14.08.2006 20:05:00

Warnaco Reports Second Quarter 2006 Results

The Warnaco Group, Inc. (NASDAQ: WRNC) today reportedresults for the second quarter ended July 1, 2006.

For the second quarter of fiscal 2006:

-- Net revenues increased 20.5% to $451.6 million, compared to $374.7 million in the second quarter of fiscal 2005;

-- Gross profit margin was 35.1% of net revenues, compared to 30.2% in the second quarter of fiscal 2005;

-- Operating income declined to $14.0 million, compared to $15.6 million in the second quarter of fiscal 2005; and

-- Net income was $3.4 million, or $0.07 per diluted share, compared to $6.3 million, or $0.14 per diluted share in the second quarter of fiscal 2005.

The Company notes that fiscal 2006 second quarter results includethe operations of the Calvin Klein Jeans and related businesses inEurope and Asia (the "CKJEA Business") which were acquired on January31, 2006. Excluding the CKJEA Business, net revenues increased 3.5% to$387.9 million, compared to $374.7 million in the prior year quarter,and operating income was $15.0 million compared to $15.6 million inthe prior year quarter. For the second quarter, net revenues from theCKJEA Business were $63.7 million and operating losses were $1.0million (including $2.6 million of amortization expense).

"Contributions from certain pre-acquisition businesses and asmaller than expected loss at the CKJEA Business resulted in thebetter than anticipated second quarter results," said Joe Gromek,Warnaco's President and Chief Executive Officer. "The Intimate ApparelGroup, led by Calvin Klein(R) Underwear and Warner's(R), continued itspositive momentum from the first quarter and delivered significantincreases in gross profit and operating income. Speedo(R) alsodelivered strong sales growth and substantial improvements inprofitability. Unfortunately, this positive performance wassubstantially offset by the poor performance of the Sportswear Group.Significantly higher dilution at Chaps(R) due to higher markdownallowances compared to the prior year period and the shift in timingof certain membership club sales negatively affected the Sportswearsegment."

Mr. Gromek continued, "We continue to believe the development ofour global wholesale and retail platform positions us to achieve ourlong term revenue and operating income targets. Additionally, with theacquisition of the CKJEA Business, which is surpassing our performanceexpectations, we believe our international businesses, which generateoperating margins well above the Company average, will account forapproximately 40% of our fiscal 2006 revenues."

Restatement

As reported on August 8, 2006, the Company will be restating itspreviously reported financial statements for its fiscal year endedDecember 31, 2005 and first fiscal quarter ended April 1, 2006. Therestatements are required as a result of certain irregularitiesdiscovered by the Company during the Company's second quarter closingreview and certain other errors. The irregularities primarily relateto the accounting for certain returns and customer allowances at theCompany's Chaps(R) menswear division. These matters were reported tothe Company's Audit Committee, which engaged outside counsel, who inturn retained independent forensic accountants, to investigate andreport to the Audit Committee. Based on information obtained in thatinvestigation, and also to correct for an error which resulted fromthe implementation of the Company's new systems infrastructure at theSwimwear Group in the first quarter of fiscal 2006, and certainimmaterial errors, the Audit Committee accepted management'srecommendation that the Company restate its financial statements.

"We are deeply disappointed by what occurred at our Chaps mensweardivision," concluded Mr. Gromek. "However, the investigation, which isnow substantially complete, did not reveal any inappropriate activityoutside of that division. In spite of what happened, Chaps remains animportant brand in our portfolio with strong brand equity and consumerloyalty and we expect Chaps to contribute to Warnaco's profitabilityin fiscal 2006 and beyond."

Financial data as of July 1, 2006, December 31, 2005 (as restated)and July 2, 2005, and for the three and six month periods ended July1, 2006 and July 2, 2005, can be found on Schedules 1, 1a, 2, 3, 4 and4a to this release.

Second Quarter Operating Highlights

Second quarter net revenues increased 20.5% to $451.6 million,including $63.7 million in revenues from the CKJEA Business. IntimateApparel Group net revenues increased 6.9% compared to the prior year,reflecting continued positive consumer response to Calvin KleinUnderwear and Warner's. Swimwear Group net revenues increased 17.6%compared to the prior year period driven by Speedo, Michael Kors(R)and Calvin Klein. Sportswear Group net revenues (excluding the CKJEABusiness) declined 13.4%, reflecting among other things thesignificantly higher dilution at Chaps, the timing shift of certainsales to membership clubs to the second half of the year and a declinein off-price sales year over year. The increase in net revenues forthe second quarter of fiscal 2006 includes approximately $2.5 millionrelated to the translation of foreign currencies, primarily as aresult of a stronger euro and Canadian Dollar relative to the secondquarter of fiscal 2005.

