Free Opening Brief in Support - District Court of Delaware - Delaware

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 1 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 2 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 3 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 4 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 5 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 6 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 7 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 8 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 9 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 10 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 11 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 12 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 13 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 14 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 15 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 16 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 17 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 18 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 19 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 20 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 21 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 22 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 23 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 24 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 25 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 26 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 27 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 28 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 29 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 30 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 31 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 32 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 33 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 34 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 35 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 36 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 37 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 38 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 39 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 40 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 41 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 42 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47

Filed 09/14/2007

Page 43 of 43

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 1 of 104

EXHIBIT 1

RLF1-2961182-1

3

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 2 of 104

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K
(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Ñscal year ended December 31, 2001 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission Ñle number 1-10218

Collins & Aikman Corporation
(Exact name of registrant as speciÑed in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

13-3489233
(I.R.S. Employer IdentiÑcation Number)

250 Stephenson Troy, Michigan 48083
(Address of principal executive oÇces, including zip code)

Registrant's telephone number, including area code: (248) 824-2500 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered

Common Stock, $.01 par value

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has Ñled all reports required to be Ñled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to Ñle such reports), and (2) has been subject to such Ñling requirements for the past 90 days. Yes No Indicate by check mark if disclosure of delinquent Ñlers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in deÑnitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of voting stock held by non-aÇliates of the Registrant was $391,879,266 as of March 20, 2002. (Treats as non-aÇliates certain holders of restricted shares who have relinquished Board designation and other rights and as an aÇliate a shareholder as to whom there is an issue.) As of March 20, 2002, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 167,993,798 shares. DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III (Items 10, 11, 12 and 13) is incorporated by reference to portions of the registrant's deÑnitive Proxy Statement for the 2002 Annual Meeting of Stockholders, which will be Ñled within 120 days of December 31, 2001.

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 3 of 104

COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES FORM 10-K ANNUAL REPORT INDEX
Page

Item Item Item Item Item Item Item Item Item Item Item Item Item Item Item

1. 2. 3. 4. 5. 6. 7. 7A. 8. 9. 10. 11. 12. 13. 14.

Business ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Properties ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Legal Proceedings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Submission of Matters to a Vote of Security Holders ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Market for Registrant's Common Equity and Related Stockholder Matters ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Selected Financial Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Management's Discussion and Analysis of Financial Condition and Results of Operations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Quantitative and Qualitative Disclosures About Market Risk ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Financial Statements and Supplementary Data ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Changes in and Disagreements With Accountants on Accounting and Financial DisclosureÏÏÏÏ Directors and Executive OÇcers of the Registrant ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Executive Compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Security Ownership of Certain BeneÑcial Owners and Management ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Certain Relationships and Related Transactions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Exhibits, Financial Statement Schedules and Reports on Form 8-K ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

2 11 11 13 13 15 16 32 33 33 34 34 34 34 35

i

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 4 of 104

PART I This Report on Form 10-K contains ""forward-looking'' information, as that term is deÑned by the federal securities laws, about our Ñnancial condition, results of operations and business. You can Ñnd many of these statements by looking for words such as ""may,'' ""will,'' ""expect,'' ""anticipate,'' ""believe,'' ""estimate,'' ""should,'' ""continue,'' ""predict,'' and similar words used in this Annual Report. The forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protection provided by the federal securities laws. These forward-looking statements are subject to numerous assumptions, risks and uncertainties (including trade relations and competition). Because the statements are subject to risks and uncertainties, actual results may diÅer materially from those expressed or implied by the forward-looking statements. We caution readers not to place undue reliance on the statements, which speak only as of the date of this Annual Report. The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on its behalf may issue. We do not undertake any obligation to review or conÑrm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reÖect events or circumstances after the date of this report or to reÖect the occurrence of unanticipated events. This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results and events may diÅer materially from those that are anticipated because of certain risks and uncertainties, including but not limited to general economic conditions in the markets in which the Company operates and industry based factors such as: , declines in the North American, South American and European automobile and light truck builds, , labor costs and strikes at our major customers and at our facilities, , changes in consumer preferences, , dependence on signiÑcant automotive customers, , the level of competition in the automotive supply industry and pricing pressure from automotive customers and , risks associated with conducting business in foreign countries. In addition, factors more speciÑc to us could cause actual results to vary materially from those anticipated in the forward-looking statements included in this report such as substantial leverage, limitations imposed by the Company's debt instruments, the Company's ability to successfully integrate acquired businesses including actions it has identiÑed as providing cost saving opportunities, and pursue our prime contractor business strategy, the Company's customer concentration and risks associated with the formerly owned operations of the Company. The Company's divisions may also be aÅected by changes in the popularity of particular vehicle models or particular interior trim packages or the loss of programs on particular vehicle models. For a discussion of certain of these and other important factors which may aÅect our operations, products and markets, see ""ITEM 1. BUSINESS'' and ""ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS'' and also our other Ñlings with the Securities and Exchange Commission. Item 1. Business

The Company The Company is a global leader in the design, engineering and manufacturing of automotive interior components, including instrument panels, fully assembled cockpit modules, Öoor and acoustic systems, automotive fabric, interior trim and convertible top systems and has the number one or two North American market share position in seven out of ten major automotive interior categories tracked by CSM Worldwide. The Company is also the largest North American supplier of convertible top systems. The Company expects the fully assembled cockpit modules market to grow signiÑcantly over the next Ñve years and has positioned itself as a leading global supplier in this market with the recent acquisition of TAC-Trim. Sales are diversiÑed among North American, European and South American Tier I integrators and automotive OEMs. In North 2

