketing

        The Company seeks to promote overall brand awareness for the stable of brands that it owns or licenses, principally through consumer advertising, in-store shop and fixtured area programs, and retail marketing associates.

        The Company supports the Haggar® brand and other brands such as Kenneth Cole® and Claiborne® through various advertising and promotional programs. The Company has advertised the Haggar® brand on national and local television and radio and in consumer and trade publications. In addition, the Company participates in co-operative advertising on a shared cost basis with major retailers in radio, television and various print media.

        An additional feature of the Company's marketing strategy is its in-store shop and fixtured area program, whereby participating retailers set aside floor space highlighted by distinctive fixtures dedicated for exclusive sale of the Company's products by the retailer. This program enables the retailer to create an environment consistent with the Company's image and to display and stock a greater volume of the Company's products per square foot of retail space. Such shops and fixtured areas encourage longer term commitment by the retailer to the Company's products. The Company believes that these shops and fixtured areas increase consumer product recognition and loyalty because of the retail customer's familiarity with the location of the Company's products in the store.

        The Company also employs an extensive staff of retail marketing associates located throughout the United States. These associates educate the retailers' salespeople about the Company's current products, provide the Company with first-hand feedback concerning consumer reaction to the Company's products and coordinate the in-store displays with the Company's retailer customers.

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Trademarks and Licensing

        The Company owns many federal trademark registrations and has several new trademark applications pending in the United States Patent and Trademark Office. The Company has also registered or applied for registration of a number of trademarks for use on a variety of apparel items in various foreign countries. The Company regards its trademarks and other proprietary rights as valuable assets and believes that they have significant value in the manufacturing and marketing of its products.

        The Company seeks to capitalize on consumer recognition and acceptance of the Haggar® brands by licensing, both domestically and internationally, the use of these trademarks on a variety of products. Typically, the licensee's agreement with the Company gives the licensee the right to produce, market and sell specified products in a particular country or region under one or more of the Company's trademarks. For example, the Company has granted exclusive domestic licenses to unaffiliated manufacturers for the production and marketing of men's leather goods, neckwear, dress shirts, sweaters, hosiery and outerwear under the Haggar® trademark.

        In addition to using and licensing its own trademarks, the Company is the licensee of certain trademarks owned by other apparel companies. The Company has entered into license agreements to manufacture and market certain men's pants and shorts under the Kenneth Cole New York®, Reaction Kenneth Cole® and Claiborne® trademarks. A similar DKNY® license expired on June 30, 2003. The Claiborne® license expires in December 2005, and the Kenneth Cole New York® and Reaction Kenneth Cole® licenses expire in December 2006. All of the licenses are subject to renewal by the Company for an additional five years, provided that certain net sales thresholds are obtained by the Company. The Company estimates that the net sales levels will be met for the renewal of these licenses.

Manufacturing and Materials Sourcing

        Products sold by the Company's various divisions are manufactured to the designs and specifications (including fabric selections) of designers employed by those divisions.

        As part of the Company's strategy to source production internationally, during fiscal 2002 and 2001, the Company closed its remaining domestic manufacturing facilities and in fiscal 2003 closed a manufacturing facility in the Dominican Republic. See "Item 7.—Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Reorganization" for additional discussion of these plant closures.

        As a result of the Company's international production strategy, during fiscal 2003 less than 1% of the Company's products (measured in units) were produced in the United States, with the balance manufactured in foreign countries. Domestic manufacturing during fiscal 2003 consisted exclusively of women's apparel produced by unaffiliated companies. Approximately 12% of the Company's foreign-made products were manufactured by facilities owned by the Company in Mexico and the Dominican Republic, with the remaining foreign-made products manufactured by unaffiliated companies in Asia, South America, Central America, Mexico, Africa and the Dominican Republic. The Company has no long-term contracts with any of its suppliers, but does not anticipate a shortage of manufacturing services in fiscal 2004.

        Raw materials used in the Company's manufacturing operations consist mainly of fabrics made from cotton, wool, synthetics and blends of synthetics with cotton or wool. These fabrics are purchased principally from major textile producers located in the United States. In addition, the Company purchases trim items such as buttons, thread and zippers from a large number of other suppliers. Ten vendors supplied approximately 70% of the Company's fabric and trim requirements during the fiscal

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year ended September 30, 2003. The Company has no long-term contracts with any of its third-party manufacturers, but does not anticipate substantial shortages of raw materials in fiscal 2004.

Distribution

        In the United States, wholesale and retail distribution occurs at its Customer Service Center in Fort Worth, Texas, which consists of approximately 660,000 square feet of warehouse space. The facility is owned by the Company and is staffed by employees under the complete control of the Company. The Fort Worth facility is the Company's main customer service center and incorporates state-of-the-art systems and equipment to monitor and track all the Company's product to ensure efficient and effective shipping capabilities and enhanced functionality to allow the Company to offer value-added services to our customers including special ticketing, customer-specific stock keeping unit information, and product-enhancing packaging. The Company's Canadian and United Kingdom distribution is performed by third party logistics companies.

Quality Control

        The Company's quality control program is designed to ensure that goods meet the Company's standards. The Company inspects prototypes of each product prior to production and performs several in-line inspections and a final inspection prior to shipment. Most finished goods for domestic distribution are shipped to the Company's Customer Service Center for re-inspection and distribution. The Company also uses third-party warehouses during peak shipping times. Finished goods shipped from third-party warehouses are subject to the same inspection standards as those shipped from the Customer Service Center.

Management Information Systems

        The Company believes that high levels of automation and technology are essential to maintain its competitive position, and the Company continues to invest in computer hardware, systems applications and networks to enhance and speed the apparel design process, to support the sale and distribution of products to its customers and to improve the integration and efficiency of its operations. The Company utilizes computer-aided design stations for use by the design teams, which provide timely translations of designs into sample depictions varying in color, cut and style. The Company also uses an Electronic Data Interchange ("EDI") system to receive on-line orders from its customers and a related electronic method to accumulate sales information on its products. This technology enables the Company to provide valuable sales and inventory maintenance information to its customers who have adopted such technology. The Company's larger customers communicate with the Company through EDI technology.

Dependence on Key Customers

        The Company's largest customer, J.C. Penney Company, Inc., accounted for approximately 20%, 21% and 23% of the Company's net sales during the fiscal years ended September 30, 2003, 2002 and 2001, respectively, and approximately 32% and 25% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. The Company's second largest customer, Kohl's Department Stores, Inc., accounted for approximately 16%, 16% and 12% of the Company's net sales during the fiscal years ended September 30, 2003, 2002 and 2001, respectively, and approximately 17% and 13% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. The Company's third largest customer, Wal-Mart Stores, Inc., accounted for approximately 8%, 9% and 11% of the Company's net sales for the fiscal years ended September 30, 2003, 2002, and 2001, respectively, and approximately 5% and 6% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. No other customer accounts for more than 10% of net sales or trade receivables. The loss of the business of one or more of the Company's larger customers could

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have a material adverse effect on the Company. The Company has no long-term commitments or contracts with any of its customers.