Gross profit was $158.4 million, or 35.1% of net revenues,including $35.2 million in gross profit from the CKJEA Business,compared to $113.0 million, or 30.2% of net revenues, for the secondquarter of fiscal 2005. The 490 basis point improvement in grossprofit margin was the result of (i) the strong gross profit margins ofthe acquired CKJEA Business, (ii) improvements in Swimwear grossprofit margins, and (iii) improved product mix and more full pricesales from the Intimate Apparel Group partially offset by declines inChaps gross profit margin due to an incremental $7.5 million inmarkdown allowances compared to the prior year period. Gross profitfor the second quarter of fiscal 2006 includes approximately $1.0million related to the translation of foreign currencies, primarily asa result of a stronger euro and Canadian dollar relative to the secondquarter of fiscal 2005.

Selling, general and administrative ("SG&A") expenses were $140.4million, or 31.1% of net revenues, compared to $95.3 million, or 25.4%of net revenues, for the prior year quarter. The increase in SG&Aincluded (i) $33.7 million from the CKJEA Business, (ii) $6.3 millionof incremental Swimwear Group expense primarily related to continuedinvestment in Ocean Pacific(R) brands and increased marketing andseverance expense, (iii) $5.1 million resulting from an increasedpercentage of the Company's revenues generated from higher SG&Abusinesses, including international and retail; and (iv) $1.6 millionof incremental corporate information technology expenses primarilyassociated with the implementation of the new systems infrastructure.SG&A was negatively affected by approximately $0.4 million related tothe translation of foreign currencies, primarily as a result of astronger euro and Canadian dollar relative to the second quarter offiscal 2005.

Amortization of intangible assets was $4.0 million, compared to$1.1 million in the prior year period, primarily due to an increase of$2.6 million in intangible assets associated with the acquisition ofthe CKJEA Business.

Operating income for the second quarter of fiscal 2006 was $14.0million, including a loss of $1.0 million from the CKJEA Business,compared to $15.6 million in the prior year period. The strongoperating profits from the Intimate Apparel Group were offset bydisappointing results in the Sportswear Group, the seasonal weaknessof the CKJEA Business and higher expenses in the Swimwear Group.Operating income for the second quarter of fiscal 2006 includesapproximately $0.6 million related to the translation of foreigncurrencies, primarily as a result of a stronger euro and Canadiandollar relative to the second quarter of fiscal 2005.

Other income was $0.8 million, compared to a loss of $0.9 millionin the prior year quarter related primarily to foreign exchange rategains on the current portion of inter-company loans denominated inforeign currencies.

Net interest expense increased to $9.4 million compared to $4.5million in the prior year period. The $4.9 million increase isprimarily the result of incremental indebtedness incurred inconnection with the acquisition of the CKJEA Business.

Net income was $3.4 million, or $0.07 per diluted share, comparedto $6.3 million, or $0.14 per diluted share, for the second quarter offiscal 2005, which reflects the continued strength in Intimate Apparelsubstantially offset by the disappointing performance of theSportswear Group.

The Company noted the following balance sheet highlights as ofJuly 1, 2006:

Cash and cash equivalents were $138.4 million, compared to $153.9million of cash and cash equivalents at July 2, 2005, notwithstandingthe approximately $70.8 million of cash (net of acquired cash) used inconnection with the acquisition of the CKJEA Business on January 31,2006.

In addition, during the quarter the Company used approximately$12.2 million of cash to repurchase 675,000 shares of common stockunder the Company's previously announced share repurchase program, atan average price of $18.05. Approximately 2.3 million shares remainauthorized for repurchase under the share repurchase program. Theshare repurchase program may be modified or terminated by theCompany's Board of Directors at any time.

Accounts receivable were $278.7 million, up from $204.2 million atJuly 2, 2005. Accounts receivable related to the CKJEA Business were$55.5 million. Receivables, excluding the CKJEA Business, were up 9.3%in the quarter.

