UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

(Mark One)

ý	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2005.

OR

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number: 0-20850

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
HAGGAR CORP.
For the quarterly period ended December 31, 2004.
(Exact name of the registrant as specified in its charter)
OR
Nevada		75-2187001
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
For the transition period from to .
11511 Luna Road Dallas, Texas 75234
Commission File Number: 0-20850
(Address of principal executive offices) (Zip Code)
Telephone Number: (214) 352-8481
(Registrant’s telephone number, including area code)

HAGGAR CORP.

(Exact name of registrant as specified in its charter)

Nevada		75-2187001
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
11511 Luna Road Dallas, Texas 75234
(Address of principal executive offices) (Zip code)
(214) 352-8481
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý

No o

As of ~~February~~ 7August 8, 2005, there were 7,~~071~~083,~~870~~333 shares of the Registrant’s common stock outstanding.

Haggar Corp. and Subsidiaries

Index

Part I. Financial Information
	Item 1.	Financial Statements (Unaudited)
	Item 1. Financial Statements (Unaudited)
	~~Consolidated Balance Sheets~~	Consolidated Balance Sheets
	(As of December 31, 2004 and September 30, 2004)
		(As of June 30, 2005 and September 30, 2004)
	Consolidated Statements of Operations and Comprehensive Income (Loss)
		Consolidated Statements of Operations and Comprehensive Income
	(Three months ended December 31, 2004 and 2003)
		(Three and nine months ended June 30, 2005 and 2004)
	~~Consolidated Statements of Cash Flows~~	Consolidated Statements of Cash Flows
	(Three months ended December 31, 2004 and 2003)
		(Nine months ended June 30, 2005 and 2004)
	~~Notes to Consolidated Financial Statements~~	Notes to Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4.	Controls and Procedures
	Item 4. Controls and Procedures
Part II. Other Information.
	Item 1.	Legal Proceedings
	Item 1. Legal Proceedings
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.	Defaults Upon Senior Securities
	Item 3. Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 5. Other Information
	Item 6.	Exhibits
	Item 6. Exhibits
Signatures

ITEM 1. FINANCIAL STATEMENTS

Haggar Corp. and Subsidiaries

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	December 31, 2004			September 30, 2004
	June 30, 2005			September 30, 2004
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2420,~~667~~175		$	30,667
Accounts receivable, net	3549,~~148~~605			56,132
Inventories, net	~~101~~87,~~138~~995			95,229
Deferred tax asset	11,021			11,021
Property held for sale	2,538			—
Other current assets	7,968			7,392
Deferred tax asset	11,027			11,021
Total current assets	179,942			200,441
Other current assets	5,923			7,392
Property, plant and equipment, net	44,597			44,394
Total current assets	177,263			200,441
Property, plant and equipment, net	41,316			44,394
Goodwill, net	9,472			9,472
Other assets	910,~~842~~197			7,165
Total assets	$	~~243~~238,~~853~~248		$	261,472
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2518,~~418~~983		$	30,621
Accrued liabilities	3629,~~256~~962			36,678
Accrued wages and other employee compensation	24,~~949~~119			8,538
Current portion of long-term debt	~~100~~—			100
Total current liabilities	6453,~~723~~064			75,937
Other non-current liabilities	13,~~120~~417			12,760
Deferred tax liability	374			374
Long-term debt	~~2,000~~—			2,000
Total liabilities	8066,~~217~~855			91,071
Commitments and contingencies
Stockholders’ equity:
Preferred stock – par value $0.10 per share; 250,000 shares authorized and no shares issued at December 31, 2004 and September 30, 2004	—			—
Preferred stock – par value $0.10 per share; 250,000 shares authorized and no shares issued and outstanding at June 30, 2005 or September 30, 2004	—			—
Common stock – par value $0.10 per share; 25,000,000 shares authorized; 9,520,043 and 9,455,679 shares issued at December 31, 2004 and September 30, 2004, respectively	952			945
Common stock – par value $0.10 per share; 25,000,000 shares authorized; 9,530,309 and 9,455,679 shares issued at June 30, 2005 and September 30, 2004, respectively	953			945
Additional paid-in capital	5556,~~927~~135			54,966
Deferred compensation	(1,~~615~~352		)	(1,796		)
Cumulative translation adjustment	~~186~~5			(9		)
Retained earnings	~~137~~145,~~621~~087			141,256
	193,071			195,362
	200,828			195,362
Less – Treasury stock, 2,446,976 and 2,242,183 shares at cost at December 31, 2004 and September 30, 2004, respectively.	(29,435		)	(24,961		)
Less – Treasury stock, 2,446,976 and 2,242,183 shares at cost at June 30, 2005 and September 30, 2004, respectively	(29,435		)	(24,961		)
Total stockholders’ equity	~~163~~171,~~636~~393			170,401
Total liabilities and stockholders’ equity	$	~~243~~238,~~853~~248		$	261,472

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

Haggar Corp. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income ~~(Loss)~~

(unaudited, in thousands, except per share amounts)

	Three Months Ended December 31,
	Three months ended June 30,						Nine months ended June 30,
	2004			2003
	2005			2004			2005			2004
Net sales	$	~~100~~119,~~543~~492		$	~~107~~116,~~735~~347		$	340,833		$	356,146
Cost of goods sold	7285,~~757~~026			7684,~~412~~109			243,725			255,690
Reorganization costs	(~~321~~1,765		)	—			(1,291		)	—
Gross profit	2836,~~107~~231			3132,~~323~~238			98,399			100,456
Selling, general and administrative expenses	(3328,~~843~~837		)	(29,~~574~~368		)	(91,601		)	(91,429		)
Royalty income	~~355~~224			~~254~~255			852			854
Other income, net	264			371
Other income (expense), net	398			(30		)	608			369
Interest expense	(~~209~~208		)	(~~457~~393		)	(653		)	(1,309		)
Income (loss) before provision (benefit) for income taxes	(5,326		)	1,917
Income before provision for income taxes	7,808			2,702			7,605			8,941
Provision (benefit) for income taxes	(2,061		)	732
Provision for income taxes	3,052			1,032			2,695			3,415
Net income (loss)	$	(3,265	)	$	1,185
Net income	$	4,756		$	1,670		$	4,910		$	5,526
Other comprehensive income (loss):
Foreign currency translation adjustment	~~195~~(107		)	~~112~~135			14			393
Comprehensive income (loss)	$	(3,070	)	$	1,297
Comprehensive income	$	4,649		$	1,805		$	4,924		$	5,919
NET INCOME (LOSS) PER COMMON SHARE:
NET INCOME PER COMMON SHARE:
– Basic and Diluted	$	(0.46	)	$	0.18
— Basic	$	0.68		$	0.24		$	0.70		$	0.81
Weighted average number of common shares outstanding:
— Diluted	$	0.67		$	0.23		$	0.69		$	0.79
– Basic	7,072			6,561
Weighted average number of common shares outstanding:
– Diluted	7,072			6,726
— Basic	6,997			7,049			7,017			6,810
— Diluted	7,090			7,164			7,124			6,962

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

Haggar Corp. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited, in thousands)

	Three Months Ended December 31,
	Nine months ended June 30,
	2004			2003
	2005			2004
Cash Flows from Operating Activities
Net income (loss)	$	(3,265	)	$	1,185
Net income	$	4,910		$	5,526
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,~~489~~134			14,~~621~~548
Gain on the disposal of property, plant and equipment	—			(201		)
Loss (gain) on the disposal of property, plant and equipment	182			(232		)
Stock compensation expense	181			85
Stock-based compensation expense	625			389
Increase in cash surrender value of officers’ life insurance	(365		)	—
Increase in cash surrender value of officers’ life insurance policies	(304		)	(370		)
Tax benefits from employee stock plans	~~193~~192			—
Changes in assets and liabilities:
Accounts receivable, net	216,~~331~~895			205,~~251~~079
Inventories	(5,757		)	(1,975		)
Inventories, net	7,225			956
Other current assets	~~(624~~1,470		)	(21,~~549~~662		)
Other non-current assets	54			—
Other assets	119			(21		)
Accounts payable	(914,~~543~~261		)	3(1,~~908~~233		)
Accrued liabilities	(~~570~~6,740		)	~~733~~3,475
Accrued wages and other employee compensation	(54,~~589~~419		)	(31,~~768~~139		)
Other non-current liabilities	~~360~~657			~~617~~1,228
Net cash provided by (used in) operating activities	(2,105		)	19,907
Net cash provided by operating activities	685			16,544
Cash Flows from Investing Activities
Purchases of property, plant and equipment	(1,741		)	(1,519		)
Purchases of property, plant and equipment, net	(4,443		)	(2,846		)
Proceeds from sale of property, plant and equipment	~~146~~842			~~201~~232
Decrease in restricted cash	—			1,287
Net payments of loans on officers’ life insurance policies	(2,422		)	—
Other non-current assets	—			(114		)
Premiums on officers’ life insurance policies	(617		)	(693		)
Net cash used in investing activities	(4,017		)	(145		)
Proceeds from officers’ life insurance policies	—			471
Net cash used in investing activities	(6,640		)	(1,549		)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt	—74,000			1566,000
Payments on long-term debt	—(76,100		)	(1869,~~671~~669		)
Proceeds from exercise of employee stock options	~~775~~797			27,~~252~~474
Debt issuance costs	—			(420		)
Purchases of treasury stock	(4,474		)	—
Increase (decrease) in book overdrafts	42,~~136~~302			(~~929~~4,472		)
Payments of cash dividends	(~~370~~1,078		)	(~~334~~1,043		)
Net cash provided by (used in) financing activities	67			(2,682		)
Net cash used in financing activities	(4,553		)	(2,130		)
Effect of exchange rates on cash and cash equivalents	5516			~~112~~148
Increase (decrease) in cash and cash equivalents	(610,~~000~~492		)	1713,~~192~~013
Cash and cash equivalents, beginning of period	30,667			7,674
Cash and cash equivalents, end of period	$	2420,~~667~~175		$	2420,~~866~~687

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

Haggar Corp. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

1. Basis of Presentation

Financial Statement Preparation

The consolidated balance sheet as of ~~December 31~~June 30, ~~2004~~2005, ~~and~~ the consolidated statements of operations and comprehensive income ~~(loss)~~for the three and ~~cash~~nine months ended June 30, 2005 and 2004, and the consolidated statements of cash flows for the ~~three~~nine months ended ~~December 31~~June 30, ~~2004~~2005 and ~~2003~~2004, have been prepared by Haggar Corp. (together with its subsidiaries, the “Company”) ~~without~~ without audit. The consolidated balance sheet as of September 30, 2004, has been derived from the Company’s audited financial statements as of that date, but does not include all of the information and footnotes required by ~~accounting principles~~ generally accepted inaccounting ~~the United~~principles ~~States of America~~ for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position, results of operations, and cash flows of the Company at ~~December 31~~June 30, ~~2004~~2005, and for all other periods presented, have been made. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the Securities and Exchange Commission’s ~~rules~~ rules for interim reporting. Accordingly, these financial statements should be read in conjunction with the financial statements and accompanying notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2004.

Accounting for Stock Based Compensation

The Company accounts for its long-term incentive plans under Accounting Principles Board Opinion No. 25. As required under Statement of Financial Accounting Standards ~~No. 123~~ (“SFAS”) No. 123”), “Accounting for Stock-Based Compensation,” the pro forma effects of stock-based compensation on net income ~~(loss)~~ and net income ~~(loss)~~ per common share are as follows (in thousands, except per share amounts):

	Three Months Ended December 31,
	Three months ended June 30,						Nine months ended June 30,
	2004			2003
	2005			2004			2005			2004
Net income (loss):
Net income:
As reported	$	(34,~~265~~756	)	$	1,~~185~~670		$	4,910		$	5,526
Add back: Stock-based employee compensation included in net income (loss) as reported, net of related tax effects	112			53
Add back: Stock-based compensation included in net income as reported, net of related tax effects	145			106			394			241
Less: Pro-forma stock-based employee compensation expense, net of related tax effects	(119		)	(59		)
Less: Pro-forma stock-based compensation expense, net of related tax effects	(161		)	(114		)	(429		)	(266		)
Pro forma net income (loss)	$	(3,272	)	$	1,179
Pro-forma net income	$	4,740		$	1,662		$	4,875		$	5,501
Net income (loss) per common share:
Net income per common share:
Basic and Diluted
—Basic
As reported	$	(0.4668	)	$	0.1824		$	0.70		$	0.81
Pro forma	$	(0.4668	)	$	0.1824		$	0.69		$	0.81
—Diluted
As reported	$	0.67		$	0.23		$	0.69		$	0.79
Pro forma	$	0.67		$	0.23		$	0.68		$	0.79

~~There were no options or restricted stock awards granted during the three months ended December 31, 2004 and 2003.~~6

6The Company granted options to certain directors in both March 2004 and February 2005 under the Company’s long-term incentive plan adopted in fiscal 2003 (the “2003 LTIP”). The options vest over three years. The fair value of the options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

2. Inventories, net

Option Grant Date	Options Granted	Fair Value		Interest Rate		Expected Volatility		Expected Dividend Rate		Expected Lives

March 2004	15,000	$	7.50	2.72	%	45.27	%	$	0.20	5 years

February 2005	15,000	$	7.09	2.95	%	44.30	%	$	0.20	5 years

~~Inventories~~In June 2005, ~~net~~3,000 ~~are~~shares ~~stated~~of atrestricted stock with a fair value of $20.11 per share were granted to one director of the ~~lower~~Company. In February 2005, 5,000 shares of restricted ~~cost~~stock ~~(first-in~~with a fair value of $18.99 per share were granted to another director of the Company. In the second quarter of fiscal 2004, ~~first-out)~~125,000 shares orof ~~market~~restricted stock with fair values ranging from $19.69 to $19.85 per share were granted to certain officers and ~~consisted~~directors of the ~~following~~Company. All atsuch ~~December~~restricted 31stock shares, ~~2004~~which were granted under the 2003 LTIP, have dividend rights and ~~September~~voting rights, but are subject to restrictions on transfer and risk of forfeiture until vested. The shares vest in three equal annual installments. The Company recorded in stockholders’ equity deferred compensation of $0.2 million and $2.5 million during the nine months ended June 30, 2005 and 2004, (respectively, related to the restricted stock grants. In May 2004, one of the Company’s officers resigned and forfeited 10,000 restricted shares. The Company reversed $0.2 million in ~~thousands):~~deferred compensation related to these shares, as well as minimal expense the Company had recognized through the date of forfeiture. The remaining deferred compensation balance will be amortized as expense on a straight-line basis over the vesting periods of the respective awards.

	December 31, 2004			September 30, 2004
Piece goods	$	4,680		$	4,473
Trimmings & supplies	1,331			1,550
Work-in-process	3,116			4,464
Finished garments	92,672			85,442
	101,799			95,929
Inventory reserves	(661		)	(700		)
Total inventories, net	$	101,138		$	95,229

Correction of Prior Period Errors

~~Work-in-~~In connection with the financial statement preparation process ~~and~~for the quarter ended December 31, 2004, the Company’s management identified two accounting errors related to prior reporting periods. The first error was an understatement of inventory at September 30, 2004, resulting from utilization of incorrect finished ~~garments~~goods ~~inventories~~inventory ~~consisted~~overhead factors at such date. This error was corrected in the quarter ended December 31, 2004 and resulted in an overstatement of cost of sales of ~~materials~~$760,000 ~~labor~~for the quarter ended December 31, 2004. The second error was an understatement of the customer allowances reserve at September 30, 2004. This error was also corrected in the quarter ended December 31, 2004, and ~~manufacturing~~resulted ~~overhead~~in an overstatement of net sales of $773,000 for the quarter ended December 31, 2004. Management believes that the impact of these errors was not quantitatively or qualitatively material on an individual and net basis to the prior period or the quarter ended December 31, 2004. As such, prior period results have not been restated and the errors corrections were recorded in the quarter ended December 31, 2004.

32. ~~Segment~~ ~~Reporting~~2005 Strategic Sourcing Changes

~~The~~Sewing Company’s three operating segments are business units that offer similar products through different distribution channels. The Company’s wholesale segment designs, manufactures, imports and markets casual and dress men’s and women’s apparel to retailers. The Company also operates two other segments, including the retail segment, which markets Haggar® branded products through 75 Company operated stores located in outlet and strip malls throughout the United States, and the licensing segment, which generates royalty income by licensing the Company’s trademarks for use by other manufacturers of specified products in specified geographic areas. The Company evaluates performance and allocates resources based on segment profits.Facilities

~~Intercompany~~On ~~sales~~May 3, ~~from~~2005, the ~~wholesale~~Company ~~segment to~~announced ~~the~~plans ~~retail~~to ~~segment~~close ~~are~~its ~~not~~two remaining ~~reflected~~Company-operated insewing ~~wholesale segment~~plants, ~~net~~located ~~sales. Additionally~~in Leon, ~~there~~Mexico isand noLa Romana, ~~profit~~Dominican ~~included~~Republic, ~~on sales~~as ~~from~~part of the ~~wholesale~~Company’s ~~segment~~plan to focus sourcing efforts in the ~~retail~~Eastern ~~segment~~Hemisphere. ~~Segment~~As ~~profit~~of March 31, ~~(loss)~~2005, isthe ~~comprised~~Company ofemployed ~~segment~~approximately 1,675 associates at the ~~net~~sewing ~~income~~facilities. The ~~(loss)~~Company ~~before~~completed the ~~net~~closures ~~interest~~during ~~expense~~the ~~and~~third ~~provision~~quarter ~~(benefit)~~of ~~for income~~fiscal ~~taxes~~2005.

~~The~~As ~~table~~of ~~below~~March 31, ~~reflects~~2005, ~~the~~given ~~Company~~that plant closures and associated severance costs were probable, management recorded a $0.8 million pre-tax charge to reorganization costs for severance and other related benefits in accordance with SFAS No. 112, “Employer’s ~~segment~~ ~~results~~Accounting for Post-employment Benefits and an Amendment of FASB Statements No. 5 and 43.” During the ~~three~~third ~~months~~quarter ~~ended~~of ~~December~~fiscal 312005, ~~2004~~the Company ~~and~~incurred ~~2003~~$0.8 (million in ~~thousands):~~additional charges related to the closure, which included $0.3 million in additional severance and other related benefits, $0.3 million related to

	Wholesale			Retail		Licensing		Consolidated
2004
Net sales	$	83,958		$	16,585	$	—	$	100,543
Segment profit (loss)	$	(6,771	)	$	1,299	$	355	$	(5,117	)
2003
Net sales	$	92,410		$	15,325	$	—	$	107,735
Segment profit	$	989		$	1,131	$	254	$	2,374

7the accelerated depreciation of certain equipment at the sewing plants and $0.2 million for other costs related to the closure.

AAs ~~reconciliation~~ of ~~total~~June 30, ~~segment~~2005, ~~profit~~the ~~(loss)~~Company toincluded ~~consolidated~~$0.4 ~~income~~million in unpaid ~~(loss)~~severance ~~before~~and ~~provision~~other ~~(benefit)~~related ~~for~~benefits ~~income~~and ~~taxes~~$0.2 million in other shutdown costs in accrued liabilities. The Company expects to pay a substantial portion of these amounts by September 2005. The Company is actively marketing the land, building and other equipment from the Mexico facility, as ~~follows~~well ~~(in~~as ~~thousands):~~certain equipment from the Dominican Republic facility. Land, building and equipment costs from both sewing plants of $0.6 million were classified as property held for sale as of June 30, 2005. Management expects the selling prices for all property held for sale to exceed carrying values.