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 5 of 104

America, the Company manufactures components for approximately 90% of all light vehicle production platforms. The Company has over 25,000 employees and more than 120 plants worldwide. The Company is a Delaware corporation formed on September 21, 1988. The Company conducts all of its operating activities through its wholly owned Collins & Aikman Products Co, (""Products'') subsidiary. Predecessors of Products have been in operation since 1843. In February 2001, Heartland Industrial Partners, L.P. acquired a controlling interest in the Company. Since the investment, the Company has pursued acquisitions that have furthered a strategy of serving as a prime contractor to both Tier I integrators, which are shifting capital and emphasis away from interior components manufacturing and towards electronics and the delivery of fully integrated interior modules, and to OEMs, which continue to increase their outsourcing of complete interior manufacturing. , On July 3, 2001, the Company acquired the Becker Group, a leading supplier of plastic components to the automotive industry. , On September 21, 2001, the Company acquired Joan Automotive Industries, a leading supplier of bodycloth to the automotive industry, and the assets of Joan's aÇliated automotive yarn dyeing operation, Western Avenue Dyers, L.P. , On December 20, 2001, the Company acquired the Textron Automotive Company's Trim division (TAC-Trim), one of the largest suppliers of instrument panels and fully assembled cockpit modules and a major automotive plastics manufacturer of interior and exterior trim components in North America, Europe and South America. The combination of Collins & Aikman, Becker, Joan and TAC-Trim created one of the industry's largest and most broadly based manufacturers of automotive interior components, systems and modules. The Company has the capability to supply diverse combinations of stylistically matched, functionally engineered and acoustically integrated interior trim components, systems and modules and markets interior products to customers through a single ""global commercial operations'' group, which supplies products from three primary categories: plastic components and cockpits, carpet and acoustics and automotive fabrics. In addition, the Company continues to market its convertible top systems through the Dura convertible group. Industry Trends The Company's strategy is to capitalize on several important automotive industry trends, which are expected to drive demand for its products. These trends include: , Increasing OEM Demand for Modules, Systems and Complete Interiors: To reduce costs and simplify assembly processes and design, OEMs increasingly expect their large-scale suppliers to provide fully engineered systems, pre-assembled combinations of components (systems or modules) and complete automotive interiors rather than individual components. , Accelerating Manufacturing Outsourcing by Tier I Total Interior Integrators: The large total interior Tier I integrators are repositioning their assets and resources to focus on electronics design, assembly and ""just-in-time'' sequencing of modules, systems and complete interiors. As a result, they are seeking to divest or outsource the manufacturing of many component categories. , Growing Technological Content and Acoustical Performance Requirements: The electronic and technological content of vehicles continues to expand, largely driven by demand for greater functionality and convenience. Changes to vehicle interiors, including hands-free cell phone systems, entertainment and navigational systems and voice-activated dashboard functions, are expected to require enhanced acoustical properties and increased sound Ñeld engineering relative to today's light vehicles. , Global Customer Requirements: Due to the opportunity for signiÑcant cost savings, reduced product development cycle times, common global platforms and improved product quality and consistency, automotive manufacturers favor suppliers with the capability to manufacture automotive interior systems and components in multiple geographic markets. Corporate Strategy The Company's goal is to become the leading manufacturer of automotive interior trim components to OEMs and Tier I integrators and to realize the integration, synergy and cost savings opportunities created by 3

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 6 of 104

the combination of Collins & Aikman, Becker, Joan and TAC-Trim. The following are the key elements of the strategy: , Provide integrated product solutions that combine interior styling, component systems and acoustical technologies: The ability to bundle multiple components into integrated, custom packages distinguishes the Company from its competitors and provides an opportunity to increase content per vehicle. The Company is a leader in product innovation, design and styling in all of its business lines, producing components that cover substantially all of the non-glass interior surfaces of automobiles. This breadth of product oÅering aÅords the Company a signiÑcant advantage as OEMs increasingly view the vehicle interior as a major point of diÅerentiation and rely upon automotive suppliers for research, engineering, design and styling capabilities. By employing a cross-disciplinary approach to acoustics, surface styling and product engineering that takes advantage of product development and technological capabilities, the Company can oÅer integrated product solutions to its customers. , Capitalize on position as prime contractor to OEMs and Tier I total interior integrators: The Company believes that OEMs will accelerate modular and system sourcing in order to lower costs, reduce time to market and accommodate global platforms and that Tier I total interior integrators will increase the redeployment of assets and capital into the integrated design, assembly and ""just in time'' sequenced delivery of complete interior systems. The Company is well positioned to capitalize on these opportunities. Furthermore, the Company's products are used in approximately 90% of North American vehicle platforms and are sold to all North American OEMs, transplants such as Toyota and Honda, and major Tier I integrators. The Company is also well positioned with respect to its Tier II competitors that have comparatively narrower product lines and signiÑcantly less size, scale and technological capabilities. , Increase content per vehicle: The Company intends to take advantage of its current position to increase content per vehicle and has substantial new business awards from customers across all product categories, with the strongest growth in fully assembled cockpit modules. Projected sales growth is primarily attributable to TAC-Trim's expanded book of full cockpit programs. By increasing content per vehicle, sales are expected to increase at a rate in excess of changes in industry production rates. , Leverage technology to improve manufacturing eÇciency: The Company believes it has many opportunities to improve manufacturing eÇciency and cost structure by rationalizing existing operations and incorporating manufacturing ""best practices,'' processes, procedures and technologies into its operations. For example, TAC-Trim is believed to be among the most eÇcient plastics suppliers in North America and Europe due to numerous proprietary manufacturing technologies, such as InvisitecTM and IntellimoldTM and EnvirosoftTM patented processes that allow the Company to manufacture and combine multiple products to produce complex integrated interiors products. The Company believes the application of technologies such as IntellimoldTM to Becker and the Company's operations, as well as the continued roll-out of these technologies throughout TAC-Trim's operations, will signiÑcantly improve plastics manufacturing cycle times, labor costs and scrap rates. , Pursue cost savings opportunities arising from our acquisitions: The Becker, Joan and TAC-Trim acquisitions create the opportunity to realize cost savings in the Ñrst full year of operation. The Company expects to realize these savings through a number of initiatives, including purchasing savings, in-sourcing the majority of our plastics tooling and yarn dyeing requirements, consolidating research and development and engineering functions, capacity rationalization and reducing global headquarters' costs. In an eÅort to achieve cost savings, the Company may also elect to implement restructuring activities in future periods above and beyond activities initiated during 2001. Segment and Geographical Information For a discussion of the Company's operating segments and the geographic regions in which the Company operates, refer to Item 7, ""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Results of Operations'' and to Note 20, ""Information About the Company's Segments'' of the Ñnancial statements included in this report. Products The Company markets the majority of its products to customers through a single ""global commercial operations'' group, which supplies products from three primary categories including plastic components and 4

