10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED APRIL 4, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-10857

THE WARNACO GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 95-4032739
(I.R.S. Employer
Identification No.)

501 Seventh Avenue
New York, New York 10018
(Address of registrant’s principal executive offices)

Registrant’s telephone number, including area code: (212) 287-8000

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.     þ Yes     o No.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     o Yes     o No.*

*Registrant is not subject to the requirements of Rule 405 of Regulation S-T at this time.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o Yes     þ No.

The number of outstanding shares of the registrant’s common stock, par value $0.01 per share, as of May 8, 2009 is as follows: 45,786,624.

THE WARNACO GROUP, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED APRIL 4, 2009

			Page
			Number
PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Consolidated Condensed Balance Sheets as of April 4, 2009, January 3, 2009 and April 5, 2008		1
		Consolidated Condensed Statements of Operations for the Three Months Ended April 4, 2009 and for the Three Months Ended April 5, 2008		2
		Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Three Months Ended April 4, 2009 and for the Three Months Ended April 5, 2008		3
		Consolidated Condensed Statements of Cash Flows for the Three Months Ended April 4, 2009 and for the Three Months Ended April 5, 2008		4
		Notes to Consolidated Condensed Financial Statements		5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		58
	Item 4.	Controls and Procedures		60
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings		61
	Item 1A.	Risk Factors		61
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		61
	Item 3.	Defaults Upon Senior Securities		61
	Item 4.	Submission of Matters to a Vote of Security Holders		61
	Item 5.	Other Information		61
	Item 6.	Exhibits		62
		SIGNATURES
EX-10.1
EX-31.1
EX-31.2
EX-32

PART I

FINANCIAL INFORMATION

Item 1.   Financial Statements.

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, excluding share and per share data)
(Unaudited)

	April 4,			January 3,			April 5,
	2009			2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	122,051		$	147,627		$	138,002
Accounts receivable, net of reserves of $77,812, $87,375 and $85,680 as of April 4, 2009, January 3, 2009 and April 5, 2008, respectively		362,518			251,886			357,602
Inventories		316,212			326,297			320,998
Assets of discontinued operations		2,093			6,279			7,819
Prepaid expenses and other current assets (including deferred income taxes of $65,404, $65,050, and $77,237 as of April 4, 2009, January 3, 2009, and April 5, 2008, respectively)		155,175			156,777			183,065
Total current assets		958,049			888,866			1,007,486
Property, plant and equipment, net		107,061			109,563			113,491
Other assets:
Licenses, trademarks and other intangible assets, net		274,885			282,656			324,794
Goodwill		97,960			100,136			114,302
Other assets (including deferred income taxes of $63,500, $76,196, and $72,202 as of April 4, 2009, January 3, 2009, and April 5, 2008, respectively)		100,473			114,872			104,624
Total assets	$	1,538,428		$	1,496,093		$	1,664,697
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	124,136		$	79,888		$	96,316
Accounts payable		127,983			146,030			144,604
Accrued liabilities		160,464			168,892			163,856
Liabilities of discontinued operations		10,514			12,055			16,785
Accrued income taxes payable (including deferred income taxes of $1,320, $1,406 and $2,272 as of April 4, 2009, January 3, 2009, and April 5, 2008, respectively)		10,250			7,447			23,813
Total current liabilities		433,347			414,312			445,374
Long-term debt		164,013			163,794			267,464
Other long-term liabilities (including deferred income taxes of $49,492, $51,192, and $69,361 as of April 4, 2009, January 3, 2009, and April 5, 2008, respectively)		122,504			129,246			122,907
Commitments and contingencies
Stockholders’ equity:
Warnaco Group Inc. stockholders’ equity:
Preferred stock (See Note 15)		—			—			—
Common stock: $0.01 par value, 112,500,000 shares authorized, 50,328,616, 50,122,614 and 48,967,223 issued as of April 4, 2009, January 3, 2009 and April 5, 2008, respectively		503			501			490
Additional paid-in capital		635,174			631,891			600,374
Accumulated other comprehensive income		2,751			12,841			98,532
Retained earnings		305,587			268,016			238,471
Treasury stock, at cost 4,933,656, 4,865,401 and 3,906,365 shares as of April 4, 2009, January 3, 2009 and April 5, 2008, respectively		(126,854	)		(125,562	)		(109,073	)
Total Warnaco Group Inc. stockholders’ equity		817,161			787,687			828,794
Noncontrolling interest		1,403			1,054			158
Total stockholders’ equity		818,564			788,741			828,952
Total liabilities and stockholders’ equity	$	1,538,428		$	1,496,093		$	1,664,697

See Notes to Consolidated Condensed Financial Statements.

1

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended
	April 4,			April 5,
	2009			2008
Net revenues	$	538,445		$	567,658
Cost of goods sold		312,885			313,537
Gross profit		225,560			254,121
Selling, general and administrative expenses		158,756			196,195
Amortization of intangible assets		2,127			2,474
Pension expense (income)		537			(291	)
Operating income		64,140			55,743
Other loss (income)		(404	)		5,461
Interest expense		6,069			9,390
Interest income		(408	)		(933	)
Income from continuing operations before provision for income taxes and noncontrolling interest		58,883			41,825
Provision for income taxes		20,134			34,642
Income from continuing operations before noncontrolling interest		38,749			7,183
Income (loss) from discontinued operations, net of taxes		(920	)		10,737
Net income	$	37,829		$	17,920
Less: Net income attributable to the noncontrolling interest		(258	)		(211	)
Net income attributable to Warnaco Group, Inc.	$	37,571		$	17,709
Amounts attributable to Warnaco Group Inc. common shareholders:
Income from continuing operations, net of tax		38,491			6,972
Discontinued operations, net of tax		(920	)		10,737
Net income		37,571			17,709
Basic income per common share attributable to Warnaco Group, Inc. common shareholders (see Note 17):
Income from continuing operations	$	0.84		$	0.15
Income (loss) from discontinued operations		(0.02	)		0.24
Net income	$	0.82		$	0.39
Diluted income per common share attributable to Warnaco Group, Inc. common shareholders (see Note 17):
Income from continuing operations	$	0.83		$	0.15
Income (loss) from discontinued operations		(0.02	)		0.23
Net income	$	0.81		$	0.38
Weighted average number of shares outstanding used in computing income per common share (see Note 17):
Basic		45,304,591			44,593,337
Diluted		45,651,170			46,096,399

See Notes to Consolidated Condensed Financial Statements.

2

THE WARNACO GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)

	Warnaco Group Inc.
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive		Retained		Treasury			Noncontrolling			Comprehensive
	Stock		Capital		Income		Earnings		Stock			Interest			Income		Total
Balance at December 29, 2007	$	482	$	587,099	$	69,583	$	220,762	$	(105,030	)	$	—		$	—		772,896
Comprehensive income:
Net income								17,709					211			17,920		17,920
Other comprehensive income, net of tax:
Foreign currency translation adjustments						28,704										28,704		28,704
Change in post retirement plans						245										245		245
Other comprehensive income													—			28,949		28,949
Comprehensive income													211		$	46,869		46,869
Effect of consolidation of noncontrolling interest													(53	)				(53	)
Stock issued in connection with stock compensation plans		8		9,305														9,313
Compensation expense in connection with employee stock compensation plans				3,970														3,970
Repurchases of common stock										(4,043	)							(4,043	)
Balance at April 5, 2008	$	490	$	600,374	$	98,532	$	238,471	$	(109,073	)	$	158				$	828,952

	Warnaco Group Inc.
					Accumulated
			Additional		Other
	Common		Paid-in		Comprehensive			Retained		Treasury			Noncontrolling		Comprehensive
	Stock		Capital		Income/(Loss)			Earnings		Stock			Interest		Income			Total
Balance at January 3, 2009	$	501	$	631,891	$	12,841		$	268,016	$	(125,562	)	$	1,054	$	—		$	788,741
Comprehensive income:
Net income									37,571					258		37,829			37,829
Other comprehensive income, net of tax:
Foreign currency translation adjustments						(10,427	)							91		(10,336	)		(10,336	)
Change in post retirement plans						(1	)									(1	)		(1	)
Loss on cash flow hedges						338										338			338
Other comprehensive income														91		(9,999	)		(9,999	)
Comprehensive income														349	$	27,830			27,830
Stock issued in connection with stock compensation plans		2		94															96
Compensation expense in connection with employee stock compensation plans				3,189															3,189
Purchase of treasury stock related to stock compensation plans											(1,292	)							(1,292	)
Balance at April 4, 2009	$	503	$	635,174	$	2,751		$	305,587	$	(126,854	)	$	1,403				$	818,564

See Notes to Consolidated Condensed Financial Statements.

3

THE WARNACO GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	Three Months Ended
	April 4,			April 5,
	2009			2008
Cash flows from operating activities:
Net income attributable to Warnaco Group, Inc.	$	37,571		$	17,709
Adjustments to reconcile net income to net cash used in operating activities:
Foreign exchange loss (gain)		(533	)		(1,855	)
(Income) loss from discontinued operations		920			(10,737	)
Depreciation and amortization		10,081			11,256
Stock compensation		3,189			3,665
Provision for trade and other bad debts		1,874			2,433
Inventory writedown		3,934			6,029
Loss on repurchase of Senior Notes/ refinancing of debt facilities		—			3,160
Other		449			1,126
Changes in operating assets and liabilities:
Accounts receivable		(113,499	)		(81,992	)
Inventories		3,482			9,656
Prepaid expenses and other assets		(1,096	)		(31,212	)
Accounts payable, accrued expenses and other liabilities		(24,039	)		2,667
Accrued income taxes		14,861			27,635
Net cash used in operating activities from continuing operations		(62,806	)		(40,460	)
Net cash provided by (used in) operating activities from discontinued operations		1,625			(2,915	)
Net cash used in operating activities		(61,181	)		(43,375	)
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable		10			148
Purchases of property, plant & equipment		(7,361	)		(11,156	)
Proceeds from the sale of businesses		—			34,653
Business acquisitions, net of cash acquired		—			(143	)
Purchase of intangible assets		—			(30,423	)
Net cash used in investing activities from continuing operations		(7,351	)		(6,921	)
Net cash used in investing activities from discontinued operations		—			—
Net cash used in investing activities		(7,351	)		(6,921	)
Cash flows from financing activities:
Repayments of Term B Note		—			(900	)
Repurchase of Senior Notes due 2013		—			(46,185	)
Decrease in short-term notes payable		(6,502	)		(12,523	)
Borrowings under revolving credit facility		52,836			47,638
Proceeds from the exercise of employee stock options		96			9,313
Purchase of treasury stock		(1,292	)		(4,043	)
Other		(502	)		(17	)
Net cash provided by (used in) financing activities from continuing operations		44,636			(6,717	)
Net cash used in financing activities from discontinued operations		—			—
Net cash provided by (used in) financing activities		44,636			(6,717	)
Effect of foreign exchange rate changes on cash and cash equivalents		(1,680	)		3,097
Decrease in cash and cash equivalents		(25,576	)		(53,916	)
Cash and cash equivalents at beginning of period		147,627			191,918
Cash and cash equivalents at end of period	$	122,051		$	138,002

See Notes to Consolidated Condensed Financial Statements.

4

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 1 — Organization

The Warnaco Group, Inc. (“Warnaco Group” and, collectively with its subsidiaries, the “Company”) was incorporated in Delaware on March 14, 1986 and, on May 10, 1986, acquired substantially all of the outstanding shares of Warnaco Inc. (“Warnaco”). Warnaco is the principal operating subsidiary of Warnaco Group.

Note 2 — Basis of Consolidation and Presentation

The consolidated financial statements include the accounts of Warnaco Group and its wholly-owned subsidiaries. Non-controlling interest represents minority shareholders’ proportionate share of the equity in the Company’s consolidated subsidiary WBR Industria e Comercio de Vestuario S.A. All inter-company accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America (“GAAP”). In the opinion of management, these financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair statement of results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the annual period ended January 3, 2009 (“Fiscal 2008”). The year end condensed consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by GAAP.

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Periods Covered:  The Company operates on a 52/53 week fiscal year basis ending on the Saturday closest to December 31. As such, the period January 4, 2009 to January 2, 2010 (“Fiscal 2009”) will contain 52 weeks of operations, while the period from December 30, 2007 to January 3, 2009 (“Fiscal 2008”) contained 53 weeks of operations. Additionally, the period from January 4, 2009 to April 4, 2009 (the “Three Months Ended April 4, 2009”) and the period from December 30, 2007 to April 5, 2008 (the “Three Months Ended April 5, 2008”) contained thirteen weeks and fourteen weeks of operations, respectively.

Reclassifications:  Prior period items on the Company’s Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Cash Flows have been reclassified to give effect to the Company’s discontinued operations. In addition, certain prior period items on the Company’s Consolidated Condensed Statements of Operations and Consolidated Condensed Balance Sheets have been reclassified to give effect to the adoption of SFAS 160 (as defined below) on January 4, 2009. Basic and diluted earnings per share data have also been recalculated in accordance with the adoption of FSP EITF 03-06-1 (see below) on January 4, 2009.

Stock-Based Compensation:  12,500 stock options were granted during the Three Months Ended April 4, 2009 and no stock options were granted during the Three Months Ended April 5, 2008. The fair values of stock

5

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

options granted during the Three Months Ended April 4, 2009 were estimated at the date of grant using a Black-Scholes-Merton option pricing model with the following assumptions:

	Three Months Ended
	April 4,
	2009
Weighted average risk free rate of return(a)		2.35	%
Dividend yield(b)		—
Expected volatility of the market price of the Company’s common stock		37.7	%
Expected option life		6 years

(a)	Based on the quoted yield for U.S. five-year treasury bonds as of the date of grant.
(b)	The terms of the Company’s New Credit Agreements and the terms of the indenture governing its Senior Notes (each as defined below) limit the Company’s ability to make certain payments, including dividends, and require the Company to meet certain financial covenants. The Company has not paid dividends on its common stock in any of the last four fiscal years.

A summary of stock-based compensation expense is as follows:

	Three Months Ended
	April 4,		April 5,
	2009		2008
Stock-based compensation expense before income taxes:
Stock options	$	1,090	$	1,271
Restricted stock grants		2,099		2,701
Total(a)		3,189		3,972
Income tax benefit:
Stock options		381		450
Restricted stock grants		546		957
Total		927		1,407
Stock-based compensation expense after income taxes:
Stock options		709		821
Restricted stock grants		1,553		1,744
Total	$	2,262	$	2,565

(a) Stock-based compensation has been reflected in the Company’s Consolidated Statement of Operations as follows:

	Three Months Ended
	April 4,		April 5,
	2009		2008
Included in income from continuing operations before provision for income taxes and noncontrolling interest	$	3,189	$	3,665
Included in income from discontinued operations, net of income taxes		—		307
	$	3,189	$	3,972

6

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”) which replaces SFAS No. 141, Business Combinations. SFAS 141(R) retains the underlying concepts of SFAS 141 in that all business combinations are required to be accounted for at fair value under the acquisition method of accounting but SFAS 141(R) changed the method of applying the acquisition method in a number of significant aspects. For example, (a) consideration paid in the form of equity securities will be measured on the closing date of the acquisition rather than on the announcement date, which introduces volatility in estimating the final acquisition price, (b) contingent consideration will be recorded at fair value on the acquisition date regardless of the likelihood of payment rather than when the contingency is resolved, which increases the initial purchase price and may give rise to more goodwill and (c) transaction costs will be expensed as incurred rather than added to the purchase price and allocated to net assets acquired, which decreases the initial purchase price and the amount of goodwill and reduces the acquirer’s earnings before and after the close of the transaction. SFAS 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. SFAS 141(R) amends SFAS 109 such that adjustments made to valuation allowances on deferred taxes and to acquired tax contingencies, such as uncertain tax positions under FIN 48, associated with acquisitions that closed prior to the effective date of SFAS 141(R) would also apply the provisions of SFAS 141(R), so that such adjustments will be recognized in earnings rather than as an adjustment to goodwill. The Company adopted SFAS 141(R) on January 4, 2009 and expects that in the event it enters into a business combination or adjusts its valuation allowances subsequent to that date, SFAS 141(R) may have a material impact on its financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51 (“SFAS 160”). SFAS 160 amends ARB 51 to establish new standards that will govern the accounting for and reporting of (1) noncontrolling interest in partially owned consolidated subsidiaries and (2) the loss of control of subsidiaries. Significant changes to accounting for noncontrolling interests include (a) the inclusion of noncontrolling interests in the equity section of the controlling entity’s consolidated balance sheet rather than in the mezzanine section and (b) changes in the controlling entity’s interest in the noncontrolling interest, without a change in control, are recognized in the controlling entity’s equity rather than being accounted for by the purchase method, which would have given rise to goodwill. SFAS 160 is effective on a prospective basis for all fiscal years, and interim periods within those fiscal years, beginning, on or after December 15, 2008, except for the presentation and disclosure requirements, which are applied retrospectively. The Company adopted SFAS 160 on January 4, 2009 and changed the presentation of noncontrolling interest (formerly called minority interests) in its Consolidated Condensed Balance Sheets and Consolidated Condensed Statements of Operations for all periods presented. Although the adoption of SFAS 160 affects certain performance and equity ratios, the Company does not expect that there will be a material effect on its ability to comply with the financial covenants contained in its debt covenant agreements.

The Company adopted the provisions of SFAS No. 157, Fair Value Measurements (“SFAS 157”) on December 30, 2007 for recurring financial assets and liabilities that are recognized or disclosed at fair value in the financial statements and on January 4, 2009 for non-recurring financial assets and liabilities and for all other non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements. SFAS 157 defines fair value, establishes a market-based framework or hierarchy for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. SFAS 157 does not expand or require any new fair value measures. However the application of this statement may change current practice. Beginning in Fiscal 2009, the full adoption of SFAS 157 includes application to financial assets and liabilities, primarily the Company’s derivative contracts, as well as non-financial assets and liabilities, such as assets and

7

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

liabilities acquired in a business combination or impairment testing of long-lived assets. The adoption of SFAS 157 did not have a material effect on the Company’s financial condition or results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133 (“SFAS 161”). The new standard requires additional disclosures regarding a company’s derivative instruments and hedging activities by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also requires disclosure of derivative features that are credit risk — related as well as cross-referencing within the notes to the financial statements to enable financial statement users to locate important information about derivative instruments, financial performance, and cash flows. SFAS 161 is effective for the Company’s fiscal year and interim periods within such year, beginning January 4, 2009. The Company has presented the expanded disclosures in Note 11 of Notes to the Consolidated Condensed Financial Statements and Item 3. Qualitative and Quantitative Disclosures About Market Risk — Foreign Exchange Risk.

In April 2008, the FASB issued FASB Staff Position (FSP) No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. In particular, an entity will use its own assumptions based on its historical experience about renewal or extension of an arrangement even when there is likely to be substantial cost or material modification. In the absence of historical experience, an entity will use the assumptions that market participants would use (consistent with the highest and best use of the asset). FSP 142-3 is intended to improve the consistency between the useful life of an intangible asset determined under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R) and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company’s adoption of FSP 142-3 did not have a material impact on its financial condition, results of operations or cash flows.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). SFAS 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for nongovernmental entities. SFAS 162 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company’s adoption of SFAS 162 did not have a material effect on its financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-06-1”), which clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are required to be included in the computation of both basic and diluted earnings per share pursuant to the two-class method as described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. FSP EITF 03-06-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented are required to be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with its provisions. The adoption of FSP EITF 03-06-1 by the Company during the Three Months Ended April 4, 2009 did not have a material impact on the calculation of either basic or diluted earnings per share for any period presented, although shares of restricted stock, which are deemed to be participating securities, were included in those calculations for all periods presented.

On December 30, 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (“FSP FAS 132R-1”). FSP FAS 132R-1 contains amendments to FASB Statement No. 132(R), Employers’ Disclosures about Pensions and Other Postretirement Benefits (SFAS 132(R)), that are intended to enhance the transparency surrounding the types of assets and associated risks in an employer’s defined benefit

8

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

pension or other postretirement plan. FSP FAS 132R-1 expands the disclosures set forth in FAS 132(R) by adding required disclosures about: (1) how investment allocation decisions are made by management, (2) major categories of plan assets, and (3) significant concentrations of risk. Additionally, FSP FAS 132R-1 requires an employer to disclose information about the valuation of plan assets similar to that required under SFAS 157. Those disclosures include: (1) the level within the fair value hierarchy in which fair value measurements of plan assets fall, (2) information about the inputs and valuation techniques used to measure the fair value of plan assets, and (3) a reconciliation of the beginning and ending balances of plan assets valued using significant unobservable inputs (Level 3 under SFAS 157). The new disclosures are required to be included in financial statements for fiscal years ending after December 15, 2009. The Company will provide the enhanced disclosures required by FSP FAS 132R-1 in its Form 10-K for the year ending January 2, 2010 (Fiscal 2009).

In April 2009, the FASB issued FSP FAS 107-2 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS 107-2 and FSP APB 28-1”). FSP FAS 107-2 and FSP APB 28-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value and the related carrying amount of financial instruments in interim financial statements as well as in annual financial statements and amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. FSP FAS 107-2 and FSP APB 28-1 also requires disclosure about the method(s) and significant assumptions used to estimate the fair value of financial instruments. FAS FSP 107-2 and FSP APB 28-1 is effective for interim and annual periods ending after June 15, 2009. Disclosures are required only on a prospective basis. The Company will adopt FAS FSP 107-2 and FSP APB 28-1 for the Three Months Ended July 4, 2009.

In April 2009, the FASB issued FSP FAS 157-4, Determining Whether a Market is Not Active and a Transaction is Not Distressed (“FSP FAS 157-4”), which confirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions (that is, in the inactive market). FSP FAS 157-4 provides guidance for identifying inactive markets and distressed transactions and for making fair value measurements more consistent with the principles presented in FAS 157 in those circumstances. If a reporting entity determines that the market for the asset is not active, the entity is required to base its conclusion about whether a transaction was not orderly on the weight of the evidence. An entity is required to disclose a change in valuation technique (and the related inputs) resulting from the application of FSP FAS 157-4 and to quantify its effects, if practicable. FSP FAS 157-4 is effective, on a prospective basis only, for interim and annual periods ending after June 15, 2009. The Company does not expect that the adoption of FSP FAS 157-4 will have a material impact on its financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies (“FSP FAS 141R-1”), which amends certain provisions of SFAS 141(R), including the elimination of the distinction between contractual and non-contractual contingencies, related to initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP FAS 141R-1 revises the guidance in SFAS 141(R) to require that an asset or liability arising from a contingency that would be within the scope of SFAS 5, Accounting for Contingencies, be recognized at the acquisition date at fair value if fair value can be reasonably determined during the measurement period. FSP FAS 141R-1 provides guidance for assessing when fair value can be reasonably determined. If those conditions are not met, assets acquired and liabilities assumed are not recognized at the acquisition date. In subsequent periods, those assets and liabilities are accounted for under SFAS 5 or other applicable GAAP. Accounting for contingent consideration arrangements remains unchanged from SFAS 141(R). FSP FAS 141R-1 is effective for business combinations for which the acquisition date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. If it enters into a business combination, the Company will assess the impact of FSP FAS 141R-1 on its financial position, results of operations and cash flows.

9

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 3 — Acquisitions

2008 CK Licenses:  In connection with the consummation of the January 31, 2006 acquisition of 100% of the shares of the companies (“the CKJEA Business”) that operate the wholesale and retail businesses of Calvin Klein jeanswear and accessories in Europe and Asia and the CK Calvin Klein “bridge” line of sportswear and accessories in Europe, the Company became obligated to acquire from the seller of the CKJEA Business, for no additional consideration and subject to certain conditions which were ministerial in nature, 100% of the shares of the company (the “Collection License Company”) that operates the license (the “Collection License”) for the Calvin Klein men’s and women’s Collection apparel and accessories worldwide. The Company acquired the Collection License Company on January 28, 2008. The Collection License was scheduled to expire in December 2013. However, pursuant to an agreement (the “Transfer Agreement”) entered into on January 30, 2008, the Company transferred the Collection License Company to Phillips-Van Heusen Corporation (“PVH”), the parent company of Calvin Klein, Inc. (“CKI”). In connection therewith, the Company paid approximately $42,000 (net of expected working capital adjustments) to, or on behalf of, PVH and entered into certain new, and amended certain existing, Calvin Klein licenses (collectively, the “2008 CK Licenses”).