Net inventories were $311.0 million, up from $277.3 million atJuly 2, 2005. Inventories at July 1, 2006 include $44.6 million ofinventory of the CKJEA Business and a $6.5 million increase inSwimwear inventory, for which the Company believes it is appropriatelyreserved. Excluding the CKJEA Business, inventories were down 3.9%,which reflects the Company's continued discipline related to planningand inventory management.

Fiscal 2006 Outlook

Larry Rutkowski, Warnaco's Chief Financial Officer commented,"Although the restatement we announced on August 8, 2006 will lowerfiscal 2005 results, our forward guidance continues to be based uponfiscal 2005 results prior to giving effect to the restatement. For theyear we continue to expect our pre-acquisition business revenue growthto be in the low single digits. In addition, for our pre-acquisitionbusinesses, we continue to expect at least a 100 basis pointimprovement in gross margin percentage and mid single digit percentageimprovement in the operating margin percentage over the prior year(assuming minimal pension expense in fiscal 2006)."

Mr. Rutkowski concluded, "Overall, for the Company (including theacquired CKJEA Business), we continue to expect (i) revenue growth in2006 to be at least in the low 20 percent range; (ii) mid single digitpercentage improvement in the operating margin percentage over theprior year (assuming minimal pension expense in fiscal 2006); and(iii) that the acquisition of the CKJEA Business will be accretive toWarnaco's 2006 earnings per share.

Subsequent Events

In August 2006, the Company received a favorable ruling from theNetherlands taxing authority relating to the Company's Europeanoperations. The ruling, which is retroactive to the beginning of 2006,is expected to have a positive impact on the Company's effective taxrate for fiscal 2006 and beyond.

Stockholders and other persons are invited to listen to the secondquarter fiscal 2006 earnings conference call scheduled for today,Monday, August 14, 2006 at 4:30 p.m. EDT. To participate in Warnaco'sconference call, dial (877)-692-2592, approximately five minutes priorto the 4:30 p.m. start time. The call will also be broadcast live overthe internet at www.warnaco.com. An online archive will be availablefollowing the call.

This press release was furnished to the SEC (www.sec.gov) and mayalso be accessed through the Company's internet website:www.warnaco.com.

ABOUT WARNACO

The Warnaco Group, Inc., headquartered in New York, is a leadingapparel company engaged in the business of designing, marketing andselling intimate apparel, menswear, jeanswear, swimwear, men's andwomen's sportswear and accessories under such owned and licensedbrands as Warner's(R), Olga(R), Lejaby(R), Body Nancy Ganz(tm),Speedo(R), Anne Cole(R), Op(R), Ocean Pacific(R), Cole ofCalifornia(R) and Catalina(R) as well as Chaps(R) sportswear anddenim, J. Lo by Jennifer Lopez(R) lingerie, Nautica(R) swimwear,Michael Kors(R) swimwear and Calvin Klein(R) men's and women'sunderwear and sportswear, men's, women's, junior women's andchildren's jeans and accessories and women's and juniors' swimwear.

FORWARD-LOOKING STATEMENTS

This press release, the earnings conference call scheduled fortoday and certain other written, electronic and oral disclosure madeby the Company from time to time, contains "forward-lookingstatements" within the meaning of Rule 3b-6 under the SecuritiesExchange Act of 1934, as amended, Rule 175 under the Securities Act of1933, as amended, and relevant legal decisions. The forward-lookingstatements involve risks and uncertainties and reflect, when made, theCompany's estimates, objectives, projections, forecasts, plans,strategies, beliefs, intentions, opportunities and expectations.Actual results may differ materially from anticipated results orexpectations and investors are cautioned not to place undue relianceon any forward-looking statements. Statements other than statements ofhistorical fact are forward-looking statements. These forward-lookingstatements may be identified by, among other things, the use offorward-looking language, such as the words "believe," "anticipate,""estimate," "expect," "intend," "may," "project," "scheduled to,""seek," "should," "will be," "will continue," "will likely result," orthe negative of those terms, or other similar words and phrases or bydiscussions of intentions or strategies.

