Warnaco Reports Fourth Quarter and Fiscal 2007 Results

The Warnaco Group, Inc. (NASDAQ: WRNC) today reported results for the fourth quarter and fiscal year ended December 29, 2007. For the fourth quarter: Net revenues were $473.0 million, up 6% from the prior year quarter Gross margin increased 60 basis points to 39% of net revenues from the prior year quarter Income from continuing operations was $22.2 million compared to $26.4 million in the prior year quarter For the fourth quarter, on an adjusted (non-GAAP) basis (excluding businesses expected to be discontinued in fiscal 2008, pension income, certain tax related items and restructuring expenses): Net revenues were $467.1 million, up 7% from the prior year quarter Gross margin increased 300 basis points to 42% of net revenues from the prior year quarter Income from continuing operations was $19.8 million compared to $21.6 million in the prior year quarter For the year: Net revenues were $1.9 billion, up 12% from the prior year Gross margin increased 190 basis points to 40% of net revenues from the prior year Operating income increased 15% to $137.0 million and operating margin increased 20 basis points to 7% of net revenues Income per diluted share from continuing operations was $1.78 compared to $1.41 in the prior year For the year, on an adjusted (non-GAAP) basis (excluding businesses expected to be discontinued in fiscal 2008, pension income, certain tax related items and restructuring expenses): Net revenues were $1.8 billion, up 13% over the prior year Gross margin increased 330 basis points to 42% of net revenues from the prior year Operating income increased 42% to $167.4 million and operating margin increased 190 basis points to over 9% of net revenues Income per diluted share from continuing operations increased 63% to $2.26 compared to $1.39 in the prior year The Company believes it is valuable for users of the Company’s financial statements to be made aware of the adjusted financial information, as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis. The accompanying tables provide a reconciliation of actual results to the adjusted results. Joe Gromek, Warnaco’s President and Chief Executive Officer, commented, "We delivered strong results throughout fiscal 2007. Not only did we achieve significant revenue and earnings per share growth during the year, we also strategically positioned the Company to maximize our global growth opportunities in 2008 and beyond. In particular, we believe that our efforts to rationalize our portfolio will allow us to focus resources on our higher margin businesses, and capitalize on expansion opportunities on a global basis. We believe this is most apparent in our Calvin Klein businesses, where we have added categories and channels (including new direct to consumer initiatives) to our existing portfolio to support our continued growth.” Mr. Gromek concluded, "We are off to a good start in 2008, and while no one is immune to macroeconomic trends, we believe our global business model and channel diversity will continue to differentiate us from our industry peers and will enable us to drive profitable growth and advance shareholder value in the near and long term.” Fourth Quarter Highlights Total Company Net revenues rose 6% to $473.0 million from $447.6 million in the prior year period. Gross margin increased 60 basis points to 39% of net revenues, and selling, general and administrative expenses ("SG&A”) as a percentage of net revenues rose to 35% from 30% in the prior year quarter. SG&A includes approximately $3.4 million and $1.9 million of expense related to restructuring and certain businesses to be discontinued in fiscal 2008, respectively. Operating income was $26.1 million compared to $40.1 million in the prior year quarter. On an adjusted basis, as detailed in the accompanying tables, net revenues rose 7% to $467.1 million from $437.2 million in the prior year period and gross margin increased 300 basis points to 42% of net revenues compared to the prior year quarter. SG&A, as a percentage of net revenues, rose to 34% from 30% in the prior year quarter, driven by the mix in business (favoring international and direct to consumer) as well as an incremental $4.8 million in marketing expense. Operating income decreased to $34.0 million from $37.4 million in the fourth quarter of fiscal 2006. Income from continuing operations was $22.2 million, or $0.48 per diluted share, compared to $26.4 million, or $0.57 per diluted share, in the prior year period and includes pre-tax expense related to restructuring and pre-tax losses related to certain businesses to be discontinued in 2008 of $14.7 million and $1.0 million, respectively. Net income was $0.49 per diluted share compared to $0.41 per diluted share in the fourth quarter of fiscal 2006. On an adjusted basis, as detailed in the accompanying tables, income from continuing operations was $19.8 million, or $0.43 per diluted share, compared to $21.6 million, or $0.47 per diluted share, in the prior year quarter. Net income, which includes the effects of discontinued operations, was $0.42 per diluted share compared to $0.32 per diluted share in the prior year quarter. The provision for income taxes was a credit of $3.8 million, primarily related to the calculation of the Company’s annualized tax rate and a benefit due to the release of valuation allowances related to the Company’s ability to recognize the benefit of certain deferred tax assets. On an adjusted basis, as detailed in the accompanying tables, the provision for income taxes was $6.6 million, or an effective tax rate of 25%, compared to $6.6 million, or an effective tax rate of 23%, for the prior year quarter. The Company expects that its effective tax rate for 2008 will be in the range of 25%-27%. The translation of foreign currencies, primarily as a result of a stronger euro and Canadian dollar, increased fourth quarter 2007 net revenues and operating income by approximately $19.8 million and $3.1 million, respectively, compared to the fourth quarter of fiscal 2006. Segment Results The following segment results are as reported and have not been adjusted. Sportswear Sportswear Group revenues increased 10% to $245.7 million from $223.3 million in the prior year quarter, driven by significant revenue growth in the Company’s global Calvin Klein jeans business offset by modest declines in Chaps revenues. Operating income was $16.6 million, or 7% of Sportswear Group net revenues, compared to $18.2 million, or 8% of Sportswear Group revenues, in the prior year quarter. Increased selling cost related to the retail expansion of Calvin Klein jeans, $4.5 million of incremental marketing expense and a timing shift in the sales of certain higher margin sportswear businesses adversely affected quarterly results. Intimate Apparel Intimate Apparel Group revenues rose 16% to $177.6 million from $153.5 million in the prior year quarter and operating income was $29.8 million, or 17% of Intimate Apparel Group net revenues compared to $26.7 million, or 17% of Intimate Apparel Group net revenues, in the prior year quarter. Strong