Competition

        The apparel industry is highly competitive due to its fashion orientation, its mix of large and small producers, the flow of imported merchandise and a wide variety of retailing methods. The Company competes with numerous domestic and foreign designers, brands and manufacturers of apparel products, some of which may be significantly larger and have greater marketing and financing resources than the Company. Intense competition in the apparel industry can result in significant discounting and lower gross margins. As measured by the National Panel Diary, the Company is the market leader in sales of men's dress pants, custom-fit suits (separately sized pants and matching jackets which may be purchased together to form a suit requiring little or no alteration) and sportcoats, and holds the number two market share in men's casual pants.

        The principal elements of competition in the apparel industry include style, quality and price of products, brand loyalty and advertising. The Company's product innovations and value-added services, such as floor-ready merchandise, electronic data interchange, fixturing and concept shops, position it to compete as a market leader. The Company also believes that its brand recognition, merchandise with relatively low vulnerability to changing fashion trends, and affordable pricing enhance its competitive position in the apparel industry. Additionally, the Company believes its advertising campaigns promote consumer demand for its products and enhance its brand and Company name recognition and image.

Seasonality

        During the last three fiscal years, the Company's sales have exhibited some seasonality with higher sales and income in its second and fourth quarters, which is prior to the selling season for spring and fall merchandise, respectively. See "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations—Seasonality."

Order Backlog

        A substantial portion of the Company's net sales is based on orders for immediate delivery, or so-called "soft-planning orders," submitted by apparel retailers (which do not constitute purchase commitments). An analysis of backlog is not, therefore, necessarily indicative of future net sales. Retailers' use of such soft-planning orders increases the difficulty of forecasting demand for the Company's products.

Employees

        As of September 30, 2003, the Company employed approximately 1,500 persons domestically and approximately 1,900 persons in foreign countries. In fiscal 2003, approximately 1,800 employees were engaged in manufacturing operations and the remainder were employed in executive, marketing, wholesale and retail sales, product design, engineering, accounting, distribution and purchasing activities. None of the Company's domestic employees are covered by a collective bargaining agreement with any union. While the Company is not a party to any collective bargaining agreements covering its foreign employees, applicable labor laws may dictate minimum wages, fringe benefit requirements and certain other obligations. The Company believes that relations with its employees are good.

Risks Related to the Company's Business

        An investment in the Company involves certain risks and uncertainties. The risks and uncertainties described below and elsewhere in this Annual Report on Form 10-K should be carefully considered. If

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any of the events described below or elsewhere occurs, the Company's business could be adversely affected in a material way.

Dependence on Key Customers

        The Company's largest customer, J.C. Penney Company, Inc., accounted for approximately 20%, 21% and 23% of the Company's net sales during the fiscal years ended September 30, 2003, 2002 and 2001, respectively, and approximately 32% and 25% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. The Company's second largest customer, Kohl's Department Stores, Inc., accounted for approximately 16%, 16% and 12% of the Company's net sales during the fiscal years ended September 30, 2003, 2002 and 2001, respectively, and approximately 17% and 13% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. The Company's third largest customer, Wal-Mart Stores, Inc., accounted for approximately 8%, 9% and 11% of the Company's net sales for the fiscal years ended September 30, 2003, 2002, and 2001, respectively, and approximately 5% and 6% of the Company's outstanding trade receivables as of September 30, 2003 and 2002, respectively. No other customer accounts for more than 10% of net sales or trade receivables. The loss of the business of one or more of these customers could have a material adverse effect on the Company.

Uncertainties in Apparel Retailing

        The apparel industry historically has been subject to substantial cyclical variations, and a recession in the general economy or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on the Company. While various retailers, including some of the Company's customers, experienced financial difficulties in the past three years, which increased the risk of extending credit to such retailers, the Company's bad debt experience has been limited. Under the Company's current credit and collection arrangements, the bankruptcy of a customer which continues to operate and carry the Company's products should not have a material adverse effect on the Company.

Competition

        The apparel industry is highly competitive in the United States and abroad. The Company competes with numerous domestic and foreign designers, brands and manufacturers of apparel, some of which may be significantly larger and have greater marketing and financial resources than the Company. Management believes that the Company's ability to compete effectively depends upon its continued flexibility in responding to market demand and its ability to offer fashion conscious consumers a wide variety of high quality apparel at competitive prices.

Dependence on Third-Party Manufacturers

        The Company is dependent upon third parties for the manufacture of approximately 88% of its products. The inability of a manufacturer to ship orders of the Company's products in a timely manner, including as a result of local financial market disruption which could impair the ability of such suppliers to finance their operations, or to meet quality standards, could cause the Company to miss the delivery date requirements of its customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse effect on the Company's financial condition and results of operations. The Company has no long-term formal arrangements with any of its suppliers and historically has experienced only limited difficulty in satisfying its raw material and finished goods requirements. Although the Company believes it could replace such suppliers without a material adverse effect on the Company, there can be no assurance that such suppliers could be replaced in a timely manner and the loss of such suppliers could have a material adverse effect on the Company's short-term operating results.

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        Substantially all of the Company's products are manufactured outside the United States. The Company's foreign production and sourcing operations are subject to various risks of doing business abroad, including quotas, work stoppages and other restrictions and regulations relating to imports and, in certain parts of the world, political or economic instability. Although the Company's operations have not been materially adversely affected by any of such factors to date, any substantial disruption of its foreign production or supply could adversely affect its operations. Some of the Company's imported merchandise is subject to United States Customs duties. In addition, bilateral agreements between the major exporting countries and the United States impose quotas which limit the amounts of certain categories of merchandise that may be imported into the United States. Any material increase in duty levels or material decrease in quota levels, or material decrease in available quota allocations could materially adversely affect the Company.

Dependence on Fort Worth Distribution Center

        The Company operates the majority of its warehouse and distribution activities in the United States out of its main distribution center in Fort Worth, Texas. Any major work disruption at the Company's Fort Worth facility could have a material adverse effect on the Company. Although the Company believes it could utilize other warehousing companies to satisfy its shipping and distribution functions, there can be no assurance that these warehousing companies could be utilized in a timely manner, and the inability to service the Company's customers for any period of time could materially adversely affect the Company.

Risks of Acquisition Strategy

        The Company seeks growth through strategic acquisitions of other apparel businesses. However, the Company cannot assure that its acquisition strategy will be successful. The success of the Company's acquisition strategy is dependent upon a number of factors, including:

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the Company's ability to identify suitable acquisition candidates;



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the Company's ability to negotiate favorable acquisition terms, including purchase price, which may be adversely affected due to increased competition with other buyers;



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the availability of financing to the Company, or on terms favorable to the Company;



•

the Company's ability to integrate effectively the systems and operations of acquired businesses; and



•

the Company's ability to retain key personnel of acquired businesses.

        Acquisitions involve a number of other risks, including diversion of management's attention from other business concerns and the assumption of known or unknown liabilities of acquired businesses. The integration of acquired businesses may place significant strains on the Company's current operating and financial systems and controls. The Company may not successfully overcome these risks or any other problems encountered in connection with its acquisition strategy.

