Financial overview (in thousand dollars)

(1)
-Net sales from continuing operations for the twelve months ended December 31, 2006 were $720.9 million. The major factors impacting net sales were continued weakness in automotive safety sales, which was partially offset by the growth of the Company's airbag cushion operations in China. Additionally, net sales within the Company's bottom-weight woven apparel fabrics segment declined by 18.8% in 2006, or $94.5 million, as compared with 2005 net sales in this segment.

(2)
- Sales in the automotive cushion segment increased approximately $2.0 million, or 1.2%, to $173.2 million for the year ended December 31, 2006 compared to the pro forma year ended December 31, 2005. The increase in sales resulted primarily from sales in new markets which offset sales decreases in certain existing markets in which vehicle platforms decreased or had been phased out in 2006 as compared to 2005. The Company's automotive cushion operations in China and South Africa had net sales of $6.7 million during the year ended December 31, 2006, as those joint ventures began production on new programs awarded in 2006, compared with net sales of $0.4 million for the pro forma year ended December 31, 2005. The increase in net sales was also driven by the positive effect of approximately $1.2 million of favorable changes in foreign currency exchange rates compared to the twelve months ended December 31, 2005.

(3)
- Sales in the automotive fabrics segment decreased $6.3 million, or 9.8%, to $57.3 million for the twelve months ended December 31, 2006 compared to the pro forma twelve months ended December 31, 2005. The decrease in sales resulted primarily from declining sales volumes on some of the Company's fabric products for vehicle platforms that were experiencing decreased sales volumes or were being phased out during 2006 and the loss of other programs as a result of insourcing by a customer and aggressive pricing by an independent competitor.

Acquisition
-In August 2006, International Textile Group, Inc. and Safety Components International, Inc. announced that they have signed an agreement to combine the two companies through a merger. Both International Textile Group (ITG) and Safety Components International (SCI) are majority owned by affiliates of WL Ross & Co. LLC. The resulting company will be named International Textile Group, Inc. SCI will form the basis of the combined company's new automotive safety components business unit. Wilbur L. Ross, Jr. will serve as Chairman of the combined company. Joseph L. Gorga, current President and CEO of ITG, will serve as President and CEO of the combined company.

- On April 1, 2007, the Company completed the acquisition of BST US Holdings, Inc. ("BST Holdings"). The Company acquired all of the outstanding shares of BST Holdings in exchange for the issuance of approximately $84.0 million of Series A Convertible Preferred Stock. As a result of the acquisition, BST Holdings became a wholly-owned subsidiary of the Company.
BST Holdings owns the BST Safety Textiles business ("BST"). BST, based in Maulburg, Germany, is a leading international manufacturer of flat and one piece woven fabrics for automotive airbags as well as narrow fabrics for seat belts and military and technical uses. In 2006, BST had net sales of approximately $270.0 million.
The Company is in the process of integrating BST with the Company's Safety Components business, and will operate BST as a part of the automotive safety business unit. Management believes the combined product, technical and market expertise of the BST and Safety Components businesses provides enhanced opportunities for accelerating the growth and expansion of the automotive safety business. The acquisition of BST is expected to provide considerable operating cash flow to ITG as well as opportunities for significant synergies upon the combination of the businesses.

- In the fourth quarter of 2006, the Company acquired certain plant and airbag cushion assets of its Romanian subcontractor for airbag cushions for an aggregate purchase price of 5.5 million Euro. This facility provides "cut and sew" services to the Company's European automotive airbag business. The Company expects that the acquisition will enable the Company to improve its margins on products produced at the facility as well as allow for expansion of production at the facility, thereby generating an enhanced contribution to future operating earnings.

R&D Expenditure

R&D Structure
-The Company has technical centers in Greenville, South Carolina; Ensenada, Mexico; and Hildesheim, Germany.

-Through its textile laboratory located in Greenville, South Carolina, USA, the Company has the ability to test and analyze a wide range of fabrics (airbag or other) under internationally accepted testing standards, including US-ASTM, Europe-DIN and ISO, Asian-JIS and Underwriters NFPA. All validation testing and analytical testing of fabric is performed at this laboratory. Additionally, the Greenville facility has prototype-manufacturing capabilities.
- The Ensenada, Mexico technical center consists of a testing laboratory and a dedicated prototype cell, complete with a separate staff and equipment.
- The center in Hildesheim, Germany has the ability to conduct static and dynamic deployment testing and analysis.

- The Company holds 35 patents and approval for 8 additional patents are pending.