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 September 27, 2014 and December 28, 2013, Condensed Consolidating Statements of Comprehensive Income (Loss) for the three and nine months ended September 27, 2014 and September 28, 2013, and Condensed Consolidating Statements of Cash Flows for the nine months ended September 27, 2014 and September 28, 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 September 27, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
ASSETS	RESTATED												RESTATED
Current Assets:
Cash and cash equivalents	$	4,026		$	112,897		$	65,760		$	—		$	182,683
Accounts receivable, net	—			43,990			218,084			—			262,074
Inventories, net	(837		)	50,697			132,345			—			182,205
Deferred income taxes	385			2,438			9,672			(2,823		)	9,672
Other current assets	10,120			10,838			67,991			—			88,949
Total current assets	13,694			220,860			493,852			(2,823		)	725,583
Property, plant and equipment, net	4,237			205,007			780,145			—			989,389
Goodwill	—			55,999			145,988			—			201,987
Intangible assets, net	36,489			120,011			15,253			—			171,753
Net investment in and advances to (from) subsidiaries	1,542,131			473,936			(843,583		)	(1,172,484		)	—
Deferred income taxes	—			—			3,621			—			3,621
Other noncurrent assets	289			9,383			25,611			—			35,283
Total assets	$	1,596,840		$	1,085,196		$	620,887		$	(1,175,307	)	$	2,127,616
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY
Current liabilities:
Short-term borrowings	$	119		$	—		$	15,683		$	—		$	15,802
Accounts payable and accrued liabilities	35,619			58,817			216,904			—			311,340
Income taxes payable	239			769			(537		)	—			471
Deferred income taxes	—			(148		)	8			1,148			1,008
Current portion of long-term debt	7,142			—			28,305			—			35,447
Total current liabilities	43,119			59,438			260,363			1,148			364,068
Long-term debt	1,413,551			—			26,579			—			1,440,130
Deferred income taxes	974			9,626			70,397			(3,971		)	77,026
Other noncurrent liabilities	494			26,994			79,561			—			107,049
Total liabilities	1,458,138			96,058			436,900			(2,823		)	1,988,273
Redeemable noncontrolling interest	93,645			—			—			—			93,645
Common stock	—			—			16,966			(16,966		)	—
Polymer Group, Inc. shareholders’ equity	45,057			989,138			166,380			(1,155,518		)	45,057
Noncontrolling interest	—			—			641			—			641
Total equity	45,057			989,138			183,987			(1,172,484		)	45,698
Total liabilities, redeemable noncontrolling interest and equity	$	1,596,840		$	1,085,196		$	620,887		$	(1,175,307	)	$	2,127,616

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	—		46,428		109,646			—			156,074
Deferred income taxes	385		2,438		2,318			(2,823		)	2,318
Other current assets	1,887		12,696		44,513			—			59,096
Total current assets	4,340		121,493		375,369			(2,823		)	498,379
Property, plant and equipment, net	2,756		207,256		442,768			—			652,780
Goodwill	—		54,683		60,645			—			115,328
Intangible assets, net	31,525		125,146		12,728			—			169,399
Net investment in and advances to (from) subsidiaries	1,013,856		615,314		(363,414		)	(1,265,756		)	—
Deferred income taxes	—		—		2,582			—			2,582
Other noncurrent assets	298		8,869		16,885			—			26,052
Total assets	$	1,052,775	$	1,132,761	$	547,563		$	(1,268,579	)	$	1,464,520
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	410	$	—	$	2,062		$	—		$	2,472
Accounts payable and accrued liabilities	36,510		61,950		209,271			—			307,731
Income taxes payable	369		—		3,244			—			3,613
Deferred income taxes	—		—		194			1,148			1,342
Current portion of long-term debt	3,039		—		10,758			—			13,797
Total current liabilities	40,328		61,950		225,529			1,148			328,955
Long-term debt	850,767		—		29,632			—			880,399
Deferred income taxes	974		12,543		23,689			(3,970		)	33,236
Other noncurrent liabilities	1,810		31,718		28,663			—			62,191
Total liabilities	893,879		106,211		307,513			(2,822		)	1,304,781
Common stock	—		—		16,966			(16,966		)	—
Polymer Group, Inc. shareholders’ equity	158,896		1,026,550		222,241			(1,248,791		)	158,896
Noncontrolling interest	—		—		843			—			843
Total equity	158,896		1,026,550		240,050			(1,265,757		)	159,739
Total liabilities and equity	$	1,052,775	$	1,132,761	$	547,563		$	(1,268,579	)	$	1,464,520

