Anvil 10-Q 2006 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarterly Period Ended October 29, 2005

Commission File Number 333-26999

ANVIL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3801705
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
228 East 45th Street
New York, New York	10017
(address of principal	(Zip Code)
executive office)
Registrant’s telephone number	(212) 476-0300
(including area code)

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 o           No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o           No ý

At December 13, 2005 there were 290,000 shares of Class A Common Stock, $0.01 par value (the “Class A Common”) and 3,600,000 shares of Class B Common Stock, $0.01 par value (the “Class B Common”) of the registrant outstanding.

ANVIL HOLDINGS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
	Consolidated Balance Sheets as of October 29, 2005 (Unaudited) and January 29, 2005
	Unaudited Consolidated Statements of Operations for the Fiscal Quarters and Nine Months Ended October 29, 2005 and October 30, 2004
	Unaudited Consolidated Statement of Stockholders’ Deficiency for the Fiscal Nine Months Ended October 29, 2005
	Unaudited Consolidated Statements of Cash Flows for the Fiscal Nine Months Ended October 29, 2005 and October 30, 2004
	Unaudited Notes to Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 3. Defaults Upon Senior Securities
	Item 6. Exhibits
SIGNATURES

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

ANVIL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)

	October 29, 2005			January 29, 2005 *
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	8,022		$	4,682
Accounts receivable, less allowances for doubtful accounts of $1,100 and $1,188	19,510			28,366
Inventories	55,352			50,206
Prepaid and refundable income taxes	142			2,547
Deferred income taxes-current portion—Net	—			3,605
Prepaid expenses and other current assets	1,978			1,365
Total current assets	85,004			90,771
PROPERTY, PLANT AND EQUIPMENT¾Net	23,058			30,915
DEFERRED INCOME TAXES—Net	—			897
INTANGIBLE ASSETS¾Net	1,780			1,998
OTHER ASSETS	1,461			1,551
TOTAL ASSETS	$	111,303		$	126,132
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
Accounts payable	$	5,731		$	7,308
Accrued expenses and other current liabilities	14,318			17,417
Revolving credit loan	15,588			10,280
Total current liabilities	35,637			35,005
10-7/8% SENIOR NOTES	129,468			129,175
OTHER LONG-TERM OBLIGATIONS	127			197
REDEEMABLE PREFERRED STOCK­-Net of Treasury Holdings	61,796			56,028
TOTAL LIABILITIES	227,028			220,405
STOCKHOLDERS’ DEFICIENCY:
Common stock
Class A, $.01 par value, 12.5% cumulative; authorized 500,000 shares, issued and outstanding: 290,000 shares (aggregate liquidation value, $83,653 and $76,299)	3			3
Class B, $.01 par value, authorized 7,500,000 shares; issued and outstanding: 3,600,000 shares	36			36
Class C, $.01 par value; authorized 1,400,000 shares; none issued	—			—
Additional paid-in capital	12,813			12,813
Accumulated deficit	(128,577		)	(107,125		)
TOTAL STOCKHOLDERS’ DEFICIENCY	(115,725		)	(94,273		)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	111,303		$	126,132

*Derived from audited financial Statements

See unaudited condensed notes to consolidated financial statements.

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ANVIL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Share Data)

	Fiscal Quarter Ended						Fiscal Nine Months Ended
	Oct 29, 2005			Oct 30, 2004			Oct 29, 2005			Oct 30, 2004
	(Unaudited)						(Unaudited)
NET SALES	$	41,399		$	41,477		$	139,850		$	147,602
COST OF GOODS SOLD	34,129			34,219			114,031			116,837
GROSS PROFIT	7,270			7,258			25,819			30,765
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	6,637			6,322			19,735			19,104
PROVISION FOR ASSET IMPAIRMENT	5,000			—			5,000			—
AMORTIZATION OF INTANGIBLE ASSETS	75			75			218			218
OPERATING (LOSS) INCOME	(4,442		)	861			866			11,443
INTEREST EXPENSE:
Interest on borrowings	3,773			3,611			11,406			11,079
Dividends and accretion on mandatorily redeemable preferred stock	1,984			1,749			5,768			5,041
Total interest expense	5,757			5,360			17,174			16,120
OTHER EXPENSE – NET, PRINCIPALLY AMORTIZATION OF DEBT COSTS	258			270			845			798
LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES	(10,457		)	(4,769		)	(17,153		)	(5,475		)
PROVISION (BENEFIT) FOR INCOME TAXES	4,989			(1,180		)	4,299			(101		)
NET LOSS	(15,446		)	(3,589		)	(21,452		)	(5,374		)
Less Class A common stock liquidation preference	(2,527		)	(2,233		)	(7,354		)	(6,443		)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(17,973	)	$	(5,822	)	$	(28,806	)	$	(11,817	)
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
Class A Common Stock	$	4.09		$	6.20		$	17.95		$	19.18
Class B Common Stock	$	(4.62	)	$	(1.50	)	$	(7.41	)	$	(3.04	)
Weighted average shares used in computation of basic and diluted income (loss) per share:
Class A Common	290,000			290,000			290,000			290,000
Class B Common	3,600,000			3,600,000			3,600,000			3,603,000

See unaudited condensed notes to consolidated financial statements.

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ANVIL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

(In Thousands)

	Common Stock					Additional		Accumulated
	Class A		Class B		Class C	Paid-in Capital		Deficit			Total
Balance at January 29, 2005	$	3	$	36	—	$	12,813	$	(107,125	)	$	(94,273	)
Net loss								(21,452		)	(21,452		)
Balance at October 29, 2005	$	3	$	36	—	$	12,813	$	(128,577	)	$	(115,725	)

See unaudited condensed notes to consolidated financial statements.

