Donnkenny, Inc. Announces Second Quarter 2001 Results and is Poised to Earn Its First Full Year Profit Since 1995.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 14, 2001

Donnkenny, Inc. (Nasdaq:DNKY) today reported its financial results for the second quarter ended June 30, 2001.

Daniel H. Levy, Chairman & CEO commented that the change in first half year results represented a $4.7 million improvement in net income compared to the previous year and that the company remains poised to return to profitability for the first time since 1995. A significant contributor to Donnkenny's anticipated return to profitability is its first half year improvement in gross margin from 17.2% to 22.7% or an improvement of $3.4 million gross margin dollars which is attributed to improved sourcing and better inventory control.

The Company reported that in the second quarter, it had a net loss of $1.4 million, or $0.33 loss per diluted share, compared to a net loss of $2.2 million, or $0.62 per diluted share for the same period a year ago. Net sales for the second quarter were $30.5 million, as compared to $27.7 million reported for last year's second quarter. The operating loss decreased from $1.1 million in the second quarter of fiscal 2000 to $0.3 million in the second quarter of fiscal 2001. The average number of common shares and common stock equivalents outstanding for purposes of computing diluted earnings per share were 4,367,417 compared to 3,616,098 for the comparable period in 2000. Per share calculations take into account a one-for-four reverse stock split effective on April 20, 2000.

For the six months ended June 30, 2001, net sales were $67.8 million, as compared to $70.1 million reported for its six month period ended June 30, 2000. The net loss decreased from $5.7 million or ($1.60) per share to $1.1 million or ($0.25) per share for the six months ended June 30, 2001 from the comparable period a year ago. The average number of common shares and common stock option equivalents outstanding for purposes of computing diluted earnings per share were 4,367,417 compared to 3,586,758 for the comparable period in 2000.

Donnkenny designs, manufactures, imports and markets a broad line of moderately-priced women's and children's sportswear. The Company's major labels include Pierre Cardin(R), Delta Burke(R), Harve Benard(R), Donnkenny(R), Casey & Max(R), Victoria Jones(R), Ann Travis(R) and Decade Designs(R).

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include a softening of retailer or consumer acceptance of the Company's products or pricing pressures and other competitive factors. These and other risks are more fully described in the Company's 10-K and 10-Q filings with the Securities and Exchange Commission.

                   DONNKENNY, INC. AND SUBSIDIARIES
                 Consolidated Statements of Operations
            (In thousands, except share and per share data)

                    Three Months Ended           Six Months Ended
                --------------------------     --------------------
                   June 30,     June 30,       June 30,      June 30,
                     2001         2000           2001          2000

NET SALES        $  30,539    $  27,733      $  67,847     $  70,127
COST OF SALES       23,968       22,262         52,422        58,073
                 ---------    ---------      ---------     ---------

  Gross profit       6,571        5,471         15,425        12,054

OPERATING
EXPENSES:
  Selling, general
    and
    administrative
    expenses         6,466        6,224         13,239        14,395
  Amortization of
    goodwill and
    other related
    acquisition
    costs              372          347            745           695
  Restructuring
    charge                                                       500
                 ---------    ---------      ---------     ---------

    Operating
      profit
      (loss)          (267)      (1,100)         1,441        (3,536)

INTEREST EXPENSE     1,120        1,081          2,426         2,122
                 ---------    ---------      ---------     ---------

  Loss before
    income
    taxes           (1,387)      (2,181)          (985)       (5,658)

INCOME TAXES            45           58             90            83
                 ---------    ---------      ---------     ---------

  NET LOSS       $  (1,432)   $  (2,239)     $  (1,075)    $  (5,741)
                 =========    =========      =========     =========

Basic (loss) per
  common share   $   (0.33)   $   (0.62)     $   (0.25)    $   (1.60)
                 =========    =========      =========     =========

Shares used in
  the calculation
  of basic (loss)
  per common
  share          4,367,417    3,616,098      4,367,417     3,586,758
                 =========    =========      =========     =========

Diluted (loss)
  per common
  share          $   (0.33)   $   (0.62)     $   (0.25)    $   (1.60)
                 =========    =========      =========     =========

Shares used in
  the calculation
  of diluted (loss)
  per common
  share          4,367,417    3,616,098      4,367,417     3,586,758
                 =========    =========      =========     =========



                   DONNKENNY, INC. AND SUBSIDIARIES
                      Consolidated Balance Sheets
                 (In Thousands, Except Per Share Data)

                               June 30,               December 31,
                                 2001                     2000
                            --------------          ----------------
                             (Unaudited)
CURRENT ASSETS
  Cash                      $      124               $       65
  Accounts receivable -
    net of allowances of
    $99 and $109,
    respectively                25,073                   30,968
  Recoverable income taxes         143                      155
  Inventories                   30,478                   19,730
  Deferred tax assets            1,482                    1,482
  Prepaid expenses and
    other current assets         1,276                    1,177
  Assets held for sale           1,163                    1,206
                            ----------                ---------
  Total current assets          59,739                   54,783
PROPERTY, PLANT AND
  EQUIPMENT, NET                 5,687                    5,076
OTHER ASSETS                       420                      430
INTANGIBLE ASSETS               30,309                   31,054
                            ----------                ---------

TOTAL                       $   96,155                $  91,343
                            ==========                =========

LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of
    long-term debt          $    1,433                $   1,523
  Accounts payable              16,095                   11,751
  Accrued expenses and
    other current liabilities    1,662                    2,310
                            ----------                ---------
    Total current
      liabilities               19,190                   15,584
                            ----------                ---------

LONG-TERM DEBT                  42,905                   40,624
DEFERRED TAX LIABILITIES         1,482                    1,482

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock $.01
    par value; authorized 500
    shares, issued none              -                        -
  Common stock, $.01 par
    value.  Authorized 10,000
    shares,  issued and
    outstanding 4,367
    shares in 2001 and 2000         44                       44
  Additional paid-in capital    50,449                   50,449
  Deficit                      (17,915)                 (16,840)
                            ----------                ---------
  Total Stockholders'
    Equity                      32,578                   33,653
                            ----------                ---------

TOTAL                       $   96,155                $  91,343
                            ==========                =========