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Three Months Ended September 27, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	46		$	145,542		$	352,150		$	275		$	498,013
Cost of goods sold	(93		)	(117,548		)	(299,605		)	(275		)	(417,521		)
Gross profit	(47		)	27,994			52,545			—			80,492
Selling, general and administrative expenses	(14,412		)	(13,534		)	(37,850		)	—			(65,796		)
Special charges, net	(3,886		)	(229		)	(10,778		)	—			(14,893		)
Other operating, net	146			96			2,024			—			2,266
Operating income (loss)	(18,199		)	14,327			5,941			—			2,069
Other income (expense):
Interest expense	(20,569		)	2,806			(11,019		)	—			(28,782		)
Debt modification and extinguishment costs	(2,612		)	—			(2,375		)	—			(4,987		)
Intercompany royalty and technical service fees	2,301			1,150			(3,451		)	—			—
Foreign currency and other, net	(6,803		)	979			(20,764		)	—			(26,588		)
Equity in earnings of subsidiaries	(12,803		)	(27,303		)	—			40,106			—
Income (loss) before income taxes	(58,685		)	(8,041		)	(31,668		)	40,106			(58,288		)
Income tax (provision) benefit	3,457			(4,818		)	2,498			—			1,137
Net income (loss)	(55,228		)	(12,859		)	(29,170		)	40,106			(57,151		)
Less: Earnings attributable to noncontrolling interest and redeemable noncontrolling interest	—			—			(1,923		)	—			(1,923		)
Net income (loss) attributable to Polymer Group, Inc.	$	(55,228	)	$	(12,859	)	$	(27,247	)	$	40,106		$	(55,228	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(87,958	)	$	(45,806	)	$	(51,084	)	$	96,890		$	(87,958	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Three Months Ended September 28, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	93,021		$	201,840		$	(5,882	)	$	288,979
Cost of goods sold	(93		)	(77,996		)	(168,572		)	5,882			(240,779		)
Gross profit	(93		)	15,025			33,268			—			48,200
Selling, general and administrative expenses	(9,078		)	(6,060		)	(18,325		)	—			(33,463		)
Special charges, net	(6,539		)	(37		)	(517		)	—			(7,093		)
Other operating, net	36			(92		)	(615		)	—			(671		)
Operating income (loss)	(15,674		)	8,836			13,811			—			6,973
Other income (expense):
Interest expense	(14,800		)	6,924			(5,309		)	—			(13,185		)
Intercompany royalty and technical service fees	1,425			1,681			(3,106		)	—			—
Foreign currency and other, net	2,815			(5		)	(512		)	—			2,298
Equity in earnings of subsidiaries	15,695			989			—			(16,684		)	—
Income (loss) before income taxes	(10,539		)	18,425			4,884			(16,684		)	(3,914		)
Income tax (provision) benefit	2,272			(2,815		)	(3,810		)	—			(4,353		)
Net income (loss)	$	(8,267	)	$	15,610		$	1,074		$	(16,684	)	$	(8,267	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(3,272	)	$	23,413		$	1,603		$	(25,016	)	$	(3,272	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Nine Months Ended September 27, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	46		$	441,790		$	946,836		$	(28,177	)	$	1,360,495
Cost of goods sold	(223		)	(354,160		)	(792,746		)	28,177			(1,118,952		)
Gross profit	(177		)	87,630			154,090			—			241,543
Selling, general and administrative expenses	(37,442		)	(41,994		)	(106,063		)	—			(185,499		)
Special charges, net	(22,823		)	(2,443		)	(22,602		)	—			(47,868		)
Other operating, net	157			395			(3,210		)	—			(2,658		)
Operating income (loss)	(60,285		)	43,588			22,215			—			5,518
Other income (expense):
Interest expense	(53,987		)	9,406			(23,024		)	—			(67,605		)
Debt modification and extinguishment costs	(13,350		)	—			(2,375		)	—			(15,725		)
Intercompany royalty and technical service fees	(4,898		)	3,943			955			—			—
Foreign currency and other, net	16,114			854			(28,594		)	—			(11,626		)
Equity in earnings of subsidiaries	21,647			(25,764		)	—			4,117			—
Income (loss) before income taxes	(94,759		)	32,027			(30,823		)	4,117			(89,438		)
Income tax (provision) benefit	10,387			(10,403		)	866			—			850
Net income (loss)	(84,372		)	21,624			(29,957		)	4,117			(88,588		)
Less: Earnings attributable to noncontrolling interest and redeemable noncontrolling interest	—			—			(4,216		)	—			(4,216		)
Net income (loss) attributable to Polymer Group, Inc.	$	(84,372	)	$	21,624		$	(25,741	)	$	4,117		$	(84,372	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(113,412	)	$	(7,620	)	$	(44,583	)	$	52,203		$	(113,412	)

Condensed Consolidating Statement of Comprehensive Income (Loss)