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ITEM 2. PROPERTIES

        The Company's principal executive offices are currently located at 6113 Lemmon Avenue, Dallas, Texas 75209. Effective January 8, 2004, the Company expects to relocate its principal executive offices to 11511 Luna Road, Dallas, Texas 75234. The general location, use, approximate size and information with respect to the ownership or lease of the Company's principal properties currently in use are set forth below:

(1)

During the fourth quarter of fiscal 2003, the Company sold its existing corporate headquarters facility and purchased a new corporate headquarters facility. The Company plans to relocate all of its corporate functions, including the Women's Wear operations, to the new facility in January 2004. Pending relocation, the Company has entered into a short-term lease for the current corporate headquarters facility with the buyer that will expire in January 2004. Although the Women's Wear operations will be relocated to the new facility during the second quarter of fiscal 2004, the Women's Wear headquarters facility remains under lease through December 2004, at which time the lease will expire.

(2)

The Company ceased operations at this facility during the second quarter of fiscal 2002. The Company has now moved the cutting operations to third-party manufacturers and cutters primarily in Mexico.

(3)

The Company previously used this property as a manufacturing plant but has ceased manufacturing operations there. The Company is profitably subleasing the property.

(4)

These properties are the Company's retail stores located in outlet malls throughout the United States. The retail stores range in size from approximately 2,100 to 11,000 square feet.

        All of the properties owned by the Company are free from material encumbrances, except the Company's closed fabric cutting facility located at Weslaco, Texas, which is subject to a lien securing an industrial revenue bond financing in the amount of $2.2 million. The Company believes that its existing facilities are well maintained, in good operating condition and adequate for its present and anticipated levels of operations.

        Future manufacturing needs are anticipated to be met through owned facilities and through the use of outside contractors. The Company's Customer Service Center in Fort Worth, Texas, is expected to meet the Company's distribution requirements for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

        The Company has been named as a defendant in several legal actions arising from its operations in the normal course of business, including actions brought by certain terminated employees. Although exact settlement amounts, if any, related to these actions cannot accurately be predicted, the claims and damages alleged, the progress of the litigation to date, and past experience with similar litigation leads

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the Company to believe that any liability resulting from these actions and those described below will not individually, or collectively, have a material adverse effect on the Company.

        The Company is a defendant in a wrongful termination lawsuit in which a jury rendered a verdict in favor of the plaintiff against the Company in the amount of $843,000, subject to potential doubling in the event judgment is entered on a jury verdict of willful discrimination, plus pre- and post-judgment interest and attorneys' fees. The trial court judge reversed the jury's verdict and rendered a judgment in favor of the Company granting zero damages to the plaintiff. The plaintiff appealed the judgment to the Fifth Circuit Court of Appeals, which reversed the judgment of the trial court and remanded the matter back to the trial court for further proceedings. The Company believes that the Court of Appeals missed several key points of law, which were recognized by the original judgment in the trial court. In addition to defending the case as remanded for further proceedings to the trial court, the Company intends to seek review of this case by the United States Supreme Court.

        The Company also is a defendant in an action for trademark infringement, among other causes of action. Although the plaintiff in the case sought a preliminary injunction against the Company, the trial court ruled in favor of the Company and denied the injunction. On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the trial court's decision in favor of the Company. Trial is currently scheduled to occur in February 2004. The parties met to mediate the case, but mediation was unsuccessful.

        During fiscal 2003, one attorney filed four separate suits against certain subsidiaries of the Company and alleged a total of approximately 2,200 former employees had been injured by airborne fibers and chemicals in certain of the Company's now closed facilities located in south Texas. (All proceedings in one suit naming over 2,100 plaintiffs are presently stayed due to the unrelated bankruptcy of one of the other defendants.) The Company believes, after taking discovery in the first of these four cases, that all of these cases and claims are frivolous and that the plaintiffs have no factual or legal basis for their allegations. In addition, the Company believes that it has meritorious defenses to the asserted claims. The Company intends to vigorously defend all of these suits.

        Two jury verdicts totaling $5.2 million have been returned against subsidiaries of the Company related to claims by former employees of now closed manufacturing facilities for wrongful discharge and common law tort. One of the verdicts was settled in fiscal 2002 for $1.3 million. The other case is currently on appeal, as management, based on the advice of legal counsel, believes the verdict in this lawsuit is both legally and factually incorrect.

        The Company maintains general liability, workers' compensation and employers liability insurance. The Company intends to pass the costs associated with lawsuits to its insurance carriers, under the applicable policies, if any, subject to the deductible limits and other provisions and exclusions of those policies.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of the Company's stockholders, through the solicitation of proxies or otherwise, during the fourth quarter ended September 30, 2003.

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Part II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Stock

        The Company's common stock is quoted on the Nasdaq National Market System under the symbol "HGGR." The following table sets forth, for the fiscal quarters indicated, the high and low sales prices for the common stock as reported by the Nasdaq National Market System and the dividends paid per share of common stock.

        As of December 4, 2003, the Company had approximately 136 stockholders of record.

Dividends

        The Company has paid a quarterly cash dividend of $0.05 per share of common stock since April 1993. Subject to contractual restrictions on the Company's ability to pay cash dividends, the Company currently intends to continue paying quarterly cash dividends on its common stock. The amount of any such dividends will be determined at the discretion of the Company's board of directors and will depend on the Company's earnings, financial condition, ability to fund its capital requirements and other factors that the board of directors deems relevant. The Company's revolving credit facility prohibits the payment of any dividend if a default exists after giving effect to such a dividend. Certain of the Company's long-term debt facilities contain restrictions on the ability of the Company's subsidiaries to transfer funds to Haggar Corp.

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EQUITY COMPENSATION PLAN INFORMATION

        The following table provides information about Common Stock that may be issued upon the exercise of options under the Company's long-term incentive plan adopted in fiscal 1992 and options, restricted shares and rights without accompanying options under the long-term incentive plan adopted in fiscal 2003:

(1)

These amounts represent the weighted average exercise price for the total number of outstanding options.

(2)

Issued under the 1992 long-term incentive plan.

(3)

Securities included in this category are attributable solely to certain increases in the number of shares of Common Stock authorized and reserved for issuance under the 1992 long-term incentive plan that were not approved by the Company's stockholders.

(4)

On May 1, 2003, the Company adopted a new stockholder approved long-term incentive plan which authorizes the Company to issue up to 575,000 additional shares in connection with options granted to directors, officers or employees of the Company.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Footnotes to Selected Consolidated Financial Data (in millions, net of tax)

Fiscal 2003

        Net income during fiscal 2003 included a gain of $3.7 million on the sale of the Company's corporate headquarters, which was classified as other income (expense), net. Net income also included $0.8 million in legal and professional fees incurred in connection with a proxy contest involving a Company stockholder, $0.1 million related to a reduction in force in the Women's Wear subsidiary and $0.3 million related to settlement of a lawsuit with the landlord of the Women's Wear subsidiary headquarters, and all of these charges were classified as selling, general and administrative expenses.

Fiscal 2002

        Net loss during fiscal 2002 included a $0.6 million charge for the closure of its Weslaco, Texas cutting operations, the reversal of a facility write-down of $1.3 million which was originally recorded in connection with the closure of the Edinburg, Texas facility in fiscal 2001, a $0.4 million charge related to the closure of one of the Company's manufacturing facilities in the Dominican Republic, and the reversal of the legal reserve by $1.9 million to income due to the settlement of an outstanding lawsuit. These amounts were all classified as reorganization costs. Net loss also included a $0.6 million charge as the Company announced the streamlining of its sales force, which was classified as selling, general and administrative expense.

