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BANK OF AMERICA CONSUMER CONFERENCE THE WARNACO GROUP, INC. Presented March 14, 2006 by: Joe Gromek, President & Chief Executive Officer Larry Rutkowski, EVP & Chief Financial Officer Forward Looking Statements Certain statements in the following presentation regarding Warnaco’s business operations may constitute “forward looking statements” as defined by the Securities and Exchange Commission. Such statements are not historical facts, but are predictions about the future which inherently involve risks and uncertainties, and these risks and uncertainties could cause actual results to differ from those contained in the forward looking statements. We urge investors to read the descriptions and discussions of these risks that are contained on slide 21 of this presentation as well as in the Company’s annual and quarterly SEC filings. 1 Agenda Overview Strategy Business Segments Intimate Apparel Sportswear Swimwear Sourcing Platform Financial Review Conclusion 2 Warnaco Overview $1.5 billion in revenue for fiscal 2005; Pro forma revenue approximately $1.8 billion* Compelling brand portfolio Dominant player in Swimwear Proven ability to profitably grow Sportswear and Intimate Apparel brands Strong international presence Recent acquisitions position Company for further growth * Unaudited pro forma for acquisition; includes approximately $265 million in revenues from the Calvin Klein Jeans and related businesses in Europe and Asia (acquired January 31, 2006). 3 Compelling Brand Portfolio Approximately 61% of fiscal 2005 revenue from brands owned or licensed in perpetuity Intimate Apparel Sportswear Swimwear Owned or Licensed in Perpetuity Calvin Klein Lejaby/Rasurel Warner’s Olga Body Nancy Ganz Licensed JLO by Jennifer Lopez Licensed Calvin Klein Jeans through 2044 Calvin Klein Jeans E&A through 2046 CK Calvin Klein ‘bridge’ through 2046 Chaps through 2018 Owned or Licensed in Perpetuity Speedo Anne Cole Cole of California Catalina Ocean Pacific Licensed Nautica Calvin Klein Michael Kors 4 A Changing Dynamic Business Across Three Segments Group Revenue Swimwear 26% Pro forma Group Revenue Swimwear 22% Intimate Apparel 34% Intimate Apparel 40% With acquisition Sportswear 34% Sportswear 44% Group Operating Income Swimwear 24% Intimate Apparel 36% Sportswear 40% Group Intimate Apparel Sportswear Swimwear Oper. Inc** Oper. (in mil) Margin $66.7 $71.8 $44.2 10.6% 14.1% 12.0% Calvin Klein Jeans Europe & Asia 2005 operating income is currently estimated to be $28 million (approx. 11% of revenues) Unaudited Pro forma for acquisition; includes approximately $265 million in revenues from the Calvin Klein Jeans and related businesses in Europe and Asia (acquired January 31, 2006) and assumes an estimated operating margin of 11%. ** Excludes corporate overhead 5 Diversified Wholesale Relationships* Department Stores Specialty Retailers Chain Stores 8% of Net Revenues Mass Membership Merchandisers Clubs 27% of Net Revenues International 32% of Revenues Canada Owned Retail 7% of Revenues 26% of Net Revenues Mexico Europe R South Korea *Unaudited pro forma percentages based on reported fiscal 2005 net revenues and approximately $265 million in revenues from Calvin Klein jeans and related businesses in Europe and Asia (acquired January 31, 2006), of which an estimated 36% is owned retail. 6 Strategy Maximize sales and profitability of our brands by leveraging competencies in Intimate Apparel, Sportswear and Swimwear, through: Product extension Geographic expansion Direct to consumer initiatives Acquisition integration 7 Intimate Apparel – Core and Fashion Brands* 2005: Net Revenues of $257.6 million Operating Margins of 3.7% Key Developments: Returned Warner’s to profitability top and bottom line growth Repositioned Olga 2006 Priorities: Build on Warner’s momentum Resolve fulfillment issues Improve profitability * Includes Warner’s, Olga, Body Nancy Ganz, Lejaby, JLo, Axcelerate Engineered by Speedo. 8 Intimate Apparel – Calvin Klein Underwear 2005: Net Revenues of $338.1 million Operating Margin of 16.9% Key Developments: Launched Perfectly Fit and 365 Expanded retail initiative Exited Choice business 2006 Priorities: Product extension Expand geographically Broaden direct to consumer platform 9 Sportswear - Chaps 2005: Net Revenues of $211.1 million Operating Margins of 12.4% Key Developments: Continued channel expansion Introduced classifications Improved profitability 2006 Priorities: Expand mid-tier penetration Realize denim potential Leverage scale of business Increase brand visibility 10 Sportswear - Calvin Klein Jeanswear Western Hemisphere 2005: Net Revenues of $284.4 million Operating Margins of 14.4% Key Developments: Improved status denim standings Men’s #1* Women’s #2* Enhanced profitability Announced exit from Choice 2006 Priorities: Increase tops as a percent of total business Continue fabrication expansion beyond denim Further improve profitability * In department stores, according to NPD. 11 Swimwear – 2005: Net Revenues of $391.1 million Operating Margin of 11.3% Key Developments: Launched Speedo FSII Ice Launched Michael Kors, Calvin Klein Held or gained share in key designer brands Anne Cole #2* Nautica #3* Internalized core categories of OP 2006 Priorities: Complete implementation of SAP Maximize Speedo potential New marketing campaign Expand key brands internationally Continue repositioning of OP * According to NPD. 12 Acquisition Calvin Klein Jeanswear -- Europe & Asia 2005*: Revenues of approximately $265 million Gross margin in the high 50% SG&A in high 40% Operating margins of approximately 11% 64% wholesale/36% owned retail 37 free standing shops 81 shop in shops 60% Europe/40% Asia & Australia 30% Italy 30% Korea * Preliminary unaudited results based on latest available information from acquired entities. 