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ANVIL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Fiscal Nine Months Ended
	October 29, 2005			October 30, 2004
	(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,452	)	$	(5,374	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of fixed assets	5,066			5,105
Amortization of other assets	906			879
Deferred income taxes	4,502			—
Provision for asset impairment	5,000			—
Preferred dividends (interest expense) payable on redemption	5,768			5,041
Changes in operating assets and liabilities:
Accounts receivable	8,856			5,909
Inventories	(5,146		)	2,828
Prepaid and refundable income taxes	2,405			3,732
Prepaid expenses and other current assets	(613		)	(456		)
Accounts payable	(1,577		)	(1,373		)
Accrued expenses and other liabilities	(3,169		)	1,890
Other¾net	(304		)	(700		)
Net cash provided by operating activities	242			17,481
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(2,676		)	(3,196		)
Proceeds from disposals of property and equipment	466			42
Net cash used in investing activities	(2,210		)	(3,154		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of Term Loan	—			(586		)
Net borrowings (repayments) of revolving credit agreement	5,308			(10,168		)
Net cash provided by (used in) financing activities	5,308			(10,754		)
INCREASE IN CASH	3,340			3,573
CASH, BEGINNING OF PERIOD	4,682			1,451
CASH, END OF PERIOD	$	8,022		$	5,024
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	14,940		$	14,613
Cash refunds of income taxes	$	(2,480	)	$	(3,833	)

See unaudited condensed notes to consolidated financial statements.

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ANVIL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in Thousands, Except Share Data)

NOTE 1 -General

Basis of Presentation:  The accompanying consolidated financial statements have been prepared in accordance with accounting principles which are generally accepted in the United States of America (“Generally Accepted Accounting Principles” or “GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation  S-X.  Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.  In the opinion of Management, all adjustments considered necessary for a fair presentation have been included.  Operating results for the fiscal period ended October 29, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending January 28, 2006, or any other period.  The balance sheet at January 29, 2005 has been derived from the audited financial statements at that date.  For further information, including a discussion of the Company’s significant accounting policies, refer to the consolidated financial statements for the fiscal year ended January 29, 2005 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission.

As used herein, the “Company” refers to Anvil Holdings, Inc. (“Holdings”), including, in some instances, its wholly-owned subsidiary, Anvil Knitwear, Inc., a Delaware corporation (“Anvil”), and its other subsidiaries, as appropriate to the context. The Company is engaged in the business of designing, manufacturing and marketing high quality activewear for men, women and children, including short and long sleeve T-shirts, sport shirts and niche products, all in a variety of styles and fabrications.  These activewear products are supplemented with caps, towels, robes and bags. The Company markets and sells its products primarily to distributors, screen printers and private label brand owners, principally in the United States.

The Company reports its operations in one segment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosures About Segments of an Enterprise and Related Information.

The Company’s operations are on a “52/53-week” fiscal year ending on the Saturday closest to January 31.  The accompanying consolidated financial statements include the accounts of the Company, after elimination of significant intercompany accounts and transactions.

Litigation:  The Company is party to various litigation matters incidental to the conduct of its business.  The Company does not believe that the outcome of any of the matters in which it is currently involved will have a material adverse effect on the consolidated financial condition, liquidity, business or results of operations of the Company.

NOTE 2  - Credit Agreement

Anvil’s Loan and Security Agreement, as amended on May 20, 2004 (the “Loan Agreement”), provides for a maximum revolving credit facility of $40,000 (the “Revolving

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Credit Facility”).   The Loan Agreement, as amended, expires January 11, 2007.  The original Loan Agreement included a term loan in the initial principal amount of $11,725, which has been fully repaid.  Amounts due under the Loan Agreement are secured by substantially all the inventory, receivables, intangibles and property, plant and equipment of Anvil.  Holdings and Spectratex, Inc., a wholly-owned subsidiary of Anvil (“Spectratex” [formerly named Cottontops]) guarantee amounts due under the Loan Agreement.   Interest on the Revolving Credit Facility is at prime plus one-quarter percent or LIBOR plus 2-1/4%, at the Company’s option.  At October 29, 2005, there was $15,588 outstanding under the Revolving Credit Facility bearing interest at  7.0%.  At the same date, the amount available for additional borrowings was $13,153.  The maximum amount outstanding under the Revolving Credit Facility during the nine months ended October 29, 2005 was $31,064.

NOTE  3  -  Inventories

Inventories at October 29, 2005 and January 29, 2005 consisted of the following:

	October 29, 2005		January 29, 2005
Finished goods	$	44,722	$	38,807
Work-in-process	1,998		1,821
Raw materials and supplies	8,632		9,578
	$	55,352	$	50,206

NOTE 4 –Intangible Assets

The Company has adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, which requires that goodwill and other intangible assets be tested for impairment annually and when an event occurs indicating that it is possible an impairment exists.

The Company’s intangible assets, which are being amortized, consist of trademarks having an aggregate value of $4,858, less accumulated amortization of $3,078 and $2,860 as of October 29, 2005 and January 29, 2005, respectively.  Amortization expense for these trademarks will be $286 in each future fiscal year.

NOTE 5 – Provision for Asset Impairment

In connection with the Company’s decision to construct a new textile facility in Honduras and to transfer certain production operations to that facility, Management assessed the recoverability of existing assets which would be affected by this decision.  Based upon such assessment, the Company determined to provide a $5,000 charge representing its preliminary estimate of the impairment to the carrying value of the affected property, plant and equipment, net of the estimated proceeds from the sale of certain of this property, plant and equipment.  This amount does not include future expenses (presently estimated at approximately $2,000) which may be incurred for personnel costs once the transition and related contractual matters have further progressed.

