International Textile Group, Inc. Business Report FY2009

Business Highlights

Financial Overview

(in thousand dollars)

	FY2009	FY2008	Rate of change (%)	Factors
Overall
Sales	673,121	995,132	(32.4)	-
Automotive Safety
Sales	143,878	403,783	(64.4)	1)

Factor
1)
-Sales in the automotive safety segment were $143.9 million in the year ended December 31, 2009 compared to sales of $403.8 million in the year ended December 31, 2008. Net sales in the year ended December 31, 2009 and 2008 included $123.5 million and $369.6 million, respectively, related to GST Holdings (GST)*. Due to the deconsolidation of GST on June 30, 2009, results of operations of GST are not included in the Company’s consolidated financial statements subsequent to June 30, 2009. After the deconsolidation, the Company’s automotive safety segment continues to include the airbag fabric operation located in Greenville, South Carolina. The decrease in sales primarily related to the deconsolidation of GST on June 30, 2009, $102.9 million of reduced volumes as a result of the deterioration of the global economy and automotive markets as reduced consumer confidence resulted in delays of purchases of durable goods such as automobiles, $7.6 million due to a less favorable product sales mix and price reductions provided to customers, and a net unfavorable effect from foreign currency exchange rates in the amount of $9.1 million. The automotive safety segment has also been negatively affected by an increase in in-sourced production by certain of the segment’s customers and potential customers.

-*GST Holdings was a wholly owned subsidiary of the Company and was the holding company that directly or indirectly owned substantially all of the subsidiaries through which the Company's automotive safety group operated (automotive airbag fabric and automotive airbag cushions businesses). GST Holdings and certain of its subsidiaries were parties to a Term and Revolving Loan Agreement, dated as of December 8, 2006 (the “Automotive Safety Facility”), which matured on June 30, 2009. Amounts outstanding under the Automotive Safety Facility, which approximated $199 million on an as-converted to U.S. dollar basis at maturity, were not repaid prior to, or upon, maturity. On June 30, 2009 (the “Petition Date”), GST Holdings, all of its direct and indirect U.S. subsidiaries, including, but not limited to, Global Safety Textiles LLC and GST Automotive Safety Components International, Inc., as well as GST Acquisition GmbH and GST Widefabric filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. With the exception of GST Acquisition GmbH and GST Widefabric, GST Holdings’ subsidiaries and operations outside the United States were not included in the GST Bankruptcy Filing. The Debtors continued to manage their properties and operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court from the Petition Date until January 8, 2010. On January 8, 2010, the plan of reorganization of the Debtors under the Bankruptcy Code was deemed effective. As a result, the Company did not regain control of GST and as of January 8, 2010, no longer had an ownership interest in GST. GST accounted for approximately 96% of automotive safety segment net sales in the first six months of 2009 prior to the deconsolidation. The Company was not a debtor in the GST Bankruptcy Filing and the operations of its other primary markets: bottom-weight woven apparel fabrics, certain automotive safety airbag fabrics, government uniform fabrics, interior furnishings fabrics and specialty fabrics and services, continued to operate in the ordinary course of business outside the chapter 11 cases and process.