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 7 of 104

cockpits, carpet and acoustics and automotive fabrics. In addition, the Company markets convertible top systems through the Dura convertible group. Products include the following: Plastic Components and Cockpits The Company manufactures substantially all of the components of the plastic interior trim within a vehicle, including automotive instrument panels, door panels, sidewall trim, overhead systems, headrests and armrests, cupholders, air registers and bezels, slush molded skins, pillar trim, Öoor console systems, instrument panel components, and fully assembled cockpit modules. This broad portfolio of plastic components and cockpits products allows the Company to oÅer customers modules and systems that incorporate individual components. Some major products include: , Instrument Panels (""IP''): As the most structurally important plastic component in the vehicle and as the plastic substrate directly in front of the driver, the IP occupies the most important piece of ""real estate'' in the interior. The Company believes that it is the number one IP supplier in North America. The advanced materials we employ include EnvirosoftTM castable thermoplastic materials, high performance PVC alloys, high-deÑnition grain and texture formulation and vacuum forming. TACTrim has also developed the InvisitecTM invisible passenger air bag system, which provides improved appearance and craftsmanship at reduced cost. , Cockpits: The Company is a leading North American and European supplier of cockpits. The complete array and breadth of our plastic component oÅerings has enabled the Company to become a leader in oÅering customers a fully assembled IP system (""cockpit'') delivered on a just-in-time basis. As most of the ancillary interior trim components revolve around the IP placement, the Company believes that it will be able to penetrate eÅectively the customer base by oÅering the IP along with complementary plastic accoutrements and additional products from our other business units. We source various other parts that make up a fully assembled modular cockpit from outside suppliers (including radios, wire harnesses, cross-vehicle beams and steering columns). The Company expects that its position as a cockpit integrator will provide signiÑcant opportunities to in-source more manufactured content in the future. Through the proprietary IntelliquenceTM software, Ñnished cockpits can be delivered to the OEMs on a just-in-time basis and installed on the assembly line. , Door Panels: The Company believes that it is the second largest supplier of door panels in North America. This decorative plastic interior trim component is an important element to the overall styling theme of a vehicle's interior. , Exteriors: Exterior trim components include plastic molded fascia systems, bodyside cladding, signal lamps, cowl grilles and wheel Öares. The Company has taken advantage of the systems trend in the exterior trim product market by producing and assembling fascia with radiator grilles, energy absorbers, trim moldings and lamps to be delivered in sequence directly to the OEMs' assembly line. Carpet and Acoustics The Company evolved from a North American carpet producer to become a market leader in a broad range of automotive Öoor systems, luggage compartment trim, dash insulators and other acoustic products with production capabilities in both North America and Europe. While acoustical products are often combined with molded Öoor carpet to provide complete interior Öoor systems, it is useful to describe four carpet and acoustics product categories: , Molded Floor Systems: Molded Öoor systems consist of thermoformed compression molded carpets. These carpets are provided in either a barrier or an absorptive NVH (noise, vibration and harshness) system. The barrier system includes polyethylene, barrier back, and a Ñber underlay system or a foamin-place system. Products include TuÖorTM, our proprietary thermoplastic Öooring product, which is rugged, durable and washable. The products in molded Öoor systems are highly engineered, and their manufacture requires a high degree of precision and draws on our robotics capabilities. The Company believes it is the number one producer of molded Öoor and acoustic systems in the North American market and manufactures molded Öoor systems for all of the North American and Japanese OEMs as well as a number of the European OEMs. , Luggage Compartment Trim: The other major carpeted area of the vehicle is the luggage compartment, which includes one-piece molded trunk systems and assemblies, wheelhouse covers and center 5

