Financial Guarantees and Condensed Consolidating Financial Statements

Polymer’s Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally on a senior secured basis, by each of Polymer’s 100% owned domestic subsidiaries (collectively, the “Guarantors”). As substantially all of Polymer’s operating income and cash flow is generated by its subsidiaries, funds necessary to meet Polymer’s debt service obligations may be provided, in part, by distributions or advances from its subsidiaries. Under certain circumstances, contractual and legal restrictions, as well as the financial condition and operating requirements of Polymer’s subsidiaries, could limit Polymer’s ability to obtain cash from its subsidiaries for the purpose of meeting its debt service obligations, including the payment of principal and interest on the Senior Secured Notes. Although holders of the Senior Secured Notes will be direct creditors of Polymer’s principal direct subsidiaries by virtue of the guarantees, Polymer has subsidiaries that are not included among the Guarantors (collectively, the “Non-Guarantors”), and such subsidiaries will not be obligated with respect to the Senior Secured Notes. As a result, the claims of creditors of the Non-Guarantors will effectively have priority with respect to the assets and earnings of such companies over the claims of creditors of Polymer, including the holders of the Senior Secured Notes.

The following Condensed Consolidating Financial Statements are presented to satisfy the disclosure requirements of Rule 3-10 of Regulation S-X. In accordance with Rule 3-10, the subsidiary guarantors are all 100% owned by PGI (the “Issuer”). The guarantees on the Senior Secured Notes are full and unconditional and all guarantees are joint and several. The information presents Condensed Consolidating Balance Sheets as of June 28, 2014 and December 28, 2013, Condensed Consolidating Statements of Comprehensive Income (Loss) for the three and six months ended June 28, 2014 and June 29, 2013, and Condensed Consolidating Statements of Cash Flows for the six months ended June 28, 2014 and June 29, 2013 of (1) PGI (Issuer), (2) the Guarantors, (3) the Non-Guarantors and (4) consolidating eliminations to arrive at the information for the Company on a consolidated basis.

Condensed Consolidating Balance Sheet

As of June 28, 2014



In thousands	PGI (Issuer)			Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	296		$	121,459	$	89,441		$	—		$	211,196
Accounts receivable, net	—			46,040		215,618			—			261,658
Inventories, net	(789		)	49,081		140,694			—			188,986
Deferred income taxes	385			2,439		6,905			(2,823		)	6,906
Other current assets	17,342			12,165		76,467			—			105,974
Total current assets	17,234			231,184		529,125			(2,823		)	774,720
Property, plant and equipment, net	3,636			209,166		824,245			—			1,037,047
Goodwill	—			37,249		178,356			—			215,605
Intangible assets, net	39,348			112,771		24,006			—			176,125
Net investment in and advances to (from) subsidiaries	1,489,997			530,756		(720,955		)	(1,299,798		)	—
Deferred income taxes	—			—		1,977			—			1,977
Other noncurrent assets	291			8,976		27,992			—			37,259
Total assets	$	1,550,506		$	1,130,102	$	864,746		$	(1,302,621	)	$	2,242,733
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	719		$	—	$	13,351		$	—		$	14,070
Accounts payable and accrued liabilities	42,335			57,952		233,073			—			333,360
Income taxes payable	399			145		567			—			1,111
Deferred income taxes	—			—		1,777			1,148			2,925
Current portion of long-term debt	62,090			—		48,236			—			110,326
Total current liabilities	105,543			58,097		297,004			1,148			461,792
Long-term debt	1,311,050			—		63,446			—			1,374,496
Deferred income taxes	973			11,562		61,357			(3,971		)	69,921
Other noncurrent liabilities	407			26,833		85,208			—			112,448
Total liabilities	1,417,973			96,492		507,015			(2,823		)	2,018,657
Common stock	—			—		16,966			(16,966		)	—
Polymer Group, Inc. shareholders’ equity	132,533			1,033,610		249,222			(1,282,832		)	132,533
Noncontrolling interests	—			—		91,543			—			91,543
Total equity	132,533			1,033,610		357,731			(1,299,798		)	224,076
Total liabilities and equity	$	1,550,506		$	1,130,102	$	864,746		$	(1,302,621	)	$	2,242,733