The rights acquired by the Company pursuant to the 2008 CK Licenses include: (i) rights to operate Calvin Klein Jeanswear Accessories Stores in Europe, Eastern Europe, Middle East, Africa and Asia, as defined; (ii) rights to operate Calvin Klein Jeanswear Accessories Stores in Central and South America (excluding Canada and Mexico, which is otherwise included in the underlying grant of rights to the company to operate Calvin Klein Jeanswear retail stores in Central and South America); (iii) rights to operate CK/Calvin Klein Bridge Accessories Stores in Europe, Eastern Europe, Middle East and Africa, as defined; (iv) rights to operate CK/Calvin Klein Bridge Accessories Stores in Central and South America (excluding Canada and Mexico, which is otherwise included in the underlying grant of rights to the Company to operate Calvin Klein Bridge Accessories Stores in Central and South America); and (v) e-commerce rights in the Americas, Europe and Asia for Calvin Klein Jeans and for Calvin Klein jeans accessories. Each of the 2008 CK Licenses are long-term arrangements. In addition, pursuant to the Transfer Agreement, the Company has entered into and is continuing negotiations with respect to a grant of rights to sublicense and distribute Calvin Klein Golf apparel and golf related accessories in department stores, specialty stores and other channels in Asia.

During the Three Months Ended April 5, 2008, the Company recorded $24,700 of intangible assets related to the 2008 CK Licenses and recorded a restructuring charge (included in selling, general and administrative expenses) of $18,535 (the “Collection License Company Charge”) related to the transfer of the Collection License Company to PVH.

Retail Stores in China:  Effective March 31, 2008, the Company acquired a business which operates 11 retail stores in China (which acquisition included the assumption of the leases related to the stores) for a total consideration of approximately $2,524.

10

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 4 — Discontinued Operations

As disclosed in its Annual Report on Form 10-K for Fiscal 2008, the Company discontinued certain operations in prior periods. Summarized operating results for the discontinued operations are as follows:

	Three Months Ended
	April 4,			April 5,
	2009			2008
Net revenues	$	31		$	36,284
(Income) loss before income tax benefit	$	(701	)	$	11,611
Income tax benefit		219			874
Income (loss) from discontinued operations	$	(920	)	$	10,737

Summarized assets and liabilities of the discontinued operations are presented in the consolidated condensed balance sheets as follows:

	April 4,		January 3,		April 5,
	2009		2009		2008
Accounts receivable, net	$	1,873	$	5,396	$	5,070
Inventories, net		35		23		178
Prepaid expenses and other current assets		185		778		2,533
Deferred Tax Asset — Current	$	—		82		—
Property, plant and equipment, net		—		—		36
Intangible and other assets		—		—		2
Assets of discontinued operations	$	2,093	$	6,279	$	7,819
Accounts payable	$	113	$	356		5,725
Accrued liabilities		8,591		9,735		8,112
Deferred Tax Liabilities		—		104		125
Deferred Tax Liability — Long Term		—		—		42
Other		1,810		1,860		2,781
Liabilities of discontinued operations	$	10,514	$	12,055	$	16,785

Note 5 — Restructuring Expenses and Other Exit Costs

During the Three Months Ended April 4, 2009, the Company incurred restructuring charges and other exit costs of $8,571 primarily related to (i) the continuation of the workforce reduction, which commenced during the fourth quarter of Fiscal 2008, in order to align the Company’s cost structure to match current economic conditions ($5,906); (ii) the rationalization and consolidation of the Company’s European operations, which had begun in Fiscal 2007 ($203); (iii) activities associated with management’s initiatives to increase productivity and profitability in the Swimwear Group, which had also begun in Fiscal 2007 ($443) and (iv) other exit activities, including contract termination costs, legal and other costs ($2,019). During the Three Months Ended April 5, 2008, the Company incurred restructuring charges and other exit costs of $20,342, primarily related to (i) the Collection License Company Charge ($18,535); (ii) activities associated with management’s initiatives to increase productivity and profitability in the Swimwear Group ($969); (iii) the rationalization and consolidation of the Company’s European operations ($264) and (iv) contract termination and employee termination costs associated with various other exit activities ($574).

11

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Restructuring charges and other exit costs have been recorded in the Consolidated Condensed Statements of Operations for the Three Months Ended April 4, 2009 and Three Months Ended April 5, 2008, as follows:

	Three Months Ended
	April 4,		April 5,
	2009		2008
Cost of goods sold	$	1,483	$	736
Selling, general and administrative expenses		7,088		19,606
	$	8,571	$	20,342
Cash portion of restructuring items	$	8,571	$	20,310
Non-cash portion of restructuring items		—		32

Changes in liabilities related to restructuring expenses and other exit costs for the Three Months Ended April 4, 2009 are summarized below:

	Total
Balance at January 3, 2009	$	5,925
Charges for the Three Months Ended April 4, 2009		8,571
Cash reductions for the Three Months Ended April 4, 2009		(5,730	)
Non-cash changes and foreign currency effects		(95	)
Balance at April 4, 2009(a)	$	8,671

(a) Includes approximately $6,956 recorded in accrued liabilities (part of current liabilities) which amounts are expected to be settled over the next 12 months and includes approximately $1,715 recorded in other long term liabilities which amounts are expected to be settled over the next five years.

Note 6 — Business Segments and Geographic Information

Business Segments:  The Company operates in three business segments: (i) Sportswear Group; (ii) Intimate Apparel Group; and (iii) Swimwear Group.

The Sportswear Group designs, sources and markets moderate to premium priced men’s and women’s sportswear under the Calvin Klein and Chaps^® brands. As of April 4, 2009, the Sportswear Group operated 428 Calvin Klein retail stores worldwide (consisting of 36 full price free-standing stores, 27 outlet free standing stores, 364 shop-in-shop/concession stores and one on-line store). As of April 4, 2009, there were also 381 retail stores operated by third parties under retail licenses or distributor agreements.

The Intimate Apparel Group designs, sources and markets moderate to premium priced intimate apparel and other products for women and better to premium priced men’s underwear, sleepwear and loungewear under the Calvin Klein, Warner’s^®, Olga^® and Body Nancy Ganz/Bodyslimmers^® brand names. As of April 4, 2009, the Intimate Apparel Group operated: 532 Calvin Klein retail stores worldwide (consisting of 56 free-standing stores, 59 outlet free-standing stores and 416 shop-in-shop/concession stores and one on-line store). As of April 4, 2009, there were also 234 Calvin Klein retail stores operated by third parties under retail licenses or distributor agreements.

The Swimwear Group designs, licenses, sources and markets mass market to premium priced swimwear, fitness apparel, swim accessories and related products under the Speedo^®, Lifeguard^® and Calvin Klein brand names. The Swimwear Group operates one on-line store.

12

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Information by business group is set forth below:

	Sportswear		Intimate		Swimwear				Corporate/
	Group		Apparel Group		Group		Group Total		Other			Total
Three Months Ended April 4, 2009
Net revenues	$	280,147	$	162,368	$	95,930	$	538,445	$	—		$	538,445
Operating income (loss)		38,321		29,402		12,555		80,278		(16,138	)		64,140
Depreciation and amortization		5,966		2,845		597		9,408		717			10,125
Restructuring expense		3,036		2,601		1,581		7,218		1,353			8,571
Capital expenditures		2,368		2,494		322		5,184		870			6,054
Three Months Ended April 5, 2008
Net revenues	$	300,119	$	167,029	$	100,510	$	567,658	$	—		$	567,658
Operating income (loss)		22,079		32,285		14,818		69,182		(13,439	)		55,743
Depreciation and amortization		6,882		2,774		487		10,143		1,113			11,256
Restructuring expense		18,696		677		969		20,342		—			20,342
Capital expenditures		3,361		2,741		47		6,149		2,092			8,241
Balance Sheet
Total Assets:
April 4, 2009		825,620		325,104		183,239		1,333,963		204,465			1,538,428
January 3, 2009		801,038		304,724		147,685		1,253,447		242,646			1,496,093
April 5, 2008		890,153		326,032		201,095		1,417,280		247,417			1,664,697
Property, Plant and Equipment:
April 4, 2009	$	25,702	$	34,374	$	4,145	$	64,221	$	42,840		$	107,061
January 3, 2009		26,525		33,921		4,091		64,537		45,026			109,563
April 5, 2008		25,072		26,495		4,448		56,015		57,476			113,491

All inter-company revenues and expenses are eliminated in consolidation. Management does not include inter-company sales when evaluating segment performance. Each segment’s performance is evaluated based upon operating income after restructuring charges but before unallocated corporate expenses, interest, foreign currency gains and losses, long-term inter-company notes and income taxes.

The table below summarizes corporate/other expenses for each period presented:

	Three Months Ended
	April 4,		April 5,
	2009		2008
Unallocated corporate expenses	$	11,700	$	12,852
Foreign exchange losses (gains)		1,831		(235	)
Pension expense (income)		537		(291	)
Restructuring expense		1,353		—
Depreciation and amortization of corporate assets		717		1,113
Corporate/other expenses	$	16,138	$	13,439

13

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

A reconciliation of operating income from operating groups to income from continuing operations before provision for income taxes and noncontrolling interest is as follows:

	Three Months Ended
	April 4,			April 5,
	2009			2008
Operating income by operating groups	$	80,278		$	69,182
Corporate/other items		(16,138	)		(13,439	)
Operating income		64,140			55,743
Other (income) loss		(404	)		5,461
Interest expense		6,069			9,390
Interest income		(408	)		(933	)
Income from continuing operations before provision for income taxes and noncontrolling interest	$	58,883		$	41,825

Geographic Information:  Net revenues summarized by geographic region are as follows:

	Three Months Ended
	April 4,					April 5,
	2009		%			2008		%
Net revenues:
United States	$	269,744		50.2	%	$	257,014		45.3	%
Europe		142,715		26.4	%		172,165		30.3	%
Asia		82,781		15.4	%		86,583		15.3	%
Canada		20,697		3.8	%		26,932		4.7	%
Mexico, Central and South America		22,508		4.2	%		24,964		4.4	%
	$	538,445		100.0	%	$	567,658		100.0	%

Information about Major Customers:  For the Three Months Ended April 4, 2009, one customer accounted for approximately 10% of the Company’s net revenues. For the Three Months Ended April 5, 2008, no one customer accounted for 10% or more of the Company’s net revenues.

Note 7 — Income Taxes

The effective tax rate for the Three Months Ended April 4, 2009 and April 5, 2008 was 34.2% and 82.8% respectively. The decrease in the effective tax rate primarily relates to (1) a non-recurring tax charge of $19,546 in the U.S. associated with the repatriation of the Lejaby sale net proceeds during the Three Months Ended April 5, 2008, as disclosed in Note 3 to Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2008; (2) income tax expense recorded upon the finalization of the Company’s tax returns in the Netherlands for years through 2005, (3) offset by a shift in forecasted earnings from lower to higher taxing jurisdictions for the Three Months Ended April 4, 2009.

The Company applies the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”) to determine whether tax benefits associated with uncertain tax positions may be recognized in the financial statements. During the Three Months Ended April 4, 2009 the Company has not had a material change to its liability for unrecognized tax benefits. Additionally, the Company believes that its accruals for uncertain tax positions are adequate and that the ultimate resolution of these

14

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

uncertainties will not have a material impact on its results of operations, financial position, or statement of cash flows.

While the Company remains under audit in various taxing jurisdictions, it is difficult to predict the final timing and resolution of any particular uncertain tax position. Based upon the Company’s assessment of many factors, including past experience and complex judgments about future events, the Company does not currently anticipate significant changes in its uncertain tax positions over the next twelve months.

Note 8 — Employee Benefit and Retirement Plans

Defined Benefit Pension Plans

The Company has a defined benefit pension plan covering certain full-time non-union domestic employees and certain domestic employees covered by a collective bargaining agreement who had completed service prior to January 1, 2003 (the “Pension Plan”). Participants in the Pension Plan will not earn any additional pension benefits after December 31, 2002. The Company also sponsors a defined benefit plan for certain of its United Kingdom employees (the “U.K. Plan”). These pension plans are noncontributory and benefits are based upon years of service. The Company also has defined benefit health care and life insurance plans that provide post-retirement benefits to retired domestic employees (the “Postretirement Plans”). The Postretirement Plans are, in most cases, contributory with retiree contributions adjusted annually.

The Company follows SFAS No. 87, Employers’ Accounting for Pensions (“SFAS 87”) and SFAS No. 158, Employer’s Accounting for Pensions, in regard to accounting for the Pension Plan. The U.K. Plan was not considered to be material for any period presented. Pursuant to SFAS 87, each quarter the Company recognizes interest cost offset by the expected return on Pension Plan assets. The Company records the effect of actual gains and losses exceeding the expected return on Pension Plan assets (including changes in actuarial assumptions) in the fourth quarter of each year. This accounting results in volatility in pension expense or income; therefore, the Company reports pension expense/income on a separate line of its statement of operations in each period.

The fair value of the Pension Plan’s assets fluctuates with market conditions and is subject to uncertainties that are difficult to predict. During the Three Months Ended April 4, 2009, the actual rate of return on the Pension Plan’s assets has been a loss of approximately 5.5%. However, based upon historical results, the Company has been using an assumed rate of return of 8% (gain) per year on Pension Plan assets to estimate pension income/expense on an interim basis.

The fair value of the Pension Plan’s assets, before contributions, was approximately $92,300 at April 4, 2009 compared to $100,587 at January 3, 2009. The fair value of the Pension Plan’s assets reflects a $7,600 decline from their assumed value of approximately $99,900, net of benefits paid but before contributions, at April 4, 2009.

The Company will record any decrease in the fair value of the Pension Plan’s assets as a reduction in Pension Plan income (increase in pension expense) in the fourth quarter of Fiscal 2009. Assuming that the fair value of the investment portfolio does not recover from its value at April 4, 2009, in light of the actual 5.5% decline in the fair value of the Company’s pension plan investment portfolio to $92,300 at April 4, 2009, the Company could recognize $7,600 of pension expense for the year ending January 2, 2010. The Company’s pension income/expense is also affected by the discount rate used to calculate Pension Plan liabilities, Pension Plan amendments, Pension Plan benefit experience compared to assumed experience and other factors. These factors could increase or decrease the amount of pension income/expense ultimately recorded by the Company for Fiscal 2009.

During the Three Months Ended April 4, 2009, the Company made a contribution of $8,000 to the Pension Plan, which increased the fair value of the Pension Plan’s assets, net of benefits paid, to approximately $100,300 at April 4, 2009. The Company’s contributions to the Pension Plan are expected to be $12,500 in total for Fiscal 2009.

15

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The following table includes only the Pension Plan. The U.K. Plan was not considered to be material for any period presented. The components of net periodic benefit cost are as follows:

	Pension Plans						Postretirement Plans
	Three Months Ended						Three Months Ended
	April 4,			April 5,			April 4,			April 5,
	2009			2008			2009			2008
Service cost	$	—		$	—		$	39		$	117
Interest cost		2,549			2,477			52			80
Expected return on plan assets		(2,012	)		(2,768	)		—			—
Amortization of actuarial loss (gain)		—			—			(41	)		(22	)
Net benefit (income) cost	$	537		$	(291	)	$	50		$	175

Deferred Compensation Plans

The Company’s liability for employee contributions and investment activity was $2,211, $1,563 and $1,815 as of April 4, 2009, January 3, 2009 and April 5, 2008, respectively. This liability is included in other long-term liabilities. The Company’s liability for director contributions and investment activity was $452, $400 and $280 as of April 4, 2009, January 3, 2009 and April 5, 2008, respectively. This liability is included in other long-term liabilities.

Note 9 — Comprehensive Income

The components of comprehensive income are as follows:

	Three Months Ended
	April 4,			April 5,
	2009			2008
Net income	$	37,829		$	17,920
Other comprehensive (loss) income:
Foreign currency translation adjustments		(10,336	)		28,704
Change in fair value of cash flow hedges		338			—
Other		(1	)		245
Total Comprehensive income		27,830			46,869
Less: Comprehensive income attributable to noncontrolling interest		(349	)		(211	)
Comprehensive income attributable to Warnaco Group Inc.	$	27,481		$	46,658

16

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The components of accumulated other comprehensive income as of April 4, 2009, January 3, 2009 and April 5, 2008 are summarized below:

	April 4,			January 3,			April 5,
	2009			2009			2008
Foreign currency translation adjustments(a)	$	2,771		$	13,198		$	99,314
Actuarial (losses), net related to post retirement medical plans		(30	)		(29	)		(771	)
Gain (Loss) on cash flow hedges		10			(328	)		—
Other		—			—			(11	)
Total accumulated other comprehensive income	$	2,751		$	12,841		$	98,532

(a) The foreign currency translation adjustments reflect the change in the U.S. dollar relative to functional currencies where the Company conducts certain of its operations. The decrease of $96,543 in foreign currency translation adjustments at April 4, 2009 compared to April 5, 2008 reflects the decline in the strength of certain foreign currencies (principally the Euro, Canadian Dollar, Korean Won and Mexican Peso) relative to the U.S. dollar coupled with the fact that more than 62% of the Company’s assets are based outside of the U.S.

Note 10 — Fair Value Measurement

The Company utilizes the market approach to measure fair value for financial assets and liabilities, which primarily relate to derivative contracts. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. SFAS 157 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy consists of the following three levels:

Level 1 —	Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 —	Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3 —	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table represents the Company’s assets and liabilities measured at fair value as of April 4, 2009, as required by SFAS 157:

	(Level 1)		(Level 2)			(Level 3)
Assets
Interest rate swaps	$	—	$	3,123		$	—
Foreign currency exchange contracts	$	—	$	2,203		$	—
Liabilities
Foreign currency exchange contracts	$	—	$	(4,828	)	$	—

Note 11 —  Derivative Financial Instruments

The Company is exposed to foreign exchange risk related to U.S. dollar-denominated purchases or sales of inventory, payment of minimum royalty and advertising costs and intercompany loans and payables by subsidiaries whose functional currencies are the Euro, Canadian Dollar, Korean Won or British Pound. The Company or its

17

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

foreign subsidiaries enter into foreign exchange forward contracts, including zero-cost collar option contracts, to offset its foreign exchange risk. The Company does not use derivative financial instruments for speculative or trading purposes.

The Company also utilizes interest rate swaps to convert a portion of the interest obligation related to its long-term debt from a fixed rate to floating rates. See Note 14. A number of international financial institutions are counterparties to the Company’s outstanding letters of credit, interest rate swap agreements, zero cost collars and foreign exchange contracts. The Company monitors its positions with, and the credit quality of, these counterparty financial institutions and does not anticipate nonperformance by these counterparties. Management believes that the Company would not suffer a material loss in the event of nonperformance by these counterparties.

During the Three Months Ended April 4, 2009, one of the Company’s European subsidiaries entered into a foreign exchange forward contract which was designed to satisfy certain U.S. dollar denominated purchases of inventory. As of April 4, 2009, the Company’s Korean and European subsidiaries also continued their hedging programs from Fiscal 2008 with foreign exchange forward contracts which were designed to satisfy the first 50% of U.S. dollar denominated purchases of inventory over an 18-month period, or payment of 100% of the minimum royalty and advertising expenses, respectively. All of the foregoing forward contracts were designated as cash flow hedges in accordance with SFAS 133.

During the Three Months Ended April 4, 2009, Warnaco Inc. entered into foreign currency forward contracts on behalf of one of its Mexican subsidiaries. In addition, as of April 4, 2009, the hedging programs also continued from Fiscal 2008 in which Warnaco Inc. has entered into foreign currency exchange contracts, including, zero-cost collars, on behalf of certain of its European, Korean and Canadian subsidiaries. These forward contracts were designed to fix the number of euros, Korean won, Canadian dollars or Mexican pesos required to satisfy (i) the first 50% of U.S. dollar denominated purchases of inventory over an 18-month period; (ii) 50% of intercompany sales to a British subsidiary or (iii) U.S. dollar denominated intercompany loans and payables. All of these foregoing foreign exchange contracts were accounted for as economic hedges, not subject to SFAS 133. In addition, one European subsidiary continued its hedging program of forward contracts related to purchases of inventory, which did not qualify for hedge accounting under SFAS 133 and was accounted for as an economic hedge. See also Item 3. Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange Risk in this Quarterly Report on Form 10-Q for further details. The Company also entered into interest rate swaps, which were designated as fair value hedges under SFAS 133, related to its long-term debt. See Note 14 to Notes to Consolidated Condensed Financial Statements.

18

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The following table summarizes the Company’s derivative instruments as of April 4, 2009:

		Asset Derivatives			Liability Derivatives
		As of April 4, 2009			As of April 4, 2009
		Balance Sheet			Balance Sheet
	Type(a)	Location	Fair Value		Location	Fair Value
Derivatives designated as hedging instruments under SFAS 133
Foreign exchange contracts	CF	Prepaid expenses and other current assets	$	302	Accrued liabilities	$	(288	)
Interest rate swaps	FV	Other assets	$	3,123	Long-term debt
Total derivatives designated as hedging instruments under SFAS 133			$	3,425		$	(288	)
Derivatives not designated as hedging instruments under SFAS 133
Foreign exchange contracts		Prepaid expenses and other current assets	$	1,901	Accrued liabilities	$	(4,540	)
Total derivatives not designated as hedging instruments under SFAS 133			$	1,901		$	(4,540	)
Total derivatives			$	5,326		$	(4,828	)

(a) CF = cash flow hedge; FV = fair value hedge

The following table summarizes the effect of the Company’s derivative instruments on the Consolidated Condensed Statement of Operations for the Three Months Ended April 4, 2009:

						Amount of
						Gain (Loss)
		Amount of				Reclassified			Amount of
		Gain (Loss)				from			Gain (Loss)
		Recognized in			Location of Gain	Accumulated			Recognized in
		OCI on			(Loss) Reclassified	OCI into		Location of Gain (Loss)	Income on
Derivatives in SFAS 133		Derivatives			from Accumulated	Income		Recognized in Income	Derivative
Cash Flow Hedging	Nature of Hedged	(Effective			OCI into Income	(Effective		on Derivative	(Ineffective
Relationships	Transaction	Portion)			(Effective Portion)	Portion)		(Ineffective Portion)(c)	Portion)
Foreign exchange contracts	Minimum royalty and advertising costs(a)	$	448		cost of goods sold	$	97	other income/loss	$	15
Foreign exchange contracts	Purchases of inventory(b)	$	(5	)	cost of goods sold	$	10	other income/loss	$	(7	)
Total		$	443			$	107		$	8

(a)	At April 4, 2009, the amount hedged was $12,607; contracts expire March 2010.
(b)	At April 4, 2009, the amount hedged was $11,890; contracts expire February 2010.
(c)	No amounts were excluded from effectiveness testing.

19

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

							Amount of
Derivatives not							Gain (Loss)
designated as hedging						Location of Gain (Loss)	Recognized
instruments under	Nature of Hedged					Recognized in Income	in Income on
SFAS 133	Transaction	Instrument	Amount Hedged		Maturity Date	on Derivative	Derivative
Foreign exchange contracts(d)	Purchases of inventory	Forward contracts	$	34,258	August 2009-August 2010	other income/loss	$	(708	)
Foreign exchange contracts(e)	Intercompany sales of inventory	Forward contracts		10,326	December 2009	other income/loss		(93	)
Foreign exchange contracts(f)	Minimum royalty and advertising costs	Forward contracts		10,000	January 2010	other income/loss		(6	)
Foreign exchange contracts	Intercompany loans	Zero-cost collars		16,260	November 2009 - April 2010	other income/loss		(85	)
Foreign exchange contracts	Intercompany payables	Zero-cost collars		56,250	May 2009 - September 2009	selling, general and administrative		1,063
Total							$	172

(d)	Forward contracts used to offset 50% of U.S. dollar-denominated purchases of inventory by the Company’s foreign subsidiaries whose functional currencies were the euro and Canadian dollar, entered into by Warnaco Inc. on behalf of foreign subsidiaries and the euro, entered into by a European subsidiary.
(e)	Forward contracts used to offset 50% of euro-denominated intercompany sales to a subsidiary whose functional currency is the British pound.
(f)	Forward contracts used to offset payment of minimum royalties and advertising costs related to sales of inventory by the Company’s foreign subsidiary whose functional currency was the euro, entered into by Warnaco Inc. on behalf of a foreign subsidiary.

During the twelve months following April 4, 2009, the net amount of gains and losses that were reported in OCI at that date that are estimated to be amortized into earnings is $22. During the Three Months Ended April 4, 2009, no amount of gains or losses was reclassified into earnings as a result of the discontinuance of cash flow hedges because it was probable that the original forecasted transactions will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter.