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 8 of 104

pan mats, seatbacks, tireboard covers and other trunk trim products. The Company believes that it is the number two supplier of luggage compartment trim in the North American market. , Accessory Floormats: The Company manufactures automotive accessory Öoormats by vulcanizing rubber backing to tufted carpet and also manufactures cargo mats with value-added distinctive aesthetic and practical features such as hand-sewn appearance of edges and moisture trapping construction with our patented Akro Edge» Öoormats. Largely due to this product diÅerentiation, the Company has become the largest fully integrated auto Öoormat producer in North America. , Acoustical Products: Acoustical products include interior dash insulators that insulate the passenger compartment from engine compartment noise and heat; damping materials that control noise in the Öoor, overhead system and sides of the vehicle; and engine compartment NVH systems. Changes to vehicle interiors, including hands-free cell phone systems, navigational systems, entertainment systems and voice-activated Internet access, will require enhanced acoustical properties and increased sound Ñeld engineering relative to today's light vehicles. Automotive Fabrics The combination of the Company's existing fabrics products with Joan makes us one of the largest automotive fabrics manufacturers. The principal automotive fabrics are bodycloth (woven or knitted fabric primarily for the seats of the vehicle) and headliner (knitted fabric laminated with foam such as that on the inside roof of the vehicle). Automotive fabrics are woven or knit based on the styling and cost preference of the customer. The Company oÅers every major fabric variation, including dobby velours, jacquard woven velours, Öat wovens, double needle-bar knits, circular knits and tricot knits. The Company's styling capability is one of its principal strengths, and is a reason for strong sales to OEMs. With the acquisition of Joan, the production of fabrics is vertically integrated with an expandable dye house operation. Due to stringent OEM ""color fastness'' standards, the dyeing and color application process is a key value-added aspect of auto fabric production and contributes signiÑcantly to price-per-yard. Dura Convertible Top Systems The Company is a vertically integrated full service supplier of convertible roof systems, and can design, engineer and manufacture all aspects of a convertible top including the framework, trim set, backlights, well slings, tonneau covers and power actuating system. In order to diÅerentiate products in the marketplace, OEMs have been increasing the number of convertible models on both existing and new platforms. Management believes that this trend will continue to drive demand for convertible systems. Top-in-a-BoxTM, a system pioneered by Dura Convertibles, is an assembly-line-ready module containing all of the components of a convertible top that enables the OEM to install a complete convertible top system on the production line. This modular, ""bolt-on'' assembly signiÑcantly reduces the time and labor traditionally required to manufacture a convertible model, enabling OEMs to more proÑtably produce and sell convertibles. Dura Convertibles has the industry's most complete line of fabric coverings for convertible and sport utility top covers for OEMs globally. The Company maintains Ñnal assembly and trim operations near the OEMs' plants, and thereby oÅers customers complete just-in-time delivery and sequencing capabilities. Customers Customers include both OEMs and Tier I total interior integrators, which have been increasingly divesting component manufacturing. In the past, OEMs have been typical direct customers for the Company's plastic components, cockpits, carpet and acoustic and convertible products, while Tier I total interior integrators have typically been direct customers for fabrics. The Company believes that over time, sales to Tier I total interior integrators will increase as a percentage of total sales as OEMs source increasingly larger sections of vehicle interiors to Tier I total interior integrators who in turn shift their capital and emphasis towards electronics and the delivery of fully integrated interior modules. Through strategic acquisitions, the Company has broadened its customer base globally, with European sales representing 14% of total sales for 2001 versus 3% in 1996. DaimlerChrylser AG (including Mercedes, Chrysler, Mitsubishi and Smart), General Motors Corporation (including General Motors, Opel, Vauxhall and Saab) and Ford Motor Company (including Ford, Jaguar, Land Rover, Aston Martin and Volvo) directly 6

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 9 of 104

and indirectly represented approximately 18.7%, 29.0% and 21.5% of 2001 sales, respectively. These percentages are likely to change with the recent acquisition of TAC-Trim. The following is a list of customers: , , , , , , , , , Alpha Romeo Audi BMW CAMMI DaimlerChrysler Faurecia Fiat Ford Freightliner , , , , , , , , , General Motors Honda Hyundai Intier Isuzu Jaguar Johnson Controls Kia Lear Corporation , , , , , , , , , Magna Man Mazda Mitsubishi Nissan NUMMI Opel Porsche PSA , , , , , , , , , Renault Rover Scania Seat Subaru Toyota Visteon Volkswagen Volvo

The Company's supply relationships are typically sole-source and extend over the life of the model, which is generally four to seven years, and do not normally require the purchase by the customer of any minimum number of products. The Company receives blanket purchase orders that normally cover annual requirements for products to be supplied for a particular vehicle model which may be terminated at any time. In order to reduce reliance on any one model, the Company produces automotive interior systems and components for a broad cross-section of both new and more established models. Marketing, Engineering and Development As a global leader in automotive interior components, the Company diÅerentiates itself in the marketplace by consistently providing high quality products, outstanding customer service and program management and cost eÅective automotive solutions to global customers. Historically, the Company marketed individual components, modules and complete systems to customers. With the implementation of ""Mega'' Tier II strategy, the Company realigned marketing eÅorts to sell integrated product ""bundles'' to customers in an eÅort to increase growth in sales and operating income while enhancing the value-add provided to customers. Central to this marketing strategy has been the development of products that enhance both the vehicles' interior aesthetics as well as its acoustic performance. Equally important, and unlike many other Tier I or Tier II automotive suppliers, is the development of marketing and program management teams speciÑcally focused on supporting not only OEMs, but major Tier I customers as well. These dedicated teams, consisting of automotive interior personnel who are able to meet a customer's entire interior needs, provide a single interface for our customers and help avoid duplication of our sales and engineering eÅorts. Products are sold directly to customers under sales contracts that are obtained primarily through competitive bidding. These sales are originated almost entirely by sales staÅ. This marketing eÅort is augmented by design and manufacturing engineers that work closely with automotive manufacturers from the preliminary design to the manufacture and supply of automotive interior modules, systems or components. A key element employed to increase sales is to develop increasingly higher value-added products through innovations in materials construction, product design, engineering and styling. In recognition of this, in April of 2000, the Company formed the Global Product Development Division (GPDD) and also created an Advanced Sales and Program Management Group. The primary focus of the GPDD is to work closely with customer engineering personnel to develop new products, processes, innovations, etc. that are central to winning new business from customers. The Advanced Sales and Program Management Group serves as a ""bridge'' between the GPDD and customer focused sales groups who market the Company's products and are responsible for ensuring that customers' needs are being met. Through sales oÇces in North America, South America, Europe and Asia-PaciÑc, our marketing personnel maintain regular contact with our various customers' engineers and purchasing agents. The Company continually seeks new business from existing customers, as well as developing relationships with new customers. The Company markets its products by maintaining strong customer relationships, developed over an 80-plus year history in the automotive industry through: , extensive technical and product development capabilities; , reliable just-in-time delivery of high-quality products; , strong customer service; , innovative new products; and , a competitive cost structure. 7