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NOTE 6 – Deferred Tax Asset Valuation Allowance

Pursuant to SFAS No. 109, Accounting for Income Taxes, during the quarter ended October 29, 2005, as a result of recent losses which the Company is not able to carry back against prior years’ income, as well as recent Management projections, the Company determined that, at this time, realization of the Company’s net deferred tax assets is uncertain.  Accordingly, the Company increased its valuation allowances relating to its deferred tax assets to fully reserve against its net deferred tax assets as of October 29, 2005.  As such, a non-cash charge of $9,100 was taken in the third quarter of fiscal 2005, which is included in the accompanying consolidated statements of operations for the three and nine month periods ended October 29, 2005 within the provision (benefit) for income taxes.  This valuation allowance offsets the net deferred tax assets of $4,502 which existed at January 29, 2005, plus approximately $4,600 of deferred tax assets related to additional operating loss carryforwards generated in the current fiscal nine month period ended October 29, 2005.  Valuation allowances will continue to be recorded to offset subsequent tax losses, and a portion or all of such valuation allowances could be reversed in the future, depending upon the availability of  deferred tax assets and carryforwards to offset any future taxable income.

NOTE 7 –Redeemable Preferred Stock

SFAS No. 150 requires that financial instruments issued in the form of shares that are mandatorily redeemable be classified as liabilities, if such financial instruments embody an unconditional obligation requiring the issuer to redeem them by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur.  Accordingly, the Company classifies its 13% Senior Exchangeable Preferred Stock (the “Preferred Stock”) as a liability, and the related dividends and accretion as interest expense. The Preferred Stock, as presented in the accompanying consolidated balance sheets, is determined as follows:

	October 29,			January 29,
	2005			2005
Preferred Stock issued and outstanding
(Liquidation value, $89,029 and $80,884)	$	89,493		$	81,139
Less—Preferred Stock in treasury
(Liquidation value, $27,554 and $25,033)	(27,697		)	(25,111		)
Preferred Stock—net
(Liquidation value, $61,475 and $55,851)	$	61,796		$	56,028

In accordance with the provisions of the Company’s Certificate of Designations relating to the Preferred Stock, the Company paid stock dividends aggregating 1,075,782 shares ($26,895 liquidation value).  This amount included all dividends declared and paid through the March 15, 2002 quarterly dividend payment date.  Dividends subsequent to that date are required to be paid in cash.  The Board of Directors of Holdings has not declared any quarterly dividends since the March 15, 2002 dividend, and such dividends have not been paid.  To date, the accrued dividends amount to $22,189, excluding dividends on preferred shares held by the Company.  Under the Certificate of Designations relating to the Preferred Stock, if the Company fails to make cash dividend payments for four consecutive quarters, the holders of the Preferred Stock, at a special meeting held for that purpose, voting together as a class, may elect two additional directors to the Company’s Board of

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Directors.    On November 6, 2003, a special meeting of the holders of the Preferred Stock was held for the purpose of electing two additional directors.  At that meeting, two directors, nominated by the holders of Preferred Stock, were elected to the Company’s Board of Directors.  Effective November 17, 2005, one such director resigned.

NOTE 8 – Income (Loss) per Share

Net income (loss) per share as presented in the accompanying unaudited consolidated statements of operations is computed by dividing net income (loss) applicable to each class of Common Stock by the average number of shares of such stock outstanding, excluding anti-dilutive options.  The 12.5% liquidation preference relating to the Company’s Class A Common Stock is considered as per share earnings of that class only.  Following is the computation of the per share amounts as presented in the consolidated statements of operations:

	Fiscal Quarter Ended						Fiscal Nine Months Ended
	October 29,			October 30,			October 29,			October 30,
	2005			2004			2005			2004
Net loss attributable to common stockholders	$	(17,973	)	$	(5,822	)	$	(28,806	)	$	(11,817	)
Net loss per common share	$	(4.62	)	$	(1.50	)	$	(7.41	)	$	(3.04	)
Liquidation Preference per Class A common share	8.71			7.70			25.36			22.22
Net income per Class A common share	$	4.09		$	6.20		$	17.95		$	19.18
Net loss per Class B common share	$	(4.62	)	$	(1.50	)	$	(7.41	)	$	(3.04	)
Weighted average shares used in computation of basic and diluted income (loss) per share:
Class A Common	290,000			290,000			290,000			290,000
Class B Common	3,600,000			3,600,000			3,600,000			3,603,000

NOTE  9 - Summarized Financial Data of Certain Wholly-Owned Subsidiaries

Holdings has no independent operations apart from its wholly-owned subsidiary, Anvil, and its sole asset is the capital stock of Anvil.  Anvil is Holdings’ only direct subsidiary.  Holdings, Spectratex and the Non-U.S. subsidiaries of Anvil fully and unconditionally, jointly and severally guarantee the 10-7/8% Senior Notes of Anvil.  In addition to Spectratex, Anvil has six other direct subsidiaries (the “Non-U.S. Subsidiaries”): A.K.H., S.A., Estrella Mfg. Ltda. and Star, S.A., organized in Honduras; Livna, Limitada, organized in El Salvador; Annic LLC, S.A., organized in Nicaragua; and Anvil GmbH (formerly named CDC GmbH), organized in Germany.  There are no other direct or indirect subsidiaries of the Company.   The following information presents certain condensed consolidating financial data for Holdings, Anvil, Spectratex and the Non-U.S. Subsidiaries.  Complete financial statements and other disclosures concerning Anvil, Spectratex and the Non-U.S. Subsidiaries are not presented because Management has determined they are not material to investors.