A reconciliation of the balance of Accumulated Other Comprehensive Income during the Three Months Ended April 4, 2009 related to cash flow hedges of foreign exchange forward contracts is as follows:

Balance January 3, 2009	$	(328	)
Derivative gains recognized		450
Amount amortized to earnings		(112	)
Balance April 4, 2009	$	10

20

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 12 — Inventories

Inventories are valued at the lower of cost to the Company (using the first-in-first-out method) or market and are summarized as follows:

	April 4,		January 3,		April 5,
	2009		2009		2008
Finished goods	$	271,760	$	259,163	$	279,617
In transit		43,508		62,932		38,437
Raw materials		944		4,202		2,944
	$	316,212	$	326,297	$	320,998

See Note 11 to Notes to Consolidated Condensed Financial Statements for details on the Company’s hedging programs related to purchases and sales of inventory.

Note 13 — Intangible Assets and Goodwill

The following tables set forth intangible assets as of April 4, 2009, January 3, 2009 and April 5, 2008 and the activity in the intangible asset accounts for the Three Months Ended April 4, 2009:

	April 4, 2009						January 3, 2009						April 5, 2008
	Gross						Gross						Gross
	Carrying		Accumulated				Carrying		Accumulated				Carrying		Accumulated
	Amount		Amortization		Net		Amount		Amortization		Net		Amount		Amortization		Net
Finite-lived intangible assets:
Licenses for a term (Company as licensee)	$	276,399	$	38,606	$	237,793	$	281,800	$	36,894	$	244,906	$	315,455	$	31,368	$	284,087
Other		15,961		7,144		8,817		16,204		6,729		9,475		17,532		5,100		12,432
		292,360		45,750		246,610		298,004		43,623		254,381		332,987		36,468		296,519
Indefinite-lived intangible assets:
Trademarks		19,366		—		19,366		19,366		—		19,366		19,366		—		19,366
Licenses in perpetuity		8,909		—		8,909		8,909		—		8,909		8,909		—		8,909
		28,275		—		28,275		28,275		—		28,275		28,275		—		28,275
Intangible Assets	$	320,635	$	45,750	$	274,885	$	326,279	$	43,623	$	282,656	$	361,262	$	36,468	$	324,794

			Licenses		Finite-lived
			in		Intangible
	Trademarks		Perpetuity		Assets			Other			Total
Balance at January 3, 2009	$	19,366	$	8,909	$	244,906		$	9,475		$	282,656
Amortization expense		—		—		(1,712	)		(415	)		(2,127	)
Translation adjustments		—		—		(5,401	)		(243	)		(5,644	)
Balance at April 4, 2009	$	19,366	$	8,909	$	237,793		$	8,817		$	274,885

21

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

The following table summarizes the Company’s estimated amortization expense for intangible assets for the next five years:

2010	$	8,788
2011		8,194
2012		8,012
2013		7,919
2014		7,320

The following table summarizes the changes in the carrying amount of goodwill for the Three Months Ended April 4, 2009:

				Intimate
	Sportswear			Apparel			Swimwear
	Group			Group			Group		Total
Goodwill balance at January 3, 2009	$	99,118		$	376		$	642	$	100,136
Adjustment:
Translation adjustments		(2,166	)		(10	)		—		(2,176	)
Goodwill balance at April 4, 2009	$	96,952		$	366		$	642	$	97,960

The Company reviews its intangible assets and goodwill for impairment in the fourth quarter of each fiscal year or sooner if events or changes in circumstances indicate that the carrying amount of any of those assets may not be recoverable. Such events may include, among others, (a) a significant adverse change in legal factors or the business climate; (b) an adverse action or assessment by a regulator; (c) unanticipated competition; (d) a loss of key personnel; (e) a more-likely-than-not expectation that a reporting unit, or a significant part of a reporting unit, will be sold or disposed of; (f) the determination of a lack of recoverability of a significant “asset group” within a reporting unit; (g) reporting a goodwill impairment loss by a subsidiary that is a component of a reporting unit; and (h) a significant decrease in the Company’s stock price.

During the Three Months Ended April 4, 2009, the Company considered the potential of an impairment in its goodwill or intangible assets, consisting of licenses and trademarks primarily for its Calvin Klein products, by reviewing these factors. The Company concluded that there were no triggering events or changes in circumstances since the end of Fiscal 2008 which would require the Company to conduct an impairment evaluation of either goodwill or intangible assets.

22

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 14 — Debt

Debt was as follows:

	April 4,		January 3,		April 5,
	2009		2009		2008
Short-term debt:
CKJEA notes payable and other		59,429	$	67,893	$	46,878
Revolving credit facilities		64,707		11,995		47,638
Current portion of Term B Note due 2012		—		—		1,800
		124,136		79,888		96,316
Long-term debt:
87/8% Senior Notes due 2013		160,890		160,890		160,890
Unrealized gain on swap agreements		3,123		2,904		1,974
Term B Note due 2012		—		—		104,600
		164,013		163,794		267,464
Total Debt	$	288,149	$	243,682	$	363,780

Senior Notes

During March 2008, the Company purchased $44,110 aggregate principal amount of the outstanding 87/8% Senior Notes due 2013 (“Senior Notes”) for a total consideration of $46,185 in the open market. In connection with the purchase, the Company recognized a loss of approximately $3,160, which included the write-off of approximately $1,085 of deferred financing costs. The loss on the repurchase is included in the other loss (income) line item in the Company’s Consolidated Statement of Operations. The aggregate principal amount outstanding under the Senior Notes was $160,890 as of April 4, 2009, January 3, 2009 and April 5, 2008.

Interest Rate Swap Agreements

The Company entered into interest rate swap agreements on September 18, 2003 (the “2003 Swap Agreement”) and November 5, 2004 (the “2004 Swap Agreement”). The 2003 Swap Agreement provides that the Company will receive interest at 87/8% and pay a variable rate of interest based upon six month LIBOR plus 4.11% (6.43% at April 4, 2009). The 2004 Swap Agreement provides that the Company will receive interest of 87/8% and pay a variable rate of interest based upon six months LIBOR plus 4.34% (6.66% at April 4, 2009). As a result of the 2003 Swap Agreement and the 2004 Swap Agreement, the weighted average effective interest rate of the Senior Notes was 7.77% as of April 4, 2009, 7.77% as of January 3, 2009 and 8.94% as of April 5, 2008.

The fair value of the Company’s outstanding interest rate swap agreements reflect the termination premium (unrealized loss) or termination discount (unrealized gain) that the Company would realize if such swaps were terminated on the valuation date. Since the provisions of the Company’s 2003 Swap Agreement and 2004 Swap Agreement match the provisions of the Company’s outstanding Senior Notes (the “Hedged Debt”), changes in the fair value of the outstanding swaps do not have any effect on the Company’s results of operations but are recorded in the Company’s consolidated balance sheets. Unrealized gains on the outstanding interest rate swap agreements are included in other assets with a corresponding increase in the Hedged Debt. Unrealized losses on the outstanding interest rate swap agreements are included as a component of long-term debt with a corresponding decrease in the

23

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Hedged Debt. The table below summarizes the unrealized gain (loss) of the Company’s outstanding swap agreements:

	April 4,		January 3,		April 5,
	2009		2009		2008
Unrealized gain:
2003 Swap Agreement	$	2,077	$	1,972	$	1,416
2004 Swap Agreement		1,046		932		558
Net unrealized gain	$	3,123	$	2,904	$	1,974

New Credit Agreements

On August 26, 2008, Warnaco, as borrower, and Warnaco Group, as guarantor, entered into a revolving credit agreement (the “New Credit Agreement”) and Warnaco of Canada Company (“Warnaco Canada”), an indirect wholly-owned subsidiary of Warnaco Group, as borrower, and Warnaco Group, as guarantor, entered into a second revolving credit agreement (the “New Canadian Credit Agreement” and, together with the New Credit Agreement, the “New Credit Agreements”), in each case with the financial institutions which, from time to time, will act as lenders and issuers of letters of credit.

The New Credit Agreement provides for a five-year asset-based revolving credit facility under which up to $270,000 initially will be available. In addition, during the term of the New Credit Agreement, Warnaco may make up to three requests for additional credit commitments in an aggregate amount not to exceed $200,000. The New Canadian Credit Agreement provides for a five-year asset-based revolving credit facility in an aggregate amount up to U.S. $30,000. The New Credit Agreements mature on August 26, 2013.

The New Credit Agreement has interest rate options that are based on (i) a Base Rate (as defined in the New Credit Agreement) plus 0.75% (4.00% at April 4, 2009) or (ii) a LIBOR (as defined in the New Credit Agreement) plus 1.75% (2.91% at April 4, 2009) in each case, on a per annum basis. The interest rate payable on outstanding borrowing is subject to adjustments based on changes in the Company’s leverage ratio. The New Canadian Credit Agreement has interest rate options that are based on (i) the prime rate announced by Bank of America (acting through its Canada branch) plus 0.75% (3.25% at April 4, 2009), or (ii) a BA Rate (as defined in the New Canadian Credit Agreement) plus 1.75% (2.31% at April 4, 2009), in each case, on a per annum basis and subject to adjustments based on changes in the Company’s leverage ratio. The BA Rate is defined as the annual rate of interest quoted by Bank of America (acting through its Canada branch) as its rate of interest for bankers’ acceptances in Canadian dollars for a face amount similar to the amount of the loan and for a term similar to the applicable interest period.

As of April 4, 2009, the Company had approximately $52,352 in loans and approximately $44,976 in letters of credit outstanding under the New Credit Agreement, leaving approximately $153,583 of availability (including $489 of available cash) under the New Credit Agreement. As of April 4, 2009, there was $12,355 in loans and no letters of credit outstanding under the New Canadian Credit Agreement and the available line of credit was approximately $14,636. As of April 4, 2009, the Company was in compliance with all financial covenants contained in the New Credit Agreements.

Revolving Credit Facility; Amended and Restated New Credit Agreement and Foreign Revolving Credit Facility

On August 26, 2008, the Company terminated the Amended and Restated Credit Agreement, including the Term B Note, in connection with the closing of the New Credit Agreements (see above). In addition, during the third

24

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

quarter of Fiscal 2008, the Company terminated the Foreign Revolving Credit Facility under which no amounts were outstanding. All guarantees, mortgages, liens and security interests related to both of those agreements were terminated at that time.

Euro-Denominated CKJEA Notes Payable and Other

The total CKJEA notes payable of $54,054 at April 4, 2009 consists of short-term revolving notes with a number of banks at various interest rates (primarily Euro LIBOR plus 1.0%). The weighted average effective interest rate for the outstanding CKJEA notes payable was 2.49% as of April 4, 2009, 4.50% as of January 3, 2009 and 5.24% as of April 5, 2008. All of the CKJEA notes payable are short-term and were renewed during the Three Months Ended April 4, 2009 for additional terms of no more than 12 months. In addition, one of the Company’s Korean subsidiaries had an outstanding note payable of $3,740 with an interest rate of 5.88% per annum and $3,785 with an interest rate of 8.84% per annum at April 4, 2009 and January 3, 2009, respectively.

Note 15 — Stockholders’ Equity

Preferred Stock

The Company has authorized an aggregate of 20,000,000 shares of preferred stock, par value $0.01 per share, of which 112,500 shares are designated as Series A preferred stock, par value $0.01 per share. There were no shares of preferred stock issued and outstanding at April 4, 2009, January 3, 2009 and April 5, 2008.

Stock Incentive Plans

A summary of stock option award activity under the Company’s stock incentive plans as of and for the Three Months Ended April 4, 2009 is presented below:

				Weighted
				Average
				Exercise
	Options			Price
Outstanding as of January 3, 2009		2,148,812		$	25.50
Granted		12,500			18.65
Exercised		(4,300	)		22.14
Forfeited / Expired		(19,216	)		41.98
Outstanding as of April 4, 2009		2,137,796		$	25.32
Option Exercisable as of April 4, 2009		1,716,682		$	21.00

A summary of the activity for unvested restricted share/unit awards under the Company’s stock incentive plans as of and for the Three Months Ended April 4, 2009 is presented below:

				Weighted Average
	Restricted			Grant Date Fair
	Shares/Units			Value
Unvested as of January 3, 2009		664,956		$	34.30
Granted		62,719			19.26
Vested		(201,702	)		25.68
Forfeited		(23,313	)		37.30
Unvested as of April 4, 2009		502,660		$	35.74

25

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 16 — Supplemental Cash Flow Information

	Three Months Ended
	April 4,			April 5,
	2009			2008
Cash paid (received) during the period for:
Interest expense	$	2,208		$	4,529
Interest income		(167	)		(903	)
Income taxes, net of refunds received		5,273			7,067
Supplemental non-cash investing and financing activities:
Accounts payable for purchase of fixed assets		2,399			2,075

Note 17 — Income per Common Share

The following table presents the calculation of both basic and diluted income per common share attributable to Warnaco Group, Inc. common shareholders in accordance with FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, which the Company adopted on January 1, 2009 (See Note 2 to Notes to Consolidated Condensed Financial Statements). The Company has determined that based on a review of its share-based awards, only its restricted stock awards are deemed participating securities, which participate equally with common shareholders. The weighted average restricted shares outstanding were 497,778 and 635,884, for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008, respectively. Undistributed income allocated to participating securities is based on the proportion of restricted shares outstanding to the sum of weighted average number of common shares outstanding attributable to Warnaco Group, Inc. common shareholders and restricted stock outstanding for each period presented.

	Three Months Ended
	April 4,			April 5,
	2009			2008
Numerator for basic and diluted income per common share:
Income from continuing operations attributable to Warnaco Group, Inc. common shareholders and participating securities	$	38,491		$	6,972
Less: allocation to participating securities		(418	)		(98	)
Income from continuing operations attributable to Warnaco Group, Inc. common shareholders	$	38,073		$	6,874
Income (loss) from discontinued operations, net of tax, attributable to Warnaco Group, Inc. common shareholders and participating securities	$	(920	)	$	10,737
Less: allocation to participating securities		10			(151	)
Income (loss) from discontinued operations attributable to Warnaco Group, Inc. common shareholders	$	(910	)	$	10,586
Net income attributable to Warnaco Group, Inc. common shareholders and participating securities	$	37,571		$	17,709
Less: allocation to participating securities		(408	)		(249	)
Net income attributable to Warnaco Group, Inc. common shareholders	$	37,163		$	17,460

26

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended
	April 4,			April 5,
	2009			2008
Basic income per common share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing income per common share		45,304,591			44,593,337
Income per common share from continuing operations	$	0.84		$	0.15
Income per common share from discontinued operations		(0.02	)		0.24
Net income per common share	$	0.82		$	0.39
Diluted income per share attributable to Warnaco Group, Inc. common shareholders:
Weighted average number of common shares outstanding used in computing basic income per common share		45,304,591			44,593,337
Effect of dilutive securities:
Stock options and restricted stock units		346,579			1,503,062
Weighted average number of shares and share equivalents used in computing income per common share		45,651,170			46,096,399
Income per common share from continuing operations	$	0.83		$	0.15
Income per common share from discontinued operations		(0.02	)		0.23
Net income per common share	$	0.81		$	0.38
Number of anti-dilutive “out-of-the-money” stock options outstanding(a)		1,409,096			4,400

(a) Options to purchase shares of common stock at an exercise price greater than the average market price of the underlying shares are anti-dilutive and therefore not included in the computation of diluted income per common share from continuing operations.

Note 18 — Legal Matters

SEC Inquiry:  As disclosed in its Annual Report on Form 10-K for Fiscal 2008, the Company announced, on August 8, 2006, that it would restate its previously reported financial statements for the fourth quarter of 2005, fiscal 2005 and the first quarter of 2006. The restatements were required as a result of certain irregularities discovered by the Company during the Company’s 2006 second quarter closing review and certain other errors. The irregularities primarily related to the accounting for certain returns and customer allowances at the Company’s Chaps menswear division. These matters were reported to the Company’s Audit Committee, which engaged outside counsel, who in turn retained independent forensic accountants, to investigate and report to the Audit Committee. Based on information obtained in that investigation, and also to correct for an error which resulted from the implementation of the Company’s new systems infrastructure at its Swimwear Group during the first quarter of 2006, and certain immaterial errors, the Audit Committee accepted management’s recommendation that the Company restate its financial statements.

In connection with the restatements, the Company contacted the SEC staff to inform them of the restatements and the Company’s related investigation. Thereafter, the SEC staff initiated an informal inquiry, and on February 22,

27

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

2008, informed the Company that in September 2007 the SEC had issued a formal order of investigation, with respect to these matters. The Company is cooperating fully with the SEC.

OP Litigation:  On August 19, 2004, the Company acquired 100% of the outstanding common stock of Ocean Pacific Apparel Corp. (“OP”). The terms of the acquisition agreement required the Company to make certain contingent payments to the sellers (the “Sellers”) under certain circumstances. On November 6, 2006, the Company sold the OP business. The Sellers of OP have filed an action against the Company alleging that certain contingent purchase price payments are due to them as a result of the Company’s sale of the OP business in November 2006. The Company believes that the Sellers’ lawsuit is without merit and intends to defend itself vigorously. The Company believes that it is adequately reserved for any potential settlements.

Other:  In addition, from time to time, the Company is involved in arbitrations or legal proceedings that arise in the ordinary course of its business. The Company cannot predict the timing or outcome of these claims and proceedings. Currently, the Company is not involved in any such arbitration and/or legal proceeding that it expects to have a material effect on its financial condition, results of operations or business.

28

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 19 — Supplemental Consolidating Condensed Financial Information

The following tables set forth supplemental consolidating condensed financial information as of April 4, 2009, January 3, 2009 and April 5, 2008 and for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008 for: (i) The Warnaco Group, Inc.; (ii) Warnaco Inc.; (iii) the subsidiaries that guarantee the Senior Notes (the “Guarantor Subsidiaries”); (iv) the subsidiaries other than the Guarantor Subsidiaries (the “Non-Guarantor Subsidiaries”); and (v) The Warnaco Group, Inc. on a consolidated basis. The Senior Notes are guaranteed by substantially all of Warnaco Inc.’s domestic subsidiaries.

	April 4, 2009
	The Warnaco		Warnaco			Guarantor			Non-Guarantor		Elimination
	Group, Inc.		Inc.			Subsidiaries			Subsidiaries		Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	13,859		$	(3	)	$	108,195	$	—		$	122,051
Accounts receivable, net		—		49,989			118,604			193,925		—			362,518
Inventories		—		68,760			73,892			173,560		—			316,212
Prepaid expenses and other current assets		—		59,251			19,741			76,183		—			155,175
Assets of discontinued operations		—		(4	)		1,908			189		—			2,093
Total current assets		—		191,855			214,142			552,052		—			958,049
Property, plant and equipment, net		—		49,128			6,248			51,685		—			107,061
Investment in subsidiaries		1,083,799		551,617			—			—		(1,635,416	)		—
Other assets		—		73,403			46,576			353,339		—			473,318
Total assets	$	1,083,799	$	866,003		$	266,966		$	957,076	$	(1,635,416	)	$	1,538,428
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Liabilities of discontinued operations	$	—	$	12		$	7,407		$	3,095	$	—		$	10,514
Accounts payable, accrued liabilities, short-term debt and accrued taxes		—		120,584			37,364			264,885		—			422,833
Total current liabilities		—		120,596			44,771			267,980		—			433,347
Intercompany accounts		265,235		65,879			(446,761	)		115,647		—			—
Long-term debt		—		164,013			—			—		—			164,013
Other long-term liabilities		—		41,342			2,784			78,378		—			122,504
Stockholders’ equity		818,564		474,173			666,172			495,071		(1,635,416	)		818,564
Total liabilities and stockholders’ equity	$	1,083,799	$	866,003		$	266,966		$	957,076	$	(1,635,416	)	$	1,538,428

29

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	January 3, 2009
	The Warnaco		Warnaco		Guarantor			Non-Guarantor		Elimination
	Group, Inc.		Inc.		Subsidiaries			Subsidiaries		Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	30,771	$	(2	)	$	116,858	$	—		$	147,627
Accounts receivable, net		—		22,755		57,709			171,422		—			251,886
Inventories		—		67,251		83,205			175,841		—			326,297
Prepaid expenses and other current assets		—		59,586		23,786			73,405		—			156,777
Assets of discontinued operations		—		—		5,381			898		—			6,279
Total current assets		—		180,363		170,079			538,424		—			888,866
Property, plant and equipment, net		—		51,220		6,045			52,298		—			109,563
Investment in subsidiaries		1,036,139		551,617		—			—		(1,587,756	)		—
Other assets		—		80,644		51,408			365,612		—			497,664
Total assets	$	1,036,139	$	863,844	$	227,532		$	956,334	$	(1,587,756	)	$	1,496,093
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Liabilities of discontinued operations	$	—	$	—	$	7,445		$	4,610	$	—		$	12,055
Accounts payable, accrued liabilities, short-term debt and accrued taxes		—		84,286		47,619			270,352		—			402,257
Total current liabilities		—		84,286		55,064			274,962		—			414,312
Intercompany accounts		247,398		97,543		(480,490	)		135,549		—			—
Long-term debt		—		163,794		—			—		—			163,794
Other long-term liabilities		—		45,814		2,648			80,784		—			129,246
Stockholders’ equity		788,741		472,407		650,310			465,039		(1,587,756	)		788,741
Total liabilities and stockholders’ equity	$	1,036,139	$	863,844	$	227,532		$	956,334	$	(1,587,756	)	$	1,496,093

30

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	April 5, 2008
	The Warnaco		Warnaco		Guarantor			Non-Guarantor		Elimination
	Group, Inc.		Inc.		Subsidiaries			Subsidiaries		Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—	$	6,275	$	294		$	131,433	$	—		$	138,002
Accounts receivable, net		—		—		149,544			208,058		—			357,602
Inventories		—		69,323		86,423			165,252		—			320,998
Prepaid expenses and other current assets		—		74,702		23,342			85,021		—			183,065
Assets of discontinued operations		—		144		4,334			3,341		—			7,819
Total current assets		—		150,444		263,937			593,105		—			1,007,486
Property, plant and equipment, net		—		55,280		6,731			51,480		—			113,491
Investment in subsidiaries		1,091,232		551,775		—			—		(1,643,007	)		—
Other assets		—		86,831		46,995			409,894		—			543,720
Total assets	$	1,091,232	$	844,330	$	317,663		$	1,054,479	$	(1,643,007	)	$	1,664,697
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Liabilities of discontinued operations	$	—	$	1,057	$	8,342		$	7,386	$	—		$	16,785
Accounts payable, accrued liabilities, short-term debt and accrued taxes		—		96,343		42,458			289,788		—			428,589
Total current liabilities		—		97,400		50,800			297,174		—			445,374
Intercompany accounts		262,280		1,130		(387,954	)		124,544		—			—
Long-term debt		—		267,464		—			—		—			267,464
Other long-term liabilities		—		26,397		2,744			93,766		—			122,907
Stockholders’ equity		828,952		451,939		652,073			538,995		(1,643,007	)		828,952
Total liabilities and stockholders’ equity	$	1,091,232	$	844,330	$	317,663		$	1,054,479	$	(1,643,007	)	$	1,664,697

31

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended April 4, 2009
	The Warnaco						Guarantor			Non-Guarantor			Elimination
	Group, Inc.			Warnaco Inc.			Subsidiaries			Subsidiaries			Entries			Consolidated
Net revenues	$	—		$	117,733		$	152,012		$	268,700		$	—		$	538,445
Cost of goods sold		—			78,111			100,591			134,183			—			312,885
Gross profit		—			39,622			51,421			134,517			—			225,560
SG&A expenses (including amortization of intangible assets)		—			35,392			26,671			98,820			—			160,883
Pension expense (income)		—			537			—			—			—			537
Operating income (loss)		—			3,693			24,750			35,697			—			64,140
Equity in income of subsidiaries		(37,571	)		—			—			—			37,571			—
Intercompany		—			(5,030	)		(566	)		5,596			—			—
Other (income) loss		—			1,724			—			(2,128	)		—			(404	)
Interest (income) expense, net		—			4,315			—			1,346			—			5,661
Income (loss) from continuing operations before provision for income taxes and noncontrolling interest		37,571			2,684			25,316			30,883			(37,571	)		58,883
Provision (benefit) for income taxes		—			917			8,657			10,560			—			20,134
Income (loss) from continuing operations before noncontrolling interest		37,571			1,767			16,659			20,323			(37,571	)		38,749
Income (loss) from discontinued operations, net of income taxes		—			—			(797	)		(123	)		—			(920	)
Net Income (loss)		37,571			1,767			15,862			20,200			(37,571	)		37,829
Less: Net Income (loss) attributable to the noncontrolling interest		—			—			—			(258	)		—			(258	)
Net income (loss) attributable to Warnaco Group, Inc.	$	37,571		$	1,767		$	15,862		$	19,942		$	(37,571	)	$	37,571