global growth in the Calvin Klein Underwear wholesale and retail businesses drove the gains in both revenues and operating income. Increased expenses associated with the Company’s retail expansion and $1.1 million of restructuring expense adversely affected fourth quarter operating margins. Swimwear Swimwear Group revenues were $49.7 million compared to $70.8 million in the prior year quarter, due largely to lower than anticipated membership club sales. The Swimwear Group’s operating loss was $17.9 million compared to operating income of $7.4 million in the prior year quarter. Operating results include approximately $14.0 million of restructuring expense associated with the Company’s previously announced exit from its designer swim businesses (excluding Calvin Klein) and $6.0 million of one-time items directly related to the Company’s exit from owned manufacturing. Fiscal 2007 Highlights Net revenues rose 12% to $1.9 billion from $1.7 billion in the prior year. Gross margin increased 190 basis points to 40% of net revenues. SG&A, as a percentage of net revenues, rose to 33% from 31% in the prior year. SG&A includes $11.1 million and $8.2 million, respectively, of expense related to restructuring and certain businesses to be discontinued in fiscal 2008. Operating income increased to $137.0 million, or 7% of net revenues, from $119.0 million, or 7% of net revenues, in the prior year. On an adjusted basis, as detailed in the accompanying tables, net revenues rose 13% to $1.8 billion from $1.6 billion in the prior year and gross margin increased 330 basis points to 42% of net revenues compared to the prior year. SG&A expenses, as a percentage of net revenues, rose to 32% from 31% in the prior year, driven by the mix in business (favoring international and direct to consumer), as well as an incremental $9.8 million in marketing expense. Operating income increased to $167.4 million, or 9% of net revenues, from $117.5 million, or 7% of net revenues, in fiscal 2006. Income from continuing operations was $82.9 million, or $1.78 per diluted share, compared to $66.2 million, or $1.41 per diluted share, in the prior year and includes pre-tax expense related to restructuring and pre-tax losses related to certain businesses to be discontinued in 2008 of $32.6 million and $6.7 million, respectively. Net income was $1.70 per diluted share compared to $1.08 in fiscal 2006. On an adjusted basis, as detailed in the accompanying tables, income from continuing operations was $105.5 million, or $2.26 per diluted share, compared to $65.1 million, or $1.39 per diluted share, in the prior year and net income was $2.04 per diluted share compared to $1.05 per diluted share in fiscal 2006. The translation of foreign currencies, primarily as a result of a stronger euro and Canadian dollar, increased fiscal 2007 net revenues and operating income by approximately $52.4 million and $8.6 million, respectively, compared to fiscal 2006. Balance Sheet Cash and cash equivalents at December 29, 2007 were $191.9 million compared to $167.0 million at December 30, 2006. During the fourth quarter the Company used approximately $25.0 million to repurchase approximately 634,000 shares of its common stock under its share repurchase plans and used approximately $20.0 million to reduce debt. For the year, the Company repurchased 1.5 million shares of its common stock at an aggregate cost of approximately $55.0 million and used approximately $79.0 million to reduce debt. Inventories were $332.7 million at December 29, 2007, an 18% decline, compared to $407.6 million at December 30, 2006, primarily as a result of discontinued operations. On a comparable basis, excluding inventories related to discontinued businesses and businesses to be discontinued in 2008, inventories were down 1% while adjusted 2007 revenues rose 13%. Fiscal 2008 Outlook For fiscal 2008, on an adjusted basis (excluding restructuring expenses), the Company expects net revenues to grow 7% - 9% over comparable fiscal 2007 levels and expects diluted earnings per share from continuing operations in the range of $2.50 - $2.60 (assuming minimal pension expense). The accompanying tables provide a reconciliation of expected revenue growth and expected diluted earnings per share from continuing operations, on a GAAP basis (7%-9% and $2.18 - $2.25 per diluted share (assuming minimal pension expense), respectively), to the adjusted fiscal 2008 outlook above. Conference Call Information Stockholders and other persons are invited to listen to the fourth quarter and fiscal 2007 earnings conference call scheduled for today, Tuesday, February 26, 2008, at 5:00 p.m. EST. To participate in Warnaco’s conference call, dial (877) 692-2592 approximately five minutes prior to the 5:00 p.m. start time. The call will also be broadcast live over the Internet at www.warnaco.com. An online archive will be available following the call. This press release was furnished to the SEC (www.sec.gov) and may also be accessed through the Company’s internet website: www.warnaco.com. ABOUT WARNACO The Warnaco Group, Inc., headquartered in New York, is a leading apparel company engaged in the business of designing, sourcing, marketing and selling intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear and accessories under such owned and licensed brands as Warner's®, Olga®, Body Nancy Ganz®, and Speedo®, as well as Chaps® sportswear and denim, and Calvin Klein® men's and women's underwear, men’s and women’s bridge apparel and accessories, men's and women's jeans and jeans accessories, junior women's and children's jeans and men’s and women's swimwear. FORWARD-LOOKING STATEMENTS The Warnaco Group, Inc. notes that this press release, the conference call scheduled for February 26, 2008 and certain other written, electronic and oral disclosure made by the Company from time to time, may contain forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words "believe," "anticipate," "estimate," "expect," "intend," "may," "project," "scheduled to," "seek," "should," "will be," "will continue," "will likely result," or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies. The following factors, among others and in addition to those described in the Company's reports filed with the SEC (including, without limitation, those described under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure," as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: the Company's ability to execute its repositioning and sale initiatives (including achieving enhanced productivity and profitability) announced on September 18, 2007; economic conditions that affect the apparel industry; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the risk of product safety issues, defects or other production problems associated with our products; the Company’s dependence on a limited number of customers; the effects of consolidation in the retail sector; the Company’s dependence on license agreements with third parties; the Company’s dependence on the reputation of its brand names, including, in particular, Calvin Klein; the Company’s exposure to conditions in