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 10 of 104

The emergence of modular sourcing favors suppliers with broad manufacturing capabilities and product lines, experience with diverse materials and modular coordination. Management believes that the Company's broad base of manufacturing expertise with interior surface resins and materials and its global leadership in delivering cockpits, will favorably position the Company in the global automotive interior industry. Automotive manufacturers have increasingly looked to suppliers to assume responsibility for introducing product innovations, shortening the development cycle of new models, decreasing tooling investment and labor costs, reducing the number of costly design changes in the early phases of production and improving automotive interior acoustics, comfort and functionality. Once the Company is engaged to develop the design for the automotive interior system or component of a speciÑc vehicle model, it is also generally engaged to supply these items when the vehicle goes into production. Substantial resources have been dedicated toward improving engineering and technical capabilities, establishing strong in-house tooling capabilities (which have been strengthened by both the Becker and TAC-Trim acquisitions) and developing advanced technology centers in the United States and in Europe. Similarly, research and development are an integral part of the sales and marketing eÅort. Especially noteworthy are TAC-Trim's proprietary IntellimoldTM injection molding control process, InvisitecTM invisible passenger air bag door system and Envirosoft castable TPU and TPO materials. In order to eÅectively develop automotive interior systems, it is necessary to have global capabilities in the engineering, research, design, development and validation of the interior components, systems and modules being produced. The Company conducts research and development at design and technology centers in Dearborn, Michigan; Dover, New Hampshire; Auburn Hills, Michigan; Plymouth, Michigan; Heidelberg, Germany and Tyngsboro, Massachusetts and at several worldwide product engineering centers. At these centers, the Company designs, develops and engineers products to comply with applicable safety standards, meet quality and durability standards, respond to environmental conditions and conform to customer aesthetic and acoustic requirements. In particular, acoustic requirements and cockpit aesthetics have become more important than ever with the advent of in-vehicle telematics. Technologically advanced acoustics testing centers are maintained in Plymouth, Michigan and Heidelberg, Germany and cockpit development centers are located in Auburn Hills and Dearborn Michigan in order to capitalize on both of these trends. Manufacturing The Company focuses on combining smaller manufacturing plants into larger scale plants that have eÇcient layouts and the ability to absorb core Ñxed costs. The Company possesses cross-disciplinary manufacturing expertise, including an ability to form and assemble multi-material combinations of hard-molded plastics, slush-molded soft skins and surfaces, carpet, fabric, foam, insulation, and other trim materials. Management believes the sophistication of the Company's carpet tufting and dying processes, the foam-in-place process for molded Öoors and its small-part plastic moldings and assemblies capabilities creates a competitive advantage. Recent acquisitions have added to the Company's manufacturing capabilities: , With the Joan acquisition, the Company gained a scaleable, low-cost package automotive yarn dyeing facility thereby bringing in-house an important source of supply for the manufacture of our fabrics products. , The acquisition of Becker, originally established as a tool shop, has supplemented existing operations with one of the industry's leading tool developers allowing the in-sourcing of a signiÑcant portion of the Company's tooling requirements. The addition of Becker's tooling expertise complemented the Company's manufacturing capabilities for carpet and acoustics products and TAC-Trim's large part injection molding process. , The TAC-Trim acquisition added advanced process technologies such as slush-molded skinning for high-end instrument panels, thermoplastic casting, and ""molded-in'' color and decoration insert capability and overall manufacturing discipline and acumen. SpeciÑc product and process additions brought on by TAC-Trim include: the patented IntellimoldTM feedback control system for injection molding control which dramatically reduces cycle times, labor costs and scrap rates; and the 8

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 11 of 104

proprietary IntelliquenceTM software sequencing system which should enable product delivery on a just-in-time basis to global OEM customers. In addition, TAC-Trim signiÑcantly expands plastic manufacturing capabilities allowing the Company to provide substantially all of an automobile's interior plastic components. Technology and Intellectual Property SigniÑcant resources are dedicated to research and development in order to maintain the position as a leading developer of technology innovations, some of which have been patented or are in the process of being patented, in the automotive interior industry. The Company has developed a number of patented and proprietary designs for innovative interior features, all focused on increasing value to the customer. Examples include the Company developed proprietary slimline cupholders, CavelÖexTM (stretch woven) fabrics and the ""AcTTM family'' of acoustically tunable products. Patents and patent applications exist in Ñve primary areas: automotive Öoor mats, automotive fabric products, acoustics, plastics and convertible systems. With respect to Öoormats, the Company holds several U.S. and foreign patents relating to the Akro Edge» Öoormats. Akro Edge» Öoormats are the industry standard for their functional and aesthetic appeal to OEMs and their customers. With respect to automotive fabric patents, the Company has numerous patents on headliners, trunkliners and Öoor panels. In the acoustics area, in addition to the proprietary Comet» acoustics software, the Company is actively seeking protection of various aspects of its AcTTM Ñber technology and various other means for improving sound deadening and sound absorption in automotive interiors. The Company has various patents and patent applications directed to cup holders, air outlet assemblies, storage systems and convertible mechanisms. In connection with the TAC-Trim acquisition the Company acquired intellectual property rights to various products and processes including the patented IntellimoldTM injection molding control process for use in its business. The IntellimoldTM patents are related to methods and/or apparatus for injection molding. TAC-Trim has also developed certain skin materials and compounding solutions that provide the capability to design cost-eÅective materials with outstanding performance and aesthetic qualities. Examples of these materials include EnvirosoftTM castable thermoplastic materials, high performance PVC alloys, high-deÑnition grain and texture formulation and vacuum thermoplastic applications. TAC-Trim has also developed the InvisitecTM invisible passenger air bag system, which provides improved appearance and craftsmanship at reduced cost. InvisitecTM systems, which integrate the air bag door with the panel and top cover, have been commercialized for soft-cast and vacuum-formed panels and hard injection molded instrument panels. In total, TAC-Trim holds approximately 270 U.S. and approximately 1200 foreign active patents and has approximately 350 patents pending. The intellectual property acquired in the TAC-Trim Acquisition is subject to certain limitations on the Company's use and creates continuing obligations to Textron. As part of the TAC-Trim acquisition, the Company entered into three intellectual property license agreements with Textron. In two of these agreements, the Company licensed back to Textron certain intellectual property that was acquired in the transaction (the ""Intellimold Agreement'' and the ""LicensedBack IP Agreement''). In the third agreement, the Company licensed from Textron other intellectual property that it did not acquire in the transaction (the ""Retained IP Agreement''). The Company is providing general descriptions of these agreements although these descriptions do not contain all the material terms in the contracts. , In all three agreements, the ability to use the intellectual property is limited based on whether the proposed use falls inside or outside a deÑned Ñeld of automotive products (the ""Restricted Field''). In the Intellimold Agreement, the Company gave Textron an exclusive worldwide, perpetual, irrevocable license to use outside the Restricted Field its rights in the Intellimold process and any enhancements developed by it. Textron was also granted a royalty-free, worldwide, perpetual, irrevocable license to use the Company's rights in the Intellimold process and any enhancements developed by the Company within the Restricted Field solely in connection with its and certain aÇliates' manufacturing, sales and development operations. The Intellimold Agreement also includes an exclusive royalty-free, worldwide, perpetual, irrevocable license for the Company to use within the Restricted Field any enhancements to the Intellimold process 9