32

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended April 5, 2008
	The Warnaco						Guarantor			Non-Guarantor			Elimination
	Group, Inc.			Warnaco Inc.			Subsidiaries			Subsidiaries			Entries			Consolidated
Net revenues	$	—		$	106,158		$	144,513		$	316,987		$	—		$	567,658
Cost of goods sold		—			70,658			97,286			145,593			—			313,537
Gross profit		—			35,500			47,227			171,394			—			254,121
SG&A expenses (including amortization of intangible assets)		—			39,167			30,719			128,783			—			198,669
Pension expense (income)		—			(291	)		—			—			—			(291	)
Operating income (loss)		—			(3,376	)		16,508			42,611			—			55,743
Equity in income of subsidiaries		(17,709	)		—			—			—			17,709			—
Intercompany		—			(1,424	)		(2,242	)		3,666			—			—
Other (income) loss		—			3,197			—			2,264			—			5,461
Interest (income) expense, net		—			7,483			(1	)		975			—			8,457
Income (loss) from continuing operations before provision for income taxes and noncontrolling interest		17,709			(12,632	)		18,751			35,706			(17,709	)		41,825
Provision (benefit) for income taxes		—			14,850			6,724			13,068			—			34,642
Income (loss) from continuing operations before noncontrolling interest		17,709			(27,482	)		12,027			22,638			(17,709	)		7,183
Income (loss) from discontinued operations, net of income taxes		—			(105	)		(3,214	)		14,056			—			10,737
Net income (loss)		17,709			(27,587	)		8,813			36,694			(17,709	)		17,920
Less: Net income attributable to the noncontrolling interest		—			—			—			(211	)		—			(211	)
Net income (loss) attributable to Warnaco Group, Inc.	$	17,709		$	(27,587	)	$	8,813		$	36,483		$	(17,709	)	$	17,709

33

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended April 4, 2009
	The Warnaco			Warnaco			Guarantor			Non-Guarantor			Elimination
	Group, Inc.			Inc.			Subsidiaries			Subsidiaries			Entries		Consolidated
Net cash provided by (used in) operating activities from continuing operations	$	1,196		$	(67,447	)	$	(1,699	)	$	5,144		$	—	$	(62,806	)
Net cash provided by (used in) operating activities from discontinued operations		—			15			2,411			(801	)		—		1,625
Net cash provided by (used in) operating activities		1,196			(67,432	)		712			4,343			—		(61,181	)
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable		—			—			—			10			—		10
Purchase of property, plant and equipment		—			(1,181	)		(713	)		(5,467	)		—		(7,361	)
Net cash used in investing activities from continuing operations		—			(1,181	)		(713	)		(5,457	)		—		(7,351	)
Net cash provided by (used in) investing activities from discontinued operations		—			—			—			—			—		—
Net cash used in investing activities		—			(1,181	)		(713	)		(5,457	)		—		(7,351	)
Cash flows from financing activities:
Borrowings under revolving credit facility		—			52,203			—			633			—		52,836
Decrease in short-term notes payable		—			—			—			(6,502	)		—		(6,502	)
Proceeds from the exercise of employee stock options		96			—			—			—			—		96
Purchase of treasury stock		(1,292	)		—			—			—			—		(1,292	)
Other		—			(502	)		—			—			—		(502	)
Net cash provided by (used in) financing activities		(1,196	)		51,701			—			(5,869	)		—		44,636
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			(1,680	)		—		(1,680	)
Decrease in cash and cash equivalents		—			(16,912	)		(1	)		(8,663	)		—		(25,576	)
Cash and cash equivalents at beginning of period		—			30,771			(2	)		116,858			—		147,627
Cash and cash equivalents at end of period	$	—		$	13,859		$	(3	)	$	108,195		$	—	$	122,051

34

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

	Three Months Ended April 5, 2008
	The Warnaco			Warnaco			Guarantor			Non-Guarantor			Elimination
	Group, Inc.			Inc.			Subsidiaries			Subsidiaries			Entries		Consolidated
Net cash provided by (used in) operating activities from continuing operations	$	(5,270	)	$	(63,574	)	$	13,074		$	15,310		$	—	$	(40,460	)
Net cash provided by (used in) operating activities from discontinued operations		—			(570	)		(6,577	)		4,232			—		(2,915	)
Net cash provided by (used in) operating activities		(5,270	)		(64,144	)		6,497			19,542			—		(43,375	)
Cash flows from investing activities:
Proceeds on disposal of assets and collection of notes receivable		—			6			—			142			—		148
Purchase of property, plant and equipment		—			(4,270	)		(584	)		(6,302	)		—		(11,156	)
Proceeds from the sale of business, net		—			—			(5,816	)		40,469			—		34,653
Business acquisitions, net of cash acquired		—			(2,027	)		—			(28,539	)		—		(30,566	)
Net cash provided by (used in) investing activities from continuing operations		—			(6,291	)		(6,400	)		5,770			—		(6,921	)
Net cash used in investing activities from discontinued operations		—			—			—			—			—		—
Net cash provided by (used in) investing activities		—			(6,291	)		(6,400	)		5,770			—		(6,921	)
Cash flows from financing activities:
Repayment of Term B Note		—			(900	)		—			—			—		(900	)
Borrowings under revolving credit facility		—			47,638			—			—			—		47,638
Other		—			(17	)		—			—			—		(17	)
Repurchase of Senior Notes due 2013		—			(46,185	)		—			—			—		(46,185	)
Decrease in short-term notes payable		—			—			—			(12,523	)		—		(12,523	)
Proceeds from the exercise of employee stock options		9,313			—			—			—			—		9,313
Purchase of treasury stock		(4,043	)		—			—			—			—		(4,043	)
Net cash provided by (used in) financing activities		5,270			536			—			(12,523	)		—		(6,717	)
Effect of foreign exchange rate changes on cash and cash equivalents		—			—			—			3,097			—		3,097
Increase (decrease) in cash and cash equivalents		—			(69,899	)		97			15,886			—		(53,916	)
Cash and cash equivalents, at beginning of period		—			76,174			197			115,547			—		191,918
Cash and cash equivalents, at end of period	$	—		$	6,275		$	294		$	131,433		$	—	$	138,002

35

THE WARNACO GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
(Dollars in thousands, excluding share and per share amounts)
(Unaudited)

Note 20 — Commitments

Except as set forth below, the contractual obligations and commitments in existence as of April 4, 2009 did not differ materially from those disclosed as of January 3, 2009 in the Company’s Annual Report on Form 10-K for Fiscal 2008.

	Payments Due by Year
	2009		2010			2011			2012		2013		Thereafter			Total
Operating leases entered into during the Three Months Ended April 4, 2009(a)	$	6,799	$	9,851		$	9,534		$	7,560	$	6,223	$	39,844		$	79,811
Other contractual obligations pursuant to agreements entered into during the Three Months Ended April 4, 2009		12,006		(432	)		(17	)		—		264		(98	)	$	11,723
Total	$	18,805	$	9,419		$	9,517		$	7,560	$	6,487	$	39,746		$	91,534

(a) includes approximately $33.9 million related to a distribution center in the Netherlands.

As of April 4, 2009, the Company was also party to outstanding hedging instruments (see Note 11 of Notes to the Consolidated Condensed Financial Statements and Item 3 — Qualitative and Quantitative Disclosures About Market Risk — Foreign Exchange Risk).

As of April 4, 2009, the Company does not anticipate significant changes to its uncertain tax positions, in accordance with FIN 48, within the next 12 months. The Company believes that the ultimate resolution of these uncertainties will not have a material impact on its results of operations, financial position, or statement of cash flows.

36

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

The Warnaco Group, Inc. (“Warnaco Group” and, collectively with its subsidiaries, the “Company”) is subject to certain risks and uncertainties that could cause its future results of operations to differ materially from its historical results of operations and that could affect the market value of the Company’s common stock. Except for the historical information contained herein, this Quarterly Report on Form 10-Q, including the following discussion, contains forward-looking statements that involve risks and uncertainties. See “Statement Regarding Forward-Looking Disclosure.”

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with: (i) the consolidated condensed financial statements and related notes thereto which are included in this Quarterly Report on Form 10-Q; and (ii) the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 (“Fiscal 2008”).

The Company operates on a 52/53 week fiscal year basis ending on the Saturday closest to December 31. As such, the period January 4, 2009 to January 2, 2010 (“Fiscal 2009”) will contain 52 weeks of operations, while the period from December 30, 2007 to January 3, 2009 (“Fiscal 2008”) contained 53 weeks of operations. Additionally, the period from January 4, 2009 to April 4, 2009 (the “Three Months Ended April 4, 2009”) and the period from December 30, 2007 to April 5, 2008 (the “Three Months Ended April 5, 2008”) contained thirteen weeks and fourteen weeks of operations, respectively.

References to “Calvin Klein Jeans” refer to jeans, accessories and “bridge” products. “Core Intimates” refer to the Intimate Apparel Group’s Warner’s^®, Olga^® and Body Nancy Ganz/Bodyslimmers^® brand names and intimate apparel private labels. References to “Retail” within each operating Group refer to the Company’s owned full price free standing stores, owned outlet stores, concession / “shop-in-shop” stores and on-line stores. Results related to stores operated by third parties under retail licenses or distributor agreements are included in “Wholesale” within each operating Group. Within each segment, inventory is transferred between the wholesale business and the retail business. These intra-segment transfers are primarily recorded at cost plus a mark-up percentage. Such intra-segment mark-up percentage is eliminated within each segment.

Overview

The Company designs, sources, markets, licenses and distributes intimate apparel, sportswear and swimwear worldwide through a line of highly recognized brand names. The Company’s products are distributed domestically and internationally in over 100 countries, primarily to wholesale customers through various distribution channels, including major department stores, independent retailers, chain stores, membership clubs, specialty and other stores, mass merchandisers and the internet. As of April 4, 2009, the Company operated: (i) 960 Calvin Klein retail stores worldwide (consisting of 178 free-standing stores (including 92 full price and 86 outlet stores), 780 shop-in-shop/concession stores, one Calvin Klein Underwear on-line store and one Calvin Klein Jeans on-line store); and (ii) one Speedo^® on-line store. As of April 4, 2009, there were also 615 Calvin Klein retail stores operated by third parties under retail licenses or distributor agreements.

Highlights for the Three Months Ended April 4, 2009 included:

•  Net revenue decreased $29.2 million, or 5.1%, to $538.4 million for the Three Months Ended April 4, 2009, reflecting decreases of $20.0 million in the Sportswear Group, $4.6 million in the Intimate Apparel Group and $4.6 million in the Swimwear Group. The decline in net revenues was primarily related to the unfavorable effect of fluctuations in foreign currency exchange rates (see below). Without the effect of foreign currency fluctuations, net revenues would have increased $31.7 million. In addition, the Three Months Ended April 5, 2008 benefitted from one additional week of operating activity as the Three Months Ended April 4, 2009 contained thirteen weeks of operations while the Three Months Ended April 5, 2008 contained fourteen weeks of operations. Net revenues related to the extra week of operations during the Three Months Ended April 5, 2008 were approximately $23.0 million. Net revenues from comparable store sales in local currency increased 4.9%. Net revenues were favorably affected by the Company’s use of its diversified channels of distribution which helped it to mitigate the effects of the downturn in the global economy.

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•  Operating income increased $8.4 million, or 15.1%, to $64.1 million for the Three Months Ended April 4, 2009 from $55.7 million for the Three Months Ended April 5, 2008. For the Three Months Ended April 4, 2009, fluctuations in foreign currency adversely affected operating income (see below). Operating income includes restructuring charges of $8.6 million for the Three Months Ended April 4, 2009. Operating income for the Three Months Ended April 5, 2008 includes restructuring expenses of $20.3 million, including a charge of $18.5 million (the “Collection License Company Charge”) recorded in the Sportswear segment related to the transfer of the Collection License Company (see Note 3 to Notes to the Consolidated Condensed Financial Statements) to Phillips-Van Heusen Corporation (“PVH”).

•  Both net revenues and operating income for the Three Months Ended April 4, 2009 were negatively impacted by fluctuations in foreign currencies. On average, for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008, the U.S. dollar strengthened relative to the functional currencies of countries where the Company conducts certain of its operations overseas (primarily the Euro, Korean Won, Canadian Dollar and Mexican Peso). Therefore, foreign currency fluctuations caused a $60.9 million decrease in net revenues and a $14.0 million decrease in operating income for the Three Months Ended April 4, 2009 (see Item 3. Quantitative and Qualitative Disclosure About Market Risk — Foreign Exchange Risk, below).

•  Income from continuing operations for the Three Months Ended April 4, 2009 was $0.83 per diluted share, a 453% increase compared to the $0.15 per diluted share for the Three Months Ended April 5, 2008. Included in income from continuing operations for the Three Months Ended April 4, 2009 are restructuring charges of $5.7 million (net of income tax benefits of $2.9 million), or $0.12 per diluted share. Income from continuing operations for the Three Months Ended April 5, 2008 included an initial estimated tax charge of approximately $19.5 million, or $0.42 per diluted share, related to the repatriation, to the U.S., of the proceeds received in connection with the sale of the Company’s Lejaby business, net of adjustments for working capital, as well as restructuring charges of $19.3 million (net of income tax benefit of $1.0 million), or $0.41 per diluted share.

•  In anticipation of further effects of the economic downturn and in order to align its cost structure to match current economic conditions, the Company continued its workforce reduction, which commenced in the fourth quarter of Fiscal 2008. During the first quarter of Fiscal 2009, this reduction resulted in the termination of 164 employees (in both the Company’s domestic and foreign operations) at a cost of approximately $5.9 million.

•  The Company launched an on-line store for the sale of Calvin Klein Jeans at www.calvinkleinjeans.com.

Discussion of Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to use judgment in making certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in its consolidated condensed financial statements and accompanying notes. See the Company’s Annual Report on Form 10-K for Fiscal 2008 for a discussion of the Company’s critical accounting policies.

Among those estimates and assumptions, the Company reviews its intangible assets and goodwill for impairment in the fourth quarter of each fiscal year or sooner if events or changes in circumstances indicate that the carrying amount of any of those assets may not be recoverable. Such events may include, among others, (a) a significant adverse change in legal factors or the business climate; (b) an adverse action or assessment by a regulator; (c) unanticipated competition; (d) a loss of key personnel; (e) a more-likely-than-not expectation that a reporting unit, or a significant part of a reporting unit, will be sold or disposed of; (f) the determination of a lack of recoverability of a significant “asset group” within a reporting unit; (g) reporting a goodwill impairment loss by a subsidiary that is a component of a reporting unit; and (h) a significant decrease in the Company’s stock price.

During the Three Months Ended April 4, 2009, the Company considered the potential of an impairment in its goodwill or intangible assets, consisting of licenses and trademarks primarily for its Calvin Klein products, by

38

reviewing these factors. The Company concluded that there were no triggering events or changes in circumstances since the end of Fiscal 2008 which would require the Company to conduct an impairment evaluation of either goodwill or intangible assets.

Recent Accounting Pronouncements

See Note 2 to Notes to Consolidated Condensed Financial Statements for a description of accounting pronouncements that have recently been issued and the Company’s assessment of the effect of their adoption on its financial position, results of operations and cash flows.

Results of Operations

Statement of Operations (Selected Data)

The following tables summarize the historical results of operations of the Company for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008. The results of the Company’s discontinued operations are included in “Income from discontinued operations, net of taxes” for all periods presented. Results of operations contained 13 weeks of activity for the Three Months Ended April 4, 2009 and 14 weeks of activity for the Three Months Ended April 5, 2008.

	Three Months						Three Months
	Ended						Ended
	April 4,			% of Net			April 5,			% of Net
	2009			Revenues			2008			Revenues
	(In thousands of dollars)
Net revenues	$	538,445			100.0	%	$	567,658			100.0	%
Cost of goods sold		312,885			58.1	%		313,537			55.2	%
Gross profit		225,560			41.9	%		254,121			44.8	%
Selling, general and administrative expenses		158,756			29.5	%		196,195			34.6	%
Amortization of intangible assets		2,127			0.4	%		2,474			0.4	%
Pension expense (income)		537			0.1	%		(291	)		(0.1	)%
Operating income		64,140			11.9	%		55,743			9.8	%
Other income (loss)		(404	)					5,461
Interest expense		6,069						9,390
Interest income		(408	)					(933	)
Income from continuing operations before provision for income taxes and noncontrolling interest		58,883						41,825
Provision for income taxes		20,134						34,642
Income from continuing operations before noncontrolling interest		38,749						7,183
Income (loss) from discontinued operations, net of taxes		(920	)					10,737
Net income		37,829						17,920
Less: Net Income attributable to the noncontrolling interest		(258	)					(211	)
Net income attributable to Warnaco Group, Inc.	$	37,571					$	17,709

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Net Revenues

Net revenues by group were as follows:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,		Increase			%
	2009		2008		(Decrease)			Change
	(In thousands of dollars)
Sportswear Group	$	280,147	$	300,119	$	(19,972	)		(6.7	)%
Intimate Apparel Group		162,368		167,029		(4,661	)		(2.8	)%
Swimwear Group		95,930		100,510		(4,580	)		(4.6	)%
Net revenues(a)	$	538,445	$	567,658	$	(29,213	)		(5.1	)%

(a) Includes $381.5 million and $401.1 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to the Company’s total Calvin Klein businesses (a decrease of 4.9%).

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

The $20.0 million decrease in Sportswear net revenues, the $4.6 million decrease in Intimate Apparel net revenues and the $4.6 million decrease in Swimwear Group net revenues relate primarily to the unfavorable effect of fluctuations in foreign currency exchange rates in countries where the Company conducts certain of its operations (primarily the Euro, Korean Won, Canadian Dollar and Mexican Peso). This unfavorable effect resulted in a $60.9 million decrease in net revenues for the Three Months Ended April 4, 2009 compared to the prior year. Without the effect of foreign currency fluctuations, net revenues would have increased $31.7 million. In addition, the Three Months Ended April 5, 2008 benefitted from one additional week of operating activity as the Three Months Ended April 4, 2009 contained thirteen weeks of operations while the Three Months Ended April 5, 2008 contained fourteen weeks of operations. Net revenues related to the extra week of operations in 2008 were approximately $23.0 million. Net revenues for the Three Months Ended April 4, 2009 also include an aggregate increase of $22.4 million due to the shifting in timing of shipments as compared to the Three Months Ended April 5, 2008 (see below).

The following tables summarize the Company’s net revenues by channel of distribution and region for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008:

	Three Months			Three Months
	Ended			Ended
	April 4,			April 5,
	2009			2008
United States — wholesale
Department stores and independent retailers		10	%		14	%
Specialty stores		9	%		8	%
Chain stores		7	%		6	%
Mass merchandisers		1	%		1	%
Membership clubs		13	%		8	%
Off price and other		9	%		7	%
Total United States — wholesale		49	%		44	%
International — wholesale		33	%		37	%
Retail		18	%		19	%
Net revenues — consolidated		100	%		100	%

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By Region:

	Net Revenues
	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,		Increase /			%
	2009		2008		(Decrease)			Change
	(In thousands of dollars)
United States	$	269,744	$	257,014	$	12,730			5.0	%
Europe		142,715		172,165		(29,450	)		(17.1	)%
Asia		82,781		86,583		(3,802	)		(4.4	)%
Canada		20,697		26,932		(6,235	)		(23.2	)%
Mexico, Central and South America		22,508		24,964		(2,456	)		(9.8	)%
Total	$	538,445	$	567,658	$	(29,213	)		(5.1	)%

By Channel:

	Net Revenues
	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,					%
	2009		2008		Increase			Change
	(In thousands of dollars)
Wholesale	$	443,801	$	462,302	$	(18,501	)		(4.0	)%
Retail		94,644		105,356		(10,712	)		(10.2	)%
Total	$	538,445	$	567,658	$	(29,213	)		(5.1	)%

Sportswear Group

Sportswear Group net revenues were as follows:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,		Increase			%
	2009		2008		(Decrease)			Change
	(In thousands of dollars)
Calvin Klein Jeans	$	182,623	$	193,628	$	(11,005	)		(5.7	)%
Chaps		37,080		39,717		(2,637	)		(6.6	)%
Sportswear wholesale		219,703		233,345		(13,642	)		(5.8	)%
Sportswear retail		60,444		66,774		(6,330	)		(9.5	)%
Sportswear Group(a)(b)	$	280,147	$	300,119	$	(19,972	)		(6.7	)%

(a)	Includes net revenues of $26.7 million and $26.9 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to the Calvin Klein accessories business in Europe and Asia.
(b)	Includes approximately $10.7 million and $12.9 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to certain sales of Calvin Klein underwear in regions managed by the Sportswear Group.

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

The $11.0 million decrease in Calvin Klein jeans wholesale net revenues reflects decreases of $15.6 million in Europe, $1.5 million in Canada, $1.3 million in Mexico, partially offset by an increase of $5.6 million in the U.S. and $1.8 million in Asia . The decrease in Europe primarily reflects the unfavorable effects of foreign currency fluctuations. The decrease in Mexico, Central and South America primarily reflects the unfavorable effects of foreign currency fluctuations coupled with decreased sales and increased customer allowances, due mainly to the

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downturn in the economy. The increase in the U.S. primarily reflects an increase in sales to off-price stores and membership clubs (due to initiation of new sales programs in the first quarter of Fiscal 2009 and a shift in timing of certain continuing programs, which occurred in the first quarter of Fiscal 2009 when comparable sales took place in the second quarter of 2008), partially offset by a decrease in sales to department stores (primarily related to decreases in the men’s and women’s jeans business, partially offset by an increase in the Petite size jeans business, which launched in the fourth quarter of 2008). The decrease in Canada primarily reflects a decline in sales to department stores. The increase in Asia primarily reflects an increase in net revenues in local currencies, partially offset by the unfavorable effects of foreign currency fluctuations, primarily related to Korea. The increase in net revenues in local currencies relates to the Company’s expansion efforts in this region, particularly in China, including an increase in the number of stores operated by distributors, as well as increased sales in Korea primarily due to an increase in promotional events and discounts.

The $2.6 million decrease in Chaps net revenues reflects decreases in the U.S., Canada and Mexico of $1.3 million, $1.1 million and $0.2 million, respectively. The decrease in Chaps net revenues in the U.S primarily reflects decreases in sales to customers in the department store and specialty store distribution channels, partially offset by increases in the off-price and chain store channels. The decline in Chaps net revenues in Canada was due primarily to a decrease in sales to department stores and decreases in Mexico primarily reflected a decrease in sales to membership clubs coupled with an increase in customer allowances.

The $6.3 million decrease in Sportswear retail net revenues primarily reflects a $7.7 million decrease in Asia (primarily related to the unfavorable effects of foreign currency fluctuations, which more than offset increases in same store sales and new store openings in China and Korea) and a $0.7 million increase in Europe (primarily related to volume increases and the effect of new store openings, partially offset by the unfavorable effect of foreign currency fluctuations) and a $0.6 million increase in Mexico, Central and South America.

Intimate Apparel Group

Intimate Apparel Group net revenues were as follows:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,		Increase
	2009		2008		(Decrease)			% Change
	(In thousands of dollars)
Calvin Klein Underwear	$	96,530	$	89,493	$	7,037			7.9	%
Core Intimates		33,974		42,134		(8,160	)		(19.4	)%
Intimate Apparel wholesale		130,504		131,627		(1,123	)		(0.9	)%
Calvin Klein Underwear retail		31,864		35,402		(3,538	)		(10.0	)%
Intimate Apparel Group	$	162,368	$	167,029	$	(4,661	)		(2.8	)%

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

The $7.0 million increase in Calvin Klein Underwear wholesale net revenues reflects an increase in the U.S. of $12.3 million and an increase of $2.5 million in Asia, partially offset by decreases in Europe of $6.1 million, in Mexico, Central and South America of $0.9 million and in Canada of $0.8 million. The decrease in Europe primarily relates to decreases in sales of men’s lines (which the Company believes is related to the downturn in the economy) and an increase in women’s lines (primarily related to new product launches and additional customer locations, despite the downturn in the economy) during the Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008 coupled with the negative impact of foreign currency fluctuations. The increase in the U.S. of the Company’s Calvin Klein Underwear wholesale business primarily related to increases in sales to membership clubs and the off-price channel of distribution (due to increases in customer-initiated orders and shipments made in the first quarter of Fiscal 2009 where comparable shipments were made in the second quarter of Fiscal 2008) and to stores operated by the licensor of the Calvin Klein brand (due to an increase in new stores opened in the first quarter of Fiscal 2009). Those increases were partially offset by a decrease in sales to department stores. The increase in Asia is primarily related to the expansion of the Company’s distribution network in China and an

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increase in shipments by distributors to Japan and Australia due to timing. The decrease in Mexico, Central and South America reflects the unfavorable effects of foreign currency fluctuations, which more than offset increases in sales to membership clubs. The decrease in Canada resulted from a decline in sales to department stores and the mass merchant channel, which the Company believes relates to the downturn in the economy.