	Three Months Ended December 31,
	2004			2003
Segment profit (loss)	$	(5,117	)	$	2,374
Interest expense	(209		)	(457		)
Consolidated income (loss) before provision (benefit) for income taxes	$	(5,326	)	$	1,917

Raw Materials Warehouse

On March 31, 2005, the Company closed its owned raw materials warehouse facility in Weslaco, Texas. The Company ~~does~~eliminated ~~not~~16 ~~segregate~~positions ~~assets~~in onconjunction with the closure, resulting in a ~~segment~~pre-tax ~~basis~~charge ~~for~~of ~~internal management~~approximately ~~reporting~~$0.1 ~~and,~~million ~~therefore~~to selling, ~~such~~general and ~~information~~administrative isexpense ~~not~~during ~~presented~~the second quarter of fiscal 2005.

4As of June 30, 2005, the Company was actively marketing the property, which includes a separate building used as a fabric cutting facility until its closure in fiscal 2002. ~~Commitments~~ Accordingly, land and ~~Contingencies~~building costs of $1.9 million were classified as property held for sale as of June 30, 2005.

~~The Company was party to an operating lease for a corporate aircraft which contained a residual value guarantee~~3. ~~Under the lease~~Inventories, which ended in December 2004, the Company had the option of (a) returning the aircraft to the lessor and paying the guaranteed residual value of $3.0 million; (b) purchasing the aircraft for $4.0 million; or (c) arranging for the sale of the aircraft to a third party. If the sales proceeds were less than $4.0 million, the Company was required to reimburse the lessor for the deficiency. If the sales proceeds exceeded $4.0 million, the Company was entitled to all of such excess amounts.net

~~On December 16~~Inventories, ~~2004,~~net ~~the~~are ~~Company~~stated ~~completed~~at the ~~sale~~lower of ~~the~~cost ~~aircraft~~(first-in, tofirst-out) aor ~~third~~market ~~party for proceeds of $3.2 million, net of commission~~ and ~~expenses~~consisted of ~~$0.2~~ ~~million. The Company reimbursed~~ the ~~lessor~~ ~~for~~following aat ~~$0.9 million deficiency~~June 30, ~~which included nominal fees related to the termination of the lease prior to December 31~~2005, ~~2004. The~~and ~~Company had accrued $0.7 million of this amount as of~~ September 30, 2004, ~~and recorded the additional $0.2 million~~ (in ~~selling,~~ ~~general and administrative expenses during the three months ending December 31, 2004.~~thousands):

The Company has been named as a defendant in several legal actions arising from its operations in the normal course of business, including actions brought by certain terminated employees. Although exact settlement amounts, if any, related to these actions cannot accurately be predicted, the claims and damages alleged, the progress of the litigation to date and past experience with similar litigation leads the Company to believe that any liability resulting from these actions and those described below will not, individually or collectively, have a material adverse effect on the Company.

	June 30, 2005			September 30, 2004
Piece goods	$	4,103		$	4,473
Trimmings & supplies	240			1,550
Work-in-process	2,954			4,464
Finished garments	81,739			85,526
	89,036			96,013
Inventory reserves	(1,041		)	(784		)
Total inventories, net	$	87,995		$	95,229

~~The Company is a defendant~~ Work-in a wrongful termination lawsuit brought in federal district court in 2000 by a former salesman. A jury rendered a verdict in January 2002 in favor of the plaintiff against the Company in the amount of $0.8 million, subject to potential doubling in the event judgment is entered on the jury’s finding of willful discrimination, plus pre-process and ~~post-judgment~~finished ~~interest~~garments ~~and attorneys’~~inventories ~~fees. After~~consisted ~~various appeals and remand to the trial court, on January 31, 2005, the Company received a Memorandum Order ordering the Company to pay, after entry~~ of ~~judgment, backpay~~ ~~in the amount of $0.8 million~~materials, ~~liquidated~~labor ~~damages of $0.8 million~~ and ~~front~~manufacturing ~~pay of $0~~overhead.5 million. The court also ordered the Company to make monthly payments of $14,583 until the Company reinstates the plaintiff to the first available sales associate vacancy in the Dallas area. The trial court denied, however, plaintiff’s request for enhanced backpay and prejudgment interest. The trial court has advised the plaintiff that the law entitles him to an award of attorney’s fees, for which he must submit a motion. The plaintiff’s counsel has sought a stipulation to attorney’s fees of $0.9 million, which the Company, through its counsel, has refused. During the first quarter of fiscal 2005, the Company recorded an additional $1.7 million charge to selling, general and administrative expenses related to this matter. The Company has reserved $2.7 million in accrued liabilities for this matter as of December 31, 2004. The Company is currently reviewing its opportunities for appeal, once a final judgment is entered by the trial court.

84. Long-Term Debt

~~During~~Long-term ~~fiscal~~debt ~~2003~~consisted ~~and~~of ~~2004, one attorney has filed five separate suits in Texas state court against~~ the ~~Company~~following ~~and~~at ~~certain of its subsidiaries~~June 30, ~~as well as unrelated third parties~~2005, ~~alleging injuries to approximately 2,200 former employees from airborne fibers~~ and ~~chemicals in certain of the Company’s now closed facilities located in south Texas.~~September ~~All proceedings in one case~~30, ~~which names over 2,100 plaintiffs, have~~ ~~been~~2004 stayed due to the unrelated bankruptcy of one of the other defendants. The Company is awaiting a decision by the trial court on its motion to dismiss another case, which names 71 plaintiffs. After taking discovery (in ~~one~~ of the remaining cases, the Company believes that all of these cases and claims are frivolous and that the plaintiffs have no factual or legal basis for any of their allegations. In addition, the Company believes that it has meritorious defenses to all of the asserted claims. The Company intends to vigorously defend all of these suits.thousands):

Jury verdicts in two cases totaling approximately $1.7 million in the aggregate were returned in fiscal 2000 against certain subsidiaries of the Company related to claims by former employees of now closed manufacturing facilities for wrongful discharge and common law tort. Both cases have been on appeal to the Texas Supreme Court, because management and legal counsel believe the verdicts in the lawsuits are both legally and factually incorrect. On December 31, 2004 the Texas Supreme Court reversed the judgment of the Court of Appeals and rendered judgment in the Company’s favor in one of such cases. As a result, during the first quarter of fiscal 2005, the Company reversed the prior accrual for such case, resulting in a $0.3 million increase in gross profit for such quarter. The other case remains on appeal. The Company has $2.6 million reserved in accrued liabilities for the remaining case as of December 31, 2004.

	June 30, 2005		September 30, 2004
Borrowings under revolving credit line	$	—	$	—
Industrial Development Revenue Bonds	—		2,100
Total debt	—		2,100
Less – current portion	—		(100		)
Long-term debt	$	—	$	2,000

~~5. Shipping and Handling Fees~~8

As of June 30, 2005, the Company had no amounts outstanding under a $111.0 million unsecured revolving credit agreement (the “Agreement”). The available borrowing capacity was restricted to $54.6 million at June 30, 2005, under the Agreement’s funded debt to operating cash flow covenant. The Company ~~records~~incurred ~~shipping~~approximately $0.3 million in unused letters of credit and ~~handling~~commitment fees asrelated ~~selling~~to the available borrowing capacity during the nine months ended June 30, ~~general~~2005. ~~and~~The interest rates ranged from 2.34% ~~administrative~~to ~~expense~~6. ~~For~~25% during the ~~three~~ nine months ended ~~December~~June 30, 312005, ~~2004~~and were based upon both margins over a bank base rate and ~~2003~~margins over LIBOR, depending on the borrowing option selected by the Company. The Agreement, which expires in June 2007, prohibits the Company from pledging its accounts receivable and inventories, contains limitations on incurring additional indebtedness, requires maintaining minimum net worth levels of the Company and the Company’s main operating subsidiary, and requires the maintenance of certain financial ratios. The Agreement also prohibits the payment of any dividend if a default exists after giving effect to such ~~costs~~a ~~were~~dividend. As of June 30, 2005, the Company was in full compliance with its financial and other covenants under the Agreement. On August 5, 2005, the Company notified the lender that it would reduce the maximum borrowings under the Agreement to $270.70 million, effective September 6, 2005. Management exercised the right to reduce the maximum borrowings in order to reduce future commitment fees due to the Company’s current anticipated borrowing requirements.

6The Company called and paid in full the remaining $2. ~~Basic~~0 million balance of outstanding Industrial Development Revenue bonds on June 30, 2005, without penalty. The bonds were collateralized by a building and ~~Diluted~~certain ~~Common~~equipment ~~Shares~~at the Company’s former fabric cutting facility in Weslaco, Texas, which the Company is currently marketing for sale.

~~The following table sets forth the computation of basic and diluted~~5. ~~weighted~~Segment ~~average common shares (in thousands):~~Reporting

	Three Months Ended December 31,
	2004	2003
Weighted average common shares outstanding	7,072	6,561
Shares equivalents, due to stock options and restricted stock	—	165
Weighted average diluted shares outstanding	7,072	6,726

The Company’s three operating segments are business units that offer similar products through different distribution channels. The Company’s wholesale segment designs, manufactures, imports and markets casual and dress men’s and women’s apparel to retailers throughout North America. The Company also operates a retail segment, which markets Haggar® branded products through 82 Company-operated stores located in outlet and strip malls throughout the United States, and a licensing segment, which generates royalty income by licensing the Company’s trademarks for use by manufacturers or marketers of specified products in specified geographic areas. The Company evaluates performance and allocates resources based on segment profits.

~~Options~~Intercompany tosales ~~purchase~~from ~~142,223~~the ~~shares~~wholesale ~~were~~segment ~~excluded~~to ~~from~~ the ~~diluted~~retail segment are ~~earnings~~not ~~per~~reflected ~~share~~in ~~calculations~~wholesale ~~for~~segment ~~the~~net ~~three~~sales. Additionally, ~~months~~there ~~ended~~is ~~December~~no ~~31,~~profit ~~2004,~~included on sales from the wholesale ~~due~~segment to the retail segment. Segment profit is comprised of segment net ~~loss~~income ~~recorded~~before ~~during~~interest ~~the~~expense ~~period~~and provision for income taxes.

~~Options~~The totable ~~purchase~~below ~~8,000~~reflects ~~shares were excluded from~~ the ~~diluted earnings~~Company’s ~~per~~segment ~~share~~results ~~calculations~~ for the three and nine months ended ~~December 31~~June 30, ~~2003, because~~2005 ~~the~~and ~~options’~~2004 ~~exercise~~(in ~~prices were greater than the average market price of the common shares during the period.~~thousands):

7. Dividends

Three months ended June 30,	Wholesale		Retail		Licensing		Consolidated
2005
Net sales	$	103,351	$	16,141	$	—	$	119,492
Segment profit	$	7,156	$	636	$	224	$	8,016

2004
Net sales	$	103,173	$	13,174	$	—	$	116,347
Segment profit	$	2,337	$	503	$	255	$	3,095

~~During the first quarter of fiscal 2005, the Company declared a cash dividend of $0.05 per share payable to the stockholders of record on February~~ 9~~, 2005, which will be paid on March 7, 2005. The fourth quarter of fiscal 2004 dividend of approximately $0.4 million was paid in November 2004.~~

Nine months ended June 30,	Wholesale		Retail		Licensing		Consolidated
2005
Net sales	$	297,268	$	43,565	$	—	$	340,833
Segment profit	$	6,263	$	1,143	$	852	$	8,258

2004
Net sales	$	317,629	$	38,517	$	—	$	356,146
Segment profit	$	8,389	$	1,007	$	854	$	10,250

~~8. Related~~A reconciliation of total segment profit to consolidated income before ~~Party~~provision ~~Transactions~~for income taxes is as follows (in thousands):

A director of the Company, who became a director in fiscal 2002, is a partner of a law firm that rendered various legal services to the Company during the three months ended December 31, 2004 and 2003. The Company paid the law firm approximately $42,000 and $0.4 million for legal services during the three months ended December 31, 2004 and 2003, respectively. There were $14,000 and $0.1 million in unpaid fees due to the law firm at December 31, 2004 and 2003, respectively, which were included in accrued liabilities.

	Three months ended June 30,						Nine months ended June 30,
	2005			2004			2005			2004
Total segment profit	$	8,016		$	3,095		$	8,258		$	10,250
Interest expense	(208		)	(393		)	(653		)	(1,309		)
Consolidated income before provision for income taxes	$	7,808		$	2,702		$	7,605		$	8,941

~~9. Sales~~The ~~Force~~table below reflects the net sales related to the Company’s key ~~Reduction~~product lines as a percentage of consolidated net sales for the three and nine months ended June 30, 2005 and 2004:

As of September 30, 2004, the Company’s senior management committed to a plan to reduce the Company’s sales force. Severance benefits for this reduction in force were to be determined in accordance with an established severance plan communicated to all affected employees. The Company recorded a $0.4 million pre-tax charge to selling, general and administrative expenses during fiscal 2004 which approximated average severance benefits for three employees pursuant to the severance plan.

	Three months ended June 30,				Nine months ended June 30,
	2005		2004		2005		2004
Net sales by category:
Men’s Haggar® branded apparel	64.2	%	62.4	%	63.4	%	66.9	%
Men’s licensed apparel	12.2	%	15.1	%	12.3	%	9.7	%
Men’s private label apparel	16.6	%	14.6	%	16.1	%	14.2	%
Women’s apparel	7.0	%	7.9	%	8.2	%	9.2	%
Consolidated net sales	100.0	%	100.0	%	100.0	%	100.0	%

~~During~~The ~~November~~Company ~~2004,~~does ~~management~~not ~~communicated~~segregate ~~the~~assets ~~reduction~~on ina ~~force~~segment ~~to the~~basis ~~sales force and asked~~ for ~~volunteers to accept the severance benefits. On December 15, 2004,~~ internal management ~~engaged~~reporting ~~in negotiations with three volunteers from the sales force~~ and, ~~as a result of these negotiations~~therefore, ~~granted~~such aninformation ~~additional~~is ~~amount~~not ~~over the severance benefits prescribed by the severance plan~~presented. The Company recorded an additional $0.3 million pre-tax charge to selling, general and administrative expenses during the first quarter of fiscal 2005 for these incremental severance benefits. Severance payments for these three employees began at their termination dates in January 2005 and are expected to continue through March 2006. The Company included $0.7 million in accrued liabilities related to these severance benefits.

106. ~~Officer’s~~ ~~Life~~Commitments ~~Insurance~~and ~~Policy Activity~~Contingencies

~~During~~The ~~fiscal~~Company ~~1991,~~was ~~the~~party ~~Company~~to ~~entered~~an ~~into~~operating ~~split-dollar~~lease ~~life insurance~~for ~~agreements~~a ~~with~~corporate ~~trusts~~aircraft that ~~established~~contained bya ~~three~~residual ~~former~~value ~~officers~~guarantee. Under of the ~~Company. Pursuant~~ tolease, ~~these~~which ~~agreements~~ended in December 2004, the Company ishad ~~entitled~~the option toof (a) returning the ~~cumulative~~aircraft ~~premiums~~to itthe ~~has~~lessor ~~paid~~and onpaying the ~~policies~~ ~~less~~guaranteed ~~the~~residual ~~Company’s~~value ~~interest~~of in$3.0 ~~policy~~million; ~~loans~~(b) purchasing ~~and~~the ~~related~~aircraft ~~accrued interest~~for $4. No0 ~~further~~million; ~~premiums~~or ~~are~~(c) arranging ~~due~~for onthe ~~these~~sale of the aircraft to a third ~~policies~~party. ~~The~~If ~~Company’s~~the ~~interest~~sales inproceeds ~~the~~were less ~~policies~~than ~~was~~ $14.10 million, atthe ~~September~~Company ~~30,~~was ~~2004,~~required ~~which~~to ~~was~~reimburse ~~net~~the oflessor for the deficiency. If the sales proceeds exceeded $94.10 million in, ~~policy~~the ~~loans~~Company ~~made~~was entitled to ~~the~~all ~~Company~~of such excess amounts.

~~The Company was notified of the death of one of the insured former officers in September 2004.~~ In ~~November~~ December 2004, the ~~insurance~~Company ~~company~~completed ~~applied~~ the ~~proceeds~~sale of ~~$4.5 million directly to~~ the ~~$4.0 million in outstanding loans related~~ aircraft to ~~this~~a ~~policy,~~third ~~and~~party ~~the~~for ~~Company received net~~ proceeds of $03.42 million, net of ~~interest~~commission and expenses of $0.12 million~~, related to this policy~~. InThe ~~October 2004, the~~ Company ~~executed~~ reimbursed the ~~surrender~~lessor offor a $20.29 million indeficiency, ~~accumulated~~which ~~cash~~included ~~dividends~~nominal onfees related to the ~~second~~termination of ~~these policies, resulting in a reduction of~~ the ~~policy~~lease ~~loans~~prior ~~for this~~to ~~amount~~December 31, 2004. InThe ~~November 2004, the~~ Company ~~repaid~~had ~~the~~accrued ~~remaining policy loans of~~ $20.97 million ~~for~~of ~~these~~this ~~policies. As~~amount aas ~~result~~ of ~~the transactions described above~~September 30, ~~at December 31,~~ 2004, ~~all~~and ~~policy~~recorded ~~loans~~the ~~had~~additional ~~been~~$0.2 million ~~repaid~~in ~~and~~selling, ~~the~~general ~~cash~~and ~~surrender~~administrative ~~value~~expenses ofduring the ~~policies~~three ~~was~~months ~~$3.6~~ended ~~million~~December 31, 2004.

~~11. Equity~~10

OnThe ~~November~~Company ~~30,~~has ~~1999,~~been ~~the~~named ~~Board~~as ofa ~~Directors~~defendant ~~authorized~~in ~~the~~several ~~Company~~legal toactions ~~repurchase~~arising offrom upits tooperations ~~3,000,000~~in ~~shares of~~ the ~~Company’s~~normal ~~stock~~course ~~(the~~of ~~“1999~~business, ~~Program”). The~~including ~~1999~~actions brought ~~Program~~by ~~does~~certain ~~not~~terminated ~~have an expiration date~~employees. As Although ofexact ~~September~~settlement 30amounts, ~~2002,~~if ~~the Company had purchased 2~~any,~~242,183~~ ~~shares~~related ofto ~~stock. The~~these ~~Company~~actions cannot ~~did~~accurately ~~not~~be ~~purchase~~predicted, ~~any~~the ~~shares~~claims ~~in fiscal~~and ~~2003~~damages oralleged, ~~fiscal~~the ~~2004. On~~progress ~~November~~of ~~8, 2004,~~ the ~~Company~~litigation ~~publicly~~to ~~announced~~date ~~that~~and itpast ~~was~~experience ~~resuming~~with ~~its~~similar ~~stock~~litigation ~~buyback~~leads the ~~program~~Company ~~and,~~to ~~during~~believe ~~the~~that ~~first~~any ~~quarter~~liability ofresulting ~~fiscal~~from ~~2005,~~these ~~purchased~~actions ~~204,793~~and ~~shares~~those ofdescribed ~~outstanding~~below ~~stock~~will ~~for~~not, ~~$4.5~~individually ~~million~~or ~~commensurate~~collectively, ~~with~~have ~~that~~a ~~announcement. The~~material ~~amount and timing of additional purchases~~adverse ~~will~~effect ~~depend~~on ~~upon~~the ~~market conditions~~Company.