The following factors, among others and in addition to thosedescribed in the Company's reports filed with the SEC (including,without limitation, those described under the headings "Risk Factors"and "Statement Regarding Forward-Looking Disclosure," as suchdisclosure may be modified or supplemented from time to time), couldcause the Company's actual results to differ materially from thoseexpressed in any forward-looking statements made by it: economicconditions that affect the apparel industry; the Company's failure toanticipate, identify or promptly react to changing trends, styles, orbrand preferences; further declines in prices in the apparel industry;declining sales resulting from increased competition in the Company'smarkets; increases in the prices of raw materials; events which resultin difficulty in procuring or producing the Company's products on acost-effective basis; the effect of laws and regulations, includingthose relating to labor, workplace and the environment; changinginternational trade regulation, including as it relates to theimposition or elimination of quotas on imports of textiles andapparel; the Company's ability to protect its intellectual property orthe costs incurred by the Company related thereto; the Company'sdependence on a limited number of customers; the effects of theconsolidation of the retail sector; the Company's dependence onlicense agreements with third parties; the Company's dependence on thereputation of its brand names, including, in particular, Calvin Klein;the Company's exposure to conditions in overseas markets in connectionwith the Company's foreign operations and the sourcing of productsfrom foreign third-party vendors; the Company's foreign currencyexposure; the Company's history of insufficient disclosure controlsand procedures and internal controls and restated financialstatements; unanticipated future internal control deficiencies orweaknesses or ineffective disclosure controls and procedures; thesufficiency of cash to fund operations, including capitalexpenditures; the Company's ability to service its indebtedness, theeffect of changes in interest rates on the Company's indebtedness thatis subject to floating interest rates and the limitations imposed onthe Company's operating and financial flexibility by the agreementsgoverning the Company's indebtedness; the Company's dependence on itssenior management team and other key personnel; disruptions in theCompany's operations caused by difficulties with the new systemsinfrastructure; the limitations on purchases under the Company's sharerepurchase program contained in the Company's debt instruments, thenumber of shares that the Company purchases under such program and theprices paid for such shares; the failure of newly acquired businessesto generate expected levels of revenues; the failure of the Company tosuccessfully integrate such businesses with its existing businesses(and as a result, not achieving all or a substantial portion of theanticipated benefits of the acquisition); and such newly acquiredbusiness being adversely affected, including by one or more of thefactors described above and thereby failing to achieve anticipatedrevenues and earnings growth.

The Company encourages investors to read the section entitled"Risk Factors" and the discussion of the Company's critical accountingpolicies under "Management's Discussion and Analysis of FinancialCondition and Results of Operations -- Discussion of CriticalAccounting Policies" included in the Company's Annual Report on Form10-K, as such discussions may be modified or supplemented bysubsequent reports that the Company files with the SEC. The discussionin this press release is not exhaustive but is designed to highlightimportant factors that may affect actual results. Forward-lookingstatements speak only as of the date on which they are made, and,except for the Company's ongoing obligation under the U.S. federalsecurities laws, the Company disclaims any intention or obligation toupdate or revise any forward-looking statements, whether as a resultof new information, future events or otherwise.
Schedule 1
THE WARNACO GROUP, INC.

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


Second Quarter Second Quarter
of Fiscal 2006 of Fiscal 2005
-------------- --------------
(Unaudited) (Unaudited)

Net revenues (a) $ 451,585 $ 374,679
Cost of goods sold 293,142 261,708
------------ -----------
Gross profit (b) 158,443 112,971
Selling, general and administrative
expenses (c) 140,370 95,333
Amortization of intangible assets (d) 4,036 1,149
Pension expense 33 200
Restructuring expense - 721
------------ -----------
Operating income (e) 14,004 15,568
Other loss (income) (766) 882
Interest expense, net (f) 9,417 4,524
------------ -----------
Income from continuing operations before
provision for income taxes 5,353 10,162
Provision for income taxes 1,930 3,581
------------ -----------
Income from continuing operations 3,423 6,581
Income from discontinued operations, net
of taxes - (253)
------------ -----------
Net income $ 3,423 $ 6,328
============ ===========

Basic and diluted income per common
share:
Income from continuing operations $ 0.07 $ 0.14
Income from discontinued operations - -
------------ -----------
Net income $ 0.07 $ 0.14
============ ===========

Weighted average number of shares
outstanding used in computing income
per common share:
Basic 46,082,333 45,817,470
============ ===========
Diluted 46,935,529 46,408,883
============ ===========

(a) For the Second Quarter of Fiscal 2006, includes net revenues of
$63,680 related to the CKJEA Business.
(b) For the Second Quarter of Fiscal 2006, includes gross profit of
$35,228 related to the CKJEA Business.
(c) For the Second Quarter of Fiscal
2006, includes selling, general and administrative expenses of
$33,646 related to the CKJEA Business.
(d) For the Second Quarter of Fiscal 2006, includes amortization of
intangible assets of $2,604 related to the CKJEA Business.
(e) For the Second Quarter of Fiscal 2006, includes operating losses
of $1,022 related to the CKJEA Business.
(f) For the Second Quarter of Fiscal 2006, includes interest expense
of $3,592 related to the CKJEA Business.