Condensed Consolidating Balance Sheet

As of December 28, 2013



In thousands	PGI (Issuer)			Guarantors		Non-Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	2,068		$	13,103	$	70,893		$	—		$	86,064
Accounts receivable, net	—			46,828		147,999			—			194,827
Inventories, net	(162		)	46,757		109,778			—			156,373
Deferred income taxes	385			2,438		2,318			(2,823		)	2,318
Other current assets	2,049			12,534		44,513			—			59,096
Total current assets	4,340			121,660		375,501			(2,823		)	498,678
Property, plant and equipment, net	2,756			176,380		473,332			—			652,468
Goodwill	—			43,182		64,640			—			107,822
Intangible assets, net	31,525			112,026		25,848			—			169,399
Net investment in and advances to (from) subsidiaries	1,012,661			627,422		(363,414		)	(1,276,669		)	—
Deferred income taxes	—			—		2,582			—			2,582
Other noncurrent assets	297			8,870		16,885			—			26,052
Total assets	$	1,051,579		$	1,089,540	$	595,374		$	(1,279,492	)	$	1,457,001
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	410		$	—	$	2,062		$	—		$	2,472
Accounts payable and accrued liabilities	36,510			61,950		209,201			—			307,661
Income taxes payable	369			—		3,244			—			3,613
Deferred income taxes	—			—		188			1,148			1,336
Current portion of long-term debt	3,039			—		10,758			—			13,797
Total current liabilities	40,328			61,950		225,453			1,148			328,879
Long-term debt	850,767			—		29,632			—			880,399
Deferred income taxes	974			8,053		22,278			(3,970		)	27,335
Other noncurrent liabilities	1,810			31,372		28,663			—			61,845
Total liabilities	893,879			101,375		306,026			(2,822		)	1,298,458
Common stock	—			—		16,966			(16,966		)	—
Polymer Group, Inc. shareholders’ equity	157,700			988,165		271,539			(1,259,704		)	157,700
Noncontrolling interests	—			—		843			—			843
Total equity	157,700			988,165		289,348			(1,276,670		)	158,543
Total liabilities and equity	$	1,051,579		$	1,089,540	$	595,374		$	(1,279,492	)	$	1,457,001