10The Company is a defendant in a wrongful termination lawsuit brought in federal district court in 2000 by a former salesman. A jury rendered a verdict in January 2002 in favor of the plaintiff against the Company. After various appeals and remand to the trial court, on January 31, 2005, the Company received a Memorandum Order ordering the Company to pay, after entry of judgment, backpay in the amount of $0.8 million, liquidated damages of $0.8 million and front pay of $0.5 million. The court also ordered the Company to make monthly payments of $14,583 until the Company reinstates the plaintiff to the first available sales associate vacancy in the Dallas area. The trial court denied, however, plaintiff’s request for enhanced backpay and prejudgment interest. During the first quarter of fiscal 2005, the Company recorded an additional $1.7 million charge to selling, general and administrative expenses related to this matter. During the second quarter of fiscal 2005, after negotiations with the plaintiff’s counsel, the Company agreed to pay $0.8 million in attorney’s fees, subject to the Company’s right to appeal the damages award. As a result, the Company recorded an additional $0.3 million charge to selling, general and administrative expenses. The Company filed its notice of appeal on April 28, 2005. The Company has reserved an aggregate of $3.1 million in accrued liabilities for this matter as of June 30, 2005.

12During fiscal years 2003 and 2004, one attorney filed five separate suits in Texas state courts against the Company and certain of its subsidiaries, as well as unrelated third parties, alleging injuries to approximately 3,000 former employees from airborne fibers and chemicals in certain of the Company’s now closed facilities located in south Texas. ~~Recently~~ All ~~Issued~~proceedings in one case, which names over 2,900 plaintiffs, have been stayed due to the unrelated bankruptcy of one of the other defendants. The Company is awaiting a decision by the trial court on its motion to dismiss another case, which names 71 plaintiffs. After taking discovery in one of the remaining cases, the Company believes that all of these cases and ~~Adopted~~claims ~~Financial~~are frivolous and that the plaintiffs have no factual or legal ~~Accounting~~basis ~~Standards~~for any of their allegations. In addition, the Company believes that it has meritorious defenses to all of the asserted claims. The Company intends to vigorously defend all of these suits, unless a favorable settlement can be achieved.

InJury ~~December~~verdicts ~~2004,~~in ~~the~~two ~~Financial~~cases ~~Accounting~~totaling ~~Standards~~approximately ~~Board issued Statement No~~$1.7 ~~123R~~million ~~(revised~~in ~~2004),~~the aggregate ~~entitled~~were ~~“Share-Based~~returned ~~Payment”~~in ~~(“SFAS~~fiscal ~~No. 123R”)~~2000 toagainst ~~amend~~certain ~~Statement~~subsidiaries of ~~Financial~~the Company ~~Accounting~~related ~~Standards~~to ~~(“SFAS”)~~claims ~~No.~~by ~~123,~~former ~~“Accounting for~~employees ~~Stock-Based~~of ~~Compensation”~~now ~~and~~closed ~~SFAS~~manufacturing facilities ~~No.~~for ~~95,~~wrongful ~~“Statement~~discharge ofand ~~Cash~~common ~~Flows”~~law tort. ~~The~~Both ~~standard’s~~cases ~~effective~~were ~~date~~appealed ~~will~~to ~~apply~~the toTexas Supreme ~~awards~~Court ~~that~~because ~~are~~management ~~granted,~~and ~~modified,~~legal orcounsel ~~settled~~believed inthe ~~cash~~verdicts inwere ~~interim~~both legally orand ~~annual~~factually incorrect. On December 31, ~~periods~~2004, ~~beginning~~the ~~after~~Texas ~~June~~Supreme ~~15,~~Court ~~2005.~~reversed ~~This~~the ~~standard~~judgment ~~eliminates~~of the ~~ability~~Court ~~to account~~of ~~for~~Appeals ~~share-based~~and rendered ~~compensation~~judgment ~~using~~in the ~~intrinsic~~Company’s ~~value-based~~favor ~~method under~~in ~~Accounting~~one ~~Principles~~of ~~Board~~such ~~Opinion No~~cases. As 25a result, ~~“Accounting~~during ~~for~~the ~~Stock~~first ~~Issued~~quarter of tofiscal ~~Employees”. SFAS~~2005, ~~No. 123R requires~~ the Company toreversed ~~calculate~~the ~~equity-based~~prior ~~compensation~~accrual ~~expense~~ for ~~stock~~such ~~options~~case, resulting in ~~and~~a ~~employee~~$0.3 ~~stock~~million ~~purchase~~increase ~~plan~~in ~~rights~~gross ~~granted~~profit tofor ~~employees~~such ~~based~~quarter. On onMay 13, 2005, the ~~fair~~Texas Supreme Court ~~value~~rendered ofjudgment for the ~~equity~~Company ~~instrument~~in at the ~~time~~remaining ~~of grant~~case. The ~~Currently,~~Texas Supreme ~~the~~Court ~~Company discloses~~reversed the ~~pro~~Court ~~forma~~of ~~net~~Appeals’ ~~income~~judgment ~~(loss)~~that ~~and~~had ~~related~~upheld ~~pro~~a ~~forma income (loss)~~jury ~~per~~verdict ~~share~~of ~~information~~$0.2 in ~~accordance~~compensatory ~~with~~damages ~~previously~~and ~~issued~~$1.4 ~~SFAS~~million Noin exemplary damages. The ~~123~~Company ~~and also~~had ~~SFAS~~accrued No$2.6 ~~148~~million as reorganization costs to cover the judgment, ~~“Accounting~~plus ~~for~~prejudgment ~~Stock~~and post-~~Based~~judgment ~~Compensation~~interest ~~Costs—Transition~~that had ~~and~~accrued ~~Disclosure”~~since the trial court entered judgment in 2000. ~~Management~~During isthe ~~currently~~third quarter of fiscal 2005, the ~~evaluating~~Company reversed the ~~impact~~prior ~~that~~accrual ~~the~~for ~~pronouncement~~such ~~will~~case, ~~have~~resulting onin ~~the~~a ~~Company’s~~$2.6 million ~~financial~~increase ~~position~~in ~~and~~gross ~~results~~profit offor ~~operations~~such quarter.

117. Shipping and Handling Fees

~~Item~~The 2Company records shipping and handling fees as selling, general and administrative expense. For ~~Management’s~~the ~~Discussion~~three and nine months ended June 30, 2005, such costs were $3.0 million and ~~Analysis~~$9.5 million, ofrespectively. For ~~Financial~~the ~~Condition~~three and nine ~~Results~~months ended June 30, 2004, such costs were $3.5 million and $10.4 ofmillion, ~~Operations~~respectively.

The following discussion and analysis of the consolidated results of operations and financial condition of the Company should be read in conjunction with the accompanying consolidated financial statements and the notes thereto and the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2004.11

~~Forward~~8. Basic ~~Looking~~and ~~Statements~~Diluted Common Shares

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts contained in this report, including statements regarding the Company’s future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The ~~words~~ ~~“believe,”~~following ~~“may,”~~table ~~“will,”~~sets ~~“estimate,”~~forth ~~“continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to~~ the ~~Company,~~computation are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of ~~operations,~~ ~~business~~basic ~~strategy~~ and ~~financial needs. These forward-looking statements are subject~~diluted toweighted aaverage ~~number~~common ofshares known and unknown risks, uncertainties and assumptions that could affect the results of the Company or the apparel industry generally and could cause the Company’s expected results to differ materially from those expressed (in ~~this Quarterly Report on Form 10-Q.~~ These risks, uncertainties and assumptions are described in “Item 1. Business” of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 10, 2004, and include, among other thingsthousands):

• changes in general business conditions,

	Three months ended June 30,		Nine months ended June 30,
	2005	2004	2005	2004
Weighted average common shares outstanding	6,997	7,049	7,017	6,810
Shares equivalents, due to stock options and restricted stock	93	115	107	152
Weighted average diluted shares outstanding	7,090	7,164	7,124	6,962

~~• changes~~All options were included in the ~~performance~~diluted earnings per share calculation for the three months ended June 30, 2005. Options to purchase 18,868 shares were excluded from the diluted earnings per share calculation for the nine months ended June 30, 2005, because the options’ exercise prices were greater than the average market price of the common shares during the ~~retail~~period. Options ~~sector~~to inpurchase ~~general~~23,000 and 14,131 shares were excluded from the ~~apparel~~diluted ~~industry~~earnings inper ~~particular~~share calculations for the three and nine months ended June 30, 2004, respectively, because the options’ exercise prices were greater than the average market price of the common shares during the period.

~~• seasonality of the Company’s~~9. ~~business,~~Dividends

~~• changes~~During inthe ~~retailer~~third ~~and~~quarter ~~consumer~~of fiscal 2005, the Company declared a cash ~~acceptance~~dividend of ~~new~~$0.05 ~~products~~per ~~and~~share payable to the ~~success~~stockholders of ~~advertising~~record on August 15, 2005, ~~marketing~~which will be paid on August 29, ~~and~~2005. The second quarter of fiscal 2005 dividend of ~~promotional~~approximately ~~campaigns,~~$0.4 million was paid in May 2005.

~~• impact~~10. Related ofParty ~~competition in the apparel industry,~~Transactions

~~• availability~~A ~~and~~director ~~cost~~of the Company is a partner of ~~raw~~a law firm that rendered ~~materials~~various legal services to the Company during the three and nine months ended June 30, 2005 and 2004. The Company paid the law firm approximately $0.3 million and $0.5 million for legal services during the three and nine months ended June 30, 2005, respectively. The Company paid the law firm approximately $0.1 million and $0.8 million for legal services during the three and nine months ended June 30, 2004, respectively. There were approximately $45,000 and $0.1 million in unpaid fees due to the law firm at June 30, 2005 and September 30, 2004, respectively, which were included in accrued liabilities.

~~• changes~~11. Sales inForce ~~laws and other regulatory actions,~~Reduction

~~• changes~~As of September 30, 2004, the Company’s senior management committed to a plan to reduce the Company’s sales force. Severance benefits for this reduction in force ~~labor~~were ~~relations~~to be determined in accordance with an established severance plan communicated to all affected employees. The Company recorded a $0.4 million pre-tax charge to selling, general and administrative expenses during fiscal 2004, which approximated average severance benefits for three employees pursuant to the severance plan.

~~• political~~During ~~and~~November 2004, ~~economic~~management ~~events~~communicated the reduction in force to the sales force and asked for volunteers to accept the severance ~~conditions~~benefits. On ~~domestically~~December 15, or2004, management engaged in ~~foreign~~negotiations ~~jurisdictions~~with inthree ~~which~~volunteers from the ~~Company~~sales force ~~operates~~and, oras ~~has~~a ~~apparel~~result ~~products~~of ~~manufactured,~~these ~~including~~negotiations, ~~but~~granted ~~not~~an ~~limited~~additional amount over the severance benefits prescribed by the severance plan. The Company recorded an additional $0.3 million pre-tax charge to, ~~acts~~selling, general and administrative expenses during the first quarter of ~~terrorism,~~fiscal 2005 ~~war,~~for orthese ~~insurrection~~incremental severance benefits. Severance payments for these three employees began at their termination dates in January 2005 and are expected to continue through March 2006. The Company included $0.5 million in accrued liabilities related to these severance benefits at June 30, 2005.

~~• unexpected judicial decisions,~~12

~~• changes~~12. Officer’s inLife ~~interest~~Insurance ~~rates~~Policy ~~and capital market conditions,~~Activity

~~• acquisitions~~During orfiscal ~~dissolution~~1991, the Company entered into split-dollar life insurance agreements with trusts established by three former officers of the ~~business~~Company. Pursuant ~~enterprises,~~to ~~including~~these agreements, the ~~ability~~Company is entitled to ~~integrate~~the ~~acquired~~cumulative ~~businesses~~premiums it has paid on the policies ~~effectively~~less the Company’s interest in policy loans and related accrued interest. No further premiums are due on these policies. The Company’s interest in the policies was $1.1 million at September 30, 2004, which was net of $9.1 million in policy loans made to the Company.

~~• natural~~The ~~disasters~~Company was notified of the death of one of the insured former officers in September 2004. In November 2004, the insurance company applied the proceeds of $4.5 million directly to the $4.0 million in outstanding loans related to this policy, and the Company received net proceeds of $0.4 million, net of interest of $0.1 million, related to this policy. In October 2004, the Company executed the surrender of $2.2 million in accumulated cash dividends on the second of these policies, resulting in a reduction of the policy loans for this amount. In November 2004, the Company repaid the remaining policy loans of $2.9 million for these policies. As a result of the transactions described above, at December 31, 2004, all policy loans had been repaid. The cash surrender value of the policies at June 30, 2005, was $3.6 million.

~~• unusual or infrequent items that~~13. ~~cannot be foreseen or are not susceptible to estimation, and~~Equity

~~• impact~~On November 30, 1999, the Board of Directors authorized the ~~identification~~Company to repurchase of ~~material~~up to 3,000,000 shares of the Company’s stock (the “1999 ~~weaknesses~~Program”). The 1999 Program does not have an expiration date. As of September 30, 2002, the Company had purchased 2,242,183 shares of stock. The Company did not purchase any shares in fiscal ~~disclosure~~2003 ~~controls~~or fiscal 2004. On November 8, 2004, the Company publicly announced that it was resuming its stock buyback program and, ~~procedures~~during the first quarter of fiscal 2005, purchased 204,793 shares of outstanding stock for $4.5 million commensurate with that announcement. There were no additional purchases during the second and third quarters of fiscal 2005. The amount and timing of additional purchases will depend upon market conditions.

1214. Property Sales

In ~~light of these risks~~April 2005, ~~uncertainties and assumptions,~~ the ~~forward-looking~~Company ~~events~~sold ~~and~~an ~~circumstances~~apartment ~~discussed~~property inlocated ~~this~~in ~~Quarterly~~New ~~Report~~York onfor ~~Form~~proceeds ~~10-Q~~of ~~may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements~~$0. ~~Accordingly,~~7 ~~readers are cautioned not to place undue reliance on such forward-looking statements~~million. The Company ~~undertakes~~recorded noa ~~obligation~~gain ~~to update~~on ~~any~~the ~~such~~sale ~~statements or publicly announce any updates or revisions to any~~ of ~~the~~approximately ~~forward-looking~~$0.5 ~~statements~~million ~~contained herein,~~ to ~~reflect any change in~~ ~~its~~other ~~expectations~~income ~~with~~during ~~regard~~the ~~thereto~~third orquarter ~~any~~of ~~change~~fiscal ~~in events, conditions, circumstances or assumptions underlying such statements~~2005.

~~Overview~~15. Recently Issued and Adopted Financial Accounting Standards

~~The~~In ~~Company designs~~December 2004, ~~manufactures,~~the ~~imports~~Financial ~~and~~Accounting ~~markets~~Standards inBoard ~~the United~~issued ~~States~~SFAS ~~and~~No. 123R ~~abroad~~(revised 2004), ~~casual~~“Share-Based ~~and~~Payment”, ~~dress~~to ~~men’s~~amend ~~and~~SFAS ~~women’s apparel products~~No. 123, ~~including~~“Accounting ~~pants,~~for ~~shorts,~~Stock-Based ~~suits,~~Compensation” ~~sportcoats,~~and ~~sweaters,~~SFAS ~~shirts~~No. 95, ~~dresses,~~“Statement ~~skirts~~of ~~and~~Cash ~~vests~~Flows”. ~~The~~SFAS ~~Company’s~~No. 123R ~~operations~~will ~~are~~require ~~organized~~companies ~~into~~to ~~three~~measure ~~business~~all ~~segments,~~employee ~~wholesale,~~stock-based ~~retail~~compensation awards using a fair value method and ~~licensing,~~recognize ~~each~~compensation costs in the financial statements. SFAS No. 123R is effective beginning as of ~~which~~the ~~offers~~first ~~similar~~annual ~~products~~reporting ~~through~~period ~~different~~beginning ~~distribution~~after ~~channels~~June 15, 2005. The Company’s ~~wholesale~~will ~~segment,~~be ~~which~~required ~~sells apparel~~to ~~products~~adopt ~~through~~SFAS ~~approximately~~No. 123R beginning 10October 1,~~000~~ ~~retail~~2005 ~~stores~~for ~~operated~~new byawards ~~the~~of stock-based compensation ~~Company’s~~granted ~~retail~~after ~~customers,~~that isdate ~~the~~and ~~primary~~for ~~distribution~~unvested ~~channel~~awards ~~through~~outstanding ~~which~~ at that date. Management believes the ~~Company~~impact ~~sells~~of ~~its~~SFAS ~~products~~No. ~~The~~ 123R on the Company’s ~~retail~~results ~~segment~~of ~~markets~~operations ~~Haggar®~~will ~~branded~~be ~~products~~consistent ~~through~~with 75the ~~Company~~historical ~~operated~~disclosure ~~retail~~of ~~stores~~pro ~~located~~forma instock ~~outlet~~compensation ~~and~~under ~~strip~~SFAS ~~malls~~No. 123; ~~throughout~~however, a portion of the ~~United States. The~~tax ~~Company’s~~benefit ~~licensing~~from ~~segment generates~~the ~~royalty~~future ~~income~~exercise byof ~~licensing~~stock ~~the~~options the Company’s ~~trademarks~~has ~~for~~historically ~~use~~classified as net cash provided by ~~other~~operating ~~manufacturers~~activities ofwill ~~specified~~be ~~products~~reported in ~~specified~~net ~~geographic~~cash ~~regions~~by financing activities after the implementation of SFAS No. 123R.

~~Critical Accounting Policies~~13

~~There~~Item ~~have~~2. ~~been no material changes to the Company~~Management’s ~~critical~~Discussion ~~accounting~~and ~~policies~~Analysis ~~during~~of ~~the~~Financial ~~three~~Condition ~~months~~and ~~ended~~Results ~~December~~of ~~31, 2004.~~Operations

~~Management’s~~The ~~Discussion~~following discussion and ~~Analysis~~analysis ~~discusses~~of the consolidated results of operations and financial condition asof ~~reflected in~~ the Company~~’s consolidated~~ ~~financial~~should ~~statements,~~be ~~which~~read ~~have been prepared~~ in ~~accordance with~~conjunction ~~accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity~~ with ~~accounting principles generally accepted in~~ the ~~United~~accompanying ~~States~~consolidated ~~of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the~~ financial statements and ~~reported amounts of revenues and expenses during~~ the ~~reporting~~ ~~period.~~notes ~~On an ongoing basis, management evaluates its estimates and~~thereto judgments, including those related to accounts receivable, inventory valuation, impairment of long-lived assets, including goodwill, litigation, workers’ compensation liabilities, revenue recognition, reorganization charges and ~~tax assessments. Management bases its estimates and judgments on~~ the Company’s ~~substantial~~ ~~historical~~Annual ~~experience~~Report ~~and~~on ~~other~~Form 10-K ~~relevant factors, the results of which form the basis~~ for ~~making judgments about~~ the ~~carrying~~fiscal ~~values~~year ofended ~~assets~~September 30, ~~and liabilities that are not readily apparent from other sources~~2004.