overseas markets in connection with the Company’s foreign operations and the sourcing of products from foreign third-party vendors; the Company's foreign currency exposure; the Company’s history of insufficient disclosure controls and procedures and internal controls and restated financial statements; unanticipated future internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the effects of fluctuations in the value of investments of the Company’s pension plan; the sufficiency of cash to fund operations, including capital expenditures; the Company's ability to service its indebtedness, the effect of changes in interest rates on the Company's indebtedness that is subject to floating interest rates and the limitations imposed on the Company's operating and financial flexibility by the agreements governing the Company's indebtedness; the Company’s dependence on its senior management team and other key personnel; the Company’s reliance on information technology; the limitations on purchases under the Company's share repurchase program contained in the Company's debt instruments, the number of shares that the Company purchases under such program and the prices paid for such shares; the Company’s inability to achieve its strategic objectives, including gross margin, SG&A and operating profit goals, as a result of one or more of the factors described above or otherwise; the failure of acquired businesses to generate expected levels of revenues; the failure of the Company to successfully integrate such businesses with its existing businesses (and as a result, not achieving all or a substantial portion of the anticipated benefits of such acquisitions); and such acquired businesses being adversely affected, including by one or more of the factors described above and thereby failing to achieve anticipated revenues and earnings growth. The Company encourages investors to read the section entitled "Risk Factors" and the discussion of the Company's critical accounting policies under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Discussion of Critical Accounting Policies" included in the Company's Annual Report on Form 10-K, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. The discussion in this press release is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.   Schedule 1 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited) As Reported Fourth Quarterof Fiscal 2007 Restructuring Charges andPension (c) As AdjustedFourth Quarterof Fiscal 2007 (e) Discontinued Operations (b) Taxation (d) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)       Net revenues $ 472,955 $ (5,842 ) $ - $ - $ 467,113 Cost of goods sold   286,561       (4,933 )   (11,328 )     270,300   Gross profit 186,394 (909 ) 11,328 - 196,813 Selling, general and administrative expenses 164,989 (1,872 ) (3,401 ) 159,716 Amortization of intangible assets 3,120 3,120 Pension income   (7,800 )       7,800       -   Operating income 26,085 963 6,929 - 33,977 Other expense (600 ) (600 ) Interest expense 9,735 9,735 Interest income   (1,473 )         (1,473 ) Income from continuing operations before provision for income taxes 18,423 963 6,929 - 26,315 Provision for income taxes   (3,805 )     -       10,357     6,552   Income from continuing operations 22,228 963 6,929 (10,357 ) 19,763 Loss from discontinued operations, net of taxes   714   (a)   (963 )       (249 ) Net income $ 22,942     $ -   $ 6,929   $ (10,357 ) $ 19,514         Basic income per common share: Income from continuing operations $ 0.50 $ 0.02 $ 0.15 $ (0.23 ) $ 0.44 Loss from discontinued operations   0.01       (0.02 )   -     -     -   Net income $ 0.51     $ -   $ 0.15   $ (0.23 ) $ 0.44       Diluted income per common share: Income from continuing operations $ 0.48 $ 0.02 $ 0.15 $ (0.22 ) $ 0.43 Loss from discontinued operations   0.01       (0.02 )   -     -     (0.01 ) Net income $ 0.49     $ -   $ 0.15   $ (0.22 ) $ 0.42     Weighted average number of shares outstanding used in computing income per common share: Basic   44,751,397       44,751,397     44,751,397     44,751,397     44,751,397     Diluted   46,430,923       46,430,923     46,430,923     46,430,923     46,430,923     (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. Amounts include restructuring charges of $672. See notes (c) and (e) below.   (c) Includes restructuring charges for the fourth quarter of fiscal 2007 primarily related to the disposition of the Company's manufacturing facilities in Mexico and the rationalization of the Company's swimwear workforce in California. This adjustment seeks to present the Company's consolidated condensed statement of operations on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations at a normalized tax rate of 24.9%. The Company’s normalized tax rate of 24.9% excludes the effects of operations expected to be discontinued in fiscal 2008, restructuring charges, pension income and certain tax related items (including the effect of the Company’s release of valuation allowances and the effect of uncertain tax positions taken by the Company associated with the application of FIN 48). See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.     Schedule 1a   THE WARNACO GROUP, INC.   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS   (Dollars in thousands, excluding per share amounts)         As ReportedFourth Quarterof Fiscal 2006 RestructuringCharges and Pension (c) As AdjustedFourth Quarterof Fiscal 2006 (e) Discontinued Operations (b) Taxation (d)     (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)     Net revenues $ 447,614 $ (10,373 ) $ - $ - $ 437,241 Cost of goods sold   274,090     (7,837 )     -       266,253   Gross profit 173,524 (2,536 ) - - 170,988 Selling, general and administrative expenses 133,024 (1,682 ) (311 ) 131,031 Amortization of intangible assets 2,531 - 2,531 Pension income   (2,107 )       -       2,107       -   Operating income 40,076 (854 ) (1,796 ) - 37,426 Other income 185 - 185 Interest expense 9,952 - 9,952 Interest income   (919 )   -           (919 ) Income from continuing operations before provision for income taxes 30,858 (854 ) (1,796 ) - 28,208 Provision for income taxes   4,429         -       -     2,132     6,561   Income from continuing operations 26,429 (854 ) (1,796 ) (2,132 ) 21,647 Loss from discontinued operations, net of taxes   (7,544 ) (a)     854           (6,690 ) Net income $ 18,885       $ -     $ (1,796 ) $ (2,132 ) $ 14,957         Basic income per common share: Income from continuing operations $ 0.59 $ (0.02 ) $ (0.04 ) $ (0.05 ) $ 0.48 Loss from discontinued operations   (0.17 )       0.02       -     -     (0.15 ) Net income $ 0.42       $ -     $ (0.04 ) $ (0.05 ) $ 0.33       Diluted income per common share: Income from continuing operations $ 0.57 $ (0.02 ) $ (0.04 ) $ (0.05 ) $ 0.47 Loss from discontinued operations   (0.16 )       0.02       -     -     (0.15 ) Net income $ 0.41       $ -     $ (0.04 ) $ (0.05 ) $ 0.32     Weighted average number of shares outstanding used in computing income per common share: Basic   45,044,744         45,044,744       45,044,744     45,044,744     