Schedule 1a
THE WARNACO GROUP, INC.

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


First Half First Half
of Fiscal of Fiscal
2006 2005
------------ ------------
(Unaudited) (Unaudited)

Net revenues (a) $ 914,365 $ 814,220
Cost of goods sold 584,531 544,241
----------- -----------
Gross profit (b) 329,834 269,979
Selling, general and administrative expenses
(c) (d) 277,171 198,170
Amortization of intangible assets (e) 7,465 2,126
Pension expense (d) 5 471
Restructuring expense - 727
----------- -----------
Operating income (f) 45,193 68,485
Other loss 1,084 791
Interest expense, net (g) 17,361 9,558
----------- -----------
Income from continuing operations before
provision for income taxes 26,748 58,136
Provision for income taxes 9,443 22,329
----------- -----------
Income from continuing operations 17,305 35,807
Income from discontinued operations, net of
taxes - (128)
----------- -----------
Net income $ 17,305 $ 35,679
=========== ===========

Basic income per common share:
Income from continuing operations $ 0.38 $ 0.78
Income from discontinued operations - -
----------- -----------
Net income $ 0.38 $ 0.78
=========== ===========

Diluted income per common share:
Income from continuing operations $ 0.37 $ 0.77
Income from discontinued operations - -
----------- -----------
Net income $ 0.37 $ 0.77
=========== ===========
Weighted average number of shares
outstanding used in computing income per
common share:
Basic 46,114,751 45,752,718
=========== ===========

Diluted 46,999,123 46,277,498
=========== ===========


(a) For the First Half of Fiscal 2006, includes net revenues of
$124,125 related to the CKJEA Business.
(b) For the First Half of Fiscal 2006, includes gross profit of
$69,117 related to the CKJEA Business.
(c) For the First Half of Fiscal 2006, includes selling, general and
administrative expenses of $59,477 related to the CKJEA Business.
(d) Pension expense of $71 has been reclassified from selling, general
and administrative expenses to pension expense in the First Half
of Fiscal 2005 to conform to the current period presentation.
(e) For the First Half of Fiscal 2006, includes amortization of
intangible assets of $4,601 related to the CKJEA Business.
(f) For the First Half of Fiscal 2006, includes operating income of
$5,039 related to the CKJEA Business.
(g) For the First Half of Fiscal 2006, includes interest expense of
$6,300 related to the CKJEA Business.


Schedule 2
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)

July 1, December 31, July 2,
2006 (a) 2005 2005
----------- ------------ -----------
(Unaudited) (Unaudited) (Unaudited)
(As Restated)
(b)
ASSETS
Current assets:
Cash and cash equivalents $ 138,372 $ 164,201 $ 153,896
Accounts receivable 278,748 210,204 204,228
Inventories 310,956 325,988 277,285
Other current assets 75,763 47,575 48,365
---------- ----------- ----------
Total current assets 803,839 747,968 683,774
---------- ----------- ----------
Property, plant and equipment,
net 131,389 116,995 105,998
Intangible and other assets 609,543 355,088 369,475
----------- ------------ -----------
TOTAL ASSETS $1,544,771 $ 1,220,051 $1,159,247
========== =========== ==========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term debt $ 43,554 $ - $ -
Accounts payable and accrued
liabilities 253,765 229,647 174,104
Accrued income taxes payable 43,863 23,557 29,867
---------- ----------- ----------
Total current liabilities 341,182 253,204 203,971
---------- ----------- ----------
Long-term debt 382,750 210,000 210,575
Other long-term liabilities 161,196 127,360 137,037
Total stockholders' equity 659,643 629,487 607,664
---------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,544,771 $ 1,220,051 $1,159,247
========== =========== ==========