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 12 of 104

developed by Textron. In the Licensed-Back IP Agreement, the Company granted Textron a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license to use solely outside the Restricted Field certain intellectual property including over 50 U.S. patents on air bag related products. In the Retained IP Agreement, Textron granted to the Company a non-exclusive, worldwide, royalty-free, perpetual and irrevocable license to use solely within the Restricted Field certain intellectual property. These patents could have applicability to the automotive industry but such use is somewhat secondary to the use of such technology outside the automotive Ñeld. As described below under the heading ""Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Liquidity Ì Leases'', the Company leases certain equipment from Textron. When those leases terminate, if Textron and its aÇliates continue to own any interest in the equipment, they will be allowed to use the equipment for certain purposes and to use related intellectual property. Raw Materials Raw materials and other supplies used in our continuing operations are normally available from a variety of competing suppliers. With respect to most materials, the loss of a single or even a few suppliers would not have a material adverse eÅect on the Company. The Company is sensitive to price movements in its raw materials supply base and has not hedged against price Öuctuations in commodity supplies, such as plastics and resins. While the Company may not be able to pass on any future raw materials price increases to customers, a signiÑcant portion of increased cost may be oÅset through volume purchase savings, value engineering/value analysis in conjunction with our major customers and reductions in the cost of oÅ-quality products and processes. The Company may evaluate commodities hedging opportunities from time to time. Competition The Company is a leading supplier in automotive molded carpet and acoustics, auto fabrics, convertible top systems and automotive plastics components and cockpits, within each segment. Customers rigorously evaluate suppliers on the basis of product, quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, leanness of facilities, operational Öexibility, customer service and overall management. Some competitors may have greater Ñnancial resources than the Company or a competitive advantage in the production of any given product that the Company manufactures, and there can be no assurance that the Company will be able to successfully compete in the markets for the products it currently provides. Joint Ventures The Company participates in two certiÑed minority business enterprises in the U.S. (Aguirre and Collins & Aikman Plastics, L.L.C., and Engineered Plastic Products, Inc.). These joint ventures play an important role in securing new business as automotive manufacturers continue to promote economic diversity by proactively increasing the amount of business they source to minority suppliers. These joint ventures were instrumental in our obtaining contracts with General Motors and Johnson Controls to supply them with various plastic components and systems for a number of vehicle models. In connection with the TAC-Trim acquisition, the Company acquired a 50% interest in an Italian joint venture. Textron Automotive Holdings (Italy) S.r.L. is an Italian company that will oÅer interior and exterior automotive trim products to customers in Italy. Textron indirectly owns the other 50% of the Italian joint venture interests. A recent project of the Italian joint venture is to service certain cockpit needs for three new Fiat lines at a facility being built at Fiat's Cassina, Italy plant. The Company will not control the joint venture but will be required to provide certain administrative, technical and engineering services and to license certain patents and other know how to the Italian joint venture. The Company expects to receive certain fees and reimbursement of certain expenses in providing these services and licensing these rights. Refer to Item 7, ""Management Discussion and Analysis of Financial Condition and Results of Operations'' for additional discussion regarding a put and call arrangement that the Company entered into with respect to acquiring the remaining 50% interest in the Italian joint venture. 10

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 13 of 104

Labor Matters and Employees As of December 31, 2001, the Company's continuing operations employed approximately 25,850 persons on a full-time or full-time equivalent basis. Approximately 55% of such employees were represented by labor unions in the United States, Canada and other countries. Each facility has its own collective bargaining unit and management believes that our relations with our employees represented by labor unions and our other employees are generally good. From time to time in the ordinary course of our business, grievances are Ñled against the Company by employees and unions. Environmental Matters A discussion of environmental matters is included in Item 3, ""Legal Proceedings'' and Item 7, ""Management Discussion and Analysis of Financial Condition and Results of Operations'' and in Note 21, ""Commitments and Contingencies'' of the Ñnancial statements included in this report. Item 2. Properties