45,044,744     Diluted   46,055,486         46,055,486       46,055,486     46,055,486     46,055,486       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) This adjustment seeks to present the Company's consolidated condensed statement of operations on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations on a continuing basis at the reported tax rate of 23.3% for fiscal 2006. See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 2 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts)                   As Reported Fiscal Year Ended December 29, 2007   Discontinued Operations (b)   Restructuring Charges and Pension (c)   Taxation (d)   As Adjusted Fiscal Year Ended December 29, 2007 (e) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)     Net revenues $ 1,860,120 $ (38,088 ) $ - $ - $ 1,822,032 Cost of goods sold   1,108,315       (36,587 )     (21,561 )         1,050,167   Gross profit 751,805 (1,501 ) 21,561 - 771,865 Selling, general and administrative expenses 610,516 (8,166 ) (11,086 ) 591,264 Amortization of intangible assets 13,167 - 13,167 Pension income   (8,838 )     -       8,838           -   Operating income 136,960 6,665 23,809 - 167,434 Other income (7,063 ) - (7,063 ) Interest expense, net 37,718 - 37,718 Interest income   (3,766 )     -               (3,766 ) Income from continuing operations before provision for income taxes 110,071 6,665 23,809 - 140,545 Provision for income taxes   27,162               7,834       34,996   Income from continuing operations 82,909 6,665 23,809 (7,834 ) 105,549 Loss from discontinued operations, net of taxes   (3,802 ) (a)   (6,665 )             (10,467 ) Net income $ 79,107     $ -     $ 23,809     $ (7,834 )   $ 95,082         Basic income per common share: Income from continuing operations $ 1.85 $ 0.15 $ 0.53 $ (0.17 ) $ 2.35 Loss from discontinued operations   (0.09 )     (0.15 )     -       -       (0.23 ) Net income $ 1.76     $ -     $ 0.53     $ (0.17 )   $ 2.12       Diluted income per common share: Income from continuing operations $ 1.78 $ 0.14 $ 0.51 $ (0.17 ) $ 2.26 Loss from discontinued operations   (0.08 )     (0.14 )     -       -       (0.22 ) Net income $ 1.70     $ -     $ 0.51     $ (0.17 )   $ 2.04     Weighted average number of shares outstanding used in computing income per common share: Basic   44,908,028       44,908,028       44,908,028       44,908,028       44,908,028     Diluted   46,618,307       46,618,307       46,618,307       46,618,307       46,618,307       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. Amounts include restructuring charges of $3,981. See notes (c) and (e) below.   (c) Includes restructuring charges primarily related to the disposition of the Company's manufacturing facilities in Canada and Mexico and the rationalization of the Company's swimwear workforce in California. This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges and pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations at a normalized tax rate of 24.9%. The Company’s normalized tax rate of 24.9% excludes the effects of operations expected to be discontinued in fiscal 2008, restructuring charges, pension income and certain tax related items (including the effect of the Company’s release of valuation allowances and the effect of uncertain tax positions taken by the Company associated with the application of FIN 48). See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 2a THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts)             As ReportedFiscal Year Ended December 30, 2006 RestructuringCharges and Pension (c) As AdjustedFiscal Year Ended December 30, 2006 (e) Discontinued Operations (b) Taxation (d)           (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)       Net revenues $ 1,655,268 $ (44,068 ) $ - $ - $ 1,611,200 Cost of goods sold   1,018,228         (36,295 )             981,933   Gross profit 637,040 (7,773 ) - - 629,267 Selling, general and administrative expenses 508,129 (8,263 ) (411 ) 499,455 Amortization of intangible assets 12,269 - 12,269 Pension income   (2,356 )       -       2,356           -   Operating income 118,998 490 (1,945 ) - 117,543 Other income (2,934 ) - (2,934 ) Interest expense 38,530 - 38,530 Interest income   (2,903 )   -               (2,903 ) Income from continuing operations before provision for income taxes 86,305 490 (1,945 ) - 84,850 Provision for income taxes   20,073         -       -       (338 )     19,735   Income from continuing operations 66,232 490 (1,945 ) 338 65,115 Loss from discontinued operations, net of taxes   (15,482 ) (a)     (490 )             (15,972 ) Net income $ 50,750       $ -     $ (1,945 )   $ 338     $ 49,143         Basic income per common share: Income from continuing operations $ 1.45 $ 0.01 $ (0.04 ) $ 0.01 $ 1.42 Loss from discontinued operations   (0.34 )       (0.01 )     -       -       (0.35 ) Net income $ 1.11       $ -     $ (0.04 )   $ 0.01     $ 1.07       Diluted income per common share: Income from continuing operations $ 1.41 $ 0.01 $ (0.04 ) $ 0.01 $ 1.39 Loss from discontinued operations   (0.33 )       (0.01 )     -       -       (0.34 ) Net income $ 1.08       $ -     $ (0.04 )   $ 0.01     $ 1.05       Weighted average number of shares outstanding used in computing income per common share: Basic   45,719,910         45,719,910       45,719,910       45,719,910       45,719,910     Diluted   46,882,399         46,882,399       46,882,399       46,882,399       46,882,399       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations on a continuing basis at the reported tax rate of 23.3% for fiscal 2006. See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 3 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) (Unaudited)   December 29, 2007   December 30, 2006 (Unaudited) (Unaudited)   ASSETS Current assets: Cash and cash equivalents $ 191,918 $ 166,990 Accounts receivable, net 267,450 294,993 Assets held for sale - 669 Inventories 332,652 407,617 Assets of discontinued operations (a) 67,931 5,657 Other current assets   133,211   72,274 Total current assets 993,162 948,200   Property, plant and equipment, net 111,916 122,628 Intangible and other assets 501,425 610,147   TOTAL ASSETS $ 1,606,503 $ 1,680,975   LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt $ 56,115 $ 108,739 Accounts payable and accrued liabilities 296,492 337,863 Accrued income taxes payable 9,978 40,194 Liabilities of discontinued operations (b)   42,566   7,527 Total current liabilities 405,151 494,323 Long-term debt 310,500 332,458 Other long-term liabilities 117,956 171,280 Total stockholders' equity   772,896   682,914   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,606,503 $ 1,680,975     (a) Assets of discontinued operations include the following: December 29, 2007 December 30, 2006   Accounts receivable, net $ 21,487 $ 3,428 Inventories 28,167 217 Other current assets 6,741 1,831 Property, plant and equipment, net 3,001 181 Intangible and other assets   8,535   - Assets of discontinued operations $ 67,931 $ 5,657   (b) Liabilities of discontinued operations include the following: December 29, 