(a) Selected balances as of July 1, 2006 related to the CKJEA
Business are presented below:
Accounts receivable $ 55,520
Inventories 44,631
Intangible assets and
goodwill 256,986
Accounts payable and
accrued liabilities 51,521

(b) On August 8, 2006, the Company announced that during the course of
completing its second quarter review process it had discovered
certain irregularities. The irregularities primarily related to
the accounting for certain return authorizations and customer
allowances at the Company's Chaps menswear division. The Company
reported these matters to its Audit Committee, which engaged
outside counsel, who in turn retained forensic accountants to
investigate and report to the Audit Committee. Based upon the
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 in the
period January 1, 2006 to April 1, 2006 ("First Quarter 2006"),
and certain immaterial errors, the Audit Committee accepted
management's recommendation that the Company restate its
financial statements for the period October 2, 2005 to December
31, 2005 ("Fourth Quarter 2005"), the period January 2, 2005 to
December 31, 2005 ("Fiscal 2005") and the First Quarter 2006. The
effect of the restatement on the Company's December 31, 2005
consolidated balance sheet is as follows:

As
Previously Adjust- As
Reported ments Restated
----------- ------------ -----------

Accounts receivable, net $ 213,364 $ (3,160) $ 210,204
Inventories 326,274 (286) 325,988
Total current assets 751,414 (3,446) 747,968
Goodwill 28,762 1,281 30,043
Total assets 1,222,216 (2,165) 1,220,051
Accrued liabilities 89,807 588 90,395
Accrued income taxes
payable 22,162 (193) 21,969
Total current liabilities 252,809 395 253,204
Retained earnings 94,406 (2,560) 91,846
Total stockholders' equity 632,047 (2,560) 629,487
Total liabilities and
stockholders' equity 1,222,216 (2,165) 1,220,051



Schedule 3
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY BUSINESS UNIT
(Dollars in thousands)
(Unaudited)

Net revenues: Second Second
Quarter Quarter
of Fiscal of Fiscal Increase/
2006 2005 (Decrease) % Change
--------- ---------- ---------- ---------
Sportswear Group $167,622 (a) $120,073 $ 47,549 39.6%
Intimate Apparel Group 153,147 143,328 9,819 6.9%
Swimwear Group 130,816 111,278 19,538 17.6%
--------- ---------- --------- ---------
Net revenues $451,585 $374,679 $ 76,906 20.5%
======== ======== ========= =======

First Half First Half
of Fiscal of Fiscal %
2006 2005 Increase Change
--------- ---------- ---------- ---------
Sportswear Group $335,494 (a) $250,436 $ 85,058 34.0%
Intimate Apparel Group 306,850 295,103 11,747 4.0%
Swimwear Group 272,021 268,681 3,340 1.2%
--------- ---------- ---------- ---------
Net revenues $914,365 $814,220 $ 100,145 12.3%
======== ======== ========= =======

(a) Includes net revenues of $63,680 and $124,125 for the Second
Quarter and First Half of Fiscal 2006, respectively, related to the
CKJEA Business.

Second Second % of
Quarter % of Total Quarter Total
Operating income: of Fiscal Net of Fiscal Net
2006 Revenues 2005 (d) Revenues
--------- ---------- ----------------------
Sportswear Group (a) $ 2,499 (b) $ 12,175
Intimate Apparel Group (c) (c)
(a) 18,237 8,295
Swimwear Group (a) 1,554 1,928
-------- ---------

Group operating income
(e) 22,290 4.9% 22,398 6.0%
Unallocated corporate
expenses (8,286) -1.8% (6,109) -1.6%
Restructuring expenses - 0.0% (721) -0.2%
-------- -------- --------- -------
Operating income $ 14,004 3.1% $ 15,568 4.2%
======== ======== ========= =======

First % of
Half % of Total First Half Total
of Fiscal Net of Fiscal Net
2006 Revenues 2005 (d) Revenues
--------- ---------- ---------- ---------
Sportswear Group (a) $ 10,441 (b) $ 26,792
Intimate Apparel Group
(a) 34,050 (c) 20,394 (c)
Swimwear Group (a) 15,636 36,060
-------- ---------
Group operating income
(e) 60,127 6.6% 83,246 10.2%
Unallocated corporate
expenses (14,934) -1.6% (14,034) -1.7%
Restructuring expenses - 0.0% (727) -0.1%
-------- -------- --------- -------
Operating income $ 45,193 4.9% $ 68,485 8.4%
======== ======== ========= =======