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																Holdings and
										Non-U.S.						Subsidiaries
	Holdings			Anvil			Spectratex			Subsidiaries			Eliminations			Consolidated
FISCAL QUARTER ENDED OCTOBER 29, 2005
Balance Sheet Data
Cash				$	6,780		$	112		$	1,130					$	8,022
Accounts receivable-net				17,687			9			1,814						19,510
Inventories				53,001			304			2,047						55,352
Other current assets				1,669			38			413						2,120
Total current assets				79,137			463			5,404						85,004
Property, plant & equipment-net				17,862			1,019			4,177						23,058
Intangibles and other non-current assets-net				2,632						609						3,241
Investment in Anvil	$	(53,929	)										$	53,929
Investment in Spectratex				1,142									(1,142		)
Investment in Non-U.S. Subsidiaries				7,613									(7,613		)
	$	(53,929	)	$	108,386		$	1,482		$	10,190		$	45,174		$	111,303
Accounts payable				$	5,148		$	231		$	352					$	5,731
Accrued liabilities and other current liabilities				11,984			109			2,225						14,318
Revolving credit loan				15,588												15,588
Total current liabilities				32,720			340			2,577						35,637
Long-term debt and other non-current liabilities	$	61,796		129,595												191,391
Stockholders’ (deficiency)/ equity	(115,725		)	(53,929		)	1,142			7,613			$	45,174		(115,725		)
	$	(53,929	)	$	108,386		$	1,482		$	10,190		$	45,174		$	111,303
Statement of Operations Data
Net sales				$	39,618		$	1,629		$	5,061		(4,909		)	$	41,399
Cost of goods sold				31,688			1694			5,656			(4,909		)	34,129
Gross profit (loss)				7,930			(65		)	(595		)				7,270
Operating expenses				6,328			119			265						6,712
Provision for asset impairment				5,000												5,000
Interest expense and other	$	1,984		4,031												6,015
Loss before income taxes	(1,984		)	(7,429		)	(184		)	(860		)				(10,457		)
Provision (benefit) for income taxes	—			4,814			231			(56		)				4,989
Net loss	$	(1,984	)	$	(12,243	)	$	(415	)	$	(804	)				$	(15,446	)
FISCAL NINE MONTHS ENDED OCTOBER 29, 2005
Statement of Operations Data
Net sales				$	133,907		$	6,369		$	16,159		(16,585		)	$	139,850
Cost of goods sold				106,739			6,683			17,194			(16,585		)	114,031
Gross profit (loss)				27,168			(314		)	(1,035		)				25,819
Operating expenses				18,659			448			846						19,953
Provision for asset impairment				5,000												5,000
Interest expense and other	$	5,768		12,251												18,019
Loss before income taxes	(5,768		)	(8,742		)	(762		)	(1,881		)				(17,153		)
Provision for income taxes	—			4,299												4,299
Net loss	$	(5,768	)	$	(13,041	)	$	(762	)	$	(1,881	)				$	(21,452	)

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																Holdings and
										Non-U.S.						Subsidiaries
	Holdings			Anvil			Spectratex			Subsidiaries			Eliminations			Consolidated
FISCAL NINE MONTHS ENDED
OCTOBER 29, 2005- (Continued)
Cash Flow Data
Cash provided (used) by operations				$	2,144		$	(711	)	$	(1,191	)				$	242
Investing Activities—Purchase of property, plant & equipment and other-net				(820		)	(116		)	(1,274		)				(2,210		)
Financing Activities—Borrowings/ repayments and other-net				5,308												5,308
Intercompany financing activities				(4,234		)	860			3,374						—
Increase in cash				2,398			33			909						3,340
Cash at beginning of period				4,382			79			221						4,682
Cash at end of period				$	6,780		$	112		$	1,130					$	8,022
FISCAL QUARTER ENDED OCTOBER 30, 2004
Statement of Operations Data
Net sales				$	39,367		$	2,419		$	5,562		$	(5,871	)	$	41,477
Cost of goods sold				32,128			2,642			5,320			(5,871		)	34,219
Gross profit (loss)				7,239			(223		)	242						7,258
Operating expenses				5,972			166			259						6,397
Interest expense and other	1,749			3,881												5,630
Loss before taxes	(1,749		)	(2,614		)	(389		)	(17		)				(4,769		)
(Benefit) provision for income taxes	—			(1,087		)	(132		)	39						(1,180		)
Net loss	$	(1,749	)	$	(1,527	)	$	(257	)	$	(56	)				$	(3,589	)
FISCAL NINE MONTHS ENDED OCTOBER 30, 2004
Statement of Operations Data
Net sales				$	132,047		$	13,737		$	17,828		$	(16,010	)	$	147,602
Cost of goods sold				102,189			13,891			16,767			(16,010		)	116,837
Gross profit (loss)				29,858			(154		)	1,061						30,765
Operating expenses				18,057			476			789						19,322
Interest expense and other	5,041			11,877												16,918
(Loss) income before taxes	(5,041		)	(76		)	(630		)	272						(5,475		)
(Benefit) provision for income taxes	—			(28		)	(233		)	160						(101		)
Net (loss) income	$	(5,041	)	$	(48	)	$	(397	)	$	112					$	(5,374	)
Cash Flow Data
Cash provided by operations				$	12,504		$	3,046		$	1,932					$	17,482
Investing Activities—Purchase of property, plant & equipment and other-net				(2,609		)	(379		)	(167		)				(3,155		)
Financing Activities—Borrowings and repayments under credit agreement -net				(10,754		)										(10,754		)
Intercompany financing activities				3,650			(2,391		)	(1,259		)				—
Increase in cash				2,791			276			506						3,573
Cash at beginning of period				1,126			2			323						1,451
Cash at end of period				$	3,917		$	278		$	829					$	5,024

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														Holdings and
									Non-U.S.					Subsidiaries
	Holdings			Anvil			Spectratex		Subsidiaries		Eliminations			Consolidated
FISCAL YEAR ENDED JANUARY 29, 2005
Balance Sheet Data
Cash				$	4,382		$	79	$	221				$	4,682
Accounts receivable-net				27,071			113		1,182					28,366
Inventories				48,464			259		1,483					50,206
Other current assets				7,275			90		152					7,517
Total current assets				87,192			541		3,038					90,771
Property, plant & equipment-net				25,259			1,155		4,501					30,915
Intangibles and other non-current assets-net				4,138					308					4,446
Investment in Anvil	$	(38,245	)								$	38,245
Investment in Spectratex				1,044							(1,044		)
Investment in Non-U.S. Subsidiaries				6,120							(6,120		)
	$	(38,245	)	$	123,753		$	1,696	$	7,847	$	31,081		$	126,132
Accounts payable				$	6,547		$	472	$	289				$	7,308
Accrued liabilities and other current liabilities				15,799			180		1,438					17,417
Revolving credit loan				10,280										10,280
Long-term debt and other non-current obligations (including mandatorily redeemable preferred stock)	$	56,028		129,372										185,400
Stockholders’ (deficiency)/ equity	(94,273		)	(38,245		)	1,044		6,120		$	31,081		(94,273		)
	$	(38,245	)	$	123,753		$	1,696	$	7,847	$	31,081		$	126,132