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        Net loss also included a $15.6 million impairment of goodwill related to the 1999 acquisition of the Women's Wear subsidiary for $39.3 million, as the Company adopted SFAS 142. There was no tax benefit associated with the impairment charge, which was recorded in cumulative effect of accounting change. In accordance with SFAS 142, the Company ceased amortization of goodwill as of October 1, 2001. Net income (loss) for fiscal 2001, 2000 and 1999 included amortization expense of $1.5 million, $1.5 million and $1.0 million, respectively, which was classified as selling, general and administrative expense.

Fiscal 2001

        Net loss during fiscal 2001 included a $13.9 million charge to reorganization costs, as the Company restructured its worldwide manufacturing capacity by closing the Edinburg, Texas facility and eliminating its Japan operations.

Fiscal 1999

        Net income during fiscal 1999 included a gain of $2.6 million related to insurance proceeds received in excess of losses incurred as a result of the damage caused by Hurricane Georges in September 1998 at two of the Company's leased manufacturing facilities, which was classified as other income (expense), net.

Other Footnotes to Selected Consolidated Financial Data (in millions, pre-tax)

        During fiscal 2003 and 2002, the Company classified certain inventoriable costs of $8.3 million and $8.7 million, respectively, which had historically been classified as selling, general and administrative expenses, to costs of goods sold.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of the consolidated results of operations and financial condition of the Company should be read in conjunction with the accompanying consolidated financial statements and related notes contained in "Item 8, Financial Statements and Supplementary Data" to provide additional information concerning the Company's financial activities and condition.

Overview

        The Company designs, manufactures, imports and markets casual and dress men's and women's apparel products, including pants, shorts, suits, sportcoats, sweaters, shirts, dresses, skirts and vests in the United States and abroad. The Company's operations are organized into three business units, wholesale, retail and licensing, each of which offers similar products through different distribution channels. The Company's wholesale segment, which sells apparel products through approximately 10,000 retail stores operated by the Company's retail customers, is the primary distribution channel through which the Company sells its products. The Company's retail segment markets Haggar® branded products through 70 Company operated retail stores located in the Company's Dallas headquarters and in outlet malls throughout the United States, and the Company's licensing segment generates royalty income by licensing the Company's trademarks for use by other manufacturers of specified products in specified geographic regions.

Critical Accounting Policies

        There have been no material changes to the Company's critical accounting policies during fiscal 2003.

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

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

Accounts Receivable

        The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our trade customers to make required payments. The Company provides a general allowance for customer accounts based on historical collection and write-off experience, and a specific allowance for any individually significant customers who are known to be experiencing financial difficulties. Judgment is critical because some retail customers have experienced financial difficulties. If the financial condition of such retail customers were to worsen, additional allowances might be required.

Inventories

        The Company's inventories are valued at the lower of cost or market value. All stock-keeping units (SKUs) in inventory are evaluated to determine excess or slow moving SKUs based on orders on hand and projections of future demand and market conditions. For those units in inventory that are so identified, the Company estimates market value or net sales value based on current realization trends. If the projected net sales value is less than cost, on an individual SKU basis, inventory is valued at the projected net sales value. This methodology recognizes projected inventory losses at the time such losses are evident rather than at the time goods are actually sold. The Company also identifies slow moving and obsolete piece goods and trimming supplies that are not forecasted to be used in production and records an allowance for those items. Additionally, the Company relies on cycle counts at its warehouse and distribution center to measure inventory quantities on hand, as a full physical inventory is not performed on an annual basis. The Company records a reserve to reflect estimated count differences based on the results of cycle counts performed.

Impairment of Long-Term Assets, Including Goodwill

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

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Litigation and Tax Assessments

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

        Additionally, the Company is periodically engaged in various tax audits by federal and state governmental authorities incidental to its business activities. The Company records reserves for its estimated probable losses for certain of these proceedings. It is possible that additional losses associated with these audits will be incurred, and the amounts could be material.

Healthcare and Workers' Compensation Liabilities

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

Revenue Recognition

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

Reorganization Charges

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

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Results of Operations

        The following table sets forth selected consolidated financial data expressed as a percentage of net sales for each of the fiscal years ended September 30, 2003, 2002 and 2001.

Business Reorganization

        The Company's strategy has been to source production internationally in order to remain competitive in the apparel marketplace and to provide high-quality, low-cost products as a value to its customers. The 2002 and 2001 reorganizations were the results of this strategy.

2002 Reorganization

        In January 2002, the Company announced plans to close its cutting facility in Weslaco, Texas. Accordingly, the Company recorded a $1.0 million pre-tax charge to operations for reorganization costs in the second quarter of fiscal 2002. All 142 employees at the Weslaco facility were terminated in conjunction with the closure, which was completed in June 2002. The 2002 reorganization has been completed and actual amounts paid pursuant to the plan approximated the initial $1.0 million charge.

        In conjunction with the closure of the Edinburg, Texas manufacturing facility in fiscal 2001 (see 2001 Reorganization below), the net book value of the facility of $2.2 million was written off since the net realizable value of the facility was expected to be insignificant. Subsequent to marketing this facility nationally, having appraisals completed on the property, and receiving an initial offer for this facility during the second quarter of fiscal 2002 (in excess of the pre-closure net book value), the Company reversed the original facility write-down and classified the facility as an asset held for sale. The $2.2 million reversal was recorded as a credit to reorganization costs in the income statement in the second quarter of fiscal 2002. In March 2003, the Company sold the facility for net cash proceeds of $2.5 million. The sale resulted in a pre-tax gain of approximately $0.3 million, which was recorded in other income (expense), net.

        In September 2002, the Company announced plans to close one of its manufacturing facilities in the Dominican Republic. Accordingly, the Company recorded a $0.6 million pre-tax charge to operations for reorganization costs in the fourth quarter of fiscal 2002. All 341 employees at the facility were terminated in conjunction with the closure, which was completed in November 2002. Severance payments of $0.5 million and other employee termination and administrative costs of $0.1 million were paid during fiscal 2003.

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        Also in September 2002, the Company settled a pending lawsuit for $1.3 million related to a claim by a former employee of a closed facility for wrongful discharge. As a result of this settlement, the Company recorded a $3.2 million credit to reorganization costs in the fourth quarter of fiscal 2002.

        The following summarizes the reorganization costs included in gross profit for the fiscal year ended September 30, 2002 ("2002 Reorganization Activities") (in thousands):

        In addition to the reorganization activities noted above, the Company reduced its sales force during the fourth quarter of fiscal 2002, terminating 6 employees. As a result, the Company recorded a $1.0 million pre-tax charge to operations in selling, general and administrative expenses. The Company paid $0.8 million in severance payments during fiscal 2003, and periodic severance payments to these terminated employees will continue through January 2004. The remaining $0.2 million in severance payments have been included in accrued liabilities as of September 30, 2003.