2007 December 30, 2006   Accounts payable $ 14,867 $ 3,315 Accrued liabilities 21,693 4,212 Other long-term liabilities   6,006   - Liabilities of discontinued operations $ 42,566 $ 7,527   Schedule 4   THE WARNACO GROUP, INC. NET REVENUES AND OPERATING INCOME BY BUSINESS GROUP (Dollars in thousands) (Unaudited)         Net revenues: Fourth Quarter Fourth Quarter Increase / % of Fiscal 2007 of Fiscal 2006 (Decrease) Change Sportswear Group $ 245,729 $ 223,330 $ 22,399 10.0% Intimate Apparel Group 177,575 153,513 24,062 15.7% Swimwear Group (a)   49,651   70,771   (21,120) -29.8% Net revenues $ 472,955 $ 447,614 $ 25,341 5.7%     Fourth Quarter of Fiscal 2007 % of Group Net Revenues Fourth Quarterof Fiscal 2006 % of GroupNet Revenues Operating income (loss): Sportswear Group (b) $ 16,557 6.7% $ 18,215 8.2% Intimate Apparel Group (b), (c) 29,795 16.8% 26,732 17.4% Swimwear Group (b), (c), (d) (17,864) -36.0% 7,367 10.4% Unallocated corporate expenses (c)   (2,403) na   (12,238) na Operating income $ 26,085 na $ 40,076 na   Operating income as a percentage of total net revenues   5.5%   9.0%     (a) Includes $5,842 and $10,373, respectively, for the fourth quarter of fiscal 2007 and for the fourth quarter of fiscal 2006, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   (b) Includes an allocation of shared services expenses as follows:   Fourth Quarter Fourth Quarter of Fiscal 2007 of Fiscal 2006 Sportswear Group $ 5,273 $ 5,342 Intimate Apparel Group $ 4,062 $ 3,388 Swimwear Group $ 5,185 $ 4,124   (c) Includes restructuring charges as follows:   Fourth Quarter Fourth Quarter of Fiscal 2007 of Fiscal 2006 Sportswear Group $ - $ - Intimate Apparel Group 1,099 - Swimwear Group 14,001  (i) - Unallocated corporate expenses   301   311 $ 15,401 $ 311 (i) Includes $672 related to brands the Company intends to classify as discontinued operations in fiscal 2008.   (d) Includes losses of $963 and $854, respectively, for the fourth quarter of fiscal 2007 and fourth quarter of fiscal 2006 related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   Schedule 5   THE WARNACO GROUP, INC. NET REVENUES AND OPERATING INCOME BY BUSINESS GROUP (Dollars in thousands) (Unaudited)           Net revenues: Fiscal Year Ended Fiscal Year Ended Increase / % December 29, 2007 December 30, 2006 (Decrease) Change Sportswear Group $ 939,147 $ 791,634 $ 147,513 18.6% Intimate Apparel Group 629,433 545,149 84,284 15.5% Swimwear Group (a)   291,540   318,485   (26,945) -8.5% Net revenues $ 1,860,120 $ 1,655,268 $ 204,852 12.4%   Fiscal Year EndedDecember 29, 2007 % of GroupNet Revenues Fiscal Year EndedDecember 30, 2006 % of GroupNet Revenues Operating income (loss): Sportswear Group (b), (c) $ 99,182 10.6% $ 60,141 7.6% Intimate Apparel Group (b), (c) 109,219 17.4% 79,315 14.5% Swimwear Group (b), (c), (d) (33,341) -11.4% 17,287 5.4% Unallocated corporate expenses   (38,100) na   (37,745) na Operating income $ 136,960 na $ 118,998 na   Operating income as a percentage of total net revenues   7.4%   7.2%   (a) Includes $38,088 and $44,068 for fiscal 2007 and fiscal 2006, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   (b) Includes an allocation of shared services expenses as follows:   Fiscal Year Ended Fiscal Year Ended December 29, 2007 December 30, 2006 Sportswear Group $ 21,092 $ 21,855 Intimate Apparel Group $ 16,240 $ 13,888 Swimwear Group $ 21,776 $ 16,425   (c) Includes restructuring charges as follows:   Fiscal Year Ended Fiscal Year Ended December 29, 2007 December 30, 2006 Sportswear Group $ 119 $ - Intimate Apparel Group 2,142 - Swimwear Group (i) 34,089 - Unallocated corporate expenses   278   411 $ 36,628 $ 411 (i) Includes $3,981 related to brands the Company intends to classify as discontinued operations in fiscal 2008.   (d) Includes losses of $6,665 and $490, respectively, for fiscal 2007 and fiscal 2006 related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   Schedule 6   THE WARNACO GROUP, INC. NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL (Dollars in thousands) (Unaudited)   By Region: Net Revenues Fourth Quarterof Fiscal 2007   Fourth Quarterof Fiscal 2006   Increase   % Change United States $ 224,588 $ 259,288 $ (34,700 ) -13.4% Europe 125,865 93,525 32,340 34.6% Asia 68,507 52,313 16,194 31.0% Canada 32,241 23,861 8,380 35.1% Mexico, Central and South America   21,754     18,627     3,127   16.8% Total (a) $ 472,955   $ 447,614   $ 25,341   5.7%   (a) For the fourth quarter of fiscal 2007 and fourth quarter of fiscal 2006, includes domestic net revenues of $4,941 and $9,839, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008. For the fourth quarter of fiscal 2007 and fourth quarter of fiscal 2006, includes foreign net revenues of $901 and $534, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   Operating Income Fourth Quarterof Fiscal 2007 Fourth Quarterof Fiscal 2006 Increase / (Decrease) % Change United States $ (7,937 ) $ 28,680 $ (36,617 ) -127.7% Europe 15,073 6,623 8,450 127.6% Asia 9,144 8,411 733 8.7% Canada 8,529 5,998 2,531 42.2% Mexico, Central and South America 3,679 2,602 1,077 41.4% Unallocated corporate expenses   (2,403 )   (12,238 )   9,835   -80.4% Total (a) $ 26,085   $ 40,076   $ (13,991 ) -34.9%   (a) For the fourth quarter of fiscal 2007and fourth quarter of fiscal 2006, includes domestic operating losses (income) of $1,296 and $(1,020), respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008. For the fourth quarter of fiscal 2007 and fourth quarter of fiscal 2006, includes foreign operating losses (income) of $(332) and $166, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   By Channel: Net Revenues Fourth Quarterof Fiscal 2007 Fourth Quarterof Fiscal 2006 Increase % Change Wholesale $ 375,094 $ 371,539 $ 3,555 1.0% Retail   97,861     76,075     21,786   28.6% Total $ 472,955   $ 447,614   $ 25,341   5.7%     Operating Income Fourth Quarterof Fiscal 2007 Fourth Quarterof Fiscal 2006 Increase / (Decrease) % Change Wholesale $ 14,520 $ 41,421 $ (26,901 ) -64.9% Retail 13,968 10,893 3,075 28.2% Unallocated corporate expenses   (2,403 )   (12,238 )   9,835   -80.4% Total $ 26,085   $ 40,076   $ (13,991 ) -34.9%   Schedule 7   THE WARNACO GROUP, INC. NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL (Dollars in thousands) (Unaudited)   By Region: Net Revenues Fiscal YearEndedDecember 29,2007   Fiscal YearEndedDecember 30,2006   Increase   % Change United States $ 961,716 $ 973,042 $ (11,326 ) -1.2% Europe 471,706 329,950 141,756 43.0% Asia 249,680 191,756 57,924 30.2% Canada 106,199 95,085 11,114 11.7% Mexico, Central and South America   70,819     65,435     5,384   8.2% Total (a) $ 1,860,120   $ 1,655,268   $ 204,852   12.4%   (a) For fiscal 2007 and fiscal 2006 includes domestic net revenues of $34,563 and $41,139, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008. For fiscal 2007 and fiscal 2006 includes foreign net revenues of $3,525 and $2,929, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   Operating Income Fiscal YearEndedDecember 29,2007 Fiscal YearEndedDecember 30,2006 Increase /(Decrease) % Change United States $ 32,520 $ 59,397 $ (26,877 ) -45.2% Europe 73,971 33,202 40,769 122.8% Asia 34,277 31,380 2,897 9.2% Canada 22,585 22,658 (73 ) -0.3% Mexico, Central and South America 11,707 10,095 1,612 16.0% Unallocated corporate expenses   (38,100 )   (37,734 )   (366 ) 1.0% Total (a) $ 136,960   $ 118,998   $ 17,962   15.1%   (a) For fiscal 2007 and fiscal 2006 includes domestic operating losses of $7,780 and $810, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008. For fiscal 2007 and fiscal 2006 includes foreign operating income of $1,116 and $320, respectively, related to the remaining designer brands (excluding Calvin Klein) which the Company intends to classify as discontinued operations in fiscal 2008.   