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

Critical Accounting Policies And Estimates

The Company’s significant accounting policies are more fully described  in Note 3 to the consolidated financial statements, included in the Company’s Form 10-K for the fiscal year ended January 29, 2005, as filed with the Securities and Exchange Commission.  The application of accounting policies require judgement by Management in selecting the appropriate assumptions for calculating financial estimates.  By their nature, these judgements are subject to an inherent degree of uncertainty and are based upon historical experience, trends in the industry, and information available from outside sources. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), requires Management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The Company’s significant critical accounting policies include:

Revenue Recognition and Allowances—Revenue is recognized at the time merchandise is shipped and title has passed.  Allowances for sales returns, discounts and for estimated uncollectible accounts are provided when sales are recorded, based upon historical experience and current trends, and periodically updated, as appropriate.   While the actual amounts have been within the range of the Company’s projections, there can be no assurances that this will continue in the future.

Inventories—Inventories are stated at the lower of cost or market, with cost being determined by the first-in, first-out (FIFO) method.  If required, based upon Management’s judgement, reserves for slow moving inventory and markdowns of inventory which has declined significantly in value are provided.  While such markdowns have been within the range of Management’s projections, the Company cannot guarantee that it will continue to experience the same level of markdowns, or that markdowns taken will be adequately representative of any future declines in selling prices.

Evaluation of Long-Lived Assets— Pursuant to SFAS No. 144, long-lived assets are assessed for recoverability whenever events or changes in circumstances indicate that an asset may have been impaired.   In evaluating an asset for recoverability, the Company estimates the future cash flows expected to result from the use of the asset and eventual disposition.  If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss, equal to the excess of the carrying amount over the fair value of the asset, is recognized.  In the fiscal quarter ended October 29, 2005, the Company recorded an impairment charge of $5,000,000 relating to the planned transfer of production operations of its textile facilities. See Note 5 to the financial statements, included elsewhere herein.

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Deferred Tax Valuation Allowances—In accordance with SFAS No. 109, the Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, net operating loss carryforwards and tax credits.  A valuation allowance is established and adjusted as appropriate for deferred tax assets which Management estimates are more likely than not to be unrealizable.  In evaluating the need for tax valuation allowances, Management considers historical and forecasted operating results, based upon approved business plans, including a review of carryforward periods, tax planning opportunities and other relevant considerations.

Results of Operations—General

The Company’s results of operations are affected by numerous factors, including competition, general economic conditions, raw material costs, mix of products sold and plant utilization.  Activewear products of the type manufactured by the Company are generally available from multiple sources and the Company’s customers often purchase products from more than one source.  The Company generally does not lead its competitors in pricing, but instead  modifies its prices to the extent necessary to remain competitive with those set by its competitors.

The gross profit margins of the Company’s products vary significantly.  Accordingly, the Company’s overall gross profit margin is affected by its product mix.  In addition, plant utilization levels are important to profitability due to the substantial fixed costs of the Company’s textile operations.   The largest component of  the Company’s cost of goods sold is the cost of yarn.  The Company obtains substantially all of its yarn from a number of domestic yarn suppliers, generally placing orders based upon Management’s expectations regarding future yarn prices and levels of supply.  Yarn prices fluctuate from time to time principally as a result of competitive conditions in the yarn market and the cost of raw cotton.  The Company adjusts the timing and size of its purchase orders for yarn in an effort to minimize fluctuations in its raw material costs resulting from changes in yarn prices.  Management is continually reviewing and adjusting the Company’s purchase commitments to take  advantage of price decreases and ameliorate the impact of price increases.

Recent Trends and Forward Looking Information

The Company’s results of operations have been significantly affected by industry-wide fluctuations in selling prices, which have declined significantly over the last several years.  Management continues its efforts to reduce costs and improve manufacturing efficiencies.  A new leased cut and sew facility in Nicaragua became operational in April 2005, replacing a Honduran facility whose lease expired in December 2004; an expansion of this facility is in process.  Upon expiration of the lease for the Company’s El Salvador facility in early 2006, the Company plans to transfer that production to its new expanded Nicaragua facility.

Anvil’s wholly-owned Honduran subsidiary, A.K.H., S.A., has entered into a lease agreement to construct a new textile facility.  In connection therewith, Management assessed the recoverability of related assets which would be affected by the transition of

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production activities.  Based upon such assessment, the Company determined to provide a $5,000,000 charge representing its preliminary estimate of the impairment to the carrying value of the affected property, plant and equipment, net of the estimated proceeds from the sale of certain of this property, plant and equipment.  This amount does not include future expenses (presently estimated at approximately $2,000,000) which may be incurred for personnel costs once the transition and related contractual matters have further progressed.

After some anticipated transitional inefficiencies, the cut and sew facility in Nicaragua and the textile facility in Honduras are expected to substantially reduce future labor costs.

Although the Company believes that prices have stabilized, Management cannot predict the future effects of numerous economic factors such as GATT implementation and the impact of a possible influx of textile products from China.   Accordingly, Management is continually seeking to diversify and expand the Company’s customer base and also to place increased emphasis on the sale of goods sourced as finished products.  While no assurances can be given, Management believes that these initiatives will enable the Company to meet the challenges of future price fluctuations, if any.