The Company has over 120 plants and facilities in North America, South America, Europe and Asia. Approximately 70% of the total square footage of these facilities is owned and the remainder is leased. Many facilities are strategically located to provide product delivery to our customers on a just-in-time basis. Facilities by Geographic Region
Type of Facility North America South America Europe Asia Total

Manufacturing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Design, Research & Development, and Technical Centers ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Sales Branches, OÇces, Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Total(1) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ

59 14 19 92

5 Ì Ì 5

24 8 7 39

Ì Ì 2 2

88 22 28 138

(1) Total facilities shown per the table exceeds the 120 plants and facilities indicated above because certain facilities listed in the table serve in more than one of the indicated capacities. Item 3. Legal Proceedings Except as described below, the Company and its subsidiaries are not party to any material pending legal proceedings, but is involved in ordinary routine litigation incidental to the business. Environmental: The Company is subject to federal, state, local and foreign environmental, and health and safety, laws and regulations that (i) aÅect ongoing operations and may increase capital costs and operating expenses in order to maintain compliance with such requirements and (ii) impose liability relating to contamination at facilities, and at other locations such as former facilities, facilities where we have sent wastes for treatment or disposal, and other properties to which the Company may be linked. Such liability may include, for example, investigation and clean-up of the contamination, personal injury and property damage caused by the contamination, and damages to natural resources. Some of these liabilities may be imposed without regard to fault, and may also be joint and several (which can result in a liable party being held responsible for the entire obligation, even where other parties are also liable). Management believes that it has obtained, and is in material compliance with those material environmental permits and approvals necessary to conduct our various businesses. Environmental compliance costs for continuing businesses are accounted for as normal operating expenses or capital expenditures. Environmental compliance costs relating to conditions existing at the time of an acquisition are generally charged to reserves established in purchase accounting. The Company accrues for environmental remediation costs when such obligations are known and reasonably estimable. In the opinion of management, based on the facts presently 11

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 14 of 104

known to it, such environmental compliance and remediation costs will not have a material eÅect on the business, consolidated Ñnancial condition, future results of operations or cash Öows. The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites, and for personal injury or property damages, if any, associated with such contamination. At some of these sites the Company has been notiÑed that it is a potentially responsible party (""PRP'') under the federal Superfund law or similar state laws. The Company may be identiÑed in other sites in the future and may be responsible for contamination, including with respect to divested and acquired businesses. The Company is currently engaged in investigating or remediating certain sites. In estimating cost of investigation and remediation, the Company considered, among other things, prior experience in remediating contaminated sites, remediation eÅorts by other parties, data released by the United States Environmental Protection Agency (""USEPA''), the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other identiÑed PRPs will have the Ñnancial resources to fulÑll their obligations at sites where they may be jointly and severally liable. It is diÇcult to estimate the total cost of investigation and remediation due to various factors including: , incomplete information regarding particular sites and other PRPs; , uncertainty regarding the nature and extent of environmental problems and our share, if any, of liability for such problems; , the ultimate selection among alternative approaches by governmental regulators; , the complexity and evolving nature of environmental laws, regulations and governmental directives; and , changes in cleanup standards. The Company has established reserves for environmental investigation and non-capital remediation costs. Management believes such reserves comply with generally accepted accounting principles. The Company records reserves for these environmental costs when litigation has commenced or a claim or assessment has been asserted or is imminent, the likelihood of an unfavorable outcome is probable, and the Ñnancial impact of such outcome is reasonably estimable. As of December 31, 2001, total reserves for these environmental costs are approximately $59.6 million. Approximately half of those environmental reserves are for the three sites discussed below. The balance relates to approximately 40 additional locations where the Company is participating in the investigation or remediation of the site, either directly or through Ñnancial contribution or where the company is alleged to be responsible for costs of investigation or remediation. The Company is implementing a 1991 Administrative Order issued by USEPA concerning the remediation of soil and groundwater contamination associated with the Stamina Mills Superfund Site in North SmithÑeld, Rhode Island. Although the outcome of ongoing litigation with the government could reduce this expense, the environmental reserve assumes that we will have full responsibility for this matter. In addition, in March 2001 the Company received notice of a suit Ñled in Rhode Island state court on behalf of a person alleging medical conditions caused by exposure over a number of years, through drinking water and otherwise, to a chlorinated solvent in contaminated groundwater associated with the site. The Company Ñled an answer denying liability. Although management believes the Company has signiÑcant defenses, the suit is in its early stages. The Company is also implementing a 1990 Administrative Order by Consent with the New Hampshire Department of Environmental Services (DES) concerning the investigation and remediation of the Cardinal LandÑll. Among other things, the Company also paid for alternative water supplies to residences impacted by groundwater contamination associated with the landÑll and investigation and, if necessary, remediation of oÅsite impacts from the landÑll. The DES is in the process of selecting a remedy to address conditions at the landÑll. Concern about conditions in the soil and groundwater at and in the vicinity of the site have prompted a lawsuit in state court, on behalf of several families that reside in a mobile home park near the landÑll, against the park owner. Although the Company believes it would have signiÑcant defenses, no assurance can be given 12