The $8.1 million decrease in Core Intimates net revenues reflects a $5.0 million decrease in the U.S., a $2.4 million decrease in Canada, and a $0.7 million decrease in Mexico. The decrease in the U.S. is primarily related to decreased sales of the Company’s Warner’s product to JC Penney, Kohl’s and Federated stores (due to decreased replenishment orders which the Company believes is related to the downturn in the economy, partially offset by an increase from the introduction of new styles in the first quarter of Fiscal 2009), decreased sales of the Olga line (primarily related to the planned reduction of new styles given the downturn in the economy, partially offset by an increase in replenishment orders) and a reduction in private label business. Those decreases were partially offset by an increase in the off-price channel and favorable effects of reductions in the level of customer returns and allowances. The decrease in Canada was due to lower sales in the mass merchant and department store channels and the unfavorable effect of foreign currency fluctuations.

The $3.5 million decrease in Calvin Klein Underwear retail net revenues primarily reflects a $3.6 million decrease in Europe, a $0.3 million decrease in Asia, and a $0.6 million decrease in the U.S., partially offset by increases of $0.6 million in Canada and $0.4 million in Mexico. The decrease in net revenues in Europe to $22.1 million for the Three Months Ended April 5, 2009 from $25.7 million for the Three Months Ended April 5, 2008 primarily reflects the unfavorable effect of foreign currency fluctuations which more than offset increases in sales at concession, outlet and full-price stores due to opening of additional new stores. The decrease in net revenues in Asia to $6.4 million for the Three Months Ended April 5, 2009 from $6.7 million for the Three Months Ended April 5, 2008 primarily reflects a decline in same store sales in China and Hong Kong, which the Company believes relates to the downturn in the economy, partially offset by an increase in the number of stores in Hong Kong.

Swimwear Group

Swimwear Group net revenues were as follows:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,		Increase
	2009		2008		(Decrease)			% Change
	(In thousands of dollars)
Speedo	$	83,773	$	81,905	$	1,868			2.3	%
Calvin Klein		9,821		15,425		(5,604	)		(36.3	)%
Swimwear wholesale		93,594		97,330		(3,736	)		(3.8	)%
Swimwear retail(a)		2,336		3,180		(844	)		(26.5	)%
Swimwear Group	$	95,930	$	100,510	$	(4,580	)		(4.6	)%

(a) Includes $0.2 million and $0.4 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to Calvin Klein retail swimwear.

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

The $1.9 million increase in net revenues for Speedo wholesale is due primarily to a $3.5 million increase in the U.S., partially offset by decreases of $1.2 million in Canada and $0.4 million in Mexico, Central and South America. The increase in the U.S. primarily reflects an increase in sales to membership clubs due to new programs and a shift in the timing of shipments into the first quarter of Fiscal 2009 (comparable shipments occurred in the fourth quarter of Fiscal 2007 and second quarter of Fiscal 2008 instead of the first quarter of Fiscal 2008), and an increase in sales to specialty stores. Those increases were partially offset by decreased sales to the mass merchandise, department store, chain store and off-price channels of distribution.

The $5.6 million decrease in Calvin Klein swimwear wholesale net revenues primarily reflects a $4.7 million decrease in Europe, a $1.1 million decrease in the U.S., partially offset by an increase of $0.2 million in Mexico. The

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decrease in Europe primarily relates to a shift in the timing of certain shipments, which are expected to occur in the second quarter of 2009, while comparable shipments occurred in the first quarter of 2008, combined with the negative effect of foreign currency fluctuations. The decrease in the U.S. is due to a decrease in the department store, specialty store and off-price channels.

The $0.8 million decrease in Swimwear retail net revenues primarily reflects a $0.6 million decrease in the U.S. and a $0.2 million decrease in Europe. The decrease in net revenues in the U.S. primarily reflects volume decreases at the online Speedo store. The decrease in net revenues in Europe primarily reflects volume decreases at concession, outlet and full-price stores (related to Calvin Klein swimwear) and the negative impact of foreign currency fluctuations.

Gross Profit

Gross profit was as follows:

	Three Months					Three Months
	Ended		% of			Ended		% of
	April 4,		Brand Net			April 5,		Brand Net
	2009		Revenues			2008		Revenues
Sportswear Group(a)	$	119,384		42.6	%	$	135,992		45.3	%
Intimate Apparel Group		73,856		45.5	%		81,025		48.5	%
Swimwear Group		32,320		33.7	%		37,104		36.9	%
Total gross profit	$	225,560		41.9	%	$	254,121		44.8	%

(a) Sportswear Group gross profit includes approximately $6.8 million and $9.6 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to certain sales of Calvin Klein underwear in regions managed by the Sportswear Group.

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Gross profit was $225.6 million, or 41.9% of net revenues, for the Three Months Ended April 4, 2009 compared to $254.1 million, or 44.8% of net revenues, for the Three Months Ended April 5, 2008. The $28.6 million decrease in gross profit was due to decreases in the Sportswear Group ($16.6 million), the Intimate Apparel Group ($7.2 million) and the Swimwear Group ($4.8 million). The U.S. dollar strengthened significantly during the Three Months Ended April 4, 2009 relative to the functional currencies where the Company conducts certain of its operations (primarily the Euro, Korean won, Canadian dollar and Mexican peso) compared to the Three Months Ended April 5, 2008. Consequently, foreign currency fluctuation resulted in a $34.4 million decrease in gross profit for the Three Months Ended April 4, 2009. In addition, gross profit for the Three Months Ended April 5, 2008 benefitted by an extra week of operations when compared to the Three Months Ended April 4, 2009. Included in gross profit for the Three Months Ended April 4, 2009 is $0.1 million, $0.8 million and $0.6 million of restructuring expenses related to the Sportswear, Intimate Apparel and Swimwear Groups, respectively, primarily related to the reduction in the Company’s workforce in January 2009. Included in gross profit for the Three Months Ended April 5, 2008 is $0.7 million of restructuring expenses related to the Swimwear Group (see Note 5 of Notes to Consolidated Financial Statements).

Sportswear Group gross profit decreased $16.6 million for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008 reflecting a $20.7 million decline in the international business (primarily related to the negative effect of fluctuations in exchange rates of foreign currencies, an unfavorable sales mix in Europe and the effect of an extra week of operations during the Three Months Ended April 5, 2008) partially offset by a $4.1 million increase in the domestic business (primarily reflecting an increase in net revenues and a reduction in sourcing costs). Gross margin decreased 270 basis points for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008 primarily reflecting an unfavorable sales mix in Europe coupled with increases in the level of promotional discounts in Asia, partially offset by favorability in sales mix and a reduction in sourcing costs in the U.S.

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Intimate Apparel Group gross profit decreased $7.2 million and gross margin decreased 300 basis points for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008 reflecting a $10.1 million decline in the international business (primarily related to the negative effect of fluctuations in exchange rates of foreign currencies, an unfavorable sales mix, an increase in the level of promotional discounts and the effect of an extra week of operations during the Three Months Ended April 5, 2008) partially offset by a $2.9 million increase in the domestic business. The increase in the domestic business primarily reflects increased net revenues and favorable sales mix in the Calvin Klein underwear business, partially offset by declines in the Core business as a result of reduced net revenues coupled with an unfavorable sales mix and restructuring expense increase in that business.

Swimwear Group gross profit decreased $4.8 million and gross margin decreased 320 basis points for the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008. The decrease in gross profit primarily reflects a $1.0 million decrease in Speedo (primarily related to increased production costs and unfavorable sales mix, which more than offset the increase in net revenues) and a $3.8 million decline in Calvin Klein gross profit (due primarily to a decrease in net sales in Europe). The decrease in gross margin also relects the effect of an extra week of operations during the Three Months Ended April 5, 2008.

Selling, General and Administrative Expenses

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Selling, general & administrative (“SG&A”) expenses decreased $37.4 million to $158.8 million (29.5% of net revenues) for the Three Months Ended April 4, 2009 compared to $196.2 million (34.6% of net revenues) for the Three Months Ended April 5, 2008. The decrease in SG&A expenses reflects a $12.5 million decrease in restructuring expenses (charges for the Three Months Ended April 4, 2009 primarily related to the reduction in the Company’s workforce in January 2009 and consolidation of the Company’s European operations of $6.1 million, while charges for the Three Months Ended April 5, 2008 related primarily to the Collection License Company Charge of $18.5 million, discussed previously, as well as activities to increase productivity and profitability in the Swimwear segment). The decrease in SG&A expenses also reflects a net decrease of $20.4 million associated with the foreign currency exchange fluctuations since the U.S. dollar strengthened during the Three Months Ended April 4, 2009 relative to the functional currencies where the Company conducts certain of its operations (primarily the Euro, Korean won, Canadian dollar and Mexican peso) compared to the Three Months Ended April 5, 2008 and the fourteenth week of operations in the Three Months Ended April 5, 2008. Administrative expenses decreased $7.4 million (primarily related to reductions in professional fees, travel and personnel costs mainly as a result of the Company’s cost cutting initiatives). Marketing expenses decreased $6.1 million (primarily in the Company’s Calvin Klein businesses in Europe, Asia and the U.S. as well as in the Speedo business in the U.S.), selling expenses decreased $9.5 million and distribution expenses decreased $1.9 million (both primarily reflecting decreases related to the effects of foreign currency fluctuations and the effects of the Company’s workforce reductions, partially offset by increases associated with the opening of additional retail stores for the Calvin Klein businesses in Europe, Asia and Canada).

Amortization of Intangible Assets

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Amortization of intangible assets was $2.1 million for the Three Months Ended April 4, 2009 compared to $2.5 million for the Three Months Ended April 5, 2008. The decrease primarily relates to the unfavorable effect of foreign currency fluctuations on the Euro-denominated carrying amounts of Calvin Klein licenses acquired in January 2006 and January 2008.

Pension Income/Expense

Pension expense was $0.5 million in the Three Months Ended April 4, 2009 compared to pension income of $0.3 million in the Three Months Ended April 5, 2008. See Note 8 of Notes to the Consolidated Condensed Financial Statements.

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Operating Income

The following table presents operating income by group:

	Three Months			Three Months
	Ended			Ended
	April 4,			April 5,
	2009			2008
	(In thousands of dollars)
Sportswear Group	$	38,321		$	22,079
Intimate Apparel Group		29,402			32,285
Swimwear Group		12,555			14,818
Unallocated corporate expenses(b)		(16,138	)		(13,439	)
Operating income(a)	$	64,140		$	55,743
Operating income as a percentage of net revenue		11.9	%		9.8	%

(a)	Includes approximately $8.6 million and $20.3 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to restructuring expenses. See Note 5 of Notes to Consolidated Condensed Financial Statements.
(b)	Includes $0.5 million and $(0.3) million of pension expense (income), $1.4 million and zero of restructuring expenses and $1.8 million and $(0.2) million of foreign currency losses (gains) for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008, respectively.

The following table summarizes key measures of the Company’s operating income for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008:

	Three Months Ended			Three Months Ended			Increase /
	April 4, 2009			April 5, 2008			(Decrease)			% Change
				(In thousands of dollars)
By Region:
Domestic	$	44,571		$	28,369		$	16,202			57.1	%
International		35,707			40,813			(5,106	)		(12.5	)%
Unallocated corporate expenses		(16,138	)		(13,439	)		(2,699	)		20.1	%
Total	$	64,140		$	55,743		$	8,397			15.1	%
By Channel:
Wholesale	$	74,851		$	55,000		$	19,851			36.1	%
Retail		5,427			14,182			(8,755	)		(61.7	)%
Unallocated corporate expenses		(16,138	)		(13,439	)		(2,699	)		20.1	%
Total	$	64,140		$	55,743		$	8,397			15.1	%
Total Calvin Klein products	$	61,423		$	50,840		$	10,583			20.8	%

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Operating income was $64.1 million (11.9% of net revenues) for the Three Months Ended April 4, 2009 compared to $55.7 million (9.8% of net revenues) for the Three Months Ended April 5, 2008. Included in operating income for the Three Months Ended April 4, 2009 are pension expense of $0.5 million and restructuring charges of $8.6 million. Included in operating income for the Three Months Ended April 5, 2008 are pension income of $0.3 million and restructuring charges of $20.3 million, of which $18.5 million relates to the Collection License Company Charge and the remainder relates to contract termination, employee severance and other costs. Operating income for the Three Months Ended April 4, 2009 and the Three Months Ended April 5, 2008 includes a $14.0 million decrease and $4.8 million increase, respectively, related to the effects of fluctuations in exchange rates

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of foreign currencies. In addition, operating income for the Three Months Ended April 5, 2008 was favorably affected by the additional week of operations.

Sportswear Group

Sportswear Group operating income was as follows:

	Three Months					Three Months
	Ended		% of			Ended		% of
	April 4,		Brand Net			April 5,		Brand Net
	2009(c)		Revenues			2008(c)		Revenues
	(In thousands of dollars)
Calvin Klein Jeans	$	31,680		17.3	%	$	14,714		7.6	%
Chaps		4,620		12.5	%		2,798		7.0	%
Sportswear wholesale		36,300		16.5	%		17,512		7.5	%
Sportswear retail		2,021		3.3	%		4,567		6.8	%
Sportswear Group(a)(b)	$	38,321		13.7	%	$	22,079		7.4	%

(a)	Includes restructuring charges of $8.6 million for the Three Months Ended April 4, 2009, primarily related to the reduction in the Company’s workforce and restructuring charges of $20.3 million for the Three Months Ended April 5, 2008, primarily related to the Collection License Company Charge of $18.5 million related to the transfer of the Collection License Company to PVH.
(b)	Includes approximately $0.8 million and $1.6 million for the Three Months Ended April 4, 2009 and April 5, 2008, respectively, related to certain sales of Calvin Klein underwear in regions managed by the Sportswear Group.
(c)	Includes an allocation of shared services expenses by brand in the following table:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,
	2009		2008
	(In thousands of dollars)
Calvin Klein Jeans	$	3,223	$	3,247
Chaps		1,806		2,115
Sportswear wholesale		5,029		5,362
Sportswear retail		2		95
Sportswear Group	$	5,031	$	5,457

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Sportswear Group operating income increased $16.2 million, or 73.6%, primarily reflecting increases of $16.9 million and $1.8 million in the Calvin Klein Jeans wholesale and Chaps businesses, partially offset by a decrease of $2.5 million in the Calvin Klein Jeans retail business. The increase in Sportswear operating income primarily reflects a $16.6 million decrease in gross profit, more than offset by a $32.8 million decrease in SG&A (including amortization of intangible assets) expenses. SG&A expenses as a percentage of net sales decreased 9.1%. The decrease in SG&A expenses primarily reflects a $15.8 million decrease in restructuring charges (see Note 5 of Notes to Consolidated Condensed Financial Statements), the effects of foreign currency fluctuations, savings as a result of cost cutting initiatives, partially offset by increases in Asia due to store openings and the benefit of an extra fourteenth week in 2008.

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Intimate Apparel Group

Intimate Apparel Group operating income was as follows:

	Three Months					Three Months
	Ended		% of			Ended		% of
	April 4,		Brand Net			April 5,		Brand Net
	2009(a)		Revenues			2008(a)		Revenues
	(In thousands of dollars)
Calvin Klein Underwear	$	23,906		24.8	%	$	18,966		21.2	%
Core Intimates		2,224		6.5	%		4,725		11.2	%
Intimate Apparel wholesale		26,130		20.0	%		23,691		18.0	%
Calvin Klein Underwear retail		3,272		10.3	%		8,594		24.3	%
Intimate Apparel Group	$	29,402		18.1	%	$	32,285		19.3	%

(a) Includes an allocation of shared services/other expenses by brand in the following table:

	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,
	2009		2008
	(In thousands of dollars)
Calvin Klein Underwear	$	2,292	$	2,652
Core Intimates		1,361		1,778
Intimate Apparel wholesale		3,653		4,430
Calvin Klein Underwear retail		86		—
Intimate Apparel Group	$	3,739	$	4,430

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Intimate Apparel Group operating income for the Three Months Ended April 4, 2009 decreased $2.9 million, or 8.9%, over the prior year reflecting a $5.3 million decrease in Calvin Klein Underwear retail, a $2.5 million decrease in Core Intimates and a $4.9 million increase in Calvin Klein Underwear wholesale. The 120 basis point decline in operating income as a percentage of net revenues primarily reflects a 300 basis point decrease in gross margin offset by a 180 basis point decrease in SG&A as a percentage of net revenues. The decrease in SG&A as a percentage of net revenues primarily reflects the Company’s initiative to reduce costs.

Swimwear Group

Swimwear Group operating income (loss) was as follows:

	Three Months					Three Months
	Ended		% of			Ended		% of
	April 4,		Brand Net			April 5,		Brand Net
	2009(a)		Revenues			2008(a)		Revenues
			(In thousands of dollars)
Speedo	$	11,767		14.0	%	$	9,805		12.0	%
Calvin Klein		655		6.7	%		3,992		25.9	%
Swimwear wholesale		12,422		13.3	%		13,797		14.2	%
Swimwear retail(b)		133		5.7	%		1,021		32.1	%
Swimwear Group	$	12,555		13.1	%	$	14,818		14.7	%

(a)	Includes an allocation of shared services expenses by brand in the following table:
(b)	Includes $(113) and $12 related to Calvin Klein retail swimwear.

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	Three Months		Three Months
	Ended		Ended
	April 4,		April 5,
	2009		2008
	(In thousands of dollars)
Speedo	$	2,409	$	3,710
Calvin Klein		56		114
Swimwear wholesale		2,465		3,824
Swimwear retail		150		—
Swimwear Group	$	2,615	$	3,824

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Swimwear Group operating income for the Three Months Ended April 4, 2009 decreased $2.3 million, or 15.3%, reflecting a $3.3 million decrease in Calvin Klein wholesale and a decline of $0.9 million in Swimwear retail, partially offset by $1.9 million increase in Speedo wholesale. Operating income for the Three Months Ended April 4, 2009 and the Three Months ended April 5, 2008 includes restructuring expenses of $1.6 million and $1.0 million, respectively, primarily related to the reduction in the Company’s workforce in January 2009 as well as the rationalization of the Swimwear Group warehouse and distribution function in California. The 160 basis point decline in operating income as a percentage of net revenues primarily reflects a 320 basis point decrease in gross margin, offset by the effects of a 160 basis point decrease in SG&A as a percentage of net revenues. The decrease in SG&A as a percentage of net revenues primarily relates to the Company’s initiative to reduce costs and the benefit of the fourteenth week of operations in the Three Months Ended April 5, 2008.

Other Loss (Income)

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Income of $0.4 million for the Three Months Ended April 4, 2009 primarily reflects net gains of $1.3 million on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency and $0.9 million of net losses related to foreign currency exchange contracts designed as economic hedges (see Note 11 to Notes to Consolidated Condensed Financial Statements). Loss of $5.5 million for the Three Months Ended April 5, 2008 primarily reflects net losses of $0.9 million on the current portion of inter-company loans denominated in currency other than that of the foreign subsidiaries’ functional currency, a $1.2 million loss related to foreign currency exchange contracts designed to fix the number of euros required to satisfy 70% of inventory purchases made by certain of the Company’s European subsidiaries and a premium paid of $3.2 million (which includes the write-off of approximately $1.1 million of deferred financing costs) related to the repurchase of $44.1 million aggregate principal amount of Senior Notes (defined below) for a total consideration of $46.2 million and other losses, net, of $0.2 million.

Interest Expense

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Interest expense decreased $3.3 million to $6.1 million for the Three Months Ended April 4, 2009 from $9.4 million for the Three Months Ended April 5, 2008. The decrease primarily relates to a decline in interest associated with the Term B Note, which was fully repaid in the third quarter of Fiscal 2008, with the Senior Notes in the U.S., which were partially repaid in the first quarter of Fiscal 2008, and to the decrease in the outstanding balance and interest rates related to the CKJEA short term notes payable. In addition, income on the Company’s interest rate swaps increased $0.2 million.

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Interest Income

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Interest income decreased $0.5 million to $0.4 million for the Three Months Ended April 4, 2009 from $0.9 million for the Three Months Ended April 5, 2008. The decrease in interest income was due primarily to a decrease in interest earned on lower outstanding cash balances at lower interest rates.

Income Taxes

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

The provision for income taxes was $20.1 million or an effective tax rate of 34.2% for the Three Months Ended April 4, 2009, compared to $34.6 million or an effective tax rate of 82.8% for the Three Months Ended April 5, 2008. The decrease in the effective tax rate primarily relates to (1) a non-recurring tax charge of $19.5 million in the U.S. associated with the repatriation of the Lejaby sale net proceeds during the Three Months ended April 5, 2008, as disclosed in Note 3 to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2008; (2) income tax expense recorded upon the finalization of the Company’s tax returns in the Netherlands for years through 2005, and (3) offset by a shift in forecasted earnings from lower to higher taxing jurisdictions for the Three Months Ended April 4, 2009.

Discontinued Operations

Three Months Ended April 4, 2009 compared to Three Months Ended April 5, 2008

Loss from discontinued operations, net of taxes, was $0.9 million for the Three Months Ended April 4, 2009 compared to income of $10.7 million for the Three Months Ended April 5, 2008. See Note 4 of Notes to Consolidated Condensed Financial Statements.

Capital Resources and Liquidity

Financing Arrangements

Senior Notes

On June 12, 2003, Warnaco Inc., the principal operating subsidiary of Warnaco Group, completed the sale of $210.0 million aggregate principal amount of Senior Notes at par value, which notes mature on June 15, 2013 and bear interest at 87/8% payable semi-annually on December 15 and June 15 of each year. No principal payments prior to the maturity date are required. The Senior Notes are unconditionally guaranteed, jointly and severally, by Warnaco Group and substantially all of Warnaco Inc.’s domestic subsidiaries (all of which are 100% owned, either directly or indirectly, by Warnaco Inc.). In June 2006, the Company purchased $5.0 million aggregate principal amount of the outstanding $210.0 million Senior Notes for total consideration of $5.2 million in the open market. During March, 2008, the Company purchased $44.1 million aggregate principal amount of the outstanding Senior Notes for a total consideration of $46.2 million in the open market. The aggregate principal amount outstanding under the Senior Notes was $160.9 million as of April 4, 2009, January 3, 2009 and April 5, 2008.

The indenture pursuant to which the Senior Notes were issued contains covenants which, among other things, restrict the Company’s ability to incur additional debt, pay dividends and make restricted payments, create or permit certain liens, use the proceeds of sales of assets and subsidiaries’ stock, create or permit restrictions on the ability of certain of Warnaco Inc.’s subsidiaries to pay dividends or make other distributions to Warnaco Group or to Warnaco Inc., enter into transactions with affiliates, engage in certain business activities, engage in sale and leaseback transactions and consolidate or merge or sell all or substantially all of its assets. The Company was in compliance with the financial covenants of the Senior Notes as April 4, 2009, January 3, 2009 and April 5, 2008.

Interest Rate Swap Agreements

On September 18, 2003, the Company entered into an Interest Rate Swap Agreement (the “2003 Swap Agreement”) with respect to the Senior Notes for a total notional amount of $50 million. The 2003 Swap Agreement

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provides that the Company will receive interest at 87/8% and pay a variable rate of interest based upon six month LIBOR plus 4.11% (6.43% at April 4, 2009). The 2003 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature).

On November 5, 2004, the Company entered into a second Interest Rate Swap Agreement (the “2004 Swap Agreement”) with respect to the Company’s Senior Notes for a total notional amount of $25 million. The 2004 Swap Agreement provides that the Company will receive interest of 87/8% and pay a variable rate of interest based upon six months LIBOR plus 4.34% (6.66% at April 4, 2009). The 2004 Swap Agreement expires on June 15, 2013 (the date on which the Senior Notes mature).