Some of the factors the Company anticipates will occur in future fiscal periods are as follows:

•Yarn costs, which were higher during the first quarter of fiscal 2005 when compared to the same period of the prior fiscal year, have since declined and were lower during the most recently completed fiscal quarter.  Such costs are expected to remain as low or lower during the Company’s fourth fiscal quarter.

•Production inefficiencies and restructuring costs experienced at Spectratex during the first fiscal quarter have abated and are expected to be minimal during future fiscal periods.

•Irregulars and related markdowns of inventory, which were exceptionally high during the first fiscal quarter, have returned to historical levels and are expected to continue at such levels in the future.

•The Company is reviewing its advertising and other sales promotion and may further reduce such expenditures as circumstances permit.

Taking into account the foregoing factors, Management now estimates that for fiscal 2005,  net sales will  be approximately 5% less than the amount realized in fiscal 2004, and EBITDA will be approximately 25% less (exclusive of charges relating to the new textile facility discussed above).

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The following table sets forth, for each of the periods indicated, certain statement of operations data, expressed as a percentage of net sales.

	Fiscal Quarter Ended						Fiscal Nine Months Ended
	Oct 29, 2005			Oct 30, 2004			Oct 29, 2005			Oct 30, 2004
Statement of Operations Data:
Net sales	100.0		%	100.0		%	100.0		%	100.0		%
Cost of goods sold	82.4			82.5			81.5			79.2
Gross profit	17.6			17.5			18.5			20.8
Selling, general and administrative expenses	16.0			15.2			14.1			12.9
Interest expense	13.9			12.9			12.3			10.9
Other Data:
EBITDA (1)	$	2,292,000		$	2,691,000		$	11,150,000		$	16,766,000
Percentage of net sales	5.5		%	6.5		%	8.0		%	11.4		%

(1)EBITDA is defined as operating income plus depreciation and amortization and certain other non-cash charges.  EBITDA should not be considered in isolation or as a substitute for net income, cash flows from operating activities and other income or cash flow statement data, or as a measure of profitability or liquidity. Management believes, however, that EBITDA represents a useful measure of assessing the performance of the Company’s ongoing operating activities as it reflects earnings trends of the Company.   In addition, Management believes EBITDA is a widely accepted financial indicator of a company’s ability to service and/or incur indebtedness.  EBITDA does not take into account the Company’s debt service requirements and other commitments and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. The EBITDA measure presented herein may not be comparable to other similarly titled measures of other companies.  Following is the computation of EBITDA for the periods indicated.

	Fiscal Quarter Ended						Fiscal Nine Months Ended
	Oct 29, 2005			Oct 30, 2004			Oct 29, 2005			Oct 30, 2004
Net loss	$	(15,446,000	)	$	(3,589,000	)	$	(21,452,000	)	$	(5,374,000	)
Add back:
Provision for asset impairment	5,000,000			—			5,000,000			—
Provision (benefit) for income taxes	4,989,000			(1,180,000		)	4,299,000			(101,000		)
Interest expense	5,757,000			5,360,000			17,174,000			16,120,000
Other expenses (non-operating)—net	258,000			270,000			845,000			798,000
	558,000			861,000			5,866,000			11,443,000
Add: Depreciation of fixed assets	1,659,000			1,755,000			5,066,000			5,105,000
Amortization of intangible assets	75,000			75,000			218,000			218,000
EBITDA	$	2,292,000		$	2,691,000		$	11,150,000		$	16,766,000

Quarter Ended October 29, 2005 Compared to Quarter Ended October 30, 2004

Net sales for the quarter ended October 29, 2005 amounted to $41,399,000, as compared to $41,477,000 for the comparable quarter of the preceding fiscal year, a decrease of $78,000, less than 0.2%.  Total units sold as well as average selling prices were approximately the same for both periods.   While the Company was able to realize increased selling prices on

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certain of its products during the current fiscal quarter, this increase was offset by an unfavorable change in product mix.

Gross profit as well as profit margins realized were approximately the same for both the fiscal quarter ended October 29, 2005 and the fiscal quarter ended October 30, 2004.  Lower yarn costs had a favorable impact of approximately $1,000,000, which was offset by an increase of like amount in production costs for the current quarter.

Selling, general and administrative expenses (including distribution expense) was $315,000 greater in the fiscal quarter ended  October 29, 2005 as compared to the same period in the prior fiscal year.   This increase is primarily the result of additional salaries incurred during the current year’s quarter.

Interest expense on borrowings increased $162,000 for the current quarter as compared to the same period of the prior year.   Due to increases in the prime rate, interest rates on the Company’s revolving credit line were higher during the current fiscal quarter.  Also, borrowing levels in the current fiscal quarter were higher than the same period of the prior year.  Dividends and accretion on the Company’s Redeemable Preferred Stock, classified as interest expense, increased $235,000 due to the compounding of unpaid dividends (see Note 6 to the financial statements included elsewhere herein).

Provision for income taxes for the quarter ended October 29, 2005 reflects the Company’s decision to establish valuation allowances for tax benefits relating to current period tax loss carryforwards as well existing deferred tax assets.   See Note 5 to the financial statements elsewhere herein.

Nine Months Ended October 29, 2005 Compared to Nine Months Ended October 30, 2004

Net sales for the nine  months ended October 29, 2005 amounted to $139,850,000, as compared to $147,602,000 for the comparable nine months of the preceding fiscal year, a decrease of $7,752,000, or 5.3%.   Total units sold in the current nine months were 1.9% less than the same period of the prior year and  average selling prices were approximately 3.5% lower, due chiefly to an unfavorable change in product mix.

Gross profit declined from $30,765,000 in the nine months ended October 30, 2004 to $25,819,000 in the current nine months ended October 29, 2005, a reduction of  $4,946,000 or 16.1%, substantially all of which occurred during the Company’s first two fiscal quarters.  Gross margin for the current year’s nine month period was 18.5% as compared to 20.8% for the same period of the prior year.   On a year to date basis, the decline in gross profit is primarily the result of an unfavorable change in product mix.  Favorable changes in yarn prices of approximately $1,300,000 in the current nine month fiscal period were offset by year to date increases in production costs.