(a) Includes an allocation of shared services expenses as follows:

Second Second First
Quarter Quarter First Half Half
of Fiscal of Fiscal of Fiscal of Fiscal
2006 2005 2006 2005
--------- ---------- ---------- ---------
Sportswear Group $ 5,024 $ 4,577 $ 10,015 $ 9,377
Intimate Apparel Group 3,165 2,931 6,308 5,880
Swimwear Group 4,739 3,875 9,357 7,805

(b) Includes operating income (loss) of $(1,022) and $5,039 for the
Second Quarter and First Half of Fiscal 2006, respectively, related
to the CKJEA Business.
(c) Includes pension expense of $116, $0, $171 and $71 related to
foreign operations for the Second Quarter of Fiscal 2006, Second
Quarter of Fiscal 2005, First Half of Fiscal 2006 and First Half of
Fiscal 2005, respectively.
(d) Operating income for each of the business groups and unallocated
corporate expenses for the Second Quarter and First Half of Fiscal
2005 have been restated to conform to the current period
presentation.
(e) The Company believes that the disclosure of group operating
income is useful to investors to meaningfully compare the results of
the Company's segments from period to period. Management evaluates
the performance of each of its segments using group operating
income. Therefore, the Company believes that this information is
also useful to investors as it allows investors to evaluate each
segment's results of operations on the same basis as management.
Group operating income is a non-GAAP financial measure which has
limitations you should consider if you use it to evaluate the
Company's financial performance. Group operating income does not
include restructuring charges, depreciation and amortization of
certain corporate assets, interest, foreign currency gains and
losses and income taxes, which may be necessary for an understanding
of the Company's results of operations. Other companies may allocate
these costs to their operating divisions and, as a result, the
operating results of the Company's operating groups may not be
directly comparable to the results of other companies.


Schedule 4
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL
(Dollars in thousands)
(Unaudited)

By Region: Net Revenues
------------------------------------------
Second Second Increase /
Quarter of Quarter (Decrease)
Fiscal 2006 of Fiscal %
2005 Change
------------------------------------------
United States $276,466 $272,212 $ 4,254 1.6%
Europe 90,463 (a) 60,255 30,208 50.1%
Canada 26,267 23,697 2,570 10.8%
Asia 43,463 (b) 7,767 35,696 459.6%
Mexico 14,926 10,748 4,178 38.9%

--------- --------- ---------- --------
Total net revenues $451,585 $374,679 $ 76,906 20.5%
======== ======== ======== ========

Operating Income
------------------------------------------
Second Second Increase /
Quarter of Quarter (Decrease)
Fiscal 2006 of Fiscal %
2005 (c) Change
------------------------------------------
United States $ 6,143 $ 5,767 $ 376 6.5%
Europe 1,287 (a) 8,489 (7,202) -84.8%
Canada 6,047 4,358 1,689 38.8%
Asia 6,226 (b) 1,959 4,267 217.8%
Mexico 2,587 1,825 762 41.8%
-------- -------- -------- --------

Group operating income $ 22,290 $ 22,398 $ (108) -0.5%
Unallocated corporate
expenses (8,286) (6,109) (2,177) 35.6%
Restructuring expenses - (721) 721 -100.0%
-------- -------- -------- --------
Operating income $ 14,004 $ 15,568 $ (1,564) -10.0%
======== ======== ======== ========

(a) Includes net revenue of $28,810 and operating loss of $4,225
related to the CKJEA Business.
(b) Includes net revenue of $34,870 and operating income of $3,203
related to the CKJEA Business.
(c) Operating income for each of the business groups and
unallocated corporate expenses have been restated to conform
to the current period presentation.