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

13This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts contained in this report, including statements regarding the Company’s future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions that could affect the results of the Company or the apparel industry generally and could cause the Company’s expected results to differ materially from those expressed in this Quarterly Report on Form 10-Q. These risks, uncertainties and assumptions are described in “Item 1. Business” of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 10, 2004, and include, among other things:

~~Comparison~~• changes in ofgeneral ~~Three~~business ~~Months Ended December 31~~conditions, ~~2004 to Three Months Ended December 31, 2003~~

~~Net~~• changes in ~~Sales~~the performance of the retail sector in general and the apparel industry in particular,

~~Net sales decreased $7.2 million, or 6.7%, to $100.5 million for the~~• seasonality ~~first quarter~~ of ~~fiscal 2005, compared to net sales of $107.7 million for~~ the ~~first~~ quarter of fiscal 2004. Unit sales increased 1.4% and the average sales price decreased 8.1%. The decrease in net sales is primarily attributable to a $11.7 million reduction in the Haggarâ branded business during the first quarter of fiscal 2005, primarily due to reduced orders and increased allowances for the Company’s ~~recently introduced Forever Newä product line. This product was initially offered at higher than normal price points. In addition~~business, the Company’s United Kingdom operations were assumed by a third party on October 3, 2004, resulting in a $1.5 million decrease in net sales during the first quarter of fiscal 2005 as compared to the first quarter of fiscal 2004. Net sales for the Company’s woman’s wear division decreased overall by $1.6 million due to a reduction in sales to specialty stores. However, net sales for the Company’s new women’s pant programs improved by $0.8 million. These decreases were offset in part by net sales increases of $5.3 million for Kenneth Coleâ and Claiborneâ licensed products and $1.2 million for men’s private label programs. In addition, net sales for the Company’s retail division increased $1.3 million for the first quarter of fiscal 2005 compared to the first quarter of fiscal 2004.

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

~~Gross profit as a percentage of net sales decreased to 28.0% in the~~• impact ~~first quarter~~ of ~~fiscal~~competition ~~2005, compared to 29.1%~~ in the ~~first~~apparel quarter of fiscal 2004. The decrease in gross profit percentage is primarily related to an increase in allowances during the first quarter of fiscal 2005 as compared to the first quarter of fiscal 2004. The allowances primarily relate to markdowns associated with the Forever Newä products during the first quarter of fiscal 2005. Gross profit for the first quarter of fiscal 2005 also included the reversal of a $0.3 million accrual to earnings related to a wrongful termination lawsuit in which the Company received a favorable judgment on appeal in December 2004.industry,

~~Selling,~~• availability and ~~General~~cost ~~and~~of ~~Administrative~~raw ~~Expenses~~materials,

~~Selling, general and administrative expenses as a percentage of net~~• changes ~~sales increased to 33.7%~~ in ~~the~~laws ~~first quarter of fiscal 2005, compared to 27.5% in the first quarter of fiscal 2004. The $4.3 million, or 14.4%, increase in selling, general~~ and administrative expenses primarily relates to an increase of $2.5 million in media advertising expense, as $3.9 million in advertising expense was incurred during the first quarter of fiscal 2005 to introduce the Forever Newä product line, a $1.7 million charge in connection with a wrongful termination lawsuit, and a $1.0 million increase in volume-related expenses consistent with the sales increase for Kenneth Coleâ and Claiborneâ licensed programs, retail stores and private label programs. The increases were partially offset by $0.4 million decrease in legal defense costs, a $0.4 million decrease in bonuses to employees and $0.4 million in other ~~miscellaneous~~regulatory ~~expense decreases.~~actions,

~~During the first quarter of fiscal 2005, the Company also recorded a~~• changes ~~$0.3 million charge for additional severance benefits to three sales force employees. The Company recorded a $0.4 million charge during fiscal 2004 when management committed to this reduction~~ in ~~force. Severance~~ ~~payments~~labor for these three employees began at their termination dates in January 2005 and are expected to continue through March 2006. The Company included $0.7 million in accrued liabilities related to these severance benefits as of December 31relations, ~~2004.~~

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

~~Interest expense decreased $0.3 million, or 54.3%, to $0.2 million for~~• unexpected ~~the~~judicial ~~first quarter of fiscal 2005~~decisions, compared to $0.5 million for the first quarter of fiscal 2004. Interest expense during the first quarter of fiscal 2004 included interest on borrowings under the Company’s revolving credit facility and outstanding senior notes. The Company did not borrow any amounts under the revolving credit facility during the first quarter of fiscal 2005 and repaid the remaining senior notes during September 2004.

14• changes in interest rates and capital market conditions,

~~Income~~• acquisitions or ~~Taxes~~dissolution of business enterprises, including the ability to integrate acquired businesses effectively,

~~The Company’s income tax benefit as a percentage of income before~~• natural ~~income tax was 38.7% for the first quarter of fiscal 2005. Comparatively~~disasters, the Company’s income tax provision as a percentage of income before income tax was 38.2% for the first quarter of fiscal 2004. The effective tax rates for the first quarters of fiscal 2005 and 2004 exceeded the statutory federal tax rate of 35% primarily as a result of state income taxes and certain permanent differences.

~~Segment~~• unusual or ~~Profitability~~infrequent items that cannot be foreseen or are not susceptible to estimation, and

~~The Company’s three operating segments are~~• impact ~~business~~of units that offer similar products through different distribution channels. The Company’s wholesale segment designs, manufactures, imports and markets casual and dress men’s and women’s apparel to retailers. The Company also operates two other segments, including the ~~retail~~identification segment, which markets Haggar® branded products through 75 Company operated stores located in outlet and strip malls throughout the United States, and the licensing segment, which generates royalty income by licensing the Company’s trademarks for use by other manufacturers of ~~specified~~material ~~products~~weaknesses in ~~specified~~disclosure ~~geographic~~controls ~~areas. The Company evaluates performance~~ and ~~allocates resources based on segment profits~~procedures.

Intercompany sales from the wholesale segment to the retail segment are not reflected in wholesale segment net sales. Additionally, there is no profit included on sales from the wholesale segment to the retail segment. Segment profit (loss) is comprised of segment net income (loss) before interest expense and provision (benefit) for income taxes.14

~~The~~In ~~table~~light ~~below~~of ~~reflects~~these risks, uncertainties and assumptions, the forward-looking ~~Company’s~~events and circumstances discussed in this Quarterly Report on Form 10-Q ~~segment~~may not occur and actual results ~~for~~could differ materially from those anticipated or implied in the ~~three~~forward-looking ~~months~~statements. Accordingly, ~~ended~~readers ~~December~~are 31cautioned not to place undue reliance on such forward-looking statements. The Company undertakes no obligation to update any such statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, ~~2004~~conditions, ~~and~~circumstances ~~2003:~~or assumptions underlying such statements.

	Wholesale			Retail		Licensing		Consolidated
2004
Net sales	$	83,958		$	16,585	$	—	$	100,543
Segment profit (loss)	$	(6,771	)	$	1,299	$	355	$	(5,117	)
2003
Net sales	$	92,410		$	15,325	$	—	$	107,735
Segment profit	$	989		$	1,131	$	254	$	2,374

Overview

~~Wholesale~~The ~~Segment~~Company designs, imports and markets casual and dress men’s and women’s apparel products, including pants, shorts, suits, sportcoats, sweaters, shirts, dresses, skirts and vests, in the United States and abroad. The Company’s operations are organized into three business units, wholesale, retail and licensing, each of which offers similar products through different distribution channels. The Company’s wholesale segment, which sells apparel products through approximately 10,000 retail stores operated by the Company’s retail customers, is the primary distribution channel through which the Company sells its products. The Company’s retail segment markets Haggar® branded products through 82 Company-operated retail stores located in outlet and strip malls throughout the United States. The Company’s licensing segment generates royalty income by licensing the Company’s trademarks for use by manufacturers or marketers of specified products in specified geographic regions.

~~Wholesale~~Within ~~segment~~these ~~net sales decreased $8.4 million~~segments, ~~or 9.1%, to $84.0 million for~~ the first quarter of fiscal 2005, compared to $92.4 million for the first quarter of fiscal 2004. The decrease in wholesale segment net sales during the first quarter of fiscal 2005 is primarily attributable to a $11.7 million reduction in the Haggarâ branded business, primarily due to reduced orders and increased allowances for the Company’s ~~Forever~~principal ~~Newä~~ product ~~line. This~~categories ~~product was initially offered at higher~~are than normal price points. In addition, the Company’s United Kingdom operations were assumed by a third party on October 3, 2004, resulting in a $1.5 million decrease in net sales during the first quarter of fiscal 2005, as compared to the first quarter of fiscal 2004. Net sales for the Company’s women’s wear divisions decreased overall by $1.6 million due to a reduction in sales to specialty stores. However, net sales for the Company’s new women’s pant programs improved by $0.8 million. These decreases were offset in part by net sales increases of $5.3 million for Kenneth Coleâ and Claiborneâ licensed products and $1.2 million for men’s private label programs.follows:

15Men’s Haggar® branded apparel. The Company’s Haggar® branded products consist of high quality, affordable men’s dress and casual pants, shirts, suits, sport coats, sweaters and vests. These products are sold nationwide in major department stores and marketed through the Company’s own retail stores located in outlet and strip malls throughout the United States. The Haggar® trademark is also licensed to manufacturers of related apparel and accessories in categories outside the core product lines of the Company, or to marketers of core or specified products in designated geographic regions outside the United States.

~~Wholesale~~Men’s ~~segment~~licensed ~~profit decreased $7~~apparel.8 The ~~million~~Company tois ~~a $6.8 million loss~~the ~~for~~licensee ~~the first quarter~~ of ~~fiscal~~certain ~~2005,~~trademarks ~~compared~~owned toby aother ~~$1.0~~apparel ~~million profit for the first quarter of fiscal 2004~~companies. The ~~decrease~~ inCompany ~~segment~~has ~~profit~~entered isinto ~~primarily~~license agreements ~~attributable~~ to asource ~~$8.5~~and ~~million~~market ~~decrease in~~certain ~~net sales as noted above, a 3.1% decrease in~~ men’s ~~wear~~pants ~~gross~~and ~~profit percentage~~shorts ~~primarily~~under ~~related to an increase in customer allowances, an increase of $2.5 million in media advertising expense, as $3.9 million was incurred during~~ the ~~first quarter of fiscal 2005 to introduce the Forever Newä~~ ~~product~~Kenneth ~~line,~~Cole aNew ~~$1.7 million charge in connection with a wrongful termination lawsuit~~York®, ~~$0.3 million in additional severance charges related to the termination of three sales force employees, and a $0.9 million increase in volume-related expenses consistent with the sales increase for~~ Kenneth ~~Coleâ and~~Cole ~~Claiborneâ~~Reaction® ~~licensed programs~~ and ~~private~~Claiborne® ~~label programs~~trademarks. ~~The increases were partially offset by a $0.4 million decrease in legal expenses, a $0.4 million decrease in bonuses to employees and $0.4 million in other miscellaneous expense decreases.~~

~~Retail~~Men’s ~~Segment~~private label apparel. The Company’s mass retailer division, The Horizon Group, markets men’s apparel products including dress pants, casual pants, shorts, suits, sport coats and shirts. In addition to sourcing products under its own labels, the Company also sources men’s apparel for certain of its customers under the individual store’s proprietary label. These products, which are offered at lower price points than Haggar® licensed and branded apparel, are sold to customers such as Wal-Mart Stores, Inc. and J.C. Penney.

~~Retail~~Women’s ~~segment net sales increased $1~~apparel.3 The ~~million,~~Company’s ~~or 8.2%, to $16.6~~women’s ~~million~~wear ~~for~~subsidiary ~~the~~markets ~~first~~women’s ~~quarter~~sportswear ofincluding ~~fiscal~~tops, ~~2005~~coats, ~~compared to $15.3 million for the~~dresses, ~~first~~skirts, ~~quarter~~pants, ofand ~~fiscal 2004~~vests. ~~The~~These product ~~increase~~lines inare ~~retail~~primarily ~~segment~~sold ~~net~~to ~~sales~~major ~~during~~department ~~the~~stores, ~~first~~including ~~quarter~~Dillard’s ~~of fiscal 2005 is~~and ~~primarily~~J.C. ~~attributable~~Penney toin the ~~Company’s~~United ~~ongoing~~States ~~strategy~~and toSears ~~identify~~ and ~~close under-performing~~The ~~stores~~Bay ~~and~~in ~~open~~Canada, ~~new~~and ~~stores~~catalog suppliers, assuch ~~well~~ as ~~increased~~Coldwater ~~sales at existing retail stores~~Creek.

Retail segment profit increased $0.2 million, or 14.9%, to $1.3 million for the first quarter of fiscal 2005, compared to $1.1 million for the first quarter of fiscal 2004. The increase in retail segment profit is primarily attributable to a $1.3 million increase in retail net sales, combined with improved gross profit due to fewer markdowns on seasonal products and improved gross profit for shirts during the first quarter of fiscal 2005 as compared to the first quarter of fiscal 2004.15

~~Licensing~~Key ~~Segment~~Performance Indicators

~~Licensing~~The ~~segment~~Company’s ~~profit~~management ~~increased~~evaluates ~~$0.1 million,~~the orfinancial ~~39.8%,~~condition ~~to $0.4 million in fiscal 2005, compared to $0.3 million in~~and ~~fiscal~~operating ~~2004~~performance ~~primarily~~of ~~due~~the tobusiness ~~increased~~on ~~sales~~the bybasis ~~the~~of ~~Company’s~~numerous ~~licensees.~~factors, including:

~~Liquidity~~Annual sales growth. The Company has reported modest sales increases in recent years despite a trend in the apparel industry of declining retail prices and ~~Capital~~the ~~Resources~~consolidation of major retailers. The Company plans to attain sales growth by maintaining a keen focus on the long-term business strategies over all the principal product categories. The Company expects reduced overall sales for fiscal 2005 as compared to fiscal 2004 mainly related to a pant product called ForeverNew™ that did not meet expectations.

Return on equity. The Company’s management ~~principal~~believes ~~sources~~that ofa ~~liquidity~~high ~~have~~return ~~been~~on ~~cash~~equity ~~flows~~is ~~from~~closely ~~operations~~correlated ~~and~~with enhancing ~~borrowings~~shareholder ~~under~~value. The ~~its~~Company defines ~~unsecured~~return ~~revolving~~on ~~credit~~equity ~~facility~~as net income as a percentage of stockholders’ equity. AsThe ofCompany ~~December~~plans ~~31,~~to ~~2004~~achieve return on equity goals by generating long-term sales growth, improving the ~~Company~~gross ~~had~~profit percentage ~~cash~~ and ~~cash~~reducing ~~equivalents~~selling, ofgeneral ~~$24.7~~and ~~million~~administrative expenses.

The Company ~~was~~continuously ~~party~~evaluates tosourcing analternatives ~~operating lease~~ for ~~a corporate aircraft~~high-quality, ~~which~~low-cost ~~contained~~sourcing achannels ~~residual value guarantee. Under the lease, which ended~~ in ~~December~~order ~~2004, the Company had the option of (a) returning the aircraft~~ to ~~the~~increase ~~lessor~~gross ~~and~~profit. During ~~paying~~ the ~~guaranteed residual~~third ~~value~~quarter of ~~$3.0~~fiscal ~~million;~~2005, ~~(b) purchasing~~ the ~~aircraft for $4.0 million;~~ orCompany ~~(c)~~closed ~~arranging for~~ the ~~sale~~remaining ofCompany-operated ~~the~~sewing ~~aircraft~~plants toin ~~a third party. If~~ the ~~sales proceeds were less than $4.0~~Western ~~million,~~Hemisphere ~~the Company was required~~ to ~~reimburse~~focus ~~the~~more ~~lessor~~sourcing ~~for~~in the ~~deficiency. If~~ ~~the~~Eastern ~~sales proceeds exceeded $4~~Hemisphere.~~0 million, the Company was entitled to all of such excess amounts.~~

~~On December 16~~Further, ~~2004,~~ the Company ~~completed~~continually ~~the~~pursues ~~sale~~initiatives ofto ~~the~~reduce ~~aircraft to~~selling, ageneral ~~third party for proceeds of $3.2 million net of commissions~~ and ~~expenses~~administrative ~~of $0~~expenses.~~2 million. The Company reimbursed the~~ ~~lessor~~Recent ~~for~~initiatives ainclude ~~$0.9 million deficiency, which included minimal fees related to~~ the ~~termination~~sale of the ~~lease~~corporate ~~prior to December 31~~aircraft, ~~2004. The Company had accrued $0.7 million of this~~a ~~amount~~headcount asreduction ofin ~~September~~the ~~30,~~sales ~~2004,~~force and ~~recorded~~ the ~~additional~~elimination ~~$0.2~~of ~~million~~redundant inactivities ~~selling,~~in ~~general and administrative expenses during~~ the ~~three~~men’s ~~months~~and ~~ending December~~women’s ~~31,~~wear ~~2004~~organizations.

16Inventory turns. The Company manages inventory levels by carefully evaluating sales plans and monitoring inventory purchasing lead times. The Company also has introduced a variety of replenishment product programs, which contribute to higher inventory turns due to the decrease in inventory carrying costs.

~~During~~Business fiscal 1991, the Company entered into split-dollar life insurance agreements with trusts established by three former officers of the Company. Pursuant to these agreements, the Company is entitled to the cumulative premiums it has paid on the policies less the Company’s interest in policy loans and related accrued interest. No further premiums are due on these policies. The Company’s interest in the policies was $1.1 million at September 30, 2004, which was net of $9.1 million in policy loans made to the Company.Strategies

The Company ~~was~~has ~~notified~~adopted of the ~~death~~following ~~of one of the insured former officers in September 2004. In November 2004~~strategies, ~~the~~as ~~insurance~~more ~~company applied the proceeds of $4.5 million directly to~~fully ~~the~~described ~~$4.0 million~~ in ~~outstanding loans related to this policy, and~~ the ~~Company received~~Annual ~~net~~Report ~~proceeds of $0.4 million, net of interest of $0.1 million, related to this policy.. In October 2004, the Company executed the surrender of $2.2 million in accumulated cash dividends~~ on ~~the~~ ~~second~~Form 10-K ~~of these policies, resulting in a reduction of the policy loans~~ for ~~this~~ ~~amount. In November 2004,~~ the ~~Company~~ ~~repaid~~year ~~the~~ended ~~remaining policy loans of $2.9 million for these policies. As a result of the transactions described above~~September 30, ~~at December 31,~~ 2004, ~~all~~to ~~policy~~achieve ~~loans~~its ~~had~~corporate ~~been repaid~~ and ~~the~~financial ~~cash surrender value of the policies was $3.6 million.~~goals:

~~During~~Increase ~~the~~Haggar® ~~first~~brand ~~quarter~~equity. The ~~of fiscal 2005, the~~ Company ~~declared~~designs acomprehensive ~~cash~~marketing ~~dividend~~plans, ofincluding ~~$0.05~~national ~~per~~advertising, ~~share~~co-operative ~~payable~~advertising, ~~to the stockholders~~ point-of ~~record on February~~-sale 9,signage ~~2005,~~and ~~which~~in-store ~~will be paid on March 7~~fixtures, ~~2005. The~~to ~~fourth~~maintain ~~quarter~~and ~~fiscal~~increase ~~2004~~brand ~~dividend~~awareness ~~of approximately $0.4 million~~and ~~was~~grow ~~paid~~market ~~in November 2004~~share.