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Three Months Ended June 28, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	147,350		$	308,021		$	(15,473	)	$	439,898
Cost of goods sold	(93		)	(116,851		)	(252,516		)	15,473			(353,987		)
Gross profit	(93		)	30,499			55,505			—			85,911
Selling, general and administrative expenses	(12,101		)	(15,404		)	(37,868		)	—			(65,373		)
Special charges, net	(14,972		)	(1,681		)	(7,611		)	—			(24,264		)
Other operating, net	—			509			(4,364		)	—			(3,855		)
Operating income (loss)	(27,166		)	13,923			5,662			—			(7,581		)
Other income (expense):
Interest expense	(24,225		)	(482		)	(6,948		)	—			(31,655		)
Intercompany royalty and technical service fees	(9,893		)	1,140			8,753			—			—
Foreign currency and other, net	12,117			(678		)	(1,436		)	—			10,003
Equity in earnings of subsidiaries	24,258			(1,712		)	—			(22,546		)	—
Income (loss) before income taxes	(24,909		)	12,191			6,031			(22,546		)	(29,233		)
Income tax (provision) benefit	3,340			12,166			(10,119		)	—			5,387
Net income (loss)	(21,569		)	24,357			(4,088		)	(22,546		)	(23,846		)
Less: Earnings attributable to noncontrolling interests	—			—			(2,277		)	—			(2,277		)
Net income (loss) attributable to Polymer Group, Inc.	$	(21,569	)	$	24,357		$	(1,811	)	$	(22,546	)	$	(21,569	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(19,566	)	$	26,562		$	1,140		$	(27,702	)	$	(19,566	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Three Months Ended June 29, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	89,817		$	206,389		$	(4,668	)	$	291,538
Cost of goods sold	(11		)	(74,870		)	(170,935		)	4,668			(241,148		)
Gross profit	(11		)	14,947			35,454			—			50,390
Selling, general and administrative expenses	(14,331		)	(6,004		)	(19,036		)	—			(39,371		)
Special charges, net	(471		)	(103		)	(1,176		)	—			(1,750		)
Other operating, net	16			(145		)	(835		)	—			(964		)
Operating income (loss)	(14,797		)	8,695			14,407			—			8,305
Other income (expense):
Interest expense	(12,246		)	3,086			(3,163		)	—			(12,323		)
Intercompany royalty and technical service fees	1,428			1,697			(3,125		)	—			—
Foreign currency and other, net	2			(150		)	(752		)	—			(900		)
Equity in earnings of subsidiaries	15,630			1,872			—			(17,502		)	—
Income (loss) before income taxes	(9,983		)	15,200			7,367			(17,502		)	(4,918		)
Income tax (provision) benefit	2,077			458			(5,523		)	—			(2,988		)
Net income (loss)	$	(7,906	)	$	15,658		$	1,844		$	(17,502	)	$	(7,906	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(5,477	)	$	8,930		$	(44	)	$	(8,886	)	$	(5,477	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Six Months Ended June 28, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	296,246		$	594,687		$	(28,451	)	$	862,482
Cost of goods sold	(130		)	(239,270		)	(491,732		)	28,451			(702,681		)
Gross profit	(130		)	56,976			102,955			—			159,801
Selling, general and administrative expenses	(23,030		)	(29,440		)	(68,437		)	—			(120,907		)
Special charges, net	(18,937		)	(2,214		)	(11,824		)	—			(32,975		)
Other operating, net	11			299			(5,234		)	—			(4,924		)
Operating income (loss)	(42,086		)	25,621			17,460			—			995
Other income (expense):
Interest expense	(44,156		)	6,601			(12,006		)	—			(49,561		)
Intercompany royalty and technical service fees	(7,198		)	2,793			4,405			—			—
Foreign currency and other, net	22,916			(125		)	(7,829		)	—			14,962
Equity in earnings of subsidiaries	31,969			(10,138		)	—			(21,831		)	—
Income (loss) before income taxes	(38,555		)	24,752			2,030			(21,831		)	(33,604		)
Income tax (provision) benefit	6,931			7,251			(14,495		)	—			(313		)
Net income (loss)	(31,624		)	32,003			(12,465		)	(21,831		)	(33,917		)
Less: Earnings attributable to noncontrolling interests	—			—			(2,293		)	—			(2,293		)
Net income (loss) attributable to Polymer Group, Inc.	$	(31,624	)	$	32,003		$	(10,172	)	$	(21,831	)	$	(31,624	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(27,934	)	$	35,706		$	(5,177	)	$	(30,529	)	$	(27,934	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Six Months Ended June 29, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	182,829		$	405,918		$	(10,127	)	$	578,620
Cost of goods sold	(36		)	(156,714		)	(335,741		)	10,127			(482,364		)
Gross profit	(36		)	26,115			70,177			—			96,256
Selling, general and administrative expenses	(23,975		)	(11,764		)	(37,974		)	—			(73,713		)
Special charges, net	(1,826		)	(139		)	(1,589		)	—			(3,554		)
Other operating, net	18			(222		)	(1,100		)	—			(1,304		)
Operating income (loss)	(25,819		)	13,990			29,514			—			17,685
Other income (expense):
Interest expense	(22,474		)	6,187			(8,120		)	—			(24,407		)
Intercompany royalty and technical service fees	2,756			3,304			(6,060		)	—			—
Foreign currency and other, net	—			(247		)	(2,073		)	—			(2,320		)
Equity in earnings of subsidiaries	27,155			5,690			—			(32,845		)	—
Income (loss) before income taxes	(18,382		)	28,924			13,261			(32,845		)	(9,042		)
Income tax (provision) benefit	4,249			(1,687		)	(7,653		)	—			(5,091		)
Net income (loss)	$	(14,133	)	$	27,237		$	5,608		$	(32,845	)	$	(14,133	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(15,380	)	$	25,035		$	5,339		$	(30,374	)	$	(15,380	)