By Channel: Net Revenues Fiscal YearEndedDecember 29,2007 Fiscal YearEndedDecember 30,2006 Increase % Change Wholesale $ 1,522,678 $ 1,408,344 $ 114,334 8.1% Retail   337,442     246,924     90,518   36.7% Total $ 1,860,120   $ 1,655,268   $ 204,852   12.4%     Operating Income Fiscal YearEndedDecember 29,2007 Fiscal YearEndedDecember 30,2006 Increase /(Decrease) % Change Wholesale $ 123,856 $ 120,793 $ 3,063 2.5% Retail 51,204 35,950 15,254 42.4% Unallocated corporate expenses   (38,100 )   (37,745 )   (355 ) 0.9% Total $ 136,960   $ 118,998   $ 17,962   15.1%   Schedule 8   THE WARNACO GROUP, INC. SUPPLEMENTAL SCHEDULE - DISCONTINUED BRANDS (Dollars in thousands) (Unaudited)     The following table is presented for informational purposes only and summarizes the net revenues and operating income of the businesses for each quarter of 2007 that have been classified as discontinued operations as of December 29, 2007 as well as the businesses the Company intends to classify as discontinued operations in fiscal 2008:     First Quarter 2007   Second Quarter 2007 Net Revenues   Operating Income (loss) Net Revenues   Operating Income (loss) Discontinued Operations:     Discontinued during fiscal 2006 (a) Intimate Apparel $ 55 $ 154 $ 35 $ 45 Swimwear 7,429 (552 ) 2,882 363   Discontinued during the 3rd quarter of fiscal 2007 (b) Intimate Apparel 37,607 5,246 21,021 (731 ) Swimwear 23,727 3,382 17,890 (2,786 )   Expected to be discontinued during fiscal 2008 (c) Swimwear 16,606 3,310 13,500 (3,354 )   Third Quarter 2007 Fourth Quarter 2007 Discontinued Operations: Net Revenues   Operating Income (loss) Net Revenues   Operating Income (loss) Discontinued during fiscal 2006 (a) Intimate Apparel $ 9 $ 11 $ 97 $ 117 Swimwear 570 (3,057 ) 333 (52 )   Discontinued during the 3rd quarter of fiscal 2007 (b) Intimate Apparel 23,953 329 27,641 1,368 Swimwear 2,094 (6,767 ) 5,047 (1,772 )   Expected to be discontinued during fiscal 2008 (c) Swimwear 2,141 (5,648 ) 5,842 (963 )     (a) Includes the Company's JLO, Lejaby Rose, Op (men's swimwear, sportswear and licensing) and Axcelerate Activewear businesses as well as three Speedo retail outlet stores, which businesses were classified as discontinued operations for financial reporting purposes during fiscal 2006.   (b) Includes the Company's Anne Cole, Catalina, Cole of California and Ocean Pacific (womens and juniors) businesses as well as Company's Lejaby business, which businesses were classified as discontinued operations for financial reporting purposes during the third quarter of fiscal 2007.   (c) Includes the Company's remaining designer Swimwear businesses (excluding the Calvin Klein swim business) which businesses the Company intends to classify as discontinued operations for financial reporting purposes in fiscal 2008.   Schedule 9   THE WARNACO GROUP, INC. SUPPLEMENTAL SCHEDULE - FISCAL 2008 OUTLOOK (Dollars in thousands) (Unaudited)     NET REVENUE GUIDANCE   Percentages (Unaudited) Estimated growth in net revenues in fiscal 2008 over comparable fiscal 2007 levels 7.00% to 9.00%       EARNINGS PER SHARE GUIDANCE U.S. Dollars Diluted Income per common share from continuing operations (Unaudited) GAAP basis $2.18 to $2.25 Restructuring charges (a) 0.32 to 0.35 As adjusted (Non-GAAP basis) (b) $2.50 to $2.60     (a)  Reflects between $14,000 to $16,000 of restructuring charges (net of an income tax benefit of between $5,000 and $6,000) for fiscal 2008 primarily related to the assignment of the Calvin Klein Collection license to Philips - Van Heusen Corporation.   (b)  The Company believes it is useful for users of the Company's financial statements to be made aware of the "adjusted" net revenue growth and per share amounts related to the Company's income from continuing operations as such measures are used by management to evaluate the operating performance of the Company's continuing businesses on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its projected results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 10 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited)     As Reported First Quarter of Fiscal 2007     Restructuring Charges and Pension (c)     As AdjustedFirst Quarter of Fiscal 2007 (e) Discontinued Operations (b) Taxation (d)         (Unaudited) (Unaudited) (Unaudited)   (Unaudited) (Unaudited)       Net revenues $ 485,864 $ (16,605 ) $ - $ - $ 469,259 Cost of goods sold   283,141         (11,274 )     (600 )           271,267   Gross profit 202,723 (5,331 ) 600 - 197,992 Selling, general and administrative expenses 144,870 (2,030 ) (242 ) 142,598 Amortization of intangible assets 3,434 3,434 Pension income   (183 )           183             -   Operating income 54,602 (3,301 ) 659 - 51,960 Other expense (602 ) (602 ) Interest expense 9,312 9,312 Interest income   (283 )                 (283 ) Income from continuing operations before provision for income taxes 46,175 (3,301 ) 659 - 43,533 Provision for income taxes   15,559         -             (4,719 )     10,840   Income from continuing operations 30,616 (3,301 ) 659 4,719 32,693 Income (Loss) from discontinued operations, net of taxes   7,357   (a)     3,301                 10,658   Net income $ 37,973       $ -     $ 659       $ 4,719     $ 43,351         Basic income per common share: Income from continuing operations $ 0.68 $ (0.07 ) $ 0.01 $ 0.10 $ 0.73 Loss from discontinued operations   0.16         0.07       -         -       0.23   Net income $ 0.84       $ -     $ 0.01       $ 0.10     $ 0.96       Diluted income per common share: Income from continuing operations $ 0.66 $ (0.07 ) $ 0.01 $ 0.10 $ 0.71 Loss from discontinued operations   0.16         0.07       -         -       0.23   Net income $ 0.82       $ -     $ 0.01       $ 0.10     $ 0.94     Weighted average number of shares outstanding used in computing income per common share:   Basic   44,977,257         44,977,257       44,977,257         44,977,257       44,977,257     Diluted   46,270,365         46,270,365       46,270,365         46,270,365       46,270,365     (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) Includes restructuring charges for the first quarter of fiscal 2007 primarily related to the closure of the Company's manufacturing facilities in Canada. This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations at a normalized tax rate of 24.9%. The Company’s normalized tax rate of 24.9% excludes the effects of operations expected to be discontinued in fiscal 2008, restructuring charges, pension income and certain tax related items (including the effect of the Company’s release of valuation allowances and the effect of uncertain tax positions taken by the Company associated with the application of FIN 48). See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.               