Selling, general and administrative expenses (including distribution expense) was $631,000 greater in the fiscal nine months ended  October 29, 2005 as compared to the same period

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in the prior fiscal year.  On a year to date basis when compared to the prior year, general, administrative and selling salaries and expenses increased approximately $900,000, primarily due to expansion of the Company’s sales force.    Distribution expense increased approximately $150,000, offset by a decline of approximately $375,000 in advertising expenses.

Interest expense on borrowings was $327,000 higher in the current fiscal nine months than the same period of the prior year.  Due to increases in the prime rate, interest rates on the Company’s revolving credit line were higher during the current fiscal nine months than the same period in the prior year.  Also, borrowing levels in the current fiscal nine  months were higher than the same period of the prior year.  Dividends and accretion on the Company’s Redeemable Preferred Stock, classified as interest expense, increased $727,000 due to the compounding of unpaid dividends (see Note 6 to the financial statements included elsewhere herein).

Provision for income taxes for the nine months ended October 29, 2005 reflects the Company’s decision to establish valuation allowances for tax benefits relating to current period tax loss carryforwards as well existing deferred tax assets.   See Note 6 to the financial statements elsewhere herein.

Analysis of Cash Flow Data

Cash provided by operating activities was $242,000 in the current fiscal nine months, as compared to $17,481,000 in the same fiscal nine months of the prior year.  The major items contributing to the variance of approximately $17,000,000 are as follows: (i) operating income (excluding the $5,000,000 asset impairment charge) was approximately $5,600,000 less in the current fiscal nine months as compared to the same period of the prior year;  (ii) inventories increased approximately $5,100,000 in the current fiscal nine months as compared to a decrease in inventories of approximately $2,800,000 during the prior fiscal nine months; (iii) accrued expenses and other liabilities were reduced by approximately $3,200,000 during the current nine months as compared to an increase of approximately $1,900,000 during the prior year’s period; and (iv) other operating assets and liabilities changed due primarily to timing of receipts and disbursements.

Cash used in investing activities was approximately $900,000 less in the fiscal nine months ended October 29, 2005 as compared to the first nine months of the prior fiscal year, representing a decrease in the Company’s net investments in capital equipment.

Cash provided by financing activities was $5,308,000 in the fiscal nine months ended October 29, 2005.  This amount represents the Company’s net borrowings under its revolving credit line through the end of the first nine months of fiscal 2005.  For the same period of the prior year, the Company made net repayments of $10,168,000 on its revolving credit line  The Company completed repayment of  its Term Loan in April 2004, and accordingly expended $586,000 less in Term Loan payments in the current fiscal nine months than the prior year’s fiscal nine months.

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Liquidity and Capital Resources

The Company has historically utilized funds generated from operations and borrowings under its credit agreements to meet working capital and capital expenditure requirements. The Company made capital expenditures of  $3,708,000 and $4,333,000 in the fiscal years ended January 31, 2004 and January 29, 2005, respectively.  Historically, the Company’s major capital expenditures have related to the acquisition of machinery and  equipment and management information systems hardware and software.  Management estimates that capital expenditures in the ordinary course of business for each of the next two fiscal years will be approximately $4,000,000 annually. This amount does not include capital expenditures relating to the planned textile facility in Honduras, which are currently estimated at approximately $2,000,000 for the remainder of fiscal 2005; $6,000,000 in fiscal 2006; and $3,000,000 in fiscal 2007.

The Company’s principal working capital requirements are financing accounts receivable and inventories.   At October 29, 2005 the Company had net working capital of $49,367,000 comprised of $8,022,000 in cash and cash equivalents, $19,510,000 of accounts receivable, $55,352,000 of inventories and $2,120,000 of other current assets, less revolving credit borrowings of $15,588,000 and accounts payable and other current liabilities of $20,049,000.  Inventories have increased due, in part, to lower than expected sales and increased inventory requirements in order to maintain availability during the aforementioned textile facility transition.

Anvil’s Loan and Security Agreement, as amended on May 20, 2004 (the “Loan Agreement”), provides for a maximum revolving credit facility of $40,000,000 (the “Revolving Credit Facility”).   The Loan Agreement, as amended, expires January 11, 2007.   The original Loan Agreement included a term loan in the initial principal amount of $11,725, which has been fully repaid.  Amounts due under the Loan Agreement are secured by substantially all the inventory, receivables, intangibles and property, plant and equipment of Anvil.  Holdings and Spectratex, Inc., a wholly-owned subsidiary of Anvil (“Spectratex” [formerly named Cottontops]) guarantee amounts due under the Loan Agreement.   Interest on the Revolving Credit Facility is at prime plus one-quarter percent or LIBOR plus 2-1/4%, at the Company’s option.  At October 29, 2005, there was $15,588,000 outstanding under the Revolving Credit Facility bearing interest at  7.0%.  At the same date, the amount available for additional borrowings was $13,153,000.  The maximum amount outstanding under the Revolving Credit Facility during the nine months ended October 29, 2005 was $31,064,000.   While on October 29, 2005, the Company had cash on hand of $8,022,000, it should be noted that both the Company’s Revolving Credit borrowings and its cash position are subject to daily fluctuations based on numerous factors such as collections, operating expenses and capital expenditures.

The Senior Notes are in the principal amount of $130,000,000, bearing interest at 10-7/8%, and are due on March 15, 2007.  The Senior Note Indenture restricts, among other things, Anvil’s and certain of its subsidiaries’ ability to pay dividends or make certain other

20

“restricted” payments (except to the extent, among other things, the restricted payments are less than 50% of the Consolidated Net Income of Anvil [as defined therein]), to incur additional indebtedness, to encumber or sell assets, to enter into transactions with affiliates, to enter into certain guarantees of indebtedness, to make certain investments, to merge or consolidate with any other entity and to transfer or lease all or substantially all of their assets.