As a result of the 2003 and 2004 Swap Agreements, the weighted average effective interest rate of the Senior Notes was 7.77% as of April 4, 2009, 7.77% as of January 3, 2009 and 8.94% as of April 5, 2008.

The fair value of the Company’s outstanding interest rate swap agreements reflect the termination premium (unrealized loss) or termination discount (unrealized gain) that the Company would realize if such swaps were terminated on the valuation date. Since the provisions of the Company’s 2003 Swap Agreement and the 2004 Swap Agreement match the provisions of the Company’s outstanding Senior Notes (the “Hedged Debt”), changes in the fair value of the outstanding swaps do not have any effect on the Company’s results of operations but are recorded in the Company’s consolidated balance sheets. Unrealized gains on the outstanding interest rate swap agreements are included in other assets with a corresponding increase in the Hedged Debt. Unrealized losses on the outstanding interest rate swap agreements are included as a component of long-term debt with a corresponding decrease in the Hedged Debt. The table below summarizes the fair value (unrealized gains (losses)) of the Company’s outstanding swap agreements:

	April 4,		January 3,		April 5,
	2009		2009		2008
	(In thousands of dollars)
Unrealized gain:
2003 Swap Agreement	$	2,077	$	1,972	$	1,416
2004 Swap Agreement		1,046		932		558
Net unrealized gain	$	3,123	$	2,904	$	1,974

New Credit Agreements

On August 26, 2008, Warnaco, as borrower, and Warnaco Group, as guarantor, entered into a revolving credit agreement (the “New Credit Agreement”) and Warnaco of Canada Company (“Warnaco Canada”), an indirect wholly-owned subsidiary of Warnaco Group, as borrower, and Warnaco Group, as guarantor, entered into a second revolving credit agreement (the “New Canadian Credit Agreement” and, together with the New Credit Agreement, the “New Credit Agreements”), in each case with the financial institutions which, from time to time, will act as lenders and issuers of letters of credit.

The New Credit Agreement provides for a five-year asset-based revolving credit facility under which up to $270.0 million initially will be available. In addition, during the term of the New Credit Agreement, Warnaco may make up to three requests for additional credit commitments in an aggregate amount not to exceed $200.0 million. The New Canadian Credit Agreement provides for a five-year asset-based revolving credit facility in an aggregate amount up to U.S. $30.0 million. The New Credit Agreements mature on August 26, 2013.

The New Credit Agreement has interest rate options that are based on (i) a Base Rate (as defined in the New Credit Agreement) plus 0.75% (4.00% at April 4, 2009) or (ii) a LIBOR (as defined in the New Credit Agreement) plus 1.75% (2.91% at April 4, 2009) in each case, on a per annum basis. The interest rate payable on outstanding borrowing is subject to adjustments based on changes in the Company’s leverage ratio. The New Canadian Credit Agreement has interest rate options that are based on (i) the prime rate announced by Bank of America (acting through its Canada branch) plus 0.75% (3.25% at April 4, 2009), or (ii) a BA Rate (as defined in the New Canadian Credit Agreement) plus 1.75% (2.31% at April 4, 2009), in each case, on a per annum basis and subject to adjustments based on changes in the Company’s leverage ratio. The BA Rate is defined as the annual rate of interest quoted by Bank of America (acting through its Canada branch) as its rate of interest for bankers’ acceptances in

51

Canadian dollars for a face amount similar to the amount of the loan and for a term similar to the applicable interest period.

The New Credit Agreement contains events of default, such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change of control, or the failure to observe the negative covenants and other covenants related to the operation and conduct of the Company’s business. Upon an event of default, the lenders and issuers will not be obligated to make loans or other extensions of credit and may, among other things, terminate their commitments and declare any then outstanding loans due and payable immediately. As of April 4, 2009 and January 3, 2009, the Company was in compliance with all financial covenants contained in the New Credit Agreements.

As of April 4, 2009, the Company had approximately $52.4 million in loans and approximately $45.0 million in letters of credit outstanding under the New Credit Agreement, leaving approximately $153.6 million of availability (including $0.5 million of available cash) under the New Credit Agreement. As of April 4, 2009, there was $12.3 million in loans and no letters of credit outstanding under the New Canadian Credit Agreement and the available line of credit was approximately $14.6 million.

Revolving Credit Facility; Amended and Restated Credit Agreement and Foreign Revolving Credit Facility

On August 26, 2008, the Company terminated the Amended and Restated Credit Agreement, including the Term B Note, in connection with the closing of the New Credit Agreements (see above). In addition, during the third quarter of Fiscal 2008, the Company terminated the Foreign Revolving Credit Facility under which no amounts were outstanding. All guarantees, mortgages, liens and security interests related to both of those agreements were terminated at that time.

Euro-Denominated CKJEA Notes Payable and Other

The total CKJEA notes payable of $54.1 million at April 4, 2009 consists of short-term revolving notes with a number of banks at various interest rates (primarily Euro LIBOR plus 1.0%). As of April 4, 2009, January 3, 2009 and April 5, 2008, the weighted average interest rate for the CKJEA notes payable outstanding was approximately 2.49%, 4.50% and 5.24%, respectively. All of the CKJEA notes payable are short-term and were renewed during the Three Months Ended April 4, 2009 for additional terms of no more than 12 months. In addition, one of the Company’s Korean subsidiaries had an outstanding note payable of $3.7 million with an interest rate of 5.88% per annum and $3.8 million with an interest rate of 8.84% per annum at April 4, 2009 and January 3, 2009, respectively.

Liquidity

The Company’s principal source of cash is from sales of its merchandise to both wholesale and retail customers. During the Three Months Ended April 4, 2009, there was a decrease in net revenues of 5.1% compared to the Three Months Ended April 5, 2008 (see Results of Operations — Net Revenues, above). The decline in net revenues was primarily due to the negative effect of fluctuations in foreign currency exchange rates of certain currencies where the Company conducts its business (principally the Euro, Korean Won, Canadian Dollar and Mexican Peso). Without that negative effect, net revenues would have increased 5.5%, despite the current weakness in the financial and credit markets. A decline in future net revenues could have a material negative impact on the ability of the Company to conduct its operations at current levels.

The Company believes that, at April 4, 2009, cash on hand, cash available under its New Credit Agreements and cash to be generated from future operating activities will be sufficient to fund its operations, including contractual obligations (see Note 20 to Notes to Consolidated Condensed Financial Statements, above) and capital expenditures, for the next 12 months. The New Credit Agreements replaced the Company’s Amended and Restated Credit Agreement on August 26, 2008 (see Capital Resources and Liquidity — Financing Arrangements, above).

In connection with the consolidation of its European operations, during the Three Months Ended April 4, 2009, the Company entered into a 15-year lease for a distribution center in the Netherlands. The Company expects to occupy the distribution center by February 2010 and to make capital improvements of approximately $10 million from November 2009 through the first quarter of 2010. The Company has also committed to leasing over

52

100,000 square feet of new retail store space worldwide, which the Company expects will result in capital expenditures of up to $20 million during Fiscal 2009.

During the Three Months Ended April 4, 2009, the Company reduced its workforce in order to align its cost structure to match the downturn in the global economy and turmoil in the financial markets. The Company made $5.0 million in cash severance payments to employees and expects to pay an additional $1.9 million during the remainder of Fiscal 2009. The Company also paid $0.7 million related to restructuring and other exit activities, including consolidation of its European operations and contract termination costs. The Company expects to incur further restructuring expenses of approximately $2.3 million in connection with the consolidation of its European operations through 2010.

During the Three Months Ended April 4, 2009, some of the Company’s foreign subsidiaries, with functional currencies other than the U.S. dollar (primarily the Euro, Korean Won, Canadian Dollar or Mexican Peso), made purchases of inventory, paid minimum royalty and advertising costs and /or had intercompany loans and payables denominated in U.S. dollars. The cash flows of those subsidiaries were, therefore, negatively impacted by the strengthening of the U.S. dollar in relation to those foreign currencies. In order to minimize foreign currency exchange risk of those transactions, the Company uses derivative financial instruments, including foreign currency exchange forward contracts and zero cost collars (option contracts). The Company also uses interest rate swaps to convert a portion of the interest obligation related to its long-term debt from a fixed rate to floating rates in order to reduce cash outflows (see Item 3. Quantitative and Qualitative Disclosures About Market Risk — Foreign Exchange Risk and Note 11 to Notes to Consolidated Financial Statements).

The Company carries its derivative financial instruments at fair value, in accordance with SFAS 157, on the Consolidated Condensed Balance Sheets. The Company utilizes the market approach to measure fair value for financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. At April 4, 2009, the Company’s hedging programs included $56.5 million of future inventory purchases, $22.6 million of future minimum royalty and advertising payments and $72.5 million of foreign denominated liabilities.

SFAS 157 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

Level 1 —	Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2 —	Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
Level 3 —	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The fair value of interest rate swaps was estimated based on the amount that the Company would receive or pay to terminate the swaps on the valuation date. Those amounts are based on receipt of interest at a fixed interest rate of 87/8% and a payment of a variable rate based on a fixed interest rate above the six month LIBOR rate. As such, the fair value of the interest rate swaps is classified as level 2, as defined above.

The fair value of foreign currency exchange contracts was determined as the net unrealized gains or losses on those contracts, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current forward exchange rate. The fair value of these foreign currency exchange contracts is based on exchange-quoted prices which are adjusted by a forward yield curve and, therefore, meets the definition of level 2 fair value, as defined above.

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The fair value of zero-cost collars was determined as the net unrealized gains or losses on the option contracts comprising each collar, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current spot exchange rate. The fair value of these foreign currency exchange contracts is based on exchange-quoted prices and, therefore, meets the definition of level 2 fair value, as defined above.

As of April 4, 2009, the Company had working capital of $524.7 million, cash and cash equivalents of $122.1 million, and short-term debt of $124.1 million. The Company’s total debt was $288.1 million, consisting of $164.0 million of the Senior Notes (including unrealized gain on the interest rate swap of $3.1 million), $52.4 million under the New Credit Agreement, $12.3 million under the New Canadian Credit Agreement, $54.1 million of the CKJEA short-term notes payable and $5.3 million of other outstanding debt. The Company repaid $44.1 million of the Senior Notes in March 2008 from the proceeds of the sale of the Lejaby business during the Three Months Ended April 5, 2008. As of April 4, 2009, under the New Credit Agreement, the Company had approximately $52.4 million in loans and approximately $45.0 million in letters of credit outstanding, leaving approximately $153.6 million of availability (including $0.5 million of available cash), and, under the New Canadian Credit Agreement, approximately $12.3 million of loans and no letters of credit, leaving approximately $14.6 million of availability. With the exception of the Company’s foreign short-term notes payable, the Company is not required to make any principal payments under its debt facilities prior to June 15, 2013.

The revolving credit facilities under the New Credit Agreements reflect funding commitments by a syndicate of 14 U.S. and Canadian banks, including Bank of America N.A., JPMorgan Chase, N.A., Deutsche Bank, HSBC, Royal Bank of Scotland and The Bank of Nova Scotia. The ability of any one or more of those banks to meet its commitment to provide the Company with funding up to the maximum of available credit is dependent on the fair value of the bank’s assets and its legal lending ratio relative to those assets (amount the bank is allowed to lend). The current turmoil in the credit markets is based on the illiquidity of certain financial instruments held by financial institutions which reduces their fair value. This illiquidity creates uncertainty for the Company as to its ability to obtain funding for its operations as needed from any one or more of the syndicated banks. The short- and long-term impact of the efforts of the U.S. Treasury to relieve the illiquidity in the capital markets remains to be seen. The inability of the Company to borrow sufficient funds, when needed, under the New Credit Agreements, could have a material negative impact on its ability to conduct its business. The Company continues to monitor the creditworthiness of the syndicated banks. During the Three Months Ended April 4, 2009, the Company was able to borrow funds under the New Credit Agreement, net of repayments, of $52.8 million for seasonal cash flow requirements. The Company expects to repay those borrowings by the end of the second quarter of Fiscal 2009.

As of April 4, 2009, the Company expects that it will continue to be able to obtain needed funds under the New Credit Agreements when requested. However, in the event that such funds are not available, the Company may have to delay certain capital expenditures or plans to expand its business, to scale back operations and/or raise capital through the sale of its equity or debt securities. There can be no assurance that the Company would be able to sell its equity or debt securities on terms that are satisfactory.

The Pension Protection Act of 2006 (the “PPA”) revised the basis and methodology for determining defined benefit plan minimum funding requirements as well as maximum contributions to and benefits paid from tax-qualified plans. Most of these provisions were first applicable to the Company’s domestic defined benefit pension plan in Fiscal 2008. The PPA may ultimately require the Company to make additional contributions to its domestic plans. During the Three Months Ended April 4, 2009, the Company contributed $8.0 million to the domestic pension plan. Fiscal 2009 domestic plan contributions of $12.5 million are currently expected and annual contributions for the following four years are expected to be similar. Actual Fiscal 2009 and later year contributions could exceed the Company’s current projections, and may be influenced by future changes in government requirements. Additionally, the Company’s projections concerning timing of the PPA funding requirements are subject to change and may be influenced by factors such as general market conditions affecting trust asset performance, interest rates, and the Company’s future decisions regarding certain elective provisions of the PPA.

Accounts receivable increased $110.6 million to $362.5 million at April 4, 2009 from $251.9 million at January 3, 2009, reflecting a $52.9 million increase in the Sportswear Group (due primarily to seasonality of sales in the domestic and overseas Calvin Klein Jeans business offset by a reduction in reserves), a $15.0 million increase in

54

the Intimate Apparel Group (due primarily to increased sales in the domestic and overseas businesses) and a $42.7 million increase in the Swimwear Group (reflecting the seasonal shipment of swimwear products). Without the effect of foreign currency fluctuations relative to the U.S. dollar in connection with transactions in countries where the Company conducts certain of its operations (principally the Euro, Korean won, Canadian dollar and Mexican peso), the balance of accounts receivable at April 4, 2009 would have been $402.2 million.

Accounts receivable increased $4.9 million to $362.5 million at April 4, 2009 from $357.6 million at April 5, 2008. The balance at April 5, 2008 includes approximately $9.0 million related to operations discontinued during the year ended April 4, 2009. Excluding these discontinued operations, accounts receivable increased $13.9 million primarily reflecting growth in the Company’s sales in the Sportswear and Intimate Apparel businesses.

Inventories decreased $10.1 million to $316.2 million at April 4, 2009 from $326.3 million at January 3, 2009, reflecting a $9.2 million decrease in the Sportswear Group (due primarily to the Company’s initiative to reduce inventory in light of the downturn in the economy), a $0.2 million increase in the Intimate Apparel Group (due to increased customer demand) and a $1.1 million decrease in the Swimwear Group (due to the seasonality of sales of the swimwear products). Without the effect of foreign currency fluctuations relative to the U.S. dollar in connection with transactions in countries where the Company conducts certain of its operations (principally the Euro, Korean won, Canadian dollar and Mexican peso), the balance of inventories at April 4, 2009 would have been $353.6 million.

Inventories decreased $4.8 million to $316.2 million at April 4, 2009 from $321.0 million at April 5, 2008. The balance at April 5, 2008 includes approximately $5.4 million related to operations discontinued during the year ended April 4, 2009. Excluding these discontinued operations, inventory increased $0.6 million.

Share Repurchase Program

In May 2007, the Company’s Board of Directors authorized a share repurchase program (the “2007 Share Repurchase Program”) for the repurchase of up to 3,000,000 shares of the Company’s common stock. The Company expects that, in order to comply with the terms of applicable debt instruments, purchases under this newly authorized program will be made from time to time over a period of up to four years beginning from the date the program was approved. During the Three Months Ended April 4, 2009, the Company did not repurchase any shares of common stock under the 2007 Share Repurchase Program. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

Repurchased shares are held in treasury pending use for general corporate purposes.

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Cash Flows

The following table summarizes the cash flows from the Company’s operating, investing and financing activities for the Three Months Ended April 4, 2009 and April 5, 2008:

	Three Months Ended
	April 4,			April 5,
	2009			2008
	(In thousands of dollars)
Net cash provided by (used in) operating activities:
Continuing operations	$	(62,806	)	$	(40,460	)
Discontinued operations		1,625			(2,915	)
Net cash (used in) investing activities:
Continuing operations		(7,351	)		(6,921	)
Discontinued operations		—			—
Net cash provided by (used in) financing activities:
Continuing operations		44,636			(6,717	)
Discontinued operations		—			—
Translation adjustments		(1,680	)		3,097
Increase (decrease) in cash and cash equivalents	$	(25,576	)	$	(53,916	)

For the Three Months Ended April 4, 2009, cash used in operating activities from continuing operations was $62.8 million compared to $40.5 million in the Three Months Ended April 5, 2008. The $22.3 million increase in cash used was due to a $19.9 million increase in net income offset by the changes to non-cash charges and working capital. Working capital changes for the Three Months Ended April 4, 2009 included cash outflows of $113.5 million related to accounts receivable (due to an increase in volume and timing of sales), $24.0 million related to accounts payable and accrued expenses (due to the timing of payments for purchases of inventory) and $1.1 million related to prepaid expenses and other assets, partially offset by cash inflows of $14.9 million related to accrued income taxes and $3.5 million related to inventory (due to the Company’s initiative to reduce inventory balances in light of the downturn in the economy). Working capital changes for the Three Months Ended April 5, 2008 included cash outflows of $82.0 million related to accounts receivable and $31.2 million related to prepaid expenses and other assets, which were partially offset by cash inflows of $9.7 million related to inventory, $2.7 million related to accounts payable and accrued expenses and $27.6 million related to accrued income taxes (including an accrual during the Three Months Ended April 5, 2008 of approximately $19.5 million associated with the repatriation, to the U.S., of the proceeds related to the sale of the Lejaby business, net of adjustments for working capital). The Company experienced a $4.8 million increase in non-cash charges in the Three Months Ended April 4, 2009 compared to the Three Months Ended April 5, 2008 primarily reflecting increases in foreign exchange losses and loss from discontinued operations, partially offset by decreases in depreciation and amortization, inventory write-downs (primarily related to the Company’s Swimwear group) and benefit for deferred income tax and loss on repurchase of Senior Notes and refinancing of revolving credit facility in 2008.

For the Three Months Ended April 4, 2009, cash used in investing activities from continuing operations was $7.4 million, mainly attributable to purchases of property, plant and equipment. For the Three Months Ended April 5, 2008, cash used in investing activities from continuing operations was $6.9 million, mainly attributable to purchases of property, plant and equipment of $11.2 million and cash used for business acquisitions of $30.6 million, mainly related to new licenses acquired from PVH on January 30, 2008 and the acquisition of a business which operates 11 retail stores in China (see Note 3 to Notes to the Consolidated Condensed Financial Statements). Those amounts were partially offset by a net amount of $34.7 million received from the sale of the Lejaby business, which closed on March 10, 2008 (see Note 4 of Notes to the Consolidated Condensed Financial Statements).

Net cash provided by financing activities for the Three Months Ended April 4, 2009 was $44.6 million, which primarily reflects $52.8 million borrowed under the New Credit Agreements, partially offset by a decrease of $6.5 million related to short-term notes payable and the repurchase of treasury stock of $1.3 million (related to surrender of shares in connection with the payment of minimum income tax due upon vesting of certain restricted

56

stock awarded by the Company to its employees). For the Three Months Ended April 5, 2008, net cash used in financing activities was $6.7 million, attributable mainly to the repurchase of $46.2 million of Senior Notes, decrease in short-term notes payable of $12.5 million, repurchase of treasury stock of $4.0 million and repayments of the Term B note of $0.9 million. Those amounts were partially offset by $47.6 million received as borrowing under the revolving credit facility and $9.3 million from the exercise of employee stock options.

Significant Contractual Obligations and Commitments

Contractual obligations and commitments as of April 4, 2009 were not materially different from those disclosed in the Company’s Annual Report on Form 10-K for Fiscal 2008, with the exception of certain operating leases and other contractual obligations pursuant to agreements entered into during the Three Months Ended April 4, 2009 (see Note 20 of Notes to Consolidated Condensed Financial Statements). Please refer to the Company’s Annual Report on Form 10-K for Fiscal 2008 for a description of those obligations and commitments outstanding as of January 3, 2009.

Off-Balance Sheet Arrangements

None.

Statement Regarding Forward-Looking Disclosure

This Quarterly Report on Form 10-Q, as well as certain other written, electronic and oral disclosures made by the Company from time to time, contains “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, targets or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact, including, without limitation, future financial targets, 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”, “targeted”, or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies.

The following factors, among others, including those described in this Quarterly Report on Form 10-Q under the heading Item 1A. Risk Factors (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) previously announced; economic conditions that affect the apparel industry, including the recent turmoil in the financial and credit markets; 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

57

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 financial targets and strategic objectives, as a result of one or more of the factors described above, changes in the assumptions underlying the targets or goals, 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 Item 1A. Risk Factors and the discussion of the Company’s critical accounting policies in Discussion of Critical Accounting Policies included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. This discussion of forward-looking statements 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.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk primarily related to changes in hypothetical investment values under certain of the Company’s employee benefit plans, interest rates and foreign currency exchange rates. The Company does not use derivative financial instruments for speculation or for trading purposes.

Market Risk

The Company’s pension plan invests in marketable equity and debt securities, mutual funds, common collective trusts, limited partnerships and cash accounts. These investments are subject to changes in the market value of individual securities and interest rates as well as changes in the overall economy. Investments are stated at fair value, except as disclosed below, based upon quoted market prices. Investments in limited partnerships are valued based on estimated fair value by the management of the limited partnerships in the absence of readily ascertainable market values. These estimated fair values are based upon the underlying investments of the limited partnerships. Because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. The limited partnerships utilize a “fund of funds” approach resulting in diversified multi-strategy, multi-manager investments. The limited partnerships invest capital in a diversified group of investment entities, generally hedge funds, private investment companies, portfolio funds and pooled investment vehicles which engage in a variety of investment strategies, managed by investment managers. Fair value is determined by the administrators of each underlying investment, in consultation with the investment managers. Investments in common collective trusts are valued at the net asset value, as determined by the trust manager, of the shares held by the pension plan at year end, which is based on the fair value of the underlying assets. The common collective trusts are not traded on a public exchange and maintains a net asset value of $1 per share.

During the first quarter of Fiscal 2009, turmoil in the worldwide financial and credit markets has continued from Fiscal 2008 and has resulted in the further decline in the fair value of debt and equity securities and other investments, including the fair value of the pension plan’s investment portfolio. Changes in the value of the pension plan’s investment portfolio are directly reflected in the Company’s consolidated condensed statement of operations through pension expense and in the Company’s consolidated condensed balance sheet as a component of accrued pension liability. The Company records the effect of any changes in actuarial assumptions (including changes in the discount rate) and the difference between the assumed rate of return on plan assets and the actual return on plan assets in the fourth quarter of its fiscal year. The total value of the pension plan’s investment portfolio was

58

$100.6 million at January 3, 2009. A hypothetical 10% increase/decrease in the value of the Company’s pension plan investment portfolio would have resulted in a decrease/increase in pension expense of $10.1 million for Fiscal 2008. Based on historical appreciation in the Company’s pension plan investment portfolio, the Company, during the first quarter of Fiscal 2009, estimated pension expense on an interim basis assuming a long-term rate of return on pension plan investments of 8%, net of pension plan expenses. A 1% decrease/increase in the actual return earned on pension plan assets (a decrease in the return on plan assets from 8% to 7% or an increase in the return on plan assets from 8% to 9%) would result in an increase/decrease of approximately $1.0 million in pension expense (decrease/increase in pension income) for Fiscal 2009.

Interest Rate Risk

The Company has market risk from exposure to changes in interest rates, at April 4, 2009, on its 2003 and 2004 Swap Agreements with notional amounts totaling $75.0 million, on $52.4 million under the New Credit Agreement and $12.3 million under the New Canadian Credit Agreement and, at April 5, 2008, on its 2003 and 2004 Swap Agreements with notional amounts totaling $75.0 million, on $106.4 million and $47.6 million of loans outstanding under the Term B Note and revolving credit facility, respectively, under the Amended and Restated Credit Agreement. The Company is not exposed to interest rate risk on its Senior Notes because the interest rate on the Senior Notes is fixed at 87/8% per annum. With respect to the 2003 and 2004 Swap Agreements, a hypothetical 10% increase in interest rates would have had an unfavorable impact of $0.1 million for the Three Months ended April 4, 2009 and $0.2 million for the Three Months Ended April 5, 2008 on the Company’s income from continuing operations before provision for income taxes. A hypothetical 10% increase in interest rates for the loans outstanding under the Term B Note and revolving credit facility would have had an unfavorable effect of $0.1 million and $0.1 million, respectively, in the Three Months Ended April 5, 2008 on the Company’s income from continuing operations before provision for income taxes. A hypothetical 10% increase in interest rates for the loans outstanding under the New Credit Agreement and New Canadian Credit Agreement would each have had negligible unfavorable effects in the Three Months Ended April 4, 2009 on the Company’s income from continuing operations before provision for income taxes. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity — Financing Arrangements and Note 14 of Notes to Consolidated Condensed Financial Statements.