OnIntroduce ~~November~~new ~~30, 1999, the Board of Directors authorized the Company to repurchase of up to 3,000,000 shares of the Company’s stock (the “1999 Program”)~~products. The ~~1999 Program does not have an expiration date. As of September 30, 2002, the~~ Company’s ~~had~~continually ~~purchased~~seeks ~~2,242,183~~to ~~shares~~introduce ofinnovative ~~stock. The~~products ~~Company~~and ~~did~~technologies ~~not~~to ~~purchase any shares in fiscal 2003 or fiscal 2004. On November 8, 2004,~~ the ~~Company~~ ~~publicly announced that it was resuming its stock buyback program and, during the first quarter of fiscal 2005, purchased 204,793 shares of outstanding stock for $4~~marketplace.~~5 million commensurate with that announcement. The amount and timing of additional purchases will depend upon market conditions.~~

~~From~~Expand ~~time~~licensing ~~to time, the Company will sell or dispose~~ of ~~assets, which it feels are under-performing or are no longer needed in the businesses in which the Company operates~~trademarks. The ~~There can be no assurance that the~~ Company ~~will be able~~ continues to ~~sell~~pursue orlicense ~~dispose~~agreements of ~~the~~Haggar-owned ~~assets~~trademarks inand ~~a manner, which is profitable to~~ the ~~Company,~~trademarks orof atother ~~all. In~~apparel ~~addition,~~companies ~~the Company will make investments in assets that management believes are needed~~ to ~~acquire~~ ~~and~~strengthen ~~maintain~~its ~~the~~market ~~businesses in which the Company operates~~position. ~~Again, there can be no assurance that the Company can obtain a reasonable return on any such investments.~~

~~The~~Expand ~~ongoing~~private ~~evaluation~~label ~~for impairment of the goodwill related to the 1999 acquisition of the Women~~women’s ~~Wear subsidiary requires significant management~~wear ~~estimation and judgment~~business. ~~Changes~~ The ~~in overall business strategy, negative industry or economic trends or actual results which do not meet the~~ Company’s ~~current~~is ~~plan~~attempting ~~for~~to ~~the~~expand its women’s ~~wear~~ ~~business~~private ~~may~~label ~~trigger~~offerings ato ~~future~~service ~~impairment~~global ~~charge,~~customers ~~which~~such ~~could~~as ~~negatively~~J.C. ~~affect the~~Penney ~~Company’s results of operations in the period in which the charge is~~and ~~recorded~~Wal-Mart.

~~The~~Actively ~~Company~~manage ~~has~~costs ~~other contractual obligations~~ and ~~commercial commitments as described in “Item 7~~collections. ~~Management’s~~The ~~Discussion~~Company ~~and~~has identified ~~Analysis~~vendors ofto ~~Financial~~provide ~~Condition~~high-quality, ~~and~~low-cost ~~Results~~product ofsourcing ~~Operations~~from —14 foreign ~~Disclosures~~countries, ~~About~~with ~~Contractual~~future ~~Obligations~~sourcing ~~And~~plans ~~Commercial~~to ~~Commitments”~~eventually ofreduce the ~~Company’s~~number of ~~Annual~~countries ~~Report~~to onsix ~~Form~~to ~~10-K~~eight, ~~filed~~given ~~with~~ the ~~Securities~~overall ~~and~~apparel ~~Exchange Commission on December 10, 2004~~marketplace. ~~There~~The ~~have~~Company ~~been~~also noseeks ~~significant~~to ~~changes~~actively inmonitor and ~~the~~pursue ~~Company’s~~timely ~~contractual~~collections ~~obligations~~on ~~and~~its ~~commercial~~receivables ~~commitments~~from ~~since~~retailer ~~September 30, 2004~~customers.

~~Cash~~Pursue ~~Flow~~strategic ~~Results~~acquisitions. The Company will ~~for~~continue to seek growth through the ~~Three~~identification ~~Months~~of ~~Ended~~acquisition ~~December~~targets ~~31,~~that are ~~2004~~aligned with the Company’s long-term financial goals.

Net cash provided by operating activities decreased $22.0 million, to $2.1 million net cash used in operating activities during the first quarter of fiscal 2005, compared to $19.9 million net cash provided by operating activities during the first quarter of fiscal 2004. The decrease was primarily due to the net loss for the first quarter of fiscal 2005 as compared to net income for the first quarter of fiscal 2004, increased inventory purchased during the period, payment of a $0.9 million residual value guarantee related to the lease on the Company’s corporate aircraft and a decrease in the accounts payable balance due to the timing of payments during the first quarter of fiscal 2005.16

17Key Activity - Three Months Ended June 30, 2005

~~Net~~Key ~~cash~~activity ~~used~~for inthe ~~investing~~three ~~activities~~months ~~increased~~ended ~~$3.9 million~~June 30, ~~to $4.0 million in the first quarter of fiscal~~ 2005, compared to $0.1 million in the first quarter of fiscal 2004. The increase was primarily due to $2.4 million in net payments on officer’s life insurance policy loans. Cash used in investing activities during the first quarter of fiscal 2004 related primarily to capital expenditures for improvements to the global headquarters, which were funded with $1.3 million in funds transferred from restricted cash.included:

~~Net~~• The Texas ~~cash~~Supreme ~~provided~~Court byrendered ~~financing~~judgment ~~activities~~for ~~increased~~the ~~$2.8~~Company ~~million,~~in toa wrongful termination $0case.1 The ~~million~~judgment ~~net~~reversed ~~cash~~a ~~provided~~court byof ~~financing~~appeals’ ~~activities~~judgment inthat ~~the~~had ~~first quarter of~~upheld ~~fiscal~~a ~~2005~~jury asverdict ~~compared~~of to $21.76 million ~~net cash used~~ in ~~financing~~total ~~activities in the first quarter of fiscal 2004~~damages. The ~~increase~~ ~~was~~judgment ~~primarily~~resulted ~~due to a reduction~~ in ~~net~~the ~~repayments~~reversal ~~on long-term debt~~to ~~during~~income ~~the first quarter~~ of ~~fiscal 2005 and an increase in book overdrafts, partially offset by~~ a ~~decrease of~~ $12.56 million inreserve ~~proceeds~~that ~~from~~had ~~the~~been ~~exercise~~accrued ~~of employee~~in ~~stock~~a ~~options~~prior ~~and~~period ~~purchases~~for these ofdamages ~~treasury~~and ~~stock~~pre- ofand ~~$4.5~~post-judgment ~~million~~interest.

~~Risks~~• The remaining ~~Related~~Company-operated tosewing facilities operated by subsidiaries of the Company in Leon, Mexico, and La Romana, Dominican Republic were closed. The Company’s ~~Business~~began to utilize other cost effective sourcing alternatives late in the third quarter 2005.

An• The ~~investment in the~~ Company ~~involves~~called ~~certain risks~~ and ~~uncertainties. The~~paid ~~risks and uncertainties described below and elsewhere~~ in ~~this~~full ~~Quarterly Report on Form 10-Q should be carefully considered. If any of~~ the ~~events~~ ~~described~~remaining ~~below~~$2.0 ormillion ~~elsewhere~~balance ~~occurs,~~of ~~the~~outstanding ~~Company’s~~Industrial ~~business~~Development ~~could~~Revenue ~~be adversely~~(“IDR”) ~~affected~~bonds inon aJune 30, ~~material~~2005, ~~way~~without penalty.

~~Dependence~~• Net sales onincreased ~~Key~~2.7% ~~Customers~~for the third quarter of fiscal 2005 as compared to net sales for the third quarter of fiscal 2004 primarily due to the Company’s expansion of retail outlets, improved sales of men’s private label products and an increase in sales of Haggar® branded products.

~~The~~• Gross profit ~~Company’s~~as ~~four~~a ~~largest~~percentage ~~customers accounted for approximately 51% and 52%~~ of ~~the Company’s~~ net sales ~~during the three months ended December 31~~, ~~2004~~excluding ~~and~~reorganization ~~2003~~costs, ~~respectively~~increased 1. ~~The~~1% ~~same four customers accounted~~ for ~~approximately~~the ~~73%~~third ~~and~~quarter ~~62%~~ of ~~trade~~fiscal ~~receivables~~2005 as ofcompared ~~December~~to ~~31, 2004 and September 30, 2004, respectively. The loss of~~ the ~~business~~third ofquarter ~~one or more~~ of fiscal ~~the Company’s larger customers could have a material adverse effect on the Company~~2004.

~~Uncertainties~~• Diluted earnings inper ~~Apparel~~share ~~Retailing~~increased 191% for the third quarter of fiscal 2005 as compared to the third quarter of fiscal 2004.

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

~~Competition~~There have been no material changes to the Company’s critical accounting policies during the nine months ended June 30, 2005.

~~The~~Management’s ~~apparel~~Discussion ~~industry~~and isAnalysis ~~highly~~discusses ~~competitive~~the results of operations and financial condition as reflected in the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ~~and~~of ~~abroad~~America. The ~~Company~~preparation of ~~competes~~financial statements in conformity with ~~numerous~~accounting ~~domestic~~principles generally accepted in the United States of America requires management to make estimates and ~~foreign~~assumptions ~~designers~~that affect the reported amounts of assets and liabilities, disclosure ~~brands~~of contingent assets and ~~manufacturers~~liabilities at the date of ~~apparel,~~the ~~some~~financial statements and reported amounts of ~~which~~revenues ~~may~~and beexpenses ~~significantly~~during ~~larger~~the reporting period. On an ongoing basis, management evaluates its estimates and ~~have~~judgments, including ~~greater~~those ~~marketing~~related to accounts receivable; inventory valuation; amortization and ~~financial~~recoverability ~~resources~~of ~~than~~long-lived ~~the~~assets, ~~Company~~including goodwill; litigation accruals; workers’ compensation liabilities; revenue recognition; and reorganization charges. Management ~~believes~~bases ~~that~~its ~~the~~estimates and judgments on the Company’s ~~ability~~substantial tohistorical ~~compete~~experience ~~effectively~~and ~~depends~~other ~~upon~~relevant ~~its~~factors, ~~continued~~the results ~~flexibility~~of inwhich ~~responding~~form tothe ~~market~~basis ~~demand~~for ~~and~~making ~~its~~judgments ~~ability~~about tothe ~~offer~~carrying ~~fashion~~values of ~~conscious~~assets ~~consumers~~and aliabilities ~~wide~~that ~~variety~~are ofnot ~~high~~readily ~~quality~~apparent ~~apparel~~from atother ~~competitive prices~~sources.

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

The Company is dependent upon third parties for the manufacture of approximately 83% of its products. The inability of a manufacturer to ship orders of the Company’s products in a timely manner or to meet quality standards could cause the Company to miss the delivery date requirements of its customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse effect on the Company. The Company has no long-term formal arrangements with any of its suppliers and historically has experienced only limited difficulty in satisfying its raw material and finished goods requirements. Although the Company believes it could replace such suppliers without a material adverse effect on the Company, there can be no assurance that such suppliers could be replaced in a timely manner and the loss of such suppliers could have a material adverse effect on the Company’s short-term operating results.17

18Comparison of Three Months Ended June 30, 2005 to Three Months Ended June 30, 2004

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

~~Dependence~~Net onsales ~~Customer~~increased ~~Service~~$3.1 ~~Center~~million, or 2.7%, to $119.5 million for the third quarter of fiscal 2005, compared to net sales of $116.3 million for the third quarter of fiscal 2004. The increase in ~~Fort~~net ~~Worth~~sales was primarily attributable to a $3.0 million increase in net sales for the Company’s retail stores due to strong same store sales and the net addition of 13 new stores since June 30, ~~Texas~~2004. Sales of men’s private label products increased $2.8 million primarily due to increased shipments to a key customer and the addition of two new customers during the third quarter of fiscal 2005. The overall net sales increase was also due to a $1.9 million increase in Haggar® branded business primarily due to a shift in the timing of orders in fiscal 2005 as compared to fiscal 2004 for one customer, offset in part by reduced sales of seasonal sportswear and sales related to the Company’s ForeverNew™ pant product. The Company also expanded its sales offerings into Mexico during February 2005, which resulted in $1.0 million in incremental sales for the third quarter of fiscal 2005 as compared to the same period in fiscal 2004.

~~The~~These ~~Company~~net ~~operates~~sales ~~the~~increases ~~majority~~were ofpartially ~~its~~offset ~~warehouse~~by ~~and~~a ~~distribution~~$3.0 million ~~activities~~decrease in ~~the~~sales ~~United~~of ~~States~~Kenneth ~~out~~Coleâ and ofClaiborneâ ~~its~~branded ~~main~~products. The ~~distribution~~Company’s ~~center~~domestic inwomen’s ~~Fort~~wear business ~~Worth,~~decreased ~~Texas~~$2. ~~Any~~0 ~~major~~million ~~work~~due ~~disruption at~~to the ~~Company’s~~elimination ~~Fort~~of ~~Worth~~programs ~~facility~~in ~~could~~the ~~have~~Juniors category and a ~~material~~continued ~~adverse~~decrease ~~effect~~in onsales to a key customer and to specialty ~~the~~stores. However, ~~Company~~this decrease was offset in part by sales growth of $1. ~~Although~~2 million for the Company ~~believes~~’s itwomen’s ~~could~~wear products ~~utilize~~in ~~other~~Canada ~~warehousing~~due ~~companies~~ to ~~satisfy~~increased ~~its~~sales ~~shipping and~~of ~~distribution~~new ~~functions,~~programs ~~there~~to ~~can~~key becustomers. The noCompany ~~assurance~~also ~~that~~transferred ~~these~~its ~~warehousing~~operations ~~companies~~in ~~could~~the beUnited ~~utilized~~Kingdom into a ~~timely~~licensee ~~manner~~during October 2004, ~~and~~which ~~the~~resulted ~~inability to service~~in ~~the~~a ~~Company’s~~$1.7 ~~customers~~million ~~for~~decrease ~~any~~in ~~period~~net ofsales ~~time~~for ~~could~~the ~~materially~~third ~~adversely affect~~quarter ~~the~~of ~~Company~~fiscal 2005.

~~Risks~~Reorganization ~~of Acquisition Strategy~~Costs

~~The~~Reorganization ~~Company~~costs ~~continues~~for tothe ~~seek~~third ~~growth~~quarter ~~through~~of ~~strategic~~fiscal ~~acquisitions~~2005 ofwere ~~other~~comprised ~~apparel~~of ~~businesses~~$2. ~~However,~~6 ~~the Company~~million ~~cannot~~in ~~give~~income ~~any~~related ~~assurances~~to ~~that~~the ~~its~~reversal ~~acquisition~~of ~~strategy~~a ~~will~~legal bereserve ~~successful. The~~due ~~success~~to ofa ~~the~~favorable ~~Company’s acquisition~~ruling ~~strategy~~in isa ~~dependent~~wrongful ~~upon~~termination asuit ~~number~~offset ofby ~~factors,~~$0.8 ~~including:~~million in expenses related to plant closures during the period.

• On May 3, 2005, the Company announced plans to close its two remaining Company-operated sewing plants, located in Leon, Mexico and La Romana, Dominican Republic, as part of the Company’s ~~ability~~plan to ~~identify~~focus sourcing ~~suitable~~efforts ~~acquisition~~in ~~candidates;~~the Eastern Hemisphere. As of March 31, 2005, the Company employed approximately 1,675 associates at the sewing facilities. The Company completed the closures during the third quarter of fiscal 2005.

~~• the~~As ~~Company’s~~of ~~ability~~March 31, 2005, given that plant closures and associated severance costs were probable, management recorded a $0.8 million pre-tax charge to ~~negotiate~~reorganization costs for severance and other related benefits in ~~favorable~~accordance ~~acquisition~~with ~~terms~~SFAS No. 112, ~~including~~“Employer’s ~~purchase~~Accounting ~~price~~for Post-employment Benefits and an Amendment of FASB Statements No. 5 and 43.” During the third quarter of fiscal 2005, the Company incurred $0.8 million in additional charges related to the closure, which ~~may~~included be$0.3 ~~adversely~~million in additional severance and other related benefits, ~~affected~~$0.3 ~~due~~million related to ~~increased~~the ~~competition~~accelerated ~~with~~depreciation of certain equipment at the sewing plants and $0.2 million for other ~~buyers;~~costs related to the closure.

• As of June 30, 2005, the ~~availability~~Company ofincluded ~~financing~~$0.4 million in unpaid severance and other related benefits and $0.2 million in other shutdown costs in accrued liabilities. The Company expects to pay a substantial portion of these amounts by September 2005. The Company is actively marketing the land, ~~Company~~building and other equipment from the Mexico facility, oras onwell ~~terms~~as ~~favorable~~certain equipment tofrom the ~~Company;~~Dominican Republic facility. Land, building and equipment costs from both sewing plants of $0.6 million were classified as property held for sale as of June 30, 2005. Management expects the selling prices for all property held for sale to exceed carrying values.

~~• the~~Gross ~~Company’s ability to integrate effectively the systems and operations of acquired businesses; and~~Profit

• Gross profit as a percentage of net sales increased to 30.3% in the third ~~Company’s~~quarter ~~ability~~of fiscal 2005, compared to ~~retain~~27.7% ~~key~~in the third quarter of fiscal ~~personnel~~2004. Absent $1.8 million in reorganization costs, gross profit as a percentage of ~~acquired~~net ~~businesses~~sales would have been 28.8% in the third quarter of fiscal 2005. The increase was primarily attributable to a decrease in customer allowances for Haggar® branded products and better product costs for the Company’s private label products.

Acquisitions involve a number of other risks, including diversion of management’s attention from other business concerns and the assumption of known or unknown liabilities of acquired businesses. The integration of acquired businesses may place significant strains on the Company’s current operating and financial systems and controls. The Company may not successfully overcome these risks or any other problems encountered in connection with its acquisition strategy.18

19Selling, General and Administrative Expenses

~~Weaknesses~~Selling, general and administrative expenses as a percentage of net sales decreased to 24.1% in ~~Internal~~the ~~Controls~~third quarter of fiscal 2005, compared to 25.2% in the third quarter of fiscal 2004. The $0.5 million, or 1.8%, decrease in selling, general and administrative expenses was primarily due to a $0.3 million decrease in incentive compensation expense due to lower overall earnings projections for fiscal 2005, $0.7 million in reduced costs due to the transfer of operations in the United Kingdom to a licensee during the first quarter of fiscal 2005, $0.6 million related to a reduced estimate of outstanding self-insured health claims and $0.3 million in savings due to the sale of the corporate aircraft during the first quarter of fiscal 2005. The expense decreases were offset by a $1.1 million increase in professional fees related to the Company’s compliance with the Sarbanes-Oxley Act as well as other miscellaneous expense increases.