Holdings has no independent operations with its sole asset being the capital stock of Anvil, which stock is pledged to secure the obligations under the Loan Agreement.  As a holding company, Holdings’ ability to pay cash dividends on the Senior Preferred Stock or, if issued, principal and interest on the debentures into which the Senior Preferred Stock is convertible (the “Exchange Debentures”) is dependent upon the earnings of Anvil and its subsidiaries and their ability to declare dividends or make other intercompany transfers to Holdings.  Under the terms of the Senior Note Indenture, Anvil may incur certain indebtedness pursuant to agreements that may restrict its ability to pay such dividends or other intercompany transfers necessary to service Holdings’ obligations, including its obligations under the terms of the Senior Preferred Stock and, if issued, the Exchange Debentures. Neither the Senior Note Indenture nor the Loan Agreement restricts Anvil’s subsidiaries from declaring dividends or making other intercompany transfers to Anvil.

It is expected that the Company will be required to refinance its indebtedness prior to the various maturity dates, and the Company is exploring its options with respect to such refinancing.  There can be no assurance that any such refinancing can be effected on satisfactory terms, if at all.

Contractual Obligations and Commitments

A summary of the Company’s contractual obligations and commitments as of October 29, 2005 is as follows:

	Less Than
	1 Year		1-3 Years		3-5 Years		Total
Long-term debt			$	130,000,000			$	130,000,000
Interest on long-term debt	$	14,137,000	7,069,000				21,206,000
Operating leases	2,787,000		3,310,000		$	352,000	6,449,000
Redeemable
Preferred Stock					96,197,000		96,197,000
Total	$	16,924,000	$	140,379,000	$	96,549,000	$	253,852,000

The Company believes that, based upon current and anticipated levels of operations, funds generated from operations, together with other available sources of liquidity, including borrowings under the Loan Agreement, will be sufficient over the next twelve months for the Company to fund its normal working capital requirements and satisfy its debt service requirements.

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Seasonality

The Company’s business is not significantly seasonal as it manufactures and sells a wide variety of activewear products that may be worn throughout the year.

Effect of Inflation

Inflation generally affects the Company by increasing the interest expense of floating rate indebtedness and by increasing the cost of labor, equipment and raw materials.  The Company does not believe that inflation has had any material effect on the Company’s business during the periods discussed herein.

Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, Inventory Costs which amends Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material.  This Statement requires that those items be recognized as current-period charges and requires that allocation of fixed production overheads to the cost of conversion be based on the normal capacity of the production facilities. This statement is effective for fiscal years beginning after June 15, 2005.   The adoption of SFAS No. 151 is not expected to have a material impact on the Company’s results of operations or financial position.

Statement Regarding Forward-Looking Information

The Company is including the following cautionary statement in this Form 10-Q to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company.  Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements which are other than statements of historical facts.  From time to time, the Company may publish or otherwise make available forward-looking statements of this nature.  All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are also expressly qualified by these cautionary statements.  Certain statements contained herein are forward-looking statements and accordingly involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  The forward-looking statements contained herein are based on various assumptions, many of which are based, in turn, upon further assumptions.  The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, Management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties, but there can be no assurance that Management’s expectation, beliefs or projections will result or be achieved or accomplished.  In addition to the other factors and matters discussed elsewhere herein, the following important factors, in the view of the

22

Company, could cause actual results to differ materially from those discussed in the forward-looking statements:

1.  Changes in economic conditions, in particular those which affect the activewear market.

2.  Changes in the availability and/or price of yarn, in particular, if increases in the price of yarn are not passed along to the Company’s customers.

3.  Changes in senior management or control of the Company.

4.  Inability to obtain new customers or retain existing ones.

5.  Significant changes in competitive factors, including product pricing conditions, affecting the Company.

6.  Governmental/regulatory actions and initiatives, including, those affecting financings.

7.  Significant changes from expectations in actual capital expenditures and operating  expenses.

8.  Occurrences affecting the Company’s ability to obtain funds from operations, debt or equity to finance needed capital expenditures and other investments.

9.  Significant changes in rates of interest, inflation or taxes.

10.  Significant changes in the Company’s relationship with its employees and the potential adverse effects if labor disputes or grievances were to occur.

11.  Changes in accounting principles and/or the application of such principles to the  Company.

The foregoing factors could affect the Company’s actual results and could cause the Company’s actual results during fiscal 2005 and beyond to be materially different from any anticipated results expressed in any forward-looking statement made by or on behalf of the Company.  The Company disclaims any obligation to update any forward-looking statements to reflect events or other circumstances after the date hereof.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company believes that its potential exposure to market and interest rate risk is not material.

Item 4.  Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures as of October 29, 2005 and concluded that these controls and procedures are effective.

There have been no changes in internal controls or in other factors that have materially affected, or are reasonably likely to materially affect, the Registrant’s controls over financial reporting subsequent to October 29, 2005.

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PART II - OTHER INFORMATION

Item 3.  Defaults Upon Senior Securities.

The Board of Directors of the Registrant has not declared any quarterly dividends on the Company’s 13% Senior Exchangeable Preferred Stock (the “Preferred Stock”) since the March 15, 2002 dividend, and such dividends have not been paid.  To date, the accrued dividends amount to $22,189,000, excluding dividends on Preferred Stock held by the Company.

Item 6.  Exhibits

31.1  Certification of Principal Executive Officer pursuant to section 240.13a-14 of general rules and regulations of the Securities Exchange act of 1934.

31.2  Certification of Principal Financial Officer pursuant to section 240.13a-14 of general rules and regulations of the Securities Exchange act of 1934.

Items 1, 2, 4 and 5 are not applicable and have been omitted.

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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 hereunto duly authorized.

ANVIL HOLDINGS, INC.

(Registrant)

/s/Frank Ferramosca

Frank Ferramosca

Vice President, Principal

Financial and Accounting Officer

Dated: December 13, 2005

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