2001 Reorganization

        In March 2001, the Company announced plans to close its manufacturing facility in Edinburg, Texas, and its operations in Japan. The Company recorded a $20.8 million charge to operations ($14.3 million after taxes) in the second quarter of fiscal 2001. The charge consisted of $8.6 million in legal costs, $8.1 million in employee termination and related costs, $3.1 million in plant and equipment impairments and $1.0 million in other asset write downs. A $0.7 million pre-tax reduction of the charges for the 2001 reorganization was credited to operations in the fourth quarter of fiscal 2001 as a result of lower than expected costs related to terminated employees and better than expected recoveries on equipment, offset by lower than anticipated recoveries on inventories and receivables in Japan.

        The $8.6 million charge for legal costs included a $1.6 million cash settlement for certain claims and $7.0 million for estimated losses on unsettled claims against the Company, including two jury verdicts totaling $5.2 million, which were returned against subsidiaries of the Company. One of the verdicts was settled in September 2002 for $1.3 million (See 2002 Reorganization above). The other case is currently on appeal. Many of the legal claims against the Company related to claims for wrongful discharge and common law tort by former employees of the Company's sewing facilities in south Texas that were closed in previous years.

        Severance and other employee related payments of $6.0 million have been made as of September 30, 2003.

        Liabilities for the 2001 reorganization costs are summarized as follows (in millions):

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Fiscal 2003 Compared to Fiscal 2002

Net Sales

        Net sales increased $0.5 million, or 0.1%, to $482.4 million in fiscal 2003, compared to net sales of $481.8 million in fiscal 2002. The increase in net sales during fiscal 2003 is primarily attributable to increased sales of Haggar® branded products to a few key customers due to the introduction of new programs in fiscal 2003, increases in Claiborne® sales primarily due to increased orders for casual pants, and sales from the new Kenneth Cole® license agreement. These increases were offset by a decrease in sales at the Women's Wear subsidiary due to a reduction in sales to specialty stores. The net sales increase was also offset by the termination of the DKNY® license in June 2003. Unit sales increased 7.1%, and the average sales price decreased 7.0%.

Gross Profit

        Gross profit as a percentage of net sales decreased to 26.8% in fiscal 2003, compared to 27.8% in fiscal 2002. Absent the impact of the reorganization costs previously discussed, the gross profit percentage would have been comparable to fiscal 2003, or 27.0% in fiscal 2002.

Selling, General and Administrative Expenses

        Selling, general and administrative expense as a percentage of net sales was 24.8% in fiscal 2003 which is comparable to 24.6% in fiscal 2002. The $0.9 million, or 0.7%, increase in selling, general and administrative expenses primarily relates to an increase in media advertising expense of $3.1 million to introduce the Haggar® comfort fit waist pants, $1.2 million in legal and professional fees incurred in a proxy contest involving a Company stockholder, $0.5 million related to the settlement of a lawsuit with the landlord of the Company's Women's Wear subsidiary headquarters, a $0.2 million severance charge related to a reduction in force in the Women's Wear subsidiary and a net increase of $0.3 million in other selling, general and administrative expenses. The expense increases were offset by a $3.4 million decrease in co-operative advertising expense and a $1.0 million severance charge related to a reduction of the Company's sales force in fiscal 2002.

Royalty Income

        Royalty income increased $0.3 million, or 20.1%, to $1.6 million for fiscal 2003, compared to $1.3 million in fiscal 2002 primarily attributable to an increase in sales for the Company's licensees, as well as increased contractual minimum royalties due for some of the Company's licensees during the fiscal year.

Other Income (Expense), Net

        Other income (expense), net, increased $6.1 million to $6.7 million for fiscal 2003, compared to $0.6 million in fiscal 2002, primarily attributable to the sale of the Company's corporate headquarters facility to a third party for net proceeds of approximately $15.0 million, resulting in a pre-tax gain of $5.9 million. The Company also sold manufacturing facilities during each of the fiscal years for pre-tax gains of $0.3 million and $0.5 million during fiscal 2003 and 2002, respectively.

Interest Expense

        Interest expense decreased $1.1 million, or 29.6%, to $2.5 million, compared to $3.6 million in fiscal 2002, primarily due to significantly reduced debt levels throughout the fiscal year, combined with lower interest rates on variable rate debt.

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Income Taxes

        The Company's income tax provision as a percentage of income before income tax and cumulative effect of accounting change was 37.3% in fiscal 2003. Comparatively, the Company's income tax provision as a percentage of income before income tax and cumulative effect of accounting change was 42.1% in fiscal 2002. The fiscal 2003 and 2002 effective rates exceeded the statutory federal tax rate of 35% primarily as a result of state income taxes. The 4.8% decrease in the effective rate from fiscal 2002 to fiscal 2003 is primarily due to foreign losses incurred in 2002 which did not recur in 2003 and certain other permanent items.

Fiscal 2002 Compared to Fiscal 2001

Net Sales

        Net sales increased $37.2 million, or 8.4%, to $481.8 million in fiscal 2002, compared to net sales of $444.6 million in fiscal 2001. The increase in net sales during fiscal 2002 is primarily attributable to increased sales of Haggar® branded products to a few key customers, and increases in Claiborne® and Haggar Direct store sales. These increases were offset by a decrease in sales at Women's Wear due to a reduction in sales to specialty stores. Unit sales increased 21.2% and the average sales price decreased 12.8%.

Gross Profit

        Gross profit as a percentage of net sales increased to 27.8% in fiscal 2002, compared to 26.3% in fiscal 2001. Absent the impact of the reorganization costs previously discussed, the gross profit percentage would have been 27.0% and 30.8% in fiscal 2002 and 2001, respectively. This decrease in gross profit percentage is primarily related to decreases in sales prices due to pressures in the marketplace by customers and competitors and an $8.7 million increase in cost of goods sold in fiscal 2002 as a result of the reclassification of certain inventoriable costs from selling, general and administrative expenses.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses as a percentage of net sales has decreased to 24.6% in fiscal 2002 from 27.9% in fiscal 2001. The $5.5 million, or 4.4%, decrease in selling, general and administrative expenses primarily relates to reduced marketing expenses of $4.6 million which was primarily a postponement of television advertising due to the overall domestic economic conditions, reduced depreciation expense of $1.2 million, as certain fixed assets became fully depreciated during the fiscal year, Haggar Japan expense reductions of $0.9 million due to the elimination of the Japan operations in fiscal 2001, reduced Women's Wear expenses of $1.5 million due to the elimination of goodwill amortization, a $1.0 million reduction in legal reserves, and the $8.7 million expense reclassification discussed above under "—Gross Profit." These decreases are offset by increases in insurance expense of $3.8 million due to increased policy premiums, bonus expense for management of $2.6 million, $2.9 million in expenses related to increased sales for the Claiborne division and increased administrative expenses for the retail stores of $1.9 million related to increased sales and new store activity, a $1.0 million severance charge related to the reduction of the Company's sales force and $0.2 million in other administrative expense increases.

Royalty Income

        Royalty income decreased $0.6 million, or 31.6%, to $1.3 million in fiscal 2002, compared to $1.9 million in fiscal 2001. The decrease relates primarily to a full fiscal year of weaker sales of dress shirts due to a domestic licensee's loss of a key customer during fiscal 2001.