~~Weaknesses~~Other in internal controls and procedures could have a material adverse effect on the Company. During the preparation of the Company’s consolidated financial statements for fiscal 2004, the Company’s management noted internal control deficiencies related to the review of journal entries and account reconciliations, the training, staffing and supervision related to intercompany accounting and foreign currency translation processes, the documentation of the Company’s foreign currency translation methodology and the periodic review of the trial balance for unusual items. These internal control deficiencies constituted a material weakness. During the first quarter of fiscal 2005, the Company’s management identified two control deficiencies which constitute material weaknesses. The first material weakness relates to the finished goods inventory valuation. Management believes that there has been inadequate analysis of the capitalized cost factors used in the finished goods inventory valuation. The second material weakness relates to internal controls for customer allowance reserves. Management has identified certain customer allowances for which a reserve was not recorded on a timely basis. For further discussion of the Company’s internal control over financial reporting, see “Item 4. Controls and Procedures”. The Company has implemented new controls to remediate the control deficiencies noted above, however other instances of weaknesses in the Company’s internal controls and procedures could occur or be identified in the future. Any such weaknesses may have a material adverse effect on the Company and the market price of the Company’s securities.Income

~~Recently~~Other ~~Issued~~income ~~and~~increased ~~Adopted~~$0.4 ~~Financial~~million ~~Accounting~~to $0.4 million of other income for ~~Standards~~the third quarter of fiscal 2005, compared to $30,000 of other expense for the third quarter of fiscal 2004. Other income for the third quarter of fiscal 2005 included a $0.5 million gain on the sale of a Company-owned apartment, offset by a $0.1 million loss on the disposal of certain fixtures.

InInterest December 2004, the FASB issued Statement No. 123R (revised 2004), entitled “Share-Based Payment” (“SFAS No. 123R”) to amend SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 95, Statement of Cash Flows”. The standard’s effective date will apply to awards that are granted, modified, or settled in cash in interim or annual periods beginning after June 15, 2005. This standard eliminates the ability to account for share-based compensation using the intrinsic value-based method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS No. 123R requires the Company to calculate equity-based compensation expense for stock options and employee stock purchase plan rights granted to employees based on the fair value of the equity instrument at the time of grant. Currently, the Company discloses the pro forma net income (loss) and related pro forma income (loss) per share information in accordance with previously issued SFAS No. 123 and also SFAS No. 148, “Accounting for Stock-Based Compensation Costs—Transition and Disclosure”. Management is currently evaluating the impact that the pronouncement will have on the Company’s financial position and results of operations.Expense

~~Item~~Interest 3expense decreased $0. ~~Quantitative~~2 ~~and~~million, ~~Qualitative~~or ~~Disclosures~~47.1%, to $0.2 million for ~~about~~the ~~Market~~third ~~Risk~~quarter of fiscal 2005, compared to $0.4 million for the third quarter of fiscal 2004, primarily due to the repayment of policy loans on officers’ life insurance policies during the first quarter of fiscal 2005 and lower debt levels during the third quarter of fiscal 2005.

~~The~~Income Company is exposed to market risk from changes in foreign currency exchange risk and interest rate risk, which may adversely affect its financial position, results of operations and cash flows. The Company does not use financial instruments for trading or other speculative purposes and is not a party to any derivative financial instrument. As of December 31, 2004, the Company’s exposure to interest rate risk was minimal due to the low level of variable rate debt.Taxes

20The Company’s income tax provision as a percentage of income before income tax was 39.1% for the third quarter of fiscal 2005. Comparatively, the Company’s income tax provision as a percentage of income before income tax was 38.2% for the third quarter of fiscal 2004. The increase in the effective tax rate was primarily due to certain non-deductible expenses and a change in the estimate of certain potential state income tax assessments.

~~Item~~Comparison ~~4. Controls~~of ~~and~~Nine ~~Procedures~~Months Ended June 30, 2005 to Nine Months Ended June 30, 2004

~~(a) The~~Net Chief Executive Officer and Chief Accounting Officer of the Company have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 240.13a-15(e) and 15d-15(e)), and have concluded, as more fully described in 4(c) below, that as of the end of the period covered by this Quarterly Report on Form 10-Q, such disclosure controls and procedures were ineffective in timely alerting them to material information relating to the Company required to be disclosed in the periodic reports the Company files or submits under the Securities Exchange Act of 1934. With respect to the material weaknesses described in Item 4(c) below we significantly expanded our disclosure controls and procedures to include additional analysis and other post-closing procedures to ensure our disclosure controls and procedures were effective over the preparation of the financial information included in this Quarterly Report on Form 10-Q.Sales

~~(b) In~~Net ~~professional~~sales ~~auditing~~decreased ~~literature~~$15.3 million, ~~“significant~~or ~~deficiencies”~~4.3%, ~~are~~to ~~referred~~$340.8 million for the nine months ended June 30, 2005, compared to asnet ~~“reportable~~sales ~~conditions~~of $356.1 million for the nine months ended June 30,” ~~which~~2004. The ~~are~~decrease ~~control~~in ~~issues~~net ~~that~~sales ~~could~~was ~~have~~primarily aattributable ~~significant~~to ~~adverse~~a ~~effect~~$23.6 onmillion reduction in the ~~ability~~domestic Haggar® branded business due to ~~record~~weak performance of the Company’s ForeverNew™ product during the first nine months of fiscal 2005, a ~~process~~shift in the timing of orders in fiscal 2005 as compared to fiscal 2004 for one customer, ~~summarize~~reduced ~~and~~sales ~~report~~of ~~financial~~seasonal ~~data~~sportswear and reductions in ~~financial~~net ~~statements~~sales to two department store customers. The decrease ~~Auditing~~in ~~literature~~domestic ~~defines~~net ~~“material~~sales ~~weakness”~~of asHaggar® branded products was partially offset by a ~~particularly~~$7.3 ~~serious~~million ~~reportable~~increase ~~condition~~in ~~where~~sales ~~the~~of ~~internal~~Kenneth ~~control~~Coleâ and ~~does~~Claiborneâ ~~not~~branded ~~reduce~~products towith aseveral ~~relatively~~customers. The ~~low~~Company ~~level~~transferred its operations in the United ~~risk~~Kingdom ~~that~~to ~~misstatements~~a ~~caused~~licensee byduring ~~error~~October 2004, orwhich ~~fraud~~resulted ~~may~~in ~~occur~~an additional $4.8 million decrease in ~~amounts~~net ~~that~~sales ~~would~~for bethe ~~material~~nine inmonths ~~relation~~ended June 30, 2005. The Company’s domestic women’s wear business decreased $8.4 million due to the ~~financial~~elimination ~~statements~~of ~~and~~programs in the Juniors ~~risk~~category ~~that~~as ~~such~~well ~~misstatements~~as ~~would~~a ~~not~~continued bedecrease ~~detected~~in ~~within~~sales to a ~~timely~~key ~~period~~customer and specialty stores. This decrease was offset in part by ~~employees~~sales growth of $3.8 million for the Company’s women’s wear products in Canada due to increased sales of new programs to key customers. The Company’s retail segment net sales increased $5.0 million due to management’s focus on effective promotional planning, improved store mix and the ~~normal~~net ~~course~~addition of ~~performing~~13 ~~their~~new ~~assigned~~stores since ~~functions~~the nine months ended June 30, 2004.

The Company reported deficiencies in internal control which constituted a material weakness in Item 9A of its Annual Report on Form 10-K filed December 10, 2004. The deficiencies included (i) inadequate and untimely review of journal entries and account reconciliations; (ii) inadequate training, staffing and supervision related to intercompany accounting and foreign currency translation processes; (iii) insufficient documentation regarding the Company’s foreign currency translation methodology; and (iv) inadequate periodic review of the trial balance for unusual items.19

InThe ~~response to the deficiencies noted above, the~~ Company ~~has~~expects ~~made~~reductions ~~the~~in ~~necessary~~orders ~~improvements~~for toHaggar® ~~the~~branded ~~internal~~men’s ~~control~~wear and ~~environment~~Kenneth toCole® ~~remediate~~and ~~the~~Claiborne® ~~material~~branded ~~weakness. Prior~~products tothrough the ~~filing~~remainder of fiscal ~~the~~2005 ~~Annual~~as ~~Report~~compared onto ~~Form~~fiscal ~~10-K,~~2004. The ~~the~~ Company ~~had~~intends ~~completed~~to ~~training~~explore ofopportunities ~~accounting personnel currently responsible~~ for ~~intercompany~~growth ~~accounting~~with ~~and~~its ~~foreign~~women’s wear ~~currency~~programs ~~translation~~in on the ~~appropriate~~United ~~methodology~~States ~~to be used~~ and ~~implemented~~in ~~a monthly control to evaluate~~ the ~~reasonableness~~women’s ofwear ~~the~~business ~~foreign~~in ~~currency translation adjustment. Since December 2004, the Company has (i) reviewed journal entries and account reconciliations~~ Canada to ~~ensure~~offset ~~the~~decreased ~~process~~volume isfor ~~effective;~~its ~~(ii)~~traditional ~~assessed the Company~~women’s ~~accounting~~wear ~~personnel~~programs. Additionally, ~~restructured~~ the ~~organization and added two senior supervisory positions; (iii) documented the system flow of the~~ Company’s ~~foreign~~plans ~~currency translation module (iv) enhanced the quarterly fluctuation analysis~~ to ~~include~~drive aadditional ~~scan~~net ofsales ~~all~~increases ~~trial~~in ~~balance~~its retail ~~accounts~~division ~~for~~by ~~unusual~~opening ~~items;~~new ~~and~~retail ~~(v)~~locations ~~adjusted~~subsequent ~~the~~to ~~timing~~June 30, 2005, ~~of quarterly~~ and ~~year~~focusing ~~end~~on ~~earnings~~same-store ~~releases~~sales ~~in order to allow appropriate time to perform all control procedures~~growth.

~~(c) In~~Reorganization connection with the financial statement close process for December 31, 2004, the Company’s management identified two additional control deficiencies which management believes constitute material weaknesses in its internal controls. The first of these relates to the finished goods inventory valuation process. Management believes that there has been inadequate analysis of the capitalized cost factors used in the finished goods inventory valuation.Costs

~~The~~Reorganization ~~Company~~costs ~~remediated~~for ~~this~~the ~~weakness~~nine inmonths ~~its~~ended ~~internal~~June 30, ~~control~~2005 ~~over financial reporting by implementing a detailed review~~ of $1.3 ~~the~~million ~~calculation~~were ofprimarily ~~capitalized~~attributable ~~cost~~to ~~factors~~$1. ~~The~~6 ~~review~~million ~~includes~~in aseverance ~~process~~costs ~~to verify completeness~~ and other ~~accuracy~~related ofbenefits ~~general~~associated ~~ledger~~with ~~accounts included in~~ the ~~calculation~~shutdown of the ~~cost~~two ~~capitalization~~remaining Company-operated ~~factors~~sewing plants, asoffset ~~well~~by asthe areversal ~~review~~ of ~~the~~accruals ~~appropriateness~~ of ~~the~~$0.3 million ~~expenses~~and ~~included within those accounts~~$2. ~~The~~6 ~~Company~~million ~~also~~to ~~implemented~~earnings arelated ~~more~~to ~~robust~~separate ~~monthly~~wrongful ~~analytical~~termination lawsuits ~~review~~in ofwhich the ~~trend~~Company ofreceived ~~capitalized~~favorable ~~cost~~judgments ~~factors~~on ~~compared~~appeal toin ~~prior~~December 2004 and ~~periods~~May 2005, respectively.

21Gross Profit

~~The~~Gross ~~second~~profit ~~material~~as ~~weakness~~a ~~relates~~percentage of net sales increased to ~~internal~~28.9% ~~controls~~in ~~for~~the nine ~~customer~~months ~~allowance~~ended ~~reserves~~June 30, 2005, compared to 28.2% in the nine months ended June 30, 2004. Absent $1.3 million in reorganization costs, gross profit as a percentage of net sales would have been 28.5% in the nine months ended June 30, 2005. The increase in gross profit percentage was primarily due to an improved product mix for the Company’s ~~periodically~~men’s ~~grants~~private label products, improved gross profits in the Company’s retail stores due to effective promotional and merchandise planning and a decrease in customer allowances ~~for~~on ~~certain~~Claiborne® ~~customers~~branded products due to a change in estimate. The ~~Company’s~~increase ~~management~~in ~~identified~~gross profit was offset in part by an increase in customer allowances ~~for~~during the first quarter of fiscal 2005, which aprimarily ~~reserve~~related ~~was~~to ~~not~~markdowns ~~recorded~~associated onwith athe ~~timely~~ForeverNewä products ~~basis~~during the first quarter of fiscal 2005.

The Company ~~remediated~~continues ~~this~~to ~~weakness~~evaluate inlower ~~internal~~cost ~~controls~~sourcing byoptions. The ~~conducting~~Company ~~training~~closed on the last two Company’s-operated ~~accounting~~sewing ~~for~~plants ~~customer~~as ~~allowance~~noted ~~reserves~~above ~~for~~and ~~those~~intends ~~senior~~to ~~sales~~reduce ~~associates~~the ~~with~~number of ~~the~~suppliers ~~responsibility~~to ~~for~~reduce ~~customer~~costs, ~~allowances~~enhance product quality and improve product deliveries.

~~(d) During the most recent fiscal quarter~~Selling, ~~there~~General ~~have~~and ~~not~~Administrative been any other changes, other than as discussed above, in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.Expenses

~~PART~~Selling, IIgeneral and administrative expenses as a percentage of net sales increased to 26.9% in the nine months ended June 30, 2005, compared to 25.7% in the nine months ended June 30, 2004. ~~OTHER~~The $0.2 million, or 0.2%, increase in ~~INFORMATION~~selling, general and administrative expenses primarily related to $2.5 million in incremental media advertising expense to introduce the ForeverNewä product line during the first quarter of fiscal 2005 and $2.0 million in connection with a wrongful termination lawsuit. The increase in selling, general and administrative expenses was also attributable to a $1.4 million increase in professional fees related to the Company’s compliance with the Sarbanes-Oxley Act, and other administrative expense increases. The increases were partially offset by a $1.5 million decrease in incentive compensation expense due to lower overall earnings projections for fiscal 2005, $1.9 million in reduced costs due to the transfer of operations in the United Kingdom to a licensee during the first quarter of fiscal 2005, $1.0 million in savings due to the sale of the corporate aircraft during the first quarter of fiscal 2005 and a $1.5 million decrease in expenses related to the Company’s global headquarters relocation in the first nine months of fiscal 2004.

~~Item~~During the first quarter of fiscal 2005, the Company also recorded a 1$0.3 million charge for additional severance benefits to three sales force employees. ~~Legal~~The ~~Proceedings~~Company recorded a $0.4 million charge during fiscal 2004 when management committed to this reduction in force. Severance payments for these three employees began at their termination dates in January 2005 and are expected to continue through March 2006. The Company included $0.5 million in accrued liabilities related to these severance benefits as of June 30, 2005.

The Company has been named as a defendant in several legal actions arising from its operations in the normal course of business, including actions brought by certain terminated employees. Although exact settlement amounts, if any, related to these actions cannot accurately be predicted, the claims and damages alleged, the progress of the litigation to date and past experience with similar litigation leads the Company to believe that any liability resulting from these actions and those described below will not individually, or collectively, have a material adverse effect on the Company.20

~~The~~Other Company is a defendant in a wrongful termination lawsuit brought in federal district court in 2000 by a former salesman. A jury rendered a verdict in January 2002 in favor of the plaintiff against the Company in the amount of $0.8 million, subject to potential doubling in the event judgment is entered on the jury’s finding of willful discrimination, plus pre- and post-judgment interest and attorneys’ fees. After various appeals and remand to the trial court, on January 31, 2005, the Company received a Memorandum Order ordering the Company to pay, after entry of judgment, backpay in the amount of $0.8 million, liquidated damages of $0.8 million and front pay of $0.5 million. The court also ordered the Company to make monthly payments of $14,583 until the Company reinstates the plaintiff to the first available sales associate vacancy in the Dallas area. The trial court denied, however, plaintiff’s request for enhanced backpay and prejudgment interest. The trial court has advised the plaintiff that the law entitles him to an award of attorney’s fees, for which he must submit a motion. The plaintiff’s counsel has sought a stipulation to attorney’s fees of $0.9 million, which the Company, through its counsel, has refused. During the first quarter of fiscal 2005, the Company recorded an additional $1.7 million charge to selling, general and administrative expenses related to this matter. The Company has reserved $2.7 million in accrued liabilities for this matter as of December 31, 2004. The Company is currently reviewing its opportunities for appeal, once a final judgment is entered by the trial court.Income

~~During~~Other ~~fiscal~~income ~~2003~~increased ~~and~~$0.2 ~~2004,~~million ~~one~~to ~~attorney~~$0.6 ~~filed~~million ~~five~~during ~~separate~~the ~~suits in~~nine ~~Texas~~months ~~state~~ended ~~court against the Company and certain of its subsidiaries~~June 30, ~~as well as unrelated third parties~~2005, ~~alleging~~compared ~~injuries~~ to ~~approximately~~$0.4 ~~2,200~~million ~~former employees~~for ~~from airborne fibers and chemicals in certain of~~ the ~~Company’s~~nine ~~now~~months ~~closed~~ended ~~facilities located in south Texas.~~June ~~All proceedings in one case~~30, ~~which names over 2,100 plaintiffs, have been stayed due to the unrelated bankruptcy of one of the other defendants~~2004. ~~The~~Other ~~Company is awaiting a~~income ~~decision~~for by the ~~trial~~nine ~~court~~months onended ~~its motion to dismiss another case~~June 30, ~~which~~2005 ~~names 71~~included ~~plaintiffs~~a $0. ~~After~~5 ~~taking~~million ~~discovery~~gain inon ~~one of~~ the ~~remaining~~sale ~~cases, the Company believes that all~~ of ~~these~~an ~~cases~~apartment ~~and claims~~property, ~~are~~offset ~~frivolous~~by ~~and~~a ~~that~~$0.1 ~~the~~million ~~plaintiffs~~loss ~~have~~on ~~no factual or legal basis for~~the ~~any~~disposal of ~~their~~certain ~~allegations~~fixtures. InThe ~~addition,~~prior ~~the~~period ~~Company~~includes ~~believes~~a ~~that~~gain iton ~~has~~the ~~meritorious~~sale ~~defenses~~of toa ~~all~~property of ~~the asserted claims~~$0. ~~The~~2 ~~Company intends to vigorously defend all of these suits~~million.