By Channel: Net Revenues
------------------------------------------
Second Second Increase /
Quarter of Quarter (Decrease)
Fiscal 2006 of Fiscal %
2005 Change
------------------------------------------
Wholesale $399,352 (a) $364,206 35,146 9.7%
Retail 52,233 (b) 10,473 41,760 398.7%
-------- -------- -------- --------
Total net revenues $451,585 $374,679 $ 76,906 20.5%
======== ======== ======== ========

Operating Income
------------------------------------------
Second Second Increase /
Quarter of Quarter (Decrease)
Fiscal 2006 of Fiscal %
2005 (c) Change
------------------------------------------
Wholesale $ 17,948 (a) $ 21,716 (3,768) -17.4%
Retail 4,342 (b) 682 3,660 536.7%
-------- -------- -------- --------
Group operating income $ 22,290 $ 22,398 $ (108) -0.5%
Unallocated corporate
expenses (8,286) (6,109) (2,177) 35.6%
Restructuring expenses - (721) 721 -100.0%

--------- --------- ---------- --------
Operating income $ 14,004 $ 15,568 $ (1,564) -10.0%
======== ======== ======== ========

(a) Includes net revenue of $25,881 and operating loss of $3,883
related to the CKJEA Business.
(b) Includes net revenue of $37,799 and operating income of $2,861
related to the CKJEA Business.
(c) Operating income for each of the business groups and
unallocated corporate expenses have been restated to conform
to the current period presentation.


Schedule 4a
THE WARNACO GROUP, INC.
NET REVENUES AND OPERATING INCOME BY REGION & CHANNEL
(Dollars in thousands)
(Unaudited)

By Region: Net Revenues
--------------------------------------------
First Half First Half
of Fiscal of Fiscal Increase/
2006 2005 (Decrease) % Change
--------------------------------------------
United States $561,038 $594,587 $(33,549) -5.6%
Europe 190,210 (a) 130,538 59,672 45.7%
Canada 50,359 49,597 762 1.5%
Asia 84,656 (b) 16,606 68,050 409.8%
Mexico 28,102 22,892 5,210 22.8%
-------- --------- --------- ---------
Total net revenues $914,365 $814,220 $100,145 12.3%
======== ======== ======== =========

Operating Income
--------------------------------------------
First Half First Half
of Fiscal of Fiscal Increase/
2006 2005 (c) (Decrease) % Change
--------------------------------------------
United States $ 18,134 $ 45,639 $(27,505) -60.3%
Europe 11,947 (a) 19,941 (7,994) -40.1%
Canada 11,660 8,966 2,694 30.0%
Asia 14,204 (b) 4,827 9,377 194.3%
Mexico 4,182 3,873 309 8.0%
-------- -------- -------- ---------
Group operating income $ 60,127 $ 83,246 $(23,119) -27.8%
Unallocated corporate
expenses (14,934) (14,034) (900) 6.4%
Restructuring expenses - (727) 727 -100.0%
-------- -------- -------- ---------
Operating income $ 45,193 $ 68,485 $(23,292) -34.0%
======== ======== ======== =========

(a) Includes net revenue of $58,151 and operating loss of $2,967
related to the CKJEA Business.
(b) Includes net revenue of $65,974 and operating income of $8,006
related to the CKJEA Business.
(c) Operating income for each of the business groups and unallocated
corporate expenses have been restated to conform to the current
period presentation.


By Channel: Net Revenues
--------------------------------------------
First Half First Half
of Fiscal of Fiscal Increase/
2006 2005 (Decrease) % Change
--------------------------------------------
Wholesale $819,351 (a) $794,773 24,578 3.1%
Retail 95,014 (b) 19,447 75,567 388.6%
-------- -------- -------- ---------
Total net revenues $914,365 $814,220 $100,145 12.3%
======== ======== ======== =========

Operating Income
--------------------------------------------
First Half First Half
of Fiscal of Fiscal Increase/
2006 2005 (c) (Decrease) % Change
--------------------------------------------
Wholesale $ 50,955 (a) $ 82,068 (31,113) -37.9%
Retail 9,172 (b) 1,178 7,994 678.6%
-------- -------- -------- ---------
Group operating income $ 60,127 $ 83,246 $(23,119) -27.8%
======== ======== ======== =========
Unallocated corporate
expenses (14,934) (14,034) (900) 6.4%
Restructuring expenses - (727) 727 -100.0%

-------- ---------- ---------- ---------
Operating income $ 45,193 $ 68,485 $(23,292) -34.0%
======== ======== ======== =========

(a) Includes net revenue of $55,952 and operating loss of $1,560
related to the CKJEA Business.
(b) Includes net revenue of $68,173 and operating income of $6,599
related to the CKJEA Business.
(c) Operating income for each of the business groups and unallocated
corporate expenses have been restated to conform to the current
period presentation.

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