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 15 of 104

that litigation will not be brought against the Company arising out of the contamination or, if so, that the matter would be resolved in a way that is not material. As a result of the TAC-Trim acquisition, the Company is also one of 11 PRPs implementing a 1993 Consent Decree with USEPA and the State of New Hampshire concerning the remediation of soil, groundwater and sediment contamination associated with the Dover Municipal LandÑll Superfund Site in Dover, New Hampshire. Under a related 1997 Administrative Order on Consent with the USEPA, the PRPs are in the process of assessing a possible alternative to the remedy previously selected for this site. In the opinion of management, based on information presently known to it, identiÑed environmental costs and contingencies will not have a material adverse eÅect on the consolidated Ñnancial condition or future results of operations. However, no assurance can be given that management has identiÑed or properly assessed all potential environmental liability arising from the Company's business or properties, and those of present and former subsidiaries and their corporate predecessors. During 2001, the Company received payments of $14.5 million on environmental claims related to discontinued operations. Of the $14.5 million in payments, the Company recorded $8.8 million, net of income taxes, as income from discontinued operations. During 2000, the Company settled claims for certain other environmental matters related to discontinued operations for a total of $20.0 million. Settlement proceeds are being paid to the Company in three installments. Installments of $7.5 million were received in both 2000 and 2001. The Company anticipates receiving the Ñnal payment of $5.0 million on June 30, 2002. Of the $20.0 million settlement, the Company recorded the present value of the settlement as $7.0 million of additional reserves, based on its assessment of potential environmental exposures, and $6.6 million, net of income taxes, as income from discontinued operations. Other Claims: As of March 18, 2002, the Company is party to approximately 662 pending cases alleging personal injury from exposure to asbestos containing materials used in boilers manufactured before 1966 by former operations of the Company which were sold in 1966. Asbestos-containing refractory bricks lined the boilers and, in some instances, the Company's former operations installed asbestos-containing insulation around the boilers. These pending cases do not include cases that have been dismissed or are subject to agreements to dismiss due to the inability of the plaintiÅs to establish exposure to a relevant product and cases that have been settled or are subject to settlement agreements. Total settlement costs for these cases have been less than $85,000 or an average of less than $2,500 per settled case. The defense and settlement costs have been substantially covered by our primary insurance carriers under a claims handling agreement that expires in August 2006. The Company has primary, excess and umbrella insurance coverage for various periods available for asbestos-related boiler and other claims. The Company's primary carriers have agreed to cover approximately 80% of certain defense and settlement costs up to a limit of approximately $70.5 million for all claims made, subject to reservations of rights. The excess insurance coverage, which varies in availability from year to year, is approximately $620 million in aggregate for all claims made. Based on the age of the boilers, the nature of the claims and settlements made to date, and the insurance coverage, management does not believe that these cases will have a material impact on the Company's Ñnancial condition, results of operations or cash Öows. However, it cannot assure that the Company will not be subjected to signiÑcant additional claims in the future, that insurance will be available as expected or that unanticipated damages or settlements in the future would not exceed insurance coverage. Item 4. Submission of Matters to a Vote of Security Holders None during the fourth quarter of 2001 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's Common Stock has been traded on the New York Stock Exchange under the symbol ""CKC'' since July 7, 1994. At March 20, 2002, there were approximately 12,000 beneÑcial holders. The 13

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 16 of 104

following table lists the high and low closing prices for the Common Stock for the full quarterly periods during the two most recent years.
2001 High Low High 2000 Low

First QuarterÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5.6875 Second Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6.2000 Third Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8.5700 Fourth Quarter ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10.3000

3.5800 4.0500 3.9500 4.7600

6.1250 7.0000 6.1250 4.9375

4.5000 5.1250 4.6875 2.8750

During the Ñrst quarter of 2001, Heartland acquired a controlling interest in the Company. As part of the transaction, Heartland purchased 25 million shares of common stock (of which approximately 8.49 million shares were treasury shares) directly from the Company. Heartland is entitled to designate a majority of the Company's Board of Directors. Mr. McCallum and Mr. Becker were elected to the Board of Directors and Textron has the right to name one of the directors. Heartland has been a signiÑcant source of recent equity Ñnancing. There can be no assurances that Heartland will provide us with additional equity Ñnancing in the future. The Company also issued 79.8 million shares of common stock in relation to the acquisition of Becker Group, LLC, Joan Fabrics and Tac-Trim. See Note 3, ""Acquisitions and Joint Ventures'' of the Ñnancial statements included in this report. On December 31, 2001, Heartland owned approximately 40% of the outstanding shares; Blackstone Partners and WP Partners owned approximately 15%; Joan Fabrics Corp. and Mr. Elkin McCallum and associates owned approximately 8%; Mr. Charles E. Becker approximately 11% and Textron owned approximately 11%. Although the Company's common stock is publicly traded, the small public Öoat of C&A common stock and registration rights granted to certain C&A stockholders, may preclude C&A from being able to issue common stock in a future public oÅering. Blackstone and certain of its aÇliates, Wasserstein and certain of its aÇliates, Heartland and certain of its aÇliates, Charles E. Becker, Joan Fabrics Corporation, Textron and certain other co-investors in the TAC-Trim acquisition are entitled to demand registration rights and ""piggyback'' registration rights at various times with respect to Company common stock held by them. Based on a review of Schedule 13Ds Ñled by the respective parties through March 20, 2002 and other information available to the Company, these parties, in the aggregate, hold approximately 160 million shares of Company common stock. The Company has paid no dividends or made similar distributions with respect to its common stock during 2001. Any payment of future dividends and the amounts thereof will be dependent upon the Company's earnings, Ñnancial requirements and other factors deemed relevant by the Company's Board of Directors. Certain restrictive covenants contained in the agreements governing the Company's credit facilities and senior subordinated notes limit the Company's ability to make dividend and other payments. See ""ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Ì Liquidity and Capital Resources'' and Note 10, ""Long-Term Debt, Mandatorily Redeemable Preferred Stock and Short-Term Borrowings'' of the financial statements included in this report.

14

Case 1:07-cv-00265-SLR-LPS

Document 47-2

Filed 09/14/2007

Page 17 of 104

Item 6. Selected Financial Data
December 31, 2001 Fiscal Year Ended (1) December 31, December 25, December 26, 2000 1999 1998 (in millions, except per share data) December 27, 1997

Statement of Operations Data: Net SalesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Gross Margin ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Selling, general and administrative expenses (exclu