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 28, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	194,945		$	148,994		$	(333,947	)	$	—		$	9,992
Investing activities:
Purchases of property, plant and equipment	(1,703		)	(16,422		)	(15,675		)	—			(33,800		)
Proceeds from the sale of assets	—			—			47			—			47
Acquisition of intangibles and other	(124		)	—			—			—			(124		)
Acquisitions, net of cash acquired	(356,039		)	—			—			—			(356,039		)
Intercompany investing activities, net	(372,158		)	(399,794		)	(6,450		)	778,402			—
Net cash provided by (used in) investing activities	(730,024		)	(416,216		)	(22,078		)	778,402			(389,916		)
Financing activities:
Proceeds from long-term borrowings	523,000			—			152			—			523,152
Proceeds from short-term borrowings	1,265			—			16,156			—			17,421
Repayment of long-term borrowings	(3,808		)	—			(4,049		)	—			(7,857		)
Repayment of short-term borrowings	(956		)	—			(4,893		)	—			(5,849		)
Loan acquisition costs	(21,312		)	—			—			—			(21,312		)
Intercompany financing activities, net	35,118			375,578			367,706			(778,402		)	—
Net cash provided by (used in) financing activities	533,307			375,578			375,072			(778,402		)	505,555
Effect of exchange rate changes on cash	—			—			(499		)	—			(499		)
Net change in cash and cash equivalents	(1,772		)	108,356			18,548			—			125,132
Cash and cash equivalents at beginning of period	2,068			13,103			70,893			—			86,064
Cash and cash equivalents at end of period	$	296		$	121,459		$	89,441		$	—		$	211,196

Condensed Consolidating Statement of Cash Flows

For the Six Months Ended June 29, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(10,239	)	$	22,547		$	(13,926	)	$	—		$	(1,618	)
Investing activities:
Purchases of property, plant and equipment	(23,207		)	(1,658		)	(1,635		)	—			(26,500		)
Proceeds from the sale of assets	—			—			75			—			75
Acquisition of intangibles and other	(135		)	—			—			—			(135		)
Intercompany investing activities, net	5,766			(28,500		)	(4,000		)	26,734			—
Net cash provided by (used in) investing activities	(17,576		)	(30,158		)	(5,560		)	26,734			(26,560		)
Financing activities:
Issuance of common stock	(232		)	—			—			—			(232		)
Proceeds from long-term borrowings	—			—			14,177			—			14,177
Proceeds from short-term borrowings	1,879			—			—			—			1,879
Repayment of long-term borrowings	(65		)	—			(3,252		)	—			(3,317		)
Repayment of short-term borrowings	(1,554		)	—			—			—			(1,554		)
Loan acquisition costs	—			—			—			—			—
Intercompany financing activities, net	28,000			(1,766		)	500			(26,734		)	—
Net cash provided by (used in) financing activities	28,028			(1,766		)	11,425			(26,734		)	10,953
Effect of exchange rate changes on cash	—			—			(183		)	—			(183		)
Net change in cash and cash equivalents	213			(9,377		)	(8,244		)	—			(17,408		)
Cash and cash equivalents at beginning of period	486			28,285			69,108			—			97,879
Cash and cash equivalents at end of period	$	699		$	18,908		$	60,864		$	—		$	80,471