22Interest Expense

~~Jury~~Interest ~~verdicts~~expense indecreased ~~two~~$0.6 ~~cases~~million, ~~totaling~~or ~~approximately~~50.0%, to $10.7 million ~~in the~~for ~~aggregate~~the ~~were~~nine ~~returned~~months inended ~~fiscal~~June 30, ~~2000~~2005, ~~against~~compared ~~certain subsidiaries of the Company related~~ to ~~claims~~$1.3 bymillion ~~former employees of now closed manufacturing facilities~~ for ~~wrongful discharge and common law tort. Both cases have been on appeal to~~ the ~~Texas~~nine ~~Supreme~~months ~~Court,~~ended ~~because management and legal counsel believe the verdicts in the lawsuits are both legally and factually incorrect. On December 31~~June 30, 2004, ~~the~~primarily ~~Texas~~due ~~Supreme~~to ~~Court reversed~~ the ~~judgment~~repayment of ~~the~~policy ~~Court of Appeals and rendered judgment in the~~loans ~~Company~~on officers’s ~~favor~~life ininsurance ~~one~~policies ~~of such cases. As a result,~~ during the first quarter of fiscal 2005~~, the Company reversed the~~ ~~prior~~and ~~accrual~~lower ~~for~~debt ~~such~~levels ~~case,~~during ~~resulting~~fiscal ~~in a $0~~2005.~~3 million increase in gross profit for such quarter. The other case remains on appeal. The Company has $2.6 million reserved in accrued liabilities for the remaining case as of December 31, 2004.~~

~~Item~~Income ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~Taxes

OnThe ~~November~~Company’s ~~30,~~income ~~1999,~~tax ~~the~~provision ~~Board~~as a percentage of ~~Directors~~income ~~authorized~~before income ~~the~~tax ~~Company~~was ~~to repurchase~~35.4% offor upthe tonine ~~3,000,000~~months ~~shares~~ended ofJune 30, 2005. Comparatively, the Company’s ~~stock~~income ~~(the~~tax ~~“1999~~provision ~~Program”)~~as a percentage of income before income tax was 38. ~~The~~2% ~~1999~~for ~~Program~~the ~~does~~nine ~~not~~months ~~have~~ended June 30, 2004. Despite an ~~expiration~~increase in certain non-deductible expenses and state ~~date. As~~income oftax ~~September~~for the period ended June 30, ~~2002~~2005, the Company’s ~~had~~effective rate ~~purchased~~decreased ~~2,242,183~~primarily ~~shares~~due ofto ~~stock~~certain discrete period adjustments. The Company ~~did~~recorded ~~not~~discrete ~~purchase~~period ~~any~~adjustments ~~shares~~to ~~in fiscal~~reflect ~~2003~~a ordownward ~~fiscal~~revision ~~2004. On November~~in ~~8, 2004,~~ the Company’s ~~publicly~~estimate ~~announced,~~of ~~that~~interest itowed ~~was~~related ~~resuming~~to ~~its~~a ~~stock~~pending ~~buyback~~settlement with ~~program~~the ~~and~~Internal ~~has~~Revenue ~~since~~Service ~~purchased~~covering ~~204,793~~tax ~~shares~~years of1993 ~~outstanding~~to ~~stock commensurate~~1998 ~~with~~and ~~that~~a ~~announcement. The~~change in ~~amount~~the ~~and~~estimate ~~timing~~ of ~~additional~~certain ~~purchases~~potential ~~will~~state ~~depend~~tax ~~upon market conditions~~assessments.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program (1)
October 1, 2004 through October 31, 2004	—	—		—	757,817
November 1, 2004 through November 30, 2004	65,400	$	19.91	65,400	692,417
December 1, 2004 through December 31, 2004	139,393	$	22.71	139,393	553,024
Total	204,793	$	21.82	204,793	553,024

Segment Profitability

~~Item~~The 3Company’s three operating segments are business units that offer similar products through different distribution channels. ~~Defaults~~The ~~Upon~~Company’s ~~Senior~~wholesale ~~Securities~~segment designs, manufactures, imports and markets casual and dress men’s and women’s apparel to retailers throughout North America. The Company also operates a retail segment, which markets Haggar® branded products through 82 Company operated stores located in outlet and strip malls throughout the United States, and a licensing segment, which generates royalty income by licensing the Company’s trademarks for use by other manufacturers of specified products in specified geographic areas. The Company evaluates performance and allocates resources based on segment profits.

~~None~~Intercompany sales from the wholesale segment to the retail segment are not reflected in wholesale segment net sales. Additionally, there is no profit included on sales from the wholesale segment to the retail segment. Segment profit is comprised of segment net income before interest expense and provision for income taxes.

~~Item 4. Submission of Matters to a Vote of Security Holders~~21

~~None.~~The table below reflects the Company’s segment results for the three and nine months ended June 30, 2005 and 2004 (in thousands):

Item 5. Other Information

Three months ended June 30,	Wholesale		Retail		Licensing		Consolidated
2005
Net sales	$	103,351	$	16,141	$	—	$	119,492
Segment profit	$	7,156	$	636	$	224	$	8,016

2004
Net sales	$	103,173	$	13,174	$	—	$	116,347
Segment profit	$	2,337	$	503	$	255	$	3,095

None.

Nine months ended June 30,	Wholesale		Retail		Licensing		Consolidated
2005
Net sales	$	297,268	$	43,565	$	—	$	340,833
Segment profit	$	6,263	$	1,143	$	852	$	8,258

2004
Net sales	$	317,629	$	38,517	$	—	$	356,146
Segment profit	$	8,389	$	1,007	$	854	$	10,250

23The table below reflects the net sales related to the Company’s key product lines as a percentage of consolidated net sales for the three and nine months ended June 30, 2005 and 2004:

Item 6. Exhibits

	Three months ended June 30,				Nine months ended June 30,
	2005		2004		2005		2004
Net sales by category:
Men’s Haggar® branded apparel	64.2	%	62.4	%	63.4	%	66.9	%
Men’s licensed apparel	12.2	%	15.1	%	12.3	%	9.7	%
Men’s private label apparel	16.6	%	14.6	%	16.1	%	14.2	%
Women’s apparel	7.0	%	7.9	%	8.2	%	9.2	%
Consolidated net sales	100.0	%	100.0	%	100.0	%	100.0	%

Exhibit Number		Description
3(a)		Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].)
3(b)		Amended and Restated Bylaws of the Company, as amended, dated October 10, 2002. (Incorporated by reference from Exhibit 99.2 to the Company’s Current Report on Form 8-K filed October 15, 2002 [File No. 0-20850].)
4(a)		Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].)
4(b)		Rights Agreement, dated as of October 10, 2002, between the Company and Mellon Investor Services, LLC, as Rights Agent, specifying the terms of the Rights, which includes the description of Series B Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the form of the Summary of Rights as Exhibit C. (Incorporated by reference from Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
4(c)		Form of Rights Certificate. (Incorporated by reference from Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
4(d)		Form of Summary of Rights. (Incorporated by reference from Exhibit 99.5 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
31(a)	*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31(b)	*	Certification of Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32(a)	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
32(b)	**	Certification of Chief Accounting Officer Pursuant to 18 U.S.C. §1350.

The Company does not segregate assets on a segment basis for internal management reporting and, therefore, such information is not presented.

*Wholesale ~~Filed herewith ** Furnished herewith~~Segment

24Wholesale segment net sales increased $0.2 million, or 0.2%, to $103.4 million for the third quarter of fiscal 2005, compared to $103.2 million for the third quarter of fiscal 2004. The increase in wholesale segment net sales was primarily attributable to a $2.8 million increase in sales of men’s private label products primarily due to increased shipments to a key customer and the addition of two new customers during the third quarter of fiscal 2005. The wholesale segment net sales increase was also due to a $1.9 million increase in Haggar® branded business primarily due to a shift in the timing of orders in fiscal 2005 as compared to fiscal 2004 for one customer, offset in part by reduced sales of seasonal sportswear and sales related to the Company’s ForeverNew™ pant product. The Company also expanded its sales offerings into Mexico during February 2005, which resulted in $1.0 million in incremental sales for the third quarter of fiscal 2005 as compared to the same period in fiscal 2004.

~~SIGNATURES~~These net sales increases were partially offset by a $3.0 million decrease in sales of Kenneth Coleâ and Claiborneâ branded products. The Company’s domestic women’s wear business decreased $2.0 million due to the elimination of programs in the Juniors category and a continued decrease in sales to a key customer and to specialty stores.

~~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.~~22

	Haggar Corp.,
Date: February 9, 2005	By:	/s/ John W. Feray
		John W. Feray
		(Chief Accounting Officer)
		Signed on behalf of the
		registrant and as principal
		accounting officer.

However, this decrease was offset in part by sales growth of $1.2 million for the Company’s women’s wear products in Canada due to increased sales of new programs to key customers. The Company also transferred its operations in the United Kingdom to a licensee during October 2004, which resulted in a $1.7 million decrease in net sales for the third quarter of fiscal 2005.

25Wholesale segment net sales decreased $20.4 million, or 6.4%, to $297.3 million for the nine months ended June 30, 2005, compared to $317.6 million for the nine months ended June 30, 2004. The decrease in wholesale segment net sales was primarily attributable to a $23.6 million reduction in the domestic Haggar® branded business due to weak performance of the Company’s ForeverNew™ product during the first nine months of fiscal 2005, a shift in the timing of orders in fiscal 2005 as compared to fiscal 2004 for one customer, reduced sales of seasonal sportswear and reductions in net sales to two department store customers. The decrease in domestic net sales of Haggar® branded products was partially offset by a $7.3 million increase in sales of Kenneth Coleâ and Claiborneâ branded products. The Company transferred its operations in the United Kingdom to a licensee during October 2004, which resulted in an additional $4.8 million decrease in net sales for the nine months ended June 30, 2005. The Company’s domestic women’s wear business decreased $8.4 million due to the elimination of programs in the Juniors category as well as a continued decrease in sales to a key customer and specialty stores. This decrease was offset in part by sales growth of $3.8 million for the Company’s women’s wear products in Canada due to increased sales of new programs to key customers.

~~INDEX~~Wholesale TOsegment ~~EXHIBITS~~profit increased $4.9 million to $7.2 million for the third quarter of fiscal 2005, compared to $2.3 million for the third quarter of fiscal 2004. The increase in wholesale segment profit was primarily due to $2.6 million in income related to the reversal of a legal reserve due to a favorable ruling in a wrongful termination suit. The increase is also attributable to a 1.0% increase in gross profit as a percentage of net sales for the wholesale segment, excluding reorganization costs, primarily due to a decrease in customer allowances for Haggar® branded products and better product costs for the Company’s private label products. The increase in wholesale segment profit was also due in part to a decrease in selling, general and administrative expenses of $1.6 million, primarily attributable to a decrease in incentive compensation expense due to lower overall earnings projections for fiscal 2005, reduced costs due to the transfer of operations in the United Kingdom to a licensee during the first quarter of fiscal 2005, a reduced estimate of outstanding self-insured health claims and savings due to the sale of the corporate aircraft during the first quarter of fiscal 2005. The expense decreases were offset in part by an increase in professional fees related to the Company’s compliance with the Sarbanes-Oxley Act and additional reorganization costs related to the closure of the sewing plants.

Exhibit Number		Description
3(a)		Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].)
3(b)		Amended and Restated Bylaws of the Company, as amended, dated October 10, 2002. (Incorporated by reference from Exhibit 99.2 to the Company’s Current Report on Form 8-K filed October 15, 2002 [File No. 0-20850].)
4(a)		Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].)
4(b)		Rights Agreement, dated as of October 10, 2002, between the Company and Mellon Investor Services, LLC, as Rights Agent, specifying the terms of the Rights, which includes the description of Series B Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the form of the Summary of Rights as Exhibit C. (Incorporated by reference from Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
4(c)		Form of Rights Certificate. (Incorporated by reference from Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
4(d)		Form of Summary of Rights. (Incorporated by reference from Exhibit 99.5 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)
31(a)	*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31(b)	*	Certification of Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32(a)	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.
32(b)	**	Certification of Chief Accounting Officer Pursuant to 18 U.S.C. §1350.

Wholesale segment profit decreased $2.1 million, or 25.3%, to $6.3 million for the nine months ended June 30, 2005, compared to $8.4 million for the nine months ended June 30, 2004. The decrease in wholesale segment profit was primarily attributable to a $20.4 million decrease in net sales as noted above. The Company also incurred $1.6 million in reorganization costs related to the shutdown of the two remaining Company-operating sewing plants. The decrease was also attributable to an increase in wholesale segment selling, general and administrative expenses as a percentage of net sales to 24.5% during the nine months ended June 30, 2005 from 23.5% for the comparable period in fiscal 2004. This increase was due to increased media advertising expense and expenses related to a wrongful termination lawsuit. The increase in selling, general and administrative expenses was also attributable to an increase in professional fees related to the Company’s compliance with the Sarbanes-Oxley Act. The increases were partially offset by a decrease in incentive compensation expense due to lower overall earnings projections for fiscal 2005, reduced costs due to the transfer of operations in the United Kingdom to a licensee during the first quarter of fiscal 2005, savings due to the sale of the corporate aircraft during the first quarter of fiscal 2005, a severance charge related to a reduction of the sales force and a decrease in expenses related to the Company’s global headquarters relocation in the first nine months of fiscal 2004.

*The ~~Filed~~decrease ~~herewith~~in **wholesale ~~Furnished~~segment ~~herewith~~profit for the nine months ended June 30, 2005 was offset in part by the reversal of accruals of $0.3 million and $2.6 million to earnings related to separate wrongful termination lawsuits in which the Company received favorable judgments on appeal in December 2004 and May 2005, respectively.

2623

Retail Segment

Retail segment net sales increased $2.9 million, or 22.5%, to $16.1 million for the third quarter of fiscal 2005, compared to $13.2 million for the third quarter of fiscal 2004. Retail segment net sales increased $5.1 million, or 13.1%, to $43.6 million for the nine months ended June 30, 2005, compared to $38.5 million for the nine months ended June 30, 2004. The increase in net sales for the retail segment for both periods was primarily attributable to strong same store sales, the net addition of 13 new stores since June 30, 2004, a seasonal promotion during the third quarter of fiscal 2005 that resulted in higher sales volume than the comparable period in fiscal 2004 and improved merchandising efforts.

Retail segment profit increased $0.1 million, or 26.4%, to $0.6 million for the third quarter of fiscal 2005, compared to $0.5 million for the third quarter of fiscal 2004. Although, the retail segment reported a $2.9 million increase in net sales for the third quarter of fiscal 2005, retail gross profit as a percentage of net sales decreased 1.3%, primarily due to seasonal promotions to address competitive discounting during the period. Retail segment selling, general and administrative expenses also increased $1.0 million primarily due to increased employee compensation and marketing expenses, increased store opening expenses and other volume-related expense increases.

Retail segment profit increased $0.1 million, or 13.5%, to $1.1 million for the nine months ended June 30, 2005, compared to $1.0 million for the nine months ended June 30, 2004. Although the retail segment reported a $5.1 million increase in net sales for the period, retail gross profit as a percentage of net sales decreased 0.5%, primarily due to promotions during the period and downward pricing pressures from the Company’s retail competitors. Retail segment selling, general and administrative expenses also increased $2.0 million primarily due to increased employee compensation and marketing expenses, increased store opening expenses and other volume-related expense increases.

Liquidity and Capital Resources

The Company’s principal sources of liquidity are cash flows from operations and borrowings under its unsecured revolving credit facility. As of June 30, 2005, the Company had cash and cash equivalents of $20.2 million.

As of June 30, 2005, the Company had no amounts outstanding under a $111.0 million unsecured revolving credit agreement (the “Agreement”). The available borrowing capacity was restricted to $54.6 million at June 30, 2005, under the Agreement’s funded debt to operating cash flow covenant. The Company incurred approximately $0.3 million in unused letters of credit and commitment fees related to the available borrowing capacity during the nine months ended June 30, 2005. The interest rates ranged from 2.34% to 6.25% during the nine months ended June 30, 2005, and were based upon both margins over a bank base rate and margins over LIBOR, depending on the borrowing option selected by the Company. The Agreement, which expires in June 2007, prohibits the Company from pledging its accounts receivable and inventories, contains limitations on incurring additional indebtedness, requires maintaining minimum net worth levels of the Company and the Company’s main operating subsidiary, and requires the maintenance of certain financial ratios. The Agreement also prohibits the payment of any dividend if a default exists after giving effect to such a dividend. As of June 30, 2005, the Company was in full compliance with its financial and other covenants under the Agreement. On August 5, 2005, the Company notified the lender that it would reduce the maximum borrowings under the Agreement to $70.0 million, effective September 6, 2005. Management exercised the right to reduce the maximum borrowings in order to reduce future commitment fees due to the Company’s current anticipated borrowing requirements.

The Company called and paid in full the remaining $2.0 million balance of outstanding IDR bonds on June 30, 2005 without penalty. The bonds were collateralized by a building and certain equipment at the Company’s fabric cutting facility in Weslaco, Texas.

In February 2005, the Company purchased software related to a new financial management system. The implementation of the system began during the third quarter of fiscal 2005, and is scheduled for completion during the third quarter of fiscal 2006. The Company anticipates that costs to purchase the software and implement the new system will be approximately $2.0 million to $3.0 million over the next nine months. The Company also plans to replace the merchandising and point-of-sale systems at the retail segment. The Company anticipates that

implementation of these systems will begin during January 2006 and conclude by the end of fiscal 2006. The Company estimates that costs to license the software and implement the new retail systems will be approximately $1.5 to $2.5 million. The Company intends to fund the implementation of these new systems with cash flows from operations.

The Company was party to an operating lease for a corporate aircraft that contained a residual value guarantee. Under the lease, which ended in December 2004, the Company had the option of (a) returning the aircraft to the lessor and paying the guaranteed residual value of $3.0 million; (b) purchasing the aircraft for $4.0 million; or (c) arranging for the sale of the aircraft to a third party. If the sales proceeds were less than $4.0 million, the Company was required to reimburse the lessor for the deficiency. If the sales proceeds exceeded $4.0 million, the Company was entitled to all of such excess amounts.

In December 2004, the Company completed the sale of the aircraft to a third party for proceeds of $3.2 million net of commissions and expenses of $0.2 million. The Company reimbursed the lessor for a $0.9 million deficiency, which included minimal fees related to the termination of the lease prior to December 31, 2004. The Company had accrued $0.7 million of this amount as of September 30, 2004, and recorded the additional $0.2 million in selling, general and administrative expenses during the three months ending December 31, 2004.

During fiscal 1991, the Company entered into split-dollar life insurance agreements with trusts established by three former officers of the Company. Pursuant to these agreements, the Company is entitled to the cumulative premiums it has paid on the policies less the Company’s interest in policy loans and related accrued interest. No further premiums are due on these policies. The Company’s interest in the policies was $1.1 million at September 30, 2004, which was net of $9.1 million in policy loans made to the Company.

The Company was notified of the death of one of the insured former officers in September 2004. In November 2004, the insurance company applied the proceeds of $4.5 million directly to the $4.0 million in outstanding loans related to this policy, and the Company received net proceeds of $0.4 million, net of interest of $0.1 million, related to this policy. In October 2004, the Company executed the surrender of $2.2 million in accumulated cash dividends on the second of these policies, resulting in a reduction of the policy loans for this amount. In November 2004, the Company repaid the remaining policy loans of $2.9 million for these policies. As a result of the transactions described above, at December 31, 2004, all policy loans had been repaid. The cash surrender value of the policies at June 30, 2005 was $3.6 million.