13 Acquisition Calvin Klein Jeanswear - Europe & Asia (cont’d) 2006 Opportunities: Expand geographic reach Increase direct to consumer presence New product launches ‘Bridge’ sportswear in Europe expected to generate $10-$12 million* Combined accessories businesses in Europe and Asia expected to generate $18-20 million* Acquired business accretive to Warnaco 2006 EPS after transition related costs * Represents annualized revenues 14 Global Sourcing Initiatives Recruited global sourcing leadership Expanded Asia offices to approximately 200 employees Migrated from third party agents to full-service sourcing organization Leverage scale by aggregating category buys Improve quality, cycle times and inventory turns Improve costs and enhance gross margins A key driver of gross margin improvement 15 Fiscal 2005 Reported Results Full Year Fiscal 2005 Fiscal 2004 Net Revenues Gross Margin Operating Income Operating Margin Income from Continuing Operations Diluted EPS from Continuing Operations Net Income (Dollars in Millions) $1,504.4 $1,424.2 33.9% $101.9 6.8% 52.2 $1.12 52.1 33.2% $96.1 6.8% 46.9 $1.02 42.5 16 Balance Sheet Assets Cash and cash equivalents Accounts receivable Inventories Other current assets PPE Other assets Total Assets Liabilities and Stockholders’ Equity Total current liabilities Long-term debt - 8 7/8% senior notes due 2013 Deferred income tax Other long-term liabilities Total Stockholders’ equity Total Liabilities and Stockholders’ Equity $252.8 210.0 74.5 52.9 632.0 $1,222.2 $234.8 210.8 67.7 63.7 576.9 $1,153.9 December 31, 2005 $164.2 213.4 326.3 47.5 117.0 353.8 $1,222.2 January 1, 2005 $65.6 219.8 335.7 48.0 106.9 377.9 $1,153.9 17 Calvin Klein Jeans Europe and Asia Pre-acquisition results Full Year Fiscal 2005* (Dollars in Millions) Net Revenues Operating Income $265 $28 Operating Margin 11% •Preliminary unaudited results based on latest available information from acquired entities. acquisition exclude the effects of amortization as a result of the acquisition. All results prior to the 18 2006 Outlook Pre-acquisition business Revenue growth similar to 2005 levels Gross margin increase of at least 100 basis points Double-digit growth in operating margin percentage (assuming minimal pension expense in 2006) For the combined Companies Revenue growth in 2006 to be at least in the low 20% range Double-digit improvements in the operating margin percentage over the prior year (assuming minimal pension expense in 2006) 19 Conclusion Strong brand performance at retail Focused on execution Core business Integrate acquisition Opportunity to expand global presence Sourcing expertise should lead to gross margin expansion Positioned to achieve long-term goals 20 Forward Looking Statements This presentation, as well as certain other written, electronic and oral disclosure made by the Company from time to time, may contain "forward-looking statements" within the meaning of Rule 3b-6 under the Securities Exchange Act of 1934, as amended, Rule 175 under the Securities Act of 1933, as amended, and relevant legal decisions. The forward-looking statements involve risks and uncertainties and reflect, when made, the Company's estimates, objectives, projections, forecasts, plans, strategies, beliefs, intentions, opportunities and expectations. Actual results may differ materially from anticipated results or expectations and investors are cautioned not to place undue reliance on any forward-looking statements. Statements other than statements of historical fact are forward-looking statements. These forward-looking statements may be identified by, among other things, the use of forward-looking language, such as the words "believe," "anticipate," "estimate," "expect," "intend," "may," "project," "scheduled to," "seek," "should," "will be," "will continue," "will likely result," or the negative of those terms, or other similar words and phrases or by discussions of intentions or strategies. The following factors, among others and in addition to those described in the Company's reports filed with the SEC (including, without limitation, those described under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure," as such disclosure may be modified or supplemented from time to time), could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by it: economic conditions that affect the apparel industry; the Company's failure to anticipate, identify or promptly react to changing trends, styles, or brand preferences; further declines in prices in the apparel industry; declining sales resulting from increased competition in the Company’s markets; increases in the prices of raw materials; events which result in difficulty in procuring or producing the Company's products on a cost-effective basis; the effect of laws and regulations, including those relating to labor, workplace and the environment; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; the Company’s ability to protect its intellectual property or the costs incurred by the Company related thereto; the Company’s dependence on a limited number of customers; 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; unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; the sufficiency of cash to fund operations, including capital expenditures; the Company’s dependence on its senior management team and other key personnel; 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 failure of newly 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 the acquisition); and such newly acquired business being adversely affected, including by one or more of the factors described above and thereby failing to achieve anticipated revenues and earnings growth. The Company encourages investors to read the section entitled "Risk Factors" and the discussion of the Company's critical accounting policies under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Discussion of Critical Accounting Policies" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, as such discussions may be modified or supplemented by subsequent reports that the Company files with the SEC. The discussion in this press release is not exhaustive but is designed to highlight important factors that may affect actual results. Forward-looking statements speak only as of the date on which they are made, and, except for the Company's ongoing obligation under the U.S. federal securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 21 The Warnaco Group, Inc.
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