Foreign Exchange Risk

The Company is exposed to foreign exchange risk related to its U.S. dollar-denominated purchases of inventory, payment of minimum royalty and advertising costs and intercompany loans and payables where the functional currencies of the subsidiaries that are party to these transactions are the Euro, Canadian Dollar, Korean Won, Mexican Peso or British Pound. The foreign currency derivative instruments that the Company uses to offset its foreign exchange risk are forward purchase contracts and zero-cost collars. See Note 11 of Notes to the Consolidated Condensed Financial Statements for further details on the derivative instruments and hedged transactions. These exposures have created significant foreign currency fluctuation risk and have had a significant negative impact on the Company’s earnings during the first quarter of Fiscal 2009 but a positive impact for the first quarter of Fiscal 2008. The negative impact during the first quarter of Fiscal 2009 is due to strengthening of the U.S. dollar against foreign currencies of the Company’s Canadian, Mexican, Central and South American, European and Asian operations. These operations accounted for approximately 49.9% of the Company’s total net revenues for the Three Months Ended April 4, 2009. These foreign operations of the Company purchase products from suppliers denominated in U.S. dollars. Total purchases of products made by foreign subsidiaries denominated in U.S. dollars amounted to approximately $65.8 million for Three Months Ended April 4, 2009. A hypothetical decrease of 10% in the value of these foreign currencies relative to the U.S. dollar would have increased cost of goods sold (which would decrease operating income) by $6.6 million for Three Months Ended April 4, 2009.

The fair value of foreign currency exchange contracts and zero cost collars was determined as the net unrealized gains or losses on those contracts, which is the net difference between (i) the U.S. dollars to be received or paid at the contracts’ settlement date and (ii) the U.S. dollar value of the foreign currency to be sold or purchased at the current forward or spot (for zero cost collars) exchange rate.

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The following table summarizes the effect on earnings for the Three Months Ended April 4, 2009 of a hypothetical 10% increase in the contractual exchange rate or strike price of the Company’s foreign currency exchange contracts and zero-cost collar option contracts:

								Weighted		Effect of Hypothetical
								Average		10% Increase in Contractual
				Foreign				Contractual		Exchange Rate or Strike Price
				Currency(a)		Amount		Exchange Rate		on Earnings
Derivative Instrument		Hedged Transaction		Sell/Buy		Hedged		or Strike Price		Gain (loss)(b)
						USD (thousands)				USD (thousands)
	Foreign exchange forward contracts		Minimum royalty and adverising costs		Euro/USD	$	10,000		1.356	$	(1,000	)
	Foreign exchange forward contracts		Minimum royalty and adverising costs		Euro/USD		12,607		1.370		(1,261	)
	Foreign exchange forward contracts		Purchases of inventory		Euro/USD		11,775		1.524		(1,178	)
	Foreign exchange forward contracts		Purchases of inventory		Euro/USD		1,724		1.404		(172	)
	Foreign exchange forward contracts		Purchases of inventory		Euro/USD		4,125		1.344		(413	)
	Foreign exchange forward contracts		Purchases of inventory		KRW/USD		7,765		0.000724		(777	)
	Foreign exchange forward contracts		Purchases of inventory		CAD/USD		16,568		0.8130		(1,657	)
	Foreign exchange forward contracts		Purchases of inventory		MXN/USD		4,191		0.0635		(419	)
	Foreign exchange forward contracts		Intercompany sales of inventory		Euro/GBP		10,326		0.877		(1,033	)
	Zero-cost collars		Intercompany loans		Euro/CAD		6,760		1.5783		486
	Zero-cost collars		Intercompany loans		USD/CAD		9,500		1.2175		(650	)
	Zero-cost collars		Intercompany payables		Euro/USD		32,000		1.2827		2,621
	Zero-cost collars		Intercompany payables		KRW/USD		24,250		0.000673		(3,445	)

(a)	USD=U.S. dollar, KRW=Korean won, CAD=Canadian dollar, MXN=Mexican peso
(b)	The Company excepts that these hypothetical gains and losses would be offset by gains and losses on the related underlying transactions.

Item 4.   Controls and Procedures.

(a)   Disclosure Controls and Procedures.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

(b)   Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended April 4, 2009 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.   Legal Proceedings.

The information required by this Item 1 of Part II is incorporated herein by reference to Part I, Item 1. Financial Statements, Note 18 Legal Matters.

Item 1A.   Risk Factors.

Please refer to Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for Fiscal 2008, filed with the SEC on March 2, 2009 for a description of certain significant risks and uncertainties to which the Company’s business, operations and financial condition are subject.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

In May 2007, the Company’s Board of Directors authorized a share repurchase program (the “2007 Share Repurchase Program”) for the repurchase of up to 3,000,000 shares of the Company’s common stock. The Company expects that, in order to comply with the terms of applicable debt instruments, purchases under this newly authorized program will be made from time to time over a period of up to four years from the date the program was approved. During the Three Months Ended April 4, 2009, the Company did not repurchase any shares of common stock under the 2007 Share Repurchase Program. The share repurchase program may be modified or terminated by the Company’s Board of Directors at any time.

An aggregate of 68,255 shares included below as repurchased during the Three Months Ended April 4, 2009 reflect the surrender of shares in connection with the vesting of certain restricted stock awarded by the Company to its employees. At the election of an employee, shares having an aggregate value on the vesting date equal to the employee’s withholding tax obligation may be surrendered to the Company in satisfaction thereof. The repurchase of these shares is not a part of the 2007 Share Repurchase Program.

Repurchased shares are held in treasury pending use for general corporate purposes.

The following table summarizes repurchases of the Company’s common stock during the Three Months Ended April 4, 2009.

					Total Number		Maximum
					of Shares		Number of Shares
	Total Number		Average		Purchased as		that May Yet Be
	of Shares		Price Paid		Part of Publicly		Repurchased Under
Period	Repurchased		per Share		Announced Plan		the Announced Plans
January 4, 2009 — January 31, 2009		—	$	—		—		1,490,131
February 1, 2009 — February 28, 2009		24,292	$	21.65		—		1,490,131
March 1, 2009 — April 4, 2009		43,963	$	17.42		—		1,490,131

The New Credit Agreements and the indenture governing the Senior Notes place restrictions on the Company’s ability to pay dividends on the Common Stock, and the Company has not paid any dividends on the Common Stock.

Item 3.   Defaults Upon Senior Securities.

None.

Item 4.   Submission of Matters to a Vote of Security Holders.

None.

Item 5.   Other Information.

None.

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Item 6.   Exhibits.

Exhibit
No			Description of Exhibit
	2	.1	Stock and Asset Purchase Agreement, dated as of February 14, 2008, between Warnaco Netherlands BV and Palmers Textil AG (incorporated by reference to Exhibit 2.1 to The Warnaco Group, Inc.’s Form 8-K filed February 19, 2008).***
	3	.1	Amended and Restated Certificate of Incorporation of The Warnaco Group, Inc. (incorporated by reference to Exhibit 1 to the Form 8-A/A filed by The Warnaco Group, Inc. on February 4, 2003).*
	3	.2	Second Amended and Restated Bylaws of The Warnaco Group, Inc. (incorporated by reference to Exhibit 3.1 to the Form 8-K filed by The Warnaco Group, Inc. on January 11, 2008).*
	10	.1	Amended and Restated Letter Agreement, dated as of May 11, 2009, by and between The Warnaco Group, Inc. and Lawrence R. Rutkowski.†
	31	.1	Certification of Chief Executive Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.†
	31	.2	Certification of Chief Financial Officer of The Warnaco Group, Inc. pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.†
	32		Certifications of Chief Executive Officer and Chief Financial Officer of The Warnaco Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

*  Previously filed.

**	The schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish copies of any of the schedules to the Securities and Exchange Commission upon request.
##	Certain portions of this exhibit omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment, which request was granted.
†	Filed herewith.

62

SIGNATURES

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

THE WARNACO GROUP, INC.

/s/  Joseph R. Gromek

Joseph R. Gromek

President and Chief Executive Officer

Date: May 12, 2009

/s/  Lawrence R. Rutkowski

Lawrence R. Rutkowski

Executive Vice President and Chief Financial Officer

Date: May 12, 2009

63

EX-10.1

Exhibit 10.1

September 11, 2003
As amended on August 11, 2005
As amended and restated as of December 31, 2008
As amended and restated as of May 11, 2009

Mr. Lawrence Rutkowski
9 Stallion Trails
Greenwich, CT 06831

Dear Larry,

     This amended and restated letter agreement is made and entered into between The Warnaco Group, Inc. (together with its subsidiaries, divisions and affiliates, the “Company”) and you to be effective as of the close of business on May 11, 2009 and reflects our best efforts to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended from time to time (the “Code”), and its implementing regulations and guidance (“Section 409A”). As such, as of the close of business on May 11, 2009, this letter agreement amends and restates the letter agreement between us dated as of September 11, 2003, as amended on August 11, 2005 and as amended and restated as of December 31, 2008. Except as otherwise provided in this agreement, the terms of your employment with the Company shall be governed by the Warnaco Job Application and current Employee Handbook.

1.

The Company agrees to employ you and you agree to serve as Senior Vice President and Chief Financial Officer of the Company, and you shall have such authorities, duties and responsibilities commensurate with the position of Chief Financial Officer. In carrying out your duties, you shall report to the Chief Executive Officer of the Company. You agree to devote your full time and best efforts to the satisfactory performance of such services and duties as the position requires, and you shall be entitled to (i) serve on the boards of directors of trade associations and charitable organizations, subject to the good faith approval of the Chief Executive Officer of the Company and the Company’s Board of Directors which approval shall not be unreasonably withheld, (ii) engage in charitable activities and community affairs and (iii) manage your personal investments and affairs, provided that such activities do not interfere with the proper performance of your duties and responsibilities for the Company. The Company acknowledges that as of the Effective Date, the Executive is employed by the Company as Executive Vice President and Chief Financial Officer.

2.

The term (the “Term”) of your employment under this letter agreement began as of September 11, 2003 (the “Commencement Date”) and shall end at the close of business on the second anniversary of the Commencement Date; provided, however, that the Term shall thereafter be automatically extended for additional one-year periods unless either you or the Company gives the other written notice at least 120 days prior to the then-scheduled expiration of the Term that such party is electing not to so extend the Term. Notwithstanding the foregoing, the Term shall end on the date on which your employment is terminated by either party in accordance with the provisions herein.

Mr. Lawrence Rutkowski
May 11, 2009
Page 2

3. Your compensation shall be as follows:

a.

During the Term, you shall be paid an annual base salary of $550,000 (“Base Salary”), payable in semi-monthly payments of $22,916.66. Your Base Salary may be reviewed annually by the Chief Executive Officer and may be increased based on such performance review within the Company’s discretion. You shall not be entitled to any additional compensation for service as an officer or member of any board of directors of any affiliate of the Company. The Company acknowledges that as of the Effective Date, Base Salary is $600,000, payable in semi-monthly payments of $25,000.

b.

During the Term, you shall be eligible to receive an annual cash incentive award with a target of 70% of Base Salary (“Target Bonus”), based on your achievement of annual performance and other targets established by the Chief Executive Officer of the Company and the Company’s Board of Directors in consultation with you. The amount and payment of any such award shall be determined in accordance with the Company’s annual incentive program for senior executives. The Company acknowledges that as of the Effective Date, Target Bonus is 85% of Base Salary.

i. For fiscal year 2003, you shall receive a guaranteed pro-rata annual incentive award, which shall be calculated by multiplying the annual incentive award you would have been entitled to receive if you had been employed for a full fiscal year based on the Target Bonus and the Company’s achievement of the applicable performance targets by a fraction, the numerator of which is the number of days you were employed during fiscal year 2003 and the denominator of which is 365. Any annual incentive award, including any annual incentive award for fiscal year 2003, shall be payable to you when bonuses for the applicable performance period are paid to other senior executives of the Company, but in all events no later than the 60^th day following the end of the fiscal year for which the annual incentive award has been earned.

c. Pursuant to the Warnaco 2003 Stock Incentive Plan (the “Plan”), on your start date, you were granted 50,000 shares of restricted stock (“restricted stock”) and an option to purchase 200,000 shares of the Company’s outstanding common stock (the “option”), subject to the terms and conditions of such awards as set out in the Plan. You may also be eligible to receive future grants of restricted stock and/or options or other forms of equity compensation at the sole discretion of the Compensation Committee of the Board of Directors.

Mr. Lawrence Rutkowski
May 11, 2009
Page 3

i.

Except as otherwise provided herein, the restricted stock as described herein and the option as described herein shall vest 25% on February 29, 2004 and shall vest 25% on each of February 28, 2005, February 28, 2006 and February 28, 2007, provided that you are employed by the Company on such vesting date and have not given notice to the Company that you are voluntarily resigning, without Good Reason (as defined in Exhibit A) prior to such vesting date. The form of the Restricted Stock Award Agreement for the restricted stock was attached as Exhibit B to the form of this letter agreement dated as of September 11, 2003. The form of the Non-Qualified Stock Option Agreement for the option was attached as Exhibit C to the form of this letter agreement dated as of September 11, 2003.

ii.

You shall be subject to the equity ownership, retention and other requirements applicable to senior executives of the Company. Except as otherwise expressly provided herein, all equity grants shall be governed by the applicable plan and award agreement, as in effect on the date hereof and as may be hereafter changed in accordance with such plan and agreement.

d. During the Term beginning with fiscal year 2005, provided you are employed by the Company, you shall be entitled to an annual award with an aggregate grant date value equal to 8% of the sum of Base Salary plus Annual Bonus as defined in this paragraph 3(d) if you will be less than age 50 by the end of the applicable fiscal year, 10% of such amount if you will be age 50 and over and less than age 60 at the end of the applicable fiscal year and 13% of such amount if you will be age 60 or older by the end of the applicable fiscal year (“Supplemental Award”), with the first such award being made no later than 60 days after the Effective Date. For this purpose, Base Salary shall be the Base Salary paid to you for the fiscal year prior to the award year and Annual Bonus shall be the annual bonus awarded to you by the Board for such fiscal year. The Supplemental Award shall not be awarded to you until after the determination by the Board of your annual bonus for the prior fiscal year (but in no event later than 60 days thereafter for any award made after fiscal year 2005) and 50% of the value of the Supplemental Award shall be awarded in the form of restricted shares pursuant to the applicable Stock Incentive Plan (“Career Shares”) and 50% shall be awarded in the form of a credit to a bookkeeping account maintained by the Company for your account (the “Notional Account”). Any Career Shares awarded hereunder shall be governed by the applicable Stock Incentive Plan and, if applicable, any award agreement. For purposes of this paragraph 3(d), each Career Share

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May 11, 2009
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shall be valued at the closing price of a share of the Company’s common stock (“Share”) on the date that the Supplemental Award is made. For the Notional Account, the Company shall select the investment alternatives available to you under the Company’s 401(k) plan. The balance in the Notional Account shall periodically be credited (or debited) with the deemed positive (or negative) return based on returns of the permissible investment alternative or alternatives under the Company’s 401(k) plan as selected in advance by you (and in accordance with the applicable rules of such plan or investment alternative) to apply to such Notional Account, with such deemed returns calculated in the same manner and at the same times as the return on such investment alternative(s). The Company’s obligation to pay the amount credited to the Notional Account, including any return thereon provided for in this paragraph 3(d), shall be an unfunded obligation to be satisfied from the general funds of the Company. Except as otherwise provided in paragraphs 6 or 8 below or the applicable Stock Incentive Plan and provided that you are employed by the Company on such vesting date, any Supplemental Award granted in the form of Career Shares will vest as follows: 50% of the Career Shares will vest on the earlier of your 62^nd birthday or upon your obtaining 15 years of “Vesting Service” and 100% of the Career Shares will vest on the earliest of (i) your 65^th birthday, (ii) upon your obtaining 20 years of “Vesting Service” or (iii) 10^th anniversary of the date of grant. Except as otherwise provided in paragraphs 6 or 8 below, and provided that you are employed by the Company on such vesting date, any Supplemental Award granted as a credit to the Notional Account (as adjusted for any returns thereon) (“Adjusted Notional Account”)) shall vest as follows: 50% on the earlier of your 62^nd birthday or upon your obtaining 5 years of “Vesting Service” and 100% on the earlier of the your 65^th birthday and upon your obtaining 10 years of “Vesting Service”. For purposes of this paragraph 3(d), “Vesting Service” shall mean the period of time that you are employed by the Company as an executive officer. Subject to paragraph 27 hereof, upon vesting the Career Shares will be delivered to you in the form of Shares. In addition, any unvested Adjusted Notional Account shall vest upon a Change in Control as defined in clauses (i) or (ii) of the definition of “Change in Control” on Exhibit A attached hereto if such event qualifies as a “change in control event” under Section 409A (“409A CIC Event”). The vested balance in the Adjusted Notional Account, if any, shall not be distributed to you until there has been a Separation From Service (as defined in Exhibit A attached hereto) or, if earlier, there has been a 409A CIC Event and, at such time, shall only be distributed at the earliest time that satisfies the requirements of this paragraph 3(d). Upon a 409A CIC Event, the vested Adjusted Notional Account shall be paid to you in a lump-sum cash payment. In addition, if

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May 11, 2009
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your employment is terminated for any reason, after taking into account paragraph 6 or paragraph 8 hereof, any unvested Supplemental Awards (whether in the form of Career Shares or the Adjusted Notional Account) shall be forfeited and any vested balance in the Adjusted Notional Account, subject to paragraph 27 hereof, shall be paid to you in a cash lump-sum payment immediately following your Separation From Service; provided, however, that if you are a “specified employee” as determined pursuant to Section 409A as of the date of your Separation From Service, such distribution shall not be made until the earlier of your death or the first business day of the seventh calendar month following the month in which your Separation From Service occurs; provided, further, that if your employment is terminated due to Disability and such Disability satisfies the requirements of Section 409A(a)(2)(C) of the Code or the Treasury Regulations implementing such section, then such distribution may be made upon your Separation From Service without regard to whether you were a “specified employee” at such time. You can elect to delay the time and/or form of payment of the Adjusted Notional Account under this paragraph 3(d), provided such election is delivered to the Company in writing at least 12 months before the scheduled payment date for such payment and the new payment date for such payment is not earlier than (i) your death, (ii) your “disability” which satisfies the requirements of Section 409A(a)(2)(C) and its implementing regulations, or (iii) five (5) years from the originally scheduled payment date. Upon the expiration or termination of the Term, the vesting and payment dates in this paragraph 3(d) (without regard to paragraphs 6 or 8, except as otherwise expressly provided in paragraph 8 of this Agreement) and the election right in this paragraph 3(d) shall continue to apply to any outstanding Supplemental Award.

4. While you are employed by the Company, and subject, of course, to the Company’s right to amend, modify or terminate any benefit plan or program, you shall be entitled to participate in all Company employee benefit plans applicable to senior executives, including the following benefits/perquisites:

a.	Reimbursement of reasonable business expenses incurred in carrying out your duties and responsibilities under this agreement, subject to documentation in accordance with Company policy.
b.	Perquisites provided to other senior executives, including a monthly car allowance of up to $700.
c.	Vacation — four weeks paid vacation per calendar year.

Mr. Lawrence Rutkowski
May 11, 2009
Page 6

Notwithstanding anything elsewhere to the contrary, except to the extent any reimbursement, payment or entitlement pursuant to this paragraph 4 does not constitute a “deferral of compensation” within the meaning of Section 409A, (i) the amount of expenses eligible for reimbursement or the provision of any in-kind benefit (as defined in Section 409A) to you during any calendar year will not affect the amount of expenses eligible for reimbursement or provided as in-kind benefits to you in any other calendar year, (ii) the reimbursements for expenses for which you are entitled shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (iii) the right to payment or reimbursement or in-kind benefits may not be liquidated or exchanged for any other benefit.

5. In the event your employment is terminated without Cause (as defined in Exhibit A) by the Company (other than upon death or due to Disability (as defined in Exhibit A)) or you resign for Good Reason (as defined in Exhibit A) (other than due to Disability) during the Term, you shall be entitled to:

a.	Base Salary through the Date of Termination (as defined in Exhibit A), payable on the first regularly scheduled payroll date following the Date of Termination.
b.	Payment of an amount equal to the Base Salary that would have been payable to you from the Date of Termination through the expiration date for the original Term, but in no event less than one times Base Salary, payable in a cash lump sum to you as soon as practicable following the Date of Termination (but in no event later than 60 days following such date).
c.	A pro-rata bonus for the fiscal year in which the Date of Termination occurs, based on the Company’s performance for such year (determined by multiplying the amount you would have received had your employment continued through the end of such fiscal year by a fraction, the numerator of which is the number of days during such fiscal year that you are employed by the Company and the denominator of which is 365), payable when bonuses for such fiscal year are paid to other Company executives (which payment date shall be no earlier than January 1st and no later than March 15th of the year following the year in which the Date of Termination occurs).
d.	Immediate vesting of that portion of the restricted stock described in paragraph 3(c) above that would have vested if you had been employed on the vesting date immediately following the Date of Termination.

Mr. Lawrence Rutkowski
May 11, 2009
Page 7

e.	That portion of the option described in paragraph 3(c) above that has vested as of the Date of Termination remaining exercisable for two years following the Date of Termination.
f.	Continued participation on the same terms as immediately prior to the Date of Termination (including costs of premiums) for you and your eligible dependents in the Company’s medical and dental plans in which you and your eligible dependents were participating immediately prior to the Date of Termination until the earlier of (a) the end of the applicable Term (without regard to its earlier termination hereunder), but in no event less than 12 months, or (b) the date, or dates, you receive equivalent coverage under the plans and programs of a subsequent employer.
g.	Outplacement counseling and use of an office during the period Base Salary is paid as salary continuation under paragraph 5(b) above.
h.	Any amounts earned, accrued or owing to you but not yet paid.
i.	As a condition to receiving severance compensation pursuant to this paragraph 5, you hereby agree to execute and deliver to the Company a general release of claims in a form acceptable to the Company no later than 45 days following the Date of Termination and not revoke such release within the applicable revocation period.

6. In the event your employment is terminated upon death or due to Disability during the Term, you (or your estate or legal representative, as the case may be) shall be entitled to:

a. Base Salary through the Date of Termination, payable on the first regularly scheduled payroll date following the Date of Termination.

b. A pro-rata bonus for the fiscal year in which the Date of Termination occurs, based on the Company’s performance for such year (determined by multiplying the amount you would have received had your employment continued through the end of such fiscal year by a fraction, the numerator of which is the number of days during such fiscal year that you are employed by the Company and the denominator of which is 365), payable when bonuses for such fiscal year are paid to other Company executives (which payment date shall be no earlier than January 1^st and no later than March 15^th of the year following the year in which the Date of Termination occurs).

c. Immediate vesting of 50% of the restricted stock described in paragraph 3(c) above that remains unvested as of the Date of Termination and 100%

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May 11, 2009
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of that portion of the option described in paragraph 3(c) above that remains unvested as of the Date of Termination, with any vested portion of such option remaining exercisable for 12 months following the Date of Termination.

d.	Any amounts earned, accrued or owing to you but not yet paid.
e.	Immediate vesting as of the Date of Termination of 50% of any previously granted Supplemental Award that remains unvested as of the Date of Termination, payable in accordance with paragraph 3(d) above.

7.

In the event the Company terminates your employment for Cause or you voluntarily resign, you shall be entitled to Base Salary through the Date of Termination. In the event of your termination for Cause, the unvested restricted stock described in paragraph 3(c) above and that portion of the option described in paragraph 3(c) above that remains unvested as of the Date of Termination shall be forfeited. In the event of your voluntary resignation, the unvested restricted stock described in paragraph 3(c) above and that portion of the option described in paragraph 3(c) above that remains unvested as of the date on which you provide written notice to the Company that you are voluntarily resigning shall be forfeited. A voluntary resignation shall be effective on 60 days prior written notice, subject to early termination by the Company, and, provided that such notice is given, shall not be deemed to be a breach of this agreement.