Other Income (Expense), Net

        Other income (expense), net, increased $0.7 million, to $0.6 million income for fiscal 2002, compared to a $0.1 million loss in fiscal 2001. The increase relates to the sale of a manufacturing facility by the Company. In June 2002, the Company sold a manufacturing facility for net cash proceeds of $80,000 and a note receivable of $0.4 million bearing interest at 8.0% and payable in monthly installments with a balloon payment for the outstanding balance in June 2006. The sale resulted in a pre-tax gain of approximately $479,000.

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Interest Expense

        Interest expense decreased $1.5 million, or 29.4%, to $3.6 million in fiscal 2002, compared to $5.1 million in fiscal 2001, primarily due to significantly reduced debt levels throughout fiscal 2002 combined with lower interest rates on variable rate debt.

Income Taxes

        The Company's income tax provision as a percentage of income before income tax and cumulative effect of accounting change was 42.1% in fiscal 2002. Comparatively, the Company's income tax benefit as a percentage of loss before income tax and cumulative effect of accounting change was 19.3% in fiscal 2001. The fiscal 2002 effective tax rate exceeded the statutory federal tax rate of 35% primarily as a result of state income taxes. The benefit in fiscal 2001 was less than the statutory rate of 35% primarily as a result of nondeductible goodwill amortization and the absence of a tax benefit associated with the Company's foreign losses.

Cumulative Effect of Accounting Change

        On October 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142 and recorded a $15.6 million impairment of goodwill related to the 1999 acquisition of the Women's Wear subsidiary. Subsequent to the acquisition, pricing pressures and a weak retail environment for women's apparel resulted in a revised earnings forecast for the Women's Wear business. In order to determine the fair value of goodwill, the Company obtained an independent appraisal, which considered both prices of comparable businesses and the discounted value of projected cash flows. As a result of this appraisal, the Company recorded a $15.6 million impairment charge to reflect the decrease in the carrying amount of goodwill from $25.1 million to $9.5 million.

        The Company subsequently performed its annual impairment test of goodwill in the fourth quarter of fiscal 2002 and determined that the fair value of the Women's Wear business exceeded its carrying value. Therefore, no further revisions to the Company's goodwill were required during fiscal 2002.

Segment Profitability

        The Company's three operating segments are business units that offer similar products through different distribution channels. The Company's wholesale segment designs, manufactures, imports and markets casual and dress men's and women's apparel to retailers throughout North America and the United Kingdom. The Company also operates two other segments, including the retail segment, which markets Haggar® branded products through 70 Company operated stores located in the Company's Dallas headquarters and in outlet malls throughout the United States, and a licensing segment, which generates royalty income by licensing the Company's trademarks for use by other manufacturers of specified products in specified geographic areas. The retail and licensing segments are not material for separate disclosure, and have been combined in the results below. The Company evaluates performance and allocates Company resources based on segment profits.

        Intercompany sales from the wholesale segment to the retail segment are not reflected in wholesale segment net sales. Additionally, there is no profit recorded on sales from the wholesale segment to the retail segment. The accounting policies of the segments are the same as those described in Note 1 to the Company's consolidated financial statements contained in "Item 8. Financial Statements and Supplementary Data." Segment profit (loss) is comprised of segment income before interest expense, provision (benefit) for income taxes and cumulative effect of accounting change.

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        The table below reflects the Company's segment results for all periods presented:

Wholesale Segment

        Wholesale segment net sales increased $0.3 million, or 0.1%, to $435.8 million in fiscal 2003 from $435.6 million in fiscal 2002. The increase is primarily attributable to increased sales of Haggar® branded and Claiborne® products and increases due to a new Kenneth Cole® license agreement. The increases were substantially offset by a decrease in sales at Women's Wear due to a reduction in sales to specialty stores and the termination of the DKNY® license agreement in June 2003.

        Wholesale segment profit decreased $0.3 million, or 1.8%, to $17.2 million in fiscal 2003 from $17.5 million in fiscal 2002. The decrease is primarily attributable to a $1.6 million increase in selling, general and administrative expenses due to a proxy contest with a Company stockholder, the settlement of a lawsuit with the landlord of the Women's Wear subsidiary headquarters, miscellaneous other administrative expenses and a decrease in gross profit primarily due to the absence of a benefit from reorganization activities which occurred in fiscal 2002. The decrease in segment profit was offset by an increase due to the $5.9 million pre-tax gain recorded on the sale of the corporate headquarters facility.

        Wholesale segment net sales increased $32.4 million, or 8.0%, to $435.6 million in fiscal 2002 from $403.1 million in fiscal 2001. The increase in wholesale segment net sales during fiscal 2002 is attributable to increased sales of Haggar® and Claiborne® branded products to a few key customers.

        Wholesale segment profit increased $22.5 million to a $17.5 million profit in fiscal 2002, compared to a $5.0 million loss in fiscal 2001. Approximately $24.0 million of the increase in segment profit during fiscal 2002 was attributable to 2002 and 2001 reorganization activities. This increase in segment profit was partially offset by decreased gross profit related to decreases in sales prices due to pressures in the marketplace by customers and competitors.

Other Segment

        Other segment net sales increased $0.2 million, or 0.5%, to $46.5 million in fiscal 2003 from $46.3 million in fiscal 2002. The increase is primarily attributable to a net increase in the number of retail stores from 68 stores in fiscal 2002 to 70 stores in fiscal 2003, as well as overall increased sales at existing stores.

        Other segment profit increased $1.1 million to a $1.1 million profit in fiscal 2003, compared to a $37,000 loss in fiscal 2002. The increase is primarily attributable to a $0.7 million reduction in selling, general and administrative expenses at the Company's retail stores, including in-store marketing and depreciation expense, as well as a $0.3 million increase in royalty income primarily due to increased sales by the Company's licensees.

        Other segment net sales increased $4.8 million, or 11.7%, to $46.3 million in fiscal 2002 from $41.4 million in fiscal 2001. The increase is primarily attributable to a net increase in the number of retail stores from 66 stores in 2001 to 68 stores in fiscal 2002, as well as overall increased sales at existing stores as a result of focused in-store marketing efforts.

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        Other segment profit improved $0.5 million to a $37,000 loss in fiscal 2002 from a $0.6 million loss in fiscal 2001. The increase is primarily due to improved sales and gross profit at the Company's retail stores, partly offset by decreased royalty income due to a domestic licensee's loss of a key customer during fiscal 2001.

Seasonality

        The Company's sales have exhibited some seasonality with higher sales and income in the second and fourth quarters, which are prior to and during the selling seasons for spring and fall merchandise, respectively, which reflect the buying patterns of the Company's customers. The following table presents certain data for each of the Company's last eight fiscal quarters. The quarterly data is unaudited but gives effect to all adjustments (consisting of normal recurring adjustments) necessary, in the opinion of management of the Company, to present fairly the data for such periods (dollars in thousands, except per share data).

(1)

During the fourth quarter of fiscal 2002, the Company announced the closing of one of its manufacturing facilities in the Dominican Republic and recorded a pre-tax charge of $0.6 million. In addition, the Company settled an outstanding lawsuit in the fourth quarter of fiscal 2002 and decreased the related reserves by $3.2 million.

(2)

During the second quarter of fiscal 2002, the Company recorded a $1.0 million charge for the closure of its Weslaco, Texas cutting operations. Also in the second quarter of fiscal 2002, subsequent to the 2001 closure and write-down of the Edinburg, Texas facility, the Company reversed the original facility write-down of $2.2 million and classified the facility as held for sale.