Schedule 11 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited) As Reported First Quarter of Fiscal 2006 Restructuring Charges and Pension (c) As AdjustedFirst Quarter of Fiscal 2006 (e) Discontinued Operations (b) Taxation (d)         (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)       Net revenues $ 394,135 $ (17,392 ) $ - $ - $ 376,743 Cost of goods sold   244,758         (11,987 )     -           232,771   Gross profit 149,377 (5,405 ) - - 143,972 Selling, general and administrative expenses 120,444 (2,284 ) - 118,160 Amortization of intangible assets 3,217 - 3,217 Pension income   (83 )           83           -   Operating income 25,799 (3,121 ) (83 ) - 22,595 Other expense 1,900 1,900 Interest expense 8,451 8,451 Interest income   (475 )               (475 ) Income from continuing operations before provision for income taxes 15,923 (3,121 ) (83 ) - 12,719 Provision for income taxes   5,769         -           (2,811 )     2,958   Income from continuing operations 10,154 (3,121 ) (83 ) 2,811 9,761 Income (Loss) from discontinued operations, net of taxes   3,731   (a)     3,121               6,852   Net income $ 13,885       $ -     $ (83 )   $ 2,811     $ 16,613         Basic income per common share: Income from continuing operations $ 0.22 $ (0.07 ) $ - $ 0.06 $ 0.21 Loss from discontinued operations   0.08         0.07       -       -       0.15   Net income $ 0.30       $ -     $ -     $ 0.06     $ 0.36       Diluted income per common share: Income from continuing operations $ 0.22 $ (0.07 ) $ - $ 0.06 $ 0.21 Loss from discontinued operations   0.08         0.07       -       -       0.15   Net income $ 0.30       $ -     $ -     $ 0.06     $ 0.36     Weighted average number of shares outstanding used in computing income per common share: Basic   46,147,169         46,147,169       46,147,169       46,147,169       46,147,169     Diluted   46,734,984         46,734,984       46,734,984       46,734,984       46,734,984       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations on a continuing basis at the reported tax rate of 23.3% for fiscal 2006. See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.             Schedule 12 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited)   As ReportedSecond Quarter of Fiscal 2007 Restructuring Charges and Pension (c) As AdjustedSecond Quarter of Fiscal 2007 (e) Discontinued Operations (b) Taxation (d)           (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)       Net revenues $ 426,013 $ (13,500 ) $ - $ - $ 412,513 Cost of goods sold   255,190         (14,772 )     (2,400 )         238,018   Gross profit 170,823 1,272 2,400 - 174,495 Selling, general and administrative expenses 141,972 (2,083 ) 35 139,924 Amortization of intangible assets 3,617 3,617 Pension income   (510 )           510           -   Operating income 25,744 3,355 1,855 - 30,954 Other expense (6,280 ) (6,280 ) Interest expense 9,494 9,494 Interest income   (753 )               (753 ) Income from continuing operations before provision for income taxes 23,283 3,355 1,855 - 28,493 Provision for income taxes   4,407         -           2,688       7,095   Income from continuing operations 18,876 3,355 1,855 (2,688 ) 21,398 Income (Loss) from discontinued operations, net of taxes   (5,100 ) (a)     (3,355 )             (8,455 ) Net income $ 13,776       $ -     $ 1,855     $ (2,688 )   $ 12,943         Basic income per common share: Income from continuing operations $ 0.42 $ 0.07 $ 0.04 $ (0.06 ) $ 0.47 Loss from discontinued operations   (0.11 )       (0.07 )     -       -       (0.18 ) Net income $ 0.31       $ -     $ 0.04     $ (0.06 )   $ 0.29       Diluted income per common share: Income from continuing operations $ 0.41 $ 0.07 $ 0.04 $ (0.06 ) $ 0.46 Loss from discontinued operations   (0.11 )       (0.07 )     -       -       (0.18 ) Net income $ 0.30       $ -     $ 0.04     $ (0.06 )   $ 0.28     Weighted average number of shares outstanding used in computing income per common share: Basic   45,146,246         45,146,246       45,146,246       45,146,246       45,146,246     Diluted   46,534,530         46,534,530       46,534,530       46,534,530       46,534,530       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. Amounts include restructuring charges of $382. See notes (c) and (e) below.   (c) Includes restructuring charges for the second quarter of fiscal 2007 primarily related to the rationalization of the Company's swimwear workforce in California. This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations at a normalized tax rate of 24.9%. The Company’s normalized tax rate of 24.9% excludes the effects of operations expected to be discontinued in fiscal 2008, restructuring charges, pension income and certain tax related items (including the effect of the Company’s release of valuation allowances and the effect of uncertain tax positions taken by the Company associated with the application of FIN 48). See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 13 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited)     As ReportedSecond Quarter of Fiscal 2006   RestructuringCharges and Pension (c)     As AdjustedSecond Quarter of Fiscal 2006 (e)   Discontinued Operations (b) Taxation (d)           (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)     Net revenues $ 393,882 $ (13,764 ) $ - $ - $ 380,118 Cost of goods sold   249,249         (13,366 )     -           235,883   Gross profit 144,633 (398 ) - - 144,235 Selling, general and administrative expenses 125,111 (2,590 ) - 122,521 Amortization of intangible assets 3,826 3,826 Pension income   (83 )           83           -   Operating income 15,779 2,192 (83 ) - 17,888 Other expense (632 ) (632 ) Interest expense 10,676 10,676 Interest income   (712 )               (712 ) Income from continuing operations before provision for income taxes   6,447 2,192 (83 ) - 8,556 Provision for income taxes   2,587         -           (597 )     1,990   Income from continuing operations 3,860 2,192 (83 ) 597 6,566 Income (Loss) from discontinued operations, net of taxes   (442 ) (a)     (2,192 )             (2,634 ) Net income $ 3,418       $ -     $ (83 )   $ 597     $ 3,932         Basic income per common share: Income from continuing operations $ 0.08 $ 0.05 $ - $ 0.01 $ 0.14 Loss from discontinued operations   (0.01 )       (0.05 )     -       -       (0.05 ) Net income $ 0.07       $ -     $ -     $ 0.01     $ 0.09       Diluted income per common share: Income from continuing operations $ 0.08 $ 0.05 $ - $ 0.01 $ 0.14 Loss from discontinued operations   (0.01 )       (0.05 )     -       -       (0.06 ) Net income $ 0.07       $ -     $ -     $ 0.01     $ 0.08     Weighted average number of shares outstanding used