8.

In the event your employment is terminated without Cause by the Company (other than upon death or due to Disability) or you resign for Good Reason (other than due to Disability), in both cases within one year following a Change in Control (as defined on Exhibit A) (provided the Term is still in effect or has expired during the one-year period), you shall be entitled to:

a.	Base Salary through the Date of Termination, payable on the first regularly scheduled payroll date following the Date of Termination.
b.	Payment of an amount equal to 2 times the sum of (a) Base Salary plus (b) Target Bonus, payable in a lump sum as soon as practicable following the Date of Termination (but in no event later than 60 days following such date).
c.	A pro-rata Target Bonus for the year of termination, determined by multiplying the Target Bonus by a fraction, the numerator of which is the number of days that you were employed by the Company during the year in which the Date of Termination occurs and the denominator of which is 365, payable in a lump sum as soon as practicable following the Date of Termination (but in no event later than 60 days following such date).

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May 11, 2009
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d.	Immediate vesting of 100% of any of the restricted stock described in paragraph 3(c) above that remains unvested as of the Date of Termination and 100% of that portion of the option described in paragraph 3(c) above that remains unvested as of the Date of Termination, with any vested portion of such option remaining exercisable for six months following the Date of Termination and immediate vesting as of the Date of Termination of all other outstanding equity awards (other than Career Shares), with any stock options granted on or after August 11, 2005 remaining exercisable for 24 months following the Date of Termination or the remainder of the option term, if shorter.
e.	Immediate vesting as of the Date of Termination of any previously granted Supplemental Award, payable in accordance with paragraph 3(d) above.
f.	Continued participation on the same terms as immediately prior to the Date of Termination (including costs of premiums) for you and your eligible dependents in the Company’s medical and dental plans in which you and your eligible dependents were participating immediately prior to the Date of Termination until the earlier of (a) the end of the applicable Term (without regard to its earlier termination hereunder), but in no event less than 24 months, or (b) the date, or dates, you receive equivalent coverage under the plans and programs of a subsequent employer.
g.	Any amounts earned, accrued or owing to you but not yet paid.
h.	As a condition to receiving severance compensation pursuant to this paragraph 8, you hereby agree to execute and deliver to the Company a general release of claims in a form acceptable to the Company no later than 45 days following the Date of Termination and not revoke such release within the applicable revocation period.

9. In the event the Company provides written notice to you in accordance with paragraph 2 above that the Term shall not renew and upon or at any time after such expiration of the Term the Company terminates your employment under circumstances that during the Term would constitute a termination of employment without Cause, you shall be entitled to:

a.	Base Salary through the Date of Termination, payable on the first regularly scheduled payroll date following the Date of Termination.
b.	Payment of an amount equal to one times Base Salary, payable in a cash lump sum as soon as practicable following the Date of Termination (but in no event later than 60 days following such date).

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May 11, 2009
Page 10

c.	That portion of the option described in paragraph 3(c) above that has vested as of the Date of Termination remaining exercisable for nine months following the Date of Termination.
d.	Continued participation on the same terms as immediately prior to the Date of Termination (including costs of premiums) for you and your eligible dependents in the Company’s medical and dental plans in which you and your eligible dependents were participating immediately prior to the Date of Termination for six months following the Date of Termination.
e.	Any amounts earned, accrued or owing to you but not yet paid.
f.	Notwithstanding the foregoing, in the event that (i) the Company provides written notice to you in accordance with paragraph 2 above that the Term shall not renew, (ii) upon or after such expiration of the Term the Company terminates your employment under circumstances that during the Term would constitute a termination of employment without Cause, and (iii) such notice of non-renewal of the Term and such termination both occur on or within one year following a Change in Control, then you shall be entitled to the payments, benefits and entitlements under paragraph 8 hereof instead of this paragraph 9.
g.	As a condition to receiving severance compensation pursuant to this paragraph 9, you hereby agree to execute and deliver to the Company a general release of claims in a form acceptable to the Company no later than 45 days following the Date of Termination and not revoke such release within the applicable revocation period.

10.

Any amounts due to you under paragraphs 5, 6, 8 or 9 are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty. Any payments provided pursuant to paragraph 5, paragraph 8 or paragraph 9 shall be in lieu of any salary continuation arrangements under any other severance program of the Company.

11.

a. Notwithstanding any other provision of this Agreement, upon the termination of your employment for any reason, unless otherwise requested by the Board, you shall immediately resign from all boards of directors of any affiliate of the Company, if any, of which you may be a member, and as a trustee of, or fiduciary to, any employee benefit plans of the Company or any affiliate of the Company. You agree to execute any and all documentation of such resignations upon request by the Company, but you shall be treated for all purposes as having so resigned upon termination of your employment, regardless of when or whether you execute any such documentation.

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May 11, 2009
Page 11

b. Section 409A. Notwithstanding anything to the contrary in this Agreement or elsewhere (except for paragraph 3(d) of this Agreement), if you are a “specified employee” as determined pursuant to Section 409A as of the date of your Separation From Service and if any payment, benefit or entitlement provided for in this Agreement or otherwise both (x) constitutes a “deferral of compensation” within the meaning of Section 409A and (y) cannot be paid or provided in a manner otherwise provided herein or otherwise without subjecting you to additional tax, interest or penalties under Section 409A, then any such payment, benefit or entitlement that is payable during the first six months following your Separation From Service shall be paid or provided to you in a cash lump-sum on the earlier of your death or the first business day of the seventh calendar month following the month in which your Separation From Service occurs. In addition, any payment, benefit or entitlement due upon a termination of your employment that represents a “deferral of compensation” within the meaning of Section 409A (other than any payments due pursuant to paragraph 3(d) of this Agreement) shall only be paid or provided to you upon a Separation From Service, in which case any reference to “Date of Termination” in connection with such payment, benefit or entitlement shall be deemed to be a reference to “Separation From Service” and the actual payment date within the time specified in the applicable provision of paragraphs 5, 6, 7, 8 or 9 shall be within the Company’s sole discretion. Notwithstanding anything to the contrary in this Agreement or otherwise, any payment or benefit under this Agreement or otherwise which is exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9)(v)(A) or (C) shall be paid or provided to you only to the extent the expenses are not incurred or the benefits are not provided beyond the last day of your second taxable year following your taxable year in which your Separation From Service occurs; and provided further that the Company reimburses such expenses no later than the last day of your third taxable year following your taxable year in which your Separation From Service occurs. Finally, to the extent that the provision of any benefit pursuant to paragraph 5(f), paragraph 8(f) or paragraph 9(d) hereof is taxable to you, any such reimbursement shall be paid to you on or before the last day of your taxable year following your taxable year in which the expense is incurred and such reimbursement shall not be subject to liquidation or exchange for any other benefit.

12.

You acknowledge that in your capacity in management you have had or will have a great deal of exposure and access of the Company’s trade secrets and confidential and proprietary information. Therefore, during the Term and thereafter (provided you are employed by the Company) and for 12 months following the termination of your employment with the Company, to protect the Company’s trade secrets and other confidential and proprietary information, you agree that you will not, other than in the ordinary course of performing your duties hereunder or as agreed by the Company in writing, engage in a

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	“Competitive Business,” directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any relationship or capacity, in any geographic location in which the Company or any of its affiliates is engaged in business. You shall not be deemed to be in violation of this paragraph 12 by reason of the fact that you own or acquire, solely as an investment, up to two percent (2%) of the outstanding equity securities (measured by value) of any entity. “Competitive Business” shall mean a business primarily engaged in apparel design, apparel wholesaling or apparel retailing.
13.	Upon any termination of employment, you agree to refrain from directly or indirectly soliciting any employee of the Company or an affiliate of the Company to terminate his/her employment (excluding, only, your personal assistant) on your own behalf or on behalf of any other person or entity or from directly or indirectly hiring any key employee (e.g., any management-level employee or any designer) of the Company for a period of eighteen (18) months thereafter. In addition, you agree that for a period of eighteen (18) months following the termination of your employment with the Company, you will not, without the prior written consent of the Company, directly or indirectly, solicit or encourage any customer of the Company or any affiliate of the Company to reduce or cease its business with the Company or any such affiliate of the Company or otherwise interfere with the relationship of the Company or any affiliate of the Company with its customers. You and the Company each agree to refrain from making any statements or comments of a defamatory or disparaging nature to third parties regarding each other (including, in the case of the Company, an affiliate of the Company or the Company’s officers, directors, personnel or products). You and the Company each understand that either party should be entitled to respond truthfully and accurately to statements about such party made publicly by you or the Company, as the case may be, provided that such response is consistent with your or the Company’s obligations not to make any statements or comments of a defamatory or disparaging nature as set forth herein above.
14.	During the Term and thereafter, other than in the ordinary course of performing your duties for the Company or as required in connection with providing any cooperation to the Company pursuant to paragraph 20 below, you agree that you will not disclose to anyone or make use of any trade secret or proprietary or confidential information of the Company or any affiliate of the Company, including such trade secret or proprietary or confidential information of any customer or other entity to which the Company owes an obligation not to disclose such information, which you acquire during the course of your employment, including, but not limited to, records kept in the ordinary course of business, except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent

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	or actual jurisdiction to order you to divulge, disclose or make accessible such information. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure by you or (ii) becomes known to the public through no wrongful disclosure by or act of you or any of your representatives. In the event you are requested by subpoena, court order, investigative demand, search warrant or other legal process to disclose any information regarding the Company, you agree, unless prohibited by law or Securities and Exchange Commission regulation, to give the Company’s General Counsel prompt written notice of any request for disclosure in advance of your making such disclosure and you shall not disclose such information regarding the Company unless and until the Company has expressly authorized you to do so in writing or the Company has had a reasonable opportunity to object to such a request or to litigate the matter (of which the Company agrees to keep you reasonably informed) and has failed to do so.
15.	You hereby sell, assign and transfer to the Company all of your right, title and interest in and to all inventions, discoveries, improvements and copyrightable subject matter (the “Rights”) which during the period of your employment are made or conceived by you, alone or with others, and which are within or arise out of any general field of the Company’s business or arise out of any work you perform, or information you receive regarding the business of the Company, while employed by the Company. You shall fully disclose to the Company as promptly as available all information known or possessed by you concerning any Rights, and upon request by the Company and without any further remuneration in any form to you by the Company, execute all applications for patents and for copyright registration, assignments thereof and other instruments and do all things which the Company may deem necessary to vest and maintain in it the entire right, title and interest in and to all such Rights.
16.	You agree that at the time of the termination of employment, whether at your instance or the Company, and regardless of the reasons therefore, you will promptly deliver to the Company’s General Counsel, and not keep or deliver to anyone else, any and all of the following which is in your possession or control: (i) Company property (including, without limitation, credit cards, computers, communication devices, home office equipment and other Company tangible property) and (ii) notes, files, memoranda, papers and, in general, any and all physical matter and computer files containing confidential or proprietary information of the Company or any of the Company’s affiliates, including any and all documents relating to the conduct of the business of the Company or any of the Company’s affiliates and any and all documents containing confidential or proprietary information of the customers of the Company or any of the Company’s affiliates, except for (x) any documents for which the Company’s General Counsel has given written consent to removal at the time of termination,

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May 11, 2009
Page 14

	(y) any documents on your personal computer if you destroy such documents and give a notarized written affidavit of such destruction and (z) any information necessary for you to retain for tax purposes (provided you maintain the confidentiality of such information in accordance with paragraph 14 above).
17.	Any failure by you to comply with the provisions of paragraphs 12, 13, 14, 15 or 16 shall relieve the Company of any of its obligations pursuant to this agreement, including pursuant to paragraphs 5, 6, 8 and 9.
18.	From and after the date hereof, should any disagreement, claim or controversy arise between you and the Company with respect to this agreement, the same may be enforced at the option of either party by confidential, binding and final arbitration in New York, New York before a single arbitrator in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The award of the arbitrator with respect to such disagreement, claim or controversy shall be enforceable in any court of competent jurisdiction and shall be binding upon the parties hereto. You consent to the personal jurisdiction of the Courts of the State of New York (including the United States District Court for the Southern District of New York) in any proceedings for equitable relief. You further agree not to interpose any objection or improper venue in any such proceeding or interpose any defense that the Company has an adequate remedy at law or that the injury suffered by the Company is not irreparable. You and the Company agree that each party shall be responsible for its own costs and expenses, including attorneys’ fees, provided, however, that if you substantially prevail with respect to all claims that are the subject matter of the dispute, your costs, including reasonable attorneys’ fees, shall be borne by the Company; provided that if such costs are not reimbursed in connection with a dispute exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(11) then such payment shall be made by the Company to you in the year following the year in which the dispute is resolved.
19.	You expressly agree and acknowledge that any breach or threatened breach of any obligation set forth in paragraphs 12, 13, 14, 15 or 16 above will cause the Company irreparable harm for which there is no adequate remedy at law, and as a result of this the Company shall be entitled to seek the issuance by a court of competent jurisdiction of an injunction, restraining order or other equitable relief in favor of itself, without the necessity of posting a bond and without proving actual damages, restraining you from committing or continuing to commit any such violation.
20.	Following the Date of Termination, upon reasonable request by the Company, you shall cooperate with the Company or any of its affiliates with respect to any legal or investigatory proceeding, including any government or regulatory investigation, or any litigation or other dispute relating to any matter in which you

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	were involved or had knowledge during your employment with the Company, subject to your reasonable personal and business schedules. The Company shall reimburse you for all reasonable out-of-pocket costs, such as travel, hotel and meal expenses and reasonable attorneys’ fees, incurred by you in providing any cooperation pursuant to this paragraph 20; provided such expenses shall be paid to you as soon as practicable but in no event later than the end of the calendar year following the calendar year in which the expenses are incurred, subject in all cases to your providing appropriate documentation to the Company. The Company shall also pay you a reasonable per diem amount for your time (other than for time spent preparing for or providing testimony) which shall be based upon your Base Salary at the Date of Termination, with such per diem paid to you in the calendar month following the month in which you provide such assistance. Any reimbursement or payment under this paragraph 20 shall not affect the amount of the reimbursement or payment to you in any other taxable year. The right to payment or reimbursement pursuant to this paragraph 20 shall not be liquidated or exchanged for any other benefit.
21.	You represent and warrant that you have the free and unfettered right to enter into this agreement and to perform your obligations under it and that you know of no agreement between you and any other person, firm or organization, or any law or regulation, that would be violated by the performance of your obligations under this agreement. You agree that you will not use or disclose any confidential or proprietary information of any prior employer in the course of performing your duties for the Company or any of its affiliates.
22.	The invalidity or unenforceability of any particular provision or provisions of this agreement (as determined by an arbitrator or a court of competent jurisdiction) shall not affect the other provisions hereof and this agreement shall be construed in all respects as if such invalid or unenforceable provisions had been omitted.
23.	This agreement (including its Exhibits) and the documents referred to herein constitute the full and complete understanding and agreement of the parties concerning the subject matter hereof and, as of the close of business on May 11, 2009, shall supersede all prior representations, understandings and agreements with respect thereto (other than any agreements governing any equity awards outstanding as of May 11, 2009), and cannot be amended, changed, modified in any respect, without the written consent of the parties, except that the Company reserves the right in its sole discretion to make changes at any time to the other documents referenced in this letter agreement. No waiver by either party of any breach by the other party of any condition or provision contained in this

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	agreement shall be deemed to be a waiver of a similar or dissimilar condition or provision.
24.	This agreement shall be binding upon and shall inure to the benefit of successors and assigns of the Company.
25.	This agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its provisions as to choice of laws. The respective rights and obligations of the parties hereunder, including without limitation paragraphs 12 through 16, shall survive any expiration of the Term, including expiration thereof upon your termination of employment for whatever reason, to the extent necessary to the intended preservation of such rights and obligations.
26.	Any notice given to either you or the Company under this agreement shall be in writing and shall be deemed to have been given upon actual receipt or refusal to accept receipt, with any such notice duly addressed to you or the Company, as the case may be, at the address indicated below or to such other address as such Party may subsequently designate by written notice in accordance with this paragraph 26: If to the Company: The Warnaco Group, Inc., 501 Seventh Avenue, New York, New York 10018, Attention: General Counsel; If to you: at your home address as indicated on the Company’s records.
27.	The Company may withhold from any amounts payable under this agreement such Federal, state, local or other taxes as shall be required to be withheld pursuant to any applicable law or regulation.
28.	The Company hereby agrees during, and after termination of, your employment to indemnify you and hold you harmless, both during the Term and thereafter, to the fullest extent permitted by law and under the certificate of incorporation and by-laws of the Company against and in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees), losses, amounts paid in settlement to the extent approved by the Company, and damages resulting from your good faith performance of your duties as an officer or director of the Company or any affiliate of the Company. The Company shall reimburse you for expenses incurred by you in connection with any proceeding hereunder upon your written request for such reimbursement and your submission of the appropriate documentation associated with these expenses. Such request shall include an undertaking by you to repay the amount of such advance or reimbursement if it shall ultimately be determined that you are not entitled to be indemnified hereunder against such costs and expenses. The Company shall use commercially reasonable efforts to obtain and maintain directors’ and officers’ liability insurance covering you to the same extent as the Company covers its other officers and directors.

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29.	a. If any amount, entitlement, or benefit paid or payable to you or provided for your benefit under this agreement and under any other agreement, plan or program of the Company (such payments, entitlements and benefits referred to as a “Payment”) is subject to the excise tax imposed under Section 4999 of the Code or any similar federal or state law (an “Excise Tax”), then notwithstanding anything contained in this agreement to the contrary, to the extent that any or all Payments would be subject to the imposition of an Excise Tax, the Payments shall be reduced (but not below zero) if and to the extent that such reduction would result in your retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if you received all of the Payments (such reduced amount is hereinafter referred to as the “Limited Payment Amount”). The Company shall reduce or eliminate the Payments, by first reducing or eliminating those payments or benefits which are payable in cash and then by reducing or eliminating non-cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined below).
	b. All calculations under this paragraph 29 shall be made by a nationally recognized accounting firm designated by the Company and reasonably acceptable to you (other than the accounting firm that is regularly engaged by any party who has effectuated a Change in Control) (the “Accounting Firm”). The Company shall pay all fees and expenses of such Accounting Firm. The Accounting Firm shall provide its calculations, together with detailed supporting documentation, both to the Company and you within 45 days after the Change in Control or the Date of Termination, whichever is later (or such earlier time as is requested by the Company) and, with respect to the Limited Payment Amount, shall deliver its opinion to you that you are not required to report any Excise Tax on your federal income tax return with respect to the Limited Payment Amount (collectively, the “Determination”). Within 5 days of your receipt of the Determination, you shall have the right to dispute the Determination (the “Dispute”). The existence of the Dispute shall not in any way affect your right to receive the Payments in accordance with the Determination. If there is no Dispute, the Determination by the Accounting Firm shall be final binding and conclusive upon the Company and you (except as provided in clause (c) below).
	c. If, after the Payments have been made to you, it is established that the Payments made to you, or provided for your benefit, exceed the limitations provided in clause (a) above (an “Excess Payment”) or are less than such limitations (an “Underpayment”), as the case may be, then the

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provisions of this clause (c) shall apply. If it is established pursuant to a final determination of a court or an Internal Revenue Service (the “IRS”) proceeding which has been finally and conclusively resolved, that an Excess Payment has been made, you shall repay the Excess Payment to the Company within 20 days following the determination of such Excess Payment. In the event that it is determined by (i) the Accounting Firm, the Company (which shall include the position taken by the Company, or together with its consolidated group, on its federal income tax return) or the IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution to your satisfaction of the Dispute, that an Underpayment has occurred, the Company shall pay an amount equal to the Underpayment to you within 10 days of such determination or resolution together with interest on such amount at the applicable federal short-term rate, as defined under Section 1274(d) of the Code and as in effect on the first date that such amount should have been paid to you under this agreement, from such date until the date that such Underpayment is made to you.

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     IN WITNESS WHEREOF, the Company and you have voluntarily executed this letter agreement to be effective as of the close of business on May 11, 2009.

Very truly yours,

THE WARNACO GROUP, INC.

/s/ Joseph Gromek

Agreed to and accepted

/s/ Lawrence Rutkowski                                                            
Lawrence Rutkowski

Exhibit A

Definitions

“Cause” shall mean:

(i)	willful misconduct by you which is injurious to the Company’s interests;
(ii)	willful breach of duty by you in the course of your employment, which, if curable, is not cured within 10 days after your receipt of written notice from the Company;
(iii)	willful failure by you after having been given written notice from the Company to perform your duties other than a failure resulting from your incapacity due to physical or mental illness; or
(iv)	indictment of you for the commission of a felony, or your engagement in other willful misconduct which is injurious to the business or reputation of the Company.

“Change in Control” shall mean any of the following:

(i)	any “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934) or group of persons acting jointly or in concert, but excluding a person who owns more than 5% of the outstanding shares of the Company as of the date of the Commencement Date, becomes a “beneficial owner” (as such term is used in Rule 13d-3 promulgated under that Act), of 50% or more of the Voting Stock of the Company;
(ii)	all or substantially all of the assets of the Company are disposed of pursuant to a merger, consolidation or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Voting Stock of the Company, all of the Voting Stock or other ownership interests of the entity or entities, if any, that succeed to the business of the Company); or
(iii)	approval by the shareholders of the Company of a complete liquidation or dissolution of all or substantially all of the assets of the Company.

     For purposes of this Change in Control definition, “Voting Stock” shall mean the capital stock of any class or classes having general voting power, in the absence of specified contingencies, to elect the directors of the Company.

“Date of Termination” shall mean:

(i) if your employment is terminated by the Company, the date specified in the notice by the Company to you that your employment is so terminated;

(ii)	if you voluntarily resign your employment, 60 days after receipt by the Company of written notice that you are terminating your employment (provided, that the Company may accelerate the Date of Termination to an earlier date by providing you with written notice of such action, or, alternatively, the Company may place you on paid leave (covering only Base Salary) during such period);
(iii)	if your employment is terminated by reason of death, the date of death; or
(iv)	if you resign your employment for Good Reason, 30 days after receipt by the Company of timely written notice from you in accordance with paragraph 26 of the letter agreement effective as of December 31, 2008 between you and the Company, unless the Company cures the event or events giving rise to Good Reason within 30 days after receipt of such written notice.

“Disability” shall mean your inability, due to physical or mental incapacity, to substantially perform your duties and responsibilities for a period of 120 consecutive days as determined by a medical doctor selected by the Company and reasonably acceptable to you.

“Good Reason” shall mean the occurrence of any of the following without your consent:

(i)	a material diminution in your authority, duties or responsibilities as Chief Financial Officer of the Company;
(ii)	a reduction in your Base Salary or Target Bonus;
(iii)	a change in reporting structure so that you report to someone other than the Chief Executive Officer of the Company;
(iv)	the removal by the Company of you as Chief Financial Officer of the Company;
(v)	the failure of a successor to all or substantially all of the assets of the Company to assume the Company’s obligations under the letter agreement either in writing or as a matter of law; or
(vi)	requiring you to be principally based at any office or location other than Manhattan or Westchester County, New York, provided that you will be required to spend time at the Company’s Milford, Connecticut office where the Company’s finance and accounting departments are located.

     Anything herein to the contrary notwithstanding, you shall not be entitled to resign for Good Reason unless you give the Company written notice of the event constituting “Good Reason” within 60 days of the occurrence of such event and the Company fails to cure such event within 30 days after receipt of such notice.

“Separation From Service” shall mean a termination of your employment in a manner consistent with Treasury Regulation Section 1.409A-1(h).

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Joseph R. Gromek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Warnaco Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Joseph R. Gromek

By: Joseph R. Gromek

Chief Executive Officer

Date: May 12, 2009

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Lawrence R. Rutkowski, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Warnaco Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Lawrence R. Rutkowski

By: Lawrence R. Rutkowski

Chief Financial Officer

Date: May 12, 2009

EX-32

EXHIBIT 32

CERTIFICATIONS OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
OF THE WARNACO GROUP, INC.
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of The Warnaco Group, Inc. (the “Company”) for the quarterly period ended April 4, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Joseph R. Gromek, as Chief Executive Officer of the Company, and Lawrence R. Rutkowski, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge, based upon a review of the Report:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  Joseph R. Gromek
Name: Joseph R. Gromek
Title: Chief Executive Officer
Date: May 12, 2009 /s/  Lawrence R. Rutkowski
Name: Lawrence R. Rutkowski
Title: Chief Financial Officer
Date: May 12, 2009