(3)

During the fourth quarter of fiscal 2002, the Company announced the streamlining of its sales force and recorded a pre-tax charge of $1.0 million.

(4)

During the second and third quarters of fiscal 2003, the Company incurred $0.3 million and $0.9 million, respectively, in legal and professional fees in connection with a proxy contest involving a Company stockholder.

(5)

During the second quarter of fiscal 2003, the Company incurred $0.5 million related to settlement of a lawsuit with the landlord of the Women's Wear subsidiary headquarters.

(6)

During the third quarter of fiscal 2003, the Company incurred $0.2 million related to a reduction in force in the Women's Wear subsidiary.

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(7)

During the fourth quarter of fiscal 2003, the Company recorded a pre-tax gain on the sale of its corporate headquarters of $5.9 million.

(8)

During the first quarter of fiscal 2002, the Company adopted SFAS No. 142 and recorded a $15.6 million impairment of goodwill related to the 1999 acquisition of the Women's Wear subsidiary.

Related Party Transactions

        A director of the Company, who became a director in fiscal 2002, is a partner of a law firm that rendered various legal services for the Company during fiscal 2003, 2002 and 2001. The Company paid the law firm approximately $0.5 million, $0.6 million and $0.3 million for legal services during fiscal 2003, 2002 and 2001, respectively. All amounts paid by the Company were at the usual and customary rates charged to other clients of the law firm. There were $0.1 million in unpaid fees to the law firm at September 30, 2003, which were included in accrued liabilities. There were no material amounts due to such firm from the Company as of September 30, 2002.

Liquidity and Capital Resources

        The Company's principal sources of liquidity have been cash flows from operations and borrowings under its unsecured revolving credit facility. As of September 30, 2003, the Company had cash and cash equivalents of $7.7 million.

        As of September 30, 2003, the Company had no amounts outstanding under the $110.0 million unsecured revolving credit agreement (the "Agreement"). The borrowing capacity is restricted to $55.4 million at September 30, 2003 under the Agreement's funded debt to operating cash flow covenant. The Company incurred approximately $0.3 million in commitment fees related to the available borrowing capacity during fiscal 2003. The interest rates ranged from 2.52% to 4.75% during fiscal 2003 and were based upon margins over a bank base rate or a LIBOR rate, depending on the loan made by the Company. The applicable margin is dependent upon the ratio of the Company's total indebtedness at the end of each fiscal quarter to its operating cash flow for the preceding year. The credit facility, which expires in June 2005, prohibits the Company from pledging its accounts receivables and inventories, contains limitations on incurring additional indebtedness, requires maintaining minimum net worth levels of the Company and the Company's main operating subsidiary, and also requires the maintenance of certain financial ratios. The Company's failure to satisfy these covenants could adversely affect the Company's ability to acquire future capital to meet its needs and to pay dividends. As of September 30, 2003, the Company was in full compliance with its financial and other covenants.

        Long-term debt includes $7.1 million in senior notes. Significant terms of the senior notes include interest payable semi-annually at 8.49% per annum and annual principal payments of approximately $3.6 million through fiscal 2005. The terms and conditions of the note purchase agreement governing the senior notes include restrictions on the sale of assets, limitations on additional indebtedness and the maintenance of certain net worth requirements.

        Long-term debt includes $2.2 million in Industrial Development Revenue Bonds ("IDR"). Significant terms of the IDR bonds include interest at a rate equal to that of high quality, short-term, tax exempt obligations, as defined in the agreement. The interest rate at September 30, 2003 was 1.13%. The IDR bonds mature in fiscal 2026, however the Company has the option to prepay the balance without penalty in fiscal 2006. The Company plans to exercise the prepayment option, and will make future annual principal payments of $0.1 million along with the remaining future balance of $2.0 million being repaid in fiscal 2006. The IDR bonds are collateralized by certain buildings and equipment with a net book value of $0.4 million as of September 30, 2003.

        Certain of the Company's long-term debt facilities contain restrictions on the ability of the Company's subsidiaries to transfer funds to Haggar Corp.

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        As of September 30, 2003 and 2002, the Company had outstanding $36.0 million and $22.9 million, respectively, of trade letters of credit for the purchase of inventory from foreign suppliers in the ordinary course of business. The increase in trade letters of credit outstanding for inventory purchases is primarily due to increased production in the Eastern hemisphere. These trade letters of credit, generally for periods of less than six months, will only be paid upon satisfactory shipment of the inventory to the Company. As of September 30, 2003 and 2002, the Company had entered into $7.0 million and $7.3 million, respectively, of standby letters of credit representing contingent guarantees of performance under self-insurance and other programs. These commitments would only be drawn upon if the Company were to fail to meet its claims obligations.

        Subsequent to the purchase of its new corporate headquarters in the fourth quarter of fiscal 2003, the Company incurred $0.6 million of costs, which include certain facilities costs, accelerated depreciation on assets to be abandoned and rent in excess of normal depreciation on the temporary lease of the Company's corporate headquarters. Management expects to incur costs of $0.8 million to $1.0 million during fiscal 2004. The Company also expects to incur approximately $2.5 million during the first quarter of fiscal 2004 for capital expenditures to prepare the new facility prior to it being occupied.

        In December 1999, the Company entered into an operating lease of the Company's corporate aircraft which contains a residual guarantee for the market value of the aircraft at the end of the lease term in December 2004. Under the lease, the Company has the option of (a) returning the aircraft to the lessor and paying the guaranteed residual value of $3.0 million; (b) purchasing the aircraft for $4.0 million; or (c) arranging for the sale of the aircraft to a third party. If the sale proceeds are less than $4.0 million, the Company is required to reimburse the lessor for the deficiency. If the sale proceeds exceed $4.0 million, the Company is entitled to all of such excess amounts.

        Based on an estimated $3.1 million market value for the aircraft when the lease ends in 2004, the Company began accruing the $0.9 million expected deficiency in fiscal 2003. As of September 30, 2003, the Company included $0.3 million in other accrued liabilities related to the deficiency. The remainder of the $0.9 million expected deficiency will be accrued using the straight line method through the end of the lease term.

        During fiscal 2003, the Company paid quarterly dividends of $0.05 per share, aggregating $1.3 million, $0.3 million of which were cash dividends declared during the fourth quarter of fiscal 2002. During the fourth quarter of fiscal 2003, the Company declared a cash dividend of $0.05 per share payable to the stockholders of record on November 3, 2003. The fourth quarter dividend of approximately $0.3 million was paid in November 2003.

        In November 2002, co-trustees of a trust which owns shares of the Company's common stock filed preliminary proxy materials with the Securities and Exchange Commission indicating that they intended to solicit stockholders in support of their own slate of directors. The Company entered into an agreement to settle this proxy contest in February 2003. The Company incurred expenses of $1.2 million in legal and professional fees during fiscal 2003 related to this matter, all of which had been paid as of September 30, 2003.

        The Company has other contractual obligations and commercial commitments as described in "—Disclosures About Contractual Obligations And Commercial Commitments."