in computing income per common share: Basic   46,082,333         46,082,333       46,082,333       46,082,333       46,082,333     Diluted   46,935,529         46,935,529       46,935,529       46,935,529       46,935,529       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations on a continuing basis at the reported tax rate of 23.3% for fiscal 2006. See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 14 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited)             As ReportedThird Quarter of Fiscal 2007 RestructuringCharges and Pension (c) As AdjustedThird Quarter of Fiscal 2007 (e) Discontinued Operations (b) Taxation (d)           (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)     Net revenues $ 475,288 $ (2,141 ) $ - $ - $ 473,147 Cost of goods sold   283,423         (5,608 )     (7,233 )         270,582   Gross profit 191,865 3,467 7,233 - 202,565 Selling, general and administrative expenses 158,685 (2,181 ) (7,478 ) 149,026 Amortization of intangible assets 2,996 2,996 Pension income   (345 )           345           -   Operating income 30,529 5,648 14,366 - 50,543 Other expense 419 419 Interest expense 9,177 9,177 Interest income   (1,257 )               (1,257 ) Income from continuing operations before provision for income taxes 22,190 5,648 14,366 - 42,204 Provision for income taxes   11,001         -           (492 )     10,509   Income from continuing operations 11,189 5,648 14,366 492 31,695 Income (Loss) from discontinued operations, net of taxes   (6,773 ) (a)     (5,648 )             (12,421 ) Net income $ 4,416       $ -     $ 14,366     $ 492     $ 19,274         Basic income per common share: Income from continuing operations $ 0.25 $ 0.13 $ 0.32 $ 0.01 $ 0.71 Loss from discontinued operations   (0.15 )       (0.13 )     -       -       (0.28 ) Net income $ 0.10       $ -     $ 0.32     $ 0.01     $ 0.43       Diluted income per common share: Income from continuing operations $ 0.24 $ 0.12 $ 0.31 $ 0.01 $ 0.68 Loss from discontinued operations   (0.14 )       (0.12 )     -       -       (0.26 ) Net income $ 0.10       $ -     $ 0.31     $ 0.01     $ 0.42     Weighted average number of shares outstanding used in computing income per common share: Basic   44,762,763         44,762,763       44,762,763       44,762,763       44,762,763     Diluted   46,347,574       46,347,574     46,347,574     46,347,574     46,347,574       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. Amounts include restructuring charges of $2,927. See note (c) and (e) below.   (c) Includes restructuring charges for the third quarter of fiscal 2007 primarily related to the disposition of the Company's manufacturing facilities in Mexico and the rationalization of the Company's swimwear workforce in California. This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations at a normalized tax rate of 24.9%. The Company’s normalized tax rate of 24.9% excludes the effects of operations expected to be discontinued in fiscal 2008, restructuring charges, pension income and certain tax related items (including the effect of the Company’s release of valuation allowances and the effect of uncertain tax positions taken by the Company associated with the application of FIN 48). See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.   Schedule 15 THE WARNACO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Dollars in thousands, excluding per share amounts) (Unaudited)             As ReportedThird Quarter of Fiscal 2006 RestructuringCharges and Pension (c) As AdjustedThird Quarter of Fiscal 2006 (e) Discontinued Operations (b) Taxation (d)         (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)       Net revenues $ 419,637 $ (2,539 ) $ - $ - $ 417,098 Cost of goods sold   250,131         (3,105 )     -           247,026   Gross profit 169,506 566 - - 170,072 Selling, general and administrative expenses 129,550 (1,707 ) (100 ) 127,743 Amortization of intangible assets 2,695 2,695 Pension income   (83 )           83           -   Operating income 37,344 2,273 17 - 39,634 Other expense (4,387 ) (4,387 ) Interest expense 9,451 9,451 Interest income   (797 )               (797 ) Income from continuing operations before provision for income taxes 33,077 2,273 17 - 35,367 Provision for income taxes   7,288         -           938       8,226   Income from continuing operations 25,789 2,273 17 (938 ) 27,141 Income (Loss) from discontinued operations, net of taxes   (11,227 ) (a)     (2,273 )             (13,500 ) Net income $ 14,562       $ -     $ 17     $ (938 )   $ 13,641         Basic income per common share: Income from continuing operations $ 0.57 $ 0.05 $ - $ (0.02 ) $ 0.59 Loss from discontinued operations   (0.25 )       (0.05 )     -       -       (0.29 ) Net income $ 0.32       $ -     $ -     $ (0.02 )   $ 0.30       Diluted income per common share: Income from continuing operations $ 0.56 $ 0.05 $ - $ (0.02 ) $ 0.58 Loss from discontinued operations   (0.25 )       (0.05 )     -       -       (0.29 ) Net income $ 0.31       $ -     $ -     $ (0.02 )   $ 0.29       Weighted average number of shares outstanding used in computing income per common share:   Basic   45,623,044         45,623,044       45,623,044       45,623,044       45,623,044     Diluted   46,465,593         46,465,593       46,465,593       46,465,593       46,465,593       (a) Includes, among other previously reported items, operations related to certain designer swimwear brands including Anne Cole, Catalina, Cole of California and Ocean Pacific, as well as the Company's Lejaby businesses, which have been classified as discontinued operations as of December 29, 2007.   (b) Reflects adjustments to classify the Company's remaining designer swimwear brands (excluding Calvin Klein) as discontinued operations. These remaining designer swimwear brands (excluding Calvin Klein) are expected to be classified as discontinued operations in fiscal 2008. The adjustments seek to present the Company's consolidated condensed statements of operations on a continuing basis assuming all the Company's designer swimwear businesses (excluding Calvin Klein) were classified as discontinued operations as of December 29, 2007. See note (e) below.   (c) Includes restructuring charges for the fourth quarter of fiscal 2007 primarily related to a closed facility in Thomasville, Georgia. This adjustment seeks to present the Company's consolidated condensed statement of operation on a continuing basis without the effects of restructuring charges or pension income. See note (e) below.   (d) Adjustment to reflect the Company's consolidated condensed statement of operations on a continuing basis at the reported tax rate of 23.3% for fiscal 2006. See note (e) below.   (e) The "As Adjusted" statement of operations is used by management to evaluate the operating performance of the Company's continuing operations on a comparable basis. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. The Company presents such non-GAAP financial measures in reporting its results to provide investors with an additional tool to evaluate the Company's operating results.