On November 30, 1999, the Board of Directors authorized the Company to repurchase of up to 3,000,000 shares of the Company’s stock (the “1999 Program”). The 1999 Program does not have an expiration date. As of September 30, 2002, the Company had purchased 2,242,183 shares of stock. The Company did not purchase any shares in fiscal 2003 or fiscal 2004. On November 8, 2004, the Company publicly announced that it was resuming its stock buyback program and, during the first quarter of fiscal 2005, purchased 204,793 shares of outstanding stock for $4.5 million commensurate with that announcement. There were no additional purchases during the second and third quarters of fiscal 2005. The amount and timing of additional purchases will depend upon market conditions.

During the third quarter of fiscal 2005, the Company declared a cash dividend of $0.05 per share payable to the stockholders of record on August 15, 2005, which will be paid on August 29, 2005. The second quarter of fiscal 2005 dividend of approximately $0.4 million was paid in May 2005.

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

The ongoing evaluation for impairment of the goodwill related to the 1999 acquisition of the Company’s women’s wear subsidiary requires significant management estimation and judgment. Changes in overall business strategy, negative industry or economic trends or actual results which do not meet the Company’s current plan for the

women’s wear business may trigger a future impairment charge, which could negatively affect the Company’s results of operations in the period in which the charge is recorded.

In March 2005, the Company extended the term of its license agreement to manufacture and market men’s pants and shorts under the Claiborne® trademark through December 2010. There were no other material revisions to the terms of this license agreement.

The Company has other contractual obligations and commercial commitments as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Disclosures About Contractual Obligations And Commercial Commitments” of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2004. Except as discussed herein, there have been no material changes in the Company’s contractual obligations and commercial commitments since September 30, 2004.

Cash Flow Results for the Nine Months Ended June 30, 2005

Net cash provided by operating activities decreased $15.8 million to $0.7 million during the nine months ended June 30, 2005, compared to $16.5 million during the nine months ended June 30, 2004. The decrease in net cash provided by operating activities was primarily due to a decrease in the accounts payable balance due to the timing of payments, a decrease in accrued liabilities primarily due to payment for inventory that was in transit at the end of fiscal 2004, payment of severance benefits for terminated employees at the sewing plants closed during the third quarter of fiscal 2005 and payment of a $0.9 million residual value guarantee related to the lease on the Company’s corporate aircraft. The decrease in cash provided by operating activities was also attributable to a decrease in accrued incentive compensation for fiscal 2005. These decreases in cash provided by operating activities were offset by a decrease in inventory purchases during the nine months ended June 30, 2005 due to improved management of inventory levels during the period.

Net cash used in investing activities increased $5.1 million to $6.6 million during the nine months ended June 30, 2005, compared to $1.5 million during the nine months ended June 30, 2004. Investing activities for the nine months ended June 30, 2005 included $2.4 million in net payments on officer’s life insurance policy loans. The increase in cash used in investing activities was also due to a $1.6 million increase in capital expenditures for the nine months ended June 30, 2005 as compared to the same period for fiscal 2004. Capital expenditures for the nine months ended June 30, 2005 included $0.5 million related the purchase of software for the Company’s new financial system to be implemented in fiscal 2006 as well as capital expenditures related to 12 new retail stores opened during the period. Capital expenditures for the nine months ended June 30, 2004 included $2.0 million related to capital improvements of the new global headquarters facility, $1.3 million of which were financed with funds transferred from restricted cash.

Net cash used in financing activities increased $2.5 million to $4.6 million in the nine months ended June 30, 2005 from $2.1 million in the nine months ended June 30, 2004. The increase was primarily due to a decrease of $6.7 million in proceeds from the exercise of employee stock options and increased purchases of treasury stock of $4.5 million, as the Company resumed its stock buyback program during fiscal 2005. The increase in cash used in financing activities was offset by $2.3 million in cash provided by book overdrafts during the nine months ended June 30, 2005, compared to $4.5 million in cash used for book overdrafts for the comparable period in fiscal 2004, due to the timing of check clearing activity at the Company’s banks. The increase in cash used in financing activities was also offset by a $1.6 million decrease in net repayments of long-term debt. While the nine months ended June 30, 2005 included a $2.1 million payment of the remaining IDR bonds, the comparable period in fiscal 2005 included a $3.5 million payment on senior notes that were no longer outstanding during fiscal 2005.

Risks Related to the Company’s Business

An investment in the Company involves certain risks and uncertainties. The risks and uncertainties described below and elsewhere in this Quarterly Report on Form 10-Q should be carefully considered. If any of the events described below or elsewhere occurs, the Company’s business could be adversely affected in a material way.

Dependence on Key Customers

The Company’s four largest customers accounted for approximately 51% and 53% of the Company’s net sales during the nine months ended June 30, 2005 and 2004, respectively. The same four customers accounted for approximately 62% of trade receivables as of June 30, 2005 and September 30, 2004. The loss of the business of one or more of the Company’s larger customers could have a material adverse effect on the Company.

Uncertainties in Apparel Retailing

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

Competition

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

Dependence on Third-Party Manufacturers

The Company is dependent upon third parties for the manufacture of 100% of its products. The inability of a manufacturer to ship orders of the Company’s products in a timely manner or to meet quality standards could cause the Company to miss the delivery date requirements of its customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse effect on the Company. The Company has no long-term formal arrangements with any of its suppliers and historically has experienced only limited difficulty in satisfying its raw material and finished goods requirements. Although the Company believes it could replace such suppliers without a material adverse effect on the Company, there can be no assurance that such suppliers could be replaced in a timely manner and the loss of such suppliers could have a material adverse effect on the Company’s short-term operating results.

Substantially all of the Company’s products are manufactured outside the United States. The Company’s foreign production and sourcing operations are subject to various risks of doing business abroad, including quotas, work stoppages and other restrictions and regulations relating to imports and, in certain parts of the world, political or economic instability. Although the Company’s operations have not been materially adversely affected by any of such factors to date, any substantial disruption of its foreign production or supply could adversely affect its operations. Some of the Company’s imported merchandise is subject to United States Customs duties. Any material increase in duty levels could materially adversely affect the Company.

Dependence on Customer Service Center in Fort Worth, Texas

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

Risks of Acquisition Strategy

The Company continues to seek growth through strategic acquisitions of other apparel businesses. However, the Company cannot give any assurances that its acquisition strategy will be successful. The success of the Company’s acquisition strategy is dependent upon a number of factors, including:

• the Company’s ability to identify suitable acquisition candidates;

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

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

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

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

Weaknesses in Internal Controls

Weaknesses in internal controls and procedures could have a material adverse effect on the Company. For further discussion of the Company’s internal control over financial reporting, including significant deficiencies and material weaknesses identified and the related remediation effort, see “Item 4. Controls and Procedures.” Other instances of weaknesses in the Company’s internal controls and procedures could occur or be identified in the future. Any such weaknesses may have a material adverse effect on the Company.

Recently Issued and Adopted Financial Accounting Standards

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R (revised 2004), “Share-Based Payment”, to amend SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 95, “Statement of Cash Flows”. SFAS No. 123R will require companies to measure all employee stock-based compensation awards using a fair value method and recognize compensation costs in the financial statements. SFAS No. 123R is effective beginning as of the first annual reporting period beginning after June 15, 2005. The Company will be required to adopt SFAS No. 123R beginning October 1, 2005 for new awards of stock-based compensation granted after that date and for unvested awards outstanding at that date. Management believes the impact of SFAS No. 123R on the Company’s results of operations will be consistent with the historical disclosure of pro forma stock compensation under SFAS No. 123; however, a portion of the tax benefit from the future exercise of stock options the Company has historically classified as net cash provided by operating activities will be reported in net cash by financing activities after the implementation of SFAS No. 123R.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company is exposed to market risk from changes in foreign currency exchange risk and interest rate risk, which may adversely affect its financial position, results of operations and cash flows. The Company does not use financial instruments for trading or other speculative purposes and is not a party to any derivative financial instrument. There was no variable rate debt outstanding at June 30, 2005.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and Chief Accounting Officer of the Company have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 240.13a-15(e) and 15d-15(e)), and have concluded, as more fully described below in Item 4(b), that as of the end of the period covered by this Quarterly Report on Form 10-Q, such disclosure controls and procedures were effective in timely alerting them to material information relating to the Company required to be disclosed in the periodic reports the Company files or submits under the Securities Exchange Act of 1934. Such disclosure controls and procedures were also effective in ensuring that this information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Internal Control over Financial Reporting

In professional auditing literature, “significant deficiencies” are referred to as “reportable conditions,” which are control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in financial statements. Auditing literature defines “material weakness” as a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and the risk that such misstatements would not be detected within a timely period by employees in the normal course of performing their assigned functions. The following significant deficiencies and material weaknesses have been identified during the nine months ended June 30, 2005:

(i) In connection with the financial statement preparation process for the quarter ended December 31, 2004, the Company’s management identified two control deficiencies which management believed constituted material weaknesses in its internal controls. The first of these related to the finished goods inventory valuation process. Management believed that there was inadequate analysis of the capitalized cost factors used in the finished goods inventory valuation. During January 2005, the Company remediated this weakness in its internal control over financial reporting by implementing a detailed review of the calculation of capitalized cost factors. The review includes a process to verify completeness and accuracy of general ledger accounts included in the calculation of the cost capitalization factors, as well as a review of the appropriateness of the expenses included within those accounts. The Company also implemented a more robust monthly analytical review of the trend of capitalized cost factors compared to prior periods.

(ii) The second material weakness related to internal controls for customer allowance reserves identified in the quarter ended December 31, 2005. The Company periodically grants allowances for certain customers. The Company’s management identified customer allowances for which a reserve was not recorded on a timely basis. During January 2005, the Company remediated this weakness in internal controls by conducting training on the Company’s accounting for customer allowance reserves for those senior sales personnel with the responsibility for customer allowances.

(iii) In connection with a review of all outstanding customer allowance reserves in February 2005, the Company’s management identified control deficiencies that, when considered in the aggregate, management believed constituted a material weakness in its internal controls. Management determined that a key control requiring adequate supporting documentation and periodic review for customer allowance reserves was not operating effectively. Management also noted that there were no controls in place to ensure adequate monitoring of customer allowance reserves by sales management personnel and timely communication of such allowances with accounting personnel.

To remediate the control deficiencies related to customer allowances which were identified during February 2005, the Company has enhanced the periodic review process by sales personnel for all customer allowances granted as well as the supporting documentation that is required to record such allowances. In addition, although the Company conducted training in January 2005 on customer allowances, the Company believed, given the new occurrence, that additional training was required. That additional training was conducted in May 2005 with sales personnel, and emphasized timely communication on all arrangements with customers and the importance of documentation of such transactions.

(iv) Management’s assessment of the Company’s internal control over financial reporting pursuant to the Sarbanes Oxley Act of 2002 is ongoing and is, therefore, incomplete. However, during the second quarter of fiscal 2005, management identified a significant deficiency that could potentially be, if not remediated, a material weakness. The significant deficiency relates to controls over the access to financial application programs and data. Specifically, the Company does not maintain effective controls over the granting, maintenance and termination of user identification and passwords for employees, the required segregation of duties within certain financial applications and the independent monitoring and verification of internal user access to data.

To address the significant deficiency related to systems access, the Company is implementing controls to require monthly updates of all user access lists for all financial applications. While the Company has not detected any financial statement errors resulting from this significant deficiency, full remediation is not complete at the date of this report. However, management expects to complete remediation by the end of fiscal 2005. The Company will also implement its new financial management systems during fiscal 2006. The benefits of this implementation include an enhanced security model as compared to the Company’s current system.

Part II. Other Information.

Item 1. Legal Proceedings

The Company is a defendant in a wrongful termination lawsuit brought in federal district court in 2000 by a former salesman. A jury rendered a verdict in January 2002 in favor of the plaintiff against the Company. After various appeals and remand to the trial court, on January 31, 2005, the Company received a Memorandum Order ordering the Company to pay, after entry of judgment, backpay in the amount of $0.8 million, liquidated damages of $0.8 million and front pay of $0.5 million. The court also ordered the Company to make monthly payments of $14,583 until the Company reinstates the plaintiff to the first available sales associate vacancy in the Dallas area. The trial court denied, however, plaintiff’s request for enhanced backpay and prejudgment interest. During the first quarter of fiscal 2005, the Company recorded an additional $1.7 million charge to selling, general and administrative expenses related to this matter. During the second quarter of fiscal 2005, after negotiations with the plaintiff’s counsel, the Company agreed to pay $0.8 million in attorney’s fees, subject to the Company’s right to appeal the damages award. As a result, the Company recorded an additional $0.3 million charge to selling, general and administrative expenses. The Company filed its notice of appeal on April 28, 2005. The Company has reserved an aggregate of $3.1 million in accrued liabilities for this matter as of June 30, 2005.

During fiscal years 2003 and 2004, one attorney filed five separate suits in Texas state courts against the Company and certain of its subsidiaries, as well as unrelated third parties, alleging injuries to approximately 3,000 former employees from airborne fibers and chemicals in certain of the Company’s now closed facilities located in south Texas. All proceedings in one case, which names over 2,900 plaintiffs, have been stayed due to the unrelated bankruptcy of one of the other defendants. The Company is awaiting a decision by the trial court on its motion to dismiss another case, which names 71 plaintiffs. After taking discovery in one of the remaining cases, the Company believes that all of these cases and claims are frivolous and that the plaintiffs have no factual or legal basis for any of their allegations. In addition, the Company believes that it has meritorious defenses to all of the asserted claims. The Company intends to vigorously defend all of these suits, unless a favorable settlement can be achieved.

Jury verdicts in two cases totaling approximately $1.7 million in the aggregate were returned in fiscal 2000 against certain subsidiaries of the Company related to claims by former employees of now closed manufacturing facilities for wrongful discharge and common law tort. Both cases were appealed to the Texas Supreme Court because management and legal counsel believed the verdicts were both legally and factually incorrect. On December 31, 2004, the Texas Supreme Court reversed the judgment of the Court of Appeals and rendered judgment in the Company’s favor in one of such cases. As a result, during the first quarter of fiscal 2005, the Company reversed the prior accrual for such case, resulting in a $0.3 million increase in gross profit for such quarter. On May 13, 2005, the Texas Supreme Court rendered judgment for the Company in the remaining case. The Texas Supreme Court reversed the Court of Appeals’ judgment that had upheld a jury verdict of $0.2 in compensatory damages and $1.4 million in exemplary damages. The Company had accrued $2.6 million as reorganization costs to cover the judgment, plus prejudgment and post-judgment interest. During the third quarter of fiscal 2005, the Company reversed the prior accrual for such case, resulting in a $2.6 million increase in gross profit for such quarter.

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

On November 30, 1999, the Board of Directors authorized the Company to repurchase of up to 3,000,000 shares of the Company’s stock. The 1999 Program does not have an expiration date. As of September 30, 2002, the Company had purchased 2,242,183 shares of stock. The Company did not purchase any shares in fiscal 2003 or fiscal 2004. On November 8, 2004, the Company publicly announced that it was resuming its stock buyback program and, during the first quarter of fiscal 2005, purchased 204,793 shares of outstanding stock for $4.5 million commensurate with that announcement. There were no additional purchases during the second and third quarters of fiscal 2005. The amount and timing of additional purchases will depend upon market conditions.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Program	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Program

October 1, 2004 through October 31, 2004	—	—		—	757,817
November 1, 2004 through November 30, 2004	65,400	$	19.91	2,307,583	692,417
December 1, 2004 through December 31, 2004	139,393	$	22.71	2,446,976	553,024
Total	204,793	$	21.82		553,024

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description

3(a)		Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].)

3(b)		Amended and Restated Bylaws of the Company, as amended, dated October 10, 2002. (Incorporated by reference from Exhibit 99.2 to the Company’s Current Report on Form 8-K filed October 15, 2002 [File No. 0-20850].)

4(a)		Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].)

4(b)		Rights Agreement, dated as of October 10, 2002, between the Company and Mellon Investor Services, LLC, as Rights Agent, specifying the terms of the Rights, which includes the description of Series B Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the form of the Summary of Rights as Exhibit C. (Incorporated by reference from Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

4(c)		Form of Rights Certificate. (Incorporated by reference from Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

4(d)		Form of Summary of Rights. (Incorporated by reference from Exhibit 99.5 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

10(a)	*	Notification dated August 5, 2005, reducing maximum borrowing under Second Amended and Restated Credit Agreement between the Company and JPMorganChase Bank, as Agent for a bank syndicate.

10(b)	*	Executive Employment Agreement dated August 8, 2005, between Haggar Clothing Co., and John W. Feray, Senior Vice President and Chief Accounting Officer.

31(a)	*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

31(b)	*	Certification of Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32(a)	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.

32(b)	**	Certification of Chief Accounting Officer Pursuant to 18 U.S.C. §1350.

*		Filed herewith
**		Furnished herewith

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.

	Haggar Corp.

Date: August 9, 2005	/s/ John W. Feray
	John W. Feray
	(Chief Accounting Officer)

	Signed on behalf of the
	registrant and as chief
	accounting officer.

INDEX TO EXHIBITS

Exhibit Number		Description

3(a)		Third Amended and Fully Restated Articles of Incorporation. (Incorporated by reference from Exhibit 3(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1993 [File No. 0-20850].)

3(b)		Amended and Restated Bylaws of the Company, as amended, dated October 10, 2002. (Incorporated by reference from Exhibit 99.2 to the Company’s Current Report on Form 8-K filed October 15, 2002 [File No. 0-20850].)

4(a)		Specimen Certificate evidencing Common Stock (and Preferred Stock Purchase Right). (Incorporated by reference from Exhibit 4(a) to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 1994 [File No. 0-20850].)

4(b)		Rights Agreement, dated as of October 10, 2002, between the Company and Mellon Investor Services, LLC, as Rights Agent, specifying the terms of the Rights, which includes the description of Series B Junior Participating Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the form of the Summary of Rights as Exhibit C. (Incorporated by reference from Exhibit 99.3 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

4(c)		Form of Rights Certificate. (Incorporated by reference from Exhibit 99.4 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

4(d)		Form of Summary of Rights. (Incorporated by reference from Exhibit 99.5 to the Company’s Current Report on Form 8-K, filed October 15, 2002 [File No. 0-20850].)

10(a)	*	Notification dated August 5, 2005, reducing maximum borrowing under Second Amended and Restated Credit Agreement between the Company and JPMorganChase Bank, as Agent for a bank syndicate.

10(b)	*	Executive Employment Agreement dated August 8, 2005, between Haggar Clothing Co., and John W. Feray, Senior Vice President and Chief Accounting Officer.

31(a)	*	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).

31(b)	*	Certification of Chief Accounting Officer required by Rule 13a-14(a) or Rule 15d-14(a).

32(a)	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. §1350.

32(b)	**	Certification of Chief Accounting Officer Pursuant to 18 U.S.C. §1350.

*		Filed herewith
**		Furnished herewith

Filing Compare · HAGGAR CORP