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

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        The ongoing evaluation for impairment of the goodwill related to the 1999 acquisition of Women's Wear requires significant management estimation and judgment. Changes in overall business strategy, negative industry or economic trends or actual results which do not meet the Company's current plan for the Women's Wear business may trigger a future impairment charge, which could negatively affect the Company's results of operations in the period in which the charge is recorded.

        The Company believes that the cash flows from operations and the funds available under its revolving credit facility will be adequate to meet its working capital, debt service, anticipated capital expenditures and related financing needs for calendar 2004. The Company's future cash flows from operations may be impacted by factors including, but not limited to:

•

the ability of the Company to retain existing customers,



•

the cancellation or delay of customer orders,



•

changes in sales mix,



•

capital expenditures,



•

changes in general economic conditions,



•

management's effectiveness in managing the manufacturing process, and



•

the ability to collect in full, and in a timely manner, amounts due the Company.

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

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

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

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

        The Company's trade accounts receivable potentially expose the Company to concentrations of credit risk as the majority of its customers are in the retail apparel industry. The Company performs ongoing credit evaluations of its customers' financial conditions and establishes an allowance for doubtful accounts based upon factors related to the credit risk of specific customers, historical trends and other information.

Fiscal 2003 Cash Flow Results

        Net cash provided by operating activities decreased $2.6 million, or 11.4%, to $20.0 million in fiscal 2003, compared to $22.6 million in fiscal 2002. The decrease is primarily attributable to a decrease in accrued liabilities, primarily due to payments on prior year severance plans. The decrease was offset in part by increased net income adjusted for non-cash items, decreased accounts receivable and reduced inventory levels due to management of inventory lead times.

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        Net cash used in investing activities decreased $2.0 million, or 76.5%, to $0.6 million in fiscal 2003, compared to $2.6 million in fiscal 2002. The decrease is primarily attributable to proceeds from the sale of the corporate headquarters facility and other asset sales, which offset the cash used to purchase the new corporate headquarters facility as well as other purchases of fixed assets in the normal course of business. Other cash used for investing activities during fiscal 2003 included the transfer of $1.3 million of the proceeds from the corporate headquarters sale to restricted cash which will be used for future capital improvements on the new facility and $0.9 million in insurance premium payments which increased the cash surrender value of certain whole life policies.

        Net cash used in financing activities decreased $7.8 million, or 33.0%, to $15.9 million in fiscal 2003, compared to $23.7 million in fiscal 2002, primarily due to higher net debt repayments during fiscal 2002.

Effects of Inflation

        Inflation did not materially impact the Company in fiscal 2003, 2002 or 2001.

Disclosures About Contractual Obligations And Commercial Commitments

        The following table summarizes the Company's future contractual obligations and payment commitments as of September 30, 2003:

Payments Due By Fiscal Years (In thousands)

(1)

Long-term debt includes annual installment payments due for the IDR bonds of $0.1 million through fiscal 2005, with a final payment of $2.0 million in fiscal 2006. The IDR bonds mature in fiscal 2026, however the Company has the option to prepay the balance without penalty in fiscal 2006. The Company plans to exercise the prepayment option, and will make future annual principal payments of $0.1 million along with the remaining future balance of $2.0 million being repaid in fiscal 2006.

(2)

The Company leases certain of its buildings and manufacturing, computer, aircraft and automotive equipment under agreements that expire at various dates through fiscal 2011. Most of these leases contain options to renew at various terms.

(3)

Royalties paid under trademark licenses are recognized in selling, general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

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Recently Issued and Adopted Financial Accounting Standards

        In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46 ("FIN 46,") "Consolidation of Variable Interest Entities—an Interpretation of ARB No. 51," which addresses consolidation of variable interest entities ("VIEs") to which the usual consolidation described in Accounting Research Bulletin No. 51, "Consolidated Financial Statements," does not apply because the VIEs have no voting interests or otherwise are not subject to control through ownership of voting interests. FIN 46 requires existing unconsolidated VIEs to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The provisions of the interpretation are effective immediately for VIEs created after January 31, 2003, and to VIEs in which an entity obtains an interest after that date. An entity with a variable interest in a VIE created before February 1, 2003, must apply the provisions no later than the first reporting period ending after December 15, 2003. The interpretation may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements. The Company has determined it is not party to any VIEs that would require consolidation.

        In May 2003, the Emerging Issues Task Force of the FASB reached a consensus on Issue 01-8 ("EITF 01-8,") "Determining Whether an Arrangement Contains a Lease." Under the provisions of EITF 01-8, arrangements conveying the right to control the use of specific property, plant and equipment must be evaluated to determine whether they contain a lease. The Company enters into contracts for the cutting and assembly of its products that, depending on the facts and circumstances, could be subject to EITF 01-8. The new rules would be applied prospectively to such contracts entered into or modified after July 1, 2003. Accordingly, the impact of EITF 01-8 on the Company's future results of operations and financial position will depend on the terms contained in contracts entered into or modified after such date.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

        As of September 30, 2003, the Company's exposure to interest rate risk was minimal due to the low level of variable rate debt outstanding.

        See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources" and "Item 8. Financial Statements and Supplementary Data—Note 5" for discussion of the terms of the Company's credit facilities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The Reports of Independent Auditors, Consolidated Financial Statements and Notes to Consolidated Financial Statements follow.

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Report of Independent Auditors

To the Board of Directors and Shareholders of
    Haggar Corp.:

        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and comprehensive income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Haggar Corp. and its Subsidiaries (the "Company") at September 30, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The financial statements of the Company for the year ended September 30, 2001, before the revisions described in Notes 2 and 10, were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements in their report dated November 1, 2001.

        As discussed above, the financial statements of the Company for the year ended September 30, 2001, were audited by other independent accountants who have ceased operations. As described in Notes 2 and 10, these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which was adopted by the Company as of October 1, 2001, and the disclosures required by Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information". We audited the transitional disclosures and segment disclosures described in Notes 2 and 10. In our opinion, the transitional disclosures and segment disclosures for 2001 in Notes 2 and 10 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole.

PricewaterhouseCoopers LLP

Dallas, Texas
November 5, 2003

33

        This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with the Company's filing on Form 10-K for the fiscal year ended September 30, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this filing on Form 10-K nor has Arthur Andersen LLP provided a consent to the inclusion of its report in this Form 10-K. For further discussion, see Exhibit 23(b) to this Form 10-K of which this report forms a part. The financial statements of Haggar Corp. and its Subsidiaries to which this report relates have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142 and segment disclosures required by Statement of Financial Accounting Standards No. 131, as described in Notes 2 and 10 to the consolidated financial statements. These revisions are not covered by the copy of the report of Arthur Andersen LLP and were audited by PricewaterhouseCoopers LLP.

Report of Independent Public Accountants

To Haggar Corp.:

        We have audited the accompanying consolidated balance sheets of Haggar Corp. (a Nevada corporation) and subsidiaries as of September 30, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Haggar Corp. and subsidiaries as of September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States.

        Arthur Andersen LLP

Dallas, Texas,
November 1, 2001

34

Haggar Corp. and Subsidiaries

Consolidated Balance Sheets
(In thousands, except share and per share amounts)

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

35

Haggar Corp. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income
(In thousands, except per share amounts)

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

36

Haggar Corp. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(In thousands, except share and per share amounts)

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

37

Haggar Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)