For the Nine Months Ended September 28, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	—		$	275,850		$	607,758		$	(16,009	)	$	867,599
Cost of goods sold	(129		)	(234,710		)	(504,313		)	16,009			(723,143		)
Gross profit	(129		)	41,140			103,445			—			144,456
Selling, general and administrative expenses	(33,053		)	(17,824		)	(56,299		)	—			(107,176		)
Special charges, net	(8,364		)	(176		)	(2,107		)	—			(10,647		)
Other operating, net	55			(313		)	(1,717		)	—			(1,975		)
Operating income (loss)	(41,491		)	22,827			43,322			—			24,658
Other income (expense):
Interest expense	(37,274		)	13,111			(13,429		)	—			(37,592		)
Intercompany royalty and technical service fees	4,181			4,985			(9,166		)	—			—
Foreign currency and other, net	2,815			(252		)	(2,585		)	—			(22		)
Equity in earnings of subsidiaries	42,848			6,679			—			(49,527		)	—
Income (loss) before income taxes	(28,921		)	47,350			18,142			(49,527		)	(12,956		)
Income tax (provision) benefit	6,521			(4,502		)	(11,463		)	—			(9,444		)
Net income (loss)	$	(22,400	)	$	42,848		$	6,679		$	(49,527	)	$	(22,400	)
Comprehensive income (loss) attributable to Polymer Group, Inc.	$	(18,652	)	$	48,449		$	6,939		$	(55,388	)	$	(18,652	)

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 27, 2014



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	127,723		$	178,124		$	(293,789	)	$	—		$	12,058
Investing activities:
Purchases of property, plant and equipment	(2,469		)	(22,092		)	(29,248		)	—			(53,809		)
Proceeds from the sale of assets	—			—			2,635			—			2,635
Acquisition of intangibles and other	(182		)	—			—			—			(182		)
Acquisitions, net of cash acquired	(356,039		)	—			—			—			(356,039		)
Intercompany investing activities, net	(361,604		)	(421,262		)	2,651			780,215			—
Net cash provided by (used in) investing activities	(720,294		)	(443,354		)	(23,962		)	780,215			(407,395		)
Financing activities:
Issuance of common stock	750			—			—			—			750
Proceeds from long-term borrowings	628,000			—			152			—			628,152
Proceeds from short-term borrowings	1,265			—			20,329			—			21,594
Repayment of long-term borrowings	(61,478		)	—			(59,592		)	—			(121,070		)
Repayment of short-term borrowings	(1,556		)	—			(6,666		)	—			(8,222		)
Loan acquisition costs	(21,289		)	—			—			—			(21,289		)
Debt modification costs	(1,680		)	—			(2,375		)	—			(4,055		)
Intercompany financing activities, net	50,517			365,024			364,674			(780,215		)	—
Net cash provided by (used in) financing activities	594,529			365,024			316,522			(780,215		)	495,860
Effect of exchange rate changes on cash	—			—			(3,904		)	—			(3,904		)
Net change in cash and cash equivalents	1,958			99,794			(5,133		)	—			96,619
Cash and cash equivalents at beginning of period	2,068			13,103			70,893			—			86,064
Cash and cash equivalents at end of period	$	4,026		$	112,897		$	65,760		$	—		$	182,683

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 28, 2013



In thousands	PGI (Issuer)			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(42,502	)	$	46,834		$	(226	)	$	—		$	4,106
Investing activities:
Purchases of property, plant and equipment	(23,703		)	(2,663		)	(9,133		)	—			(35,499		)
Proceeds from the sale of assets	—			—			25			—			25
Acquisition of intangibles and other	(260		)	—			(4,226		)	—			(4,486		)
Intercompany investing activities, net	6,408			(59,073		)	(5,000		)	57,665			—
Net cash provided by (used in) investing activities	(17,555		)	(61,736		)	(18,334		)	57,665			(39,960		)
Financing activities:
Issuance of common stock	(222		)	—			—			—			(222		)
Proceeds from long-term borrowings	234			—			18,256			—			18,490
Proceeds from short-term borrowings	1,879			—			—			—			1,879
Repayment of long-term borrowings	(109		)	—			(5,157		)	—			(5,266		)
Repayment of short-term borrowings	(2,476		)	—			—			—			(2,476		)
Loan acquisition costs	—			—			—			—			—
Intercompany financing activities, net	61,800			(1,408		)	(2,727		)	(57,665		)	—
Net cash provided by (used in) financing activities	61,106			(1,408		)	10,372			(57,665		)	12,405
Effect of exchange rate changes on cash	—			—			248			—			248
Net change in cash and cash equivalents	1,049			(16,310		)	(7,940		)	—			(23,201		)
Cash and cash equivalents at beginning of period	486			28,285			69,108			—			97,879
Cash and cash equivalents at end of period	$	1,535		$	11,975		$	61,168		$	—		$	74,678