Net sales for the 2009 third quarter were $130.3 million, an 18.2% decrease from net sales for the 2008 third quarter of $159.3 million. Excluding currency effects shown in the table below, third quarter 2009 net sales decreased 15.6% from the third quarter of 2008, with declines of 14.9% and 16.8% in the clothing and roll covers segments, respectively. See “Segment Information” below.

Gross margins improved to 37.4% in the third quarter of 2009 from 33.1% in the third quarter of 2008. The improvement is primarily due to the absence in 2009 of the increased provision for slow-moving and obsolete inventory of $8 million that was recorded in the third quarter of 2008, primarily in the clothing segment.

Operating expenses for the 2009 third quarter increased by $22.0 million to $36.9 million, a 59.6% increase from operating expenses for the 2008 third quarter of $14.9 million. The increase was principally due to the $40.0 million of curtailment/settlement gains recognized during the third quarter of 2008 (as a result of freezing certain pension benefits in the U.S. and no longer sponsoring our U.S. retiree health insurance program) that was absent in the third quarter of 2009. The increase was partially offset by decreases in the other operating costs, specifically decreases of $12.8 million in general and administrative expenses, $3.1 million in selling expenses and $1.8 million in restructuring and impairments during the third quarter of 2009, as compared with the third quarter of 2008.

General and administrative expenses decreased by $12.8 million in the 2009 third quarter as compared with the 2008 third quarter due to the following: (i) environmental accruals of $4.1 million recorded in the third quarter of 2008 that were absent in the third quarter of 2009, (ii) decreased provisions for bad debts of approximately $9.8 million, principally due to an $8.1 million increase in 2008 that was absent in the third quarter of 2009 and (iii) decreased salaries, travel and other costs as a result of cost reduction efforts during the three months ended September 30, 2009 as compared with the three months ended September 30, 2008. These decreases were partially offset by (i) increased bank and related fees of $2.2 million related to initiatives undertaken to resolve our credit issues and (ii) gains on the sale of property and equipment of $2.4 million recorded in the third quarter of 2008 that were absent in the third quarter of 2009.

Selling expenses decreased by $3.1 million in the 2009 third quarter as compared with the 2008 third quarter due to the following: (i) a reduction in salaried sales positions, commissions and travel expenses and (ii) favorable currency translation effects of $0.8 million.

Net loss for the third quarter of 2009 was $7.4 million or $0.15 per diluted share, compared to a net income of $21.5 million or $0.46 per diluted share for the third quarter of 2008.

Adjusted EBITDA (as defined by the Company’s amended credit facility) was $25.1 million for the third quarter of 2009, compared to $54.2 million for the third quarter of 2008. See “Non-GAAP Liquidity Measures” below.

Cash on hand at September 30, 2009 was $21.8 million, compared to $20.4 million at June 30, 2009, $34.7 million at December 31, 2008 and $18.4 million at September 30, 2008.

Total bank debt at September 30, 2009 increased to $628.6 million from $618.7 million at June 30, 2009 primarily due to unfavorable currency effects, partially offset by long-term debt principal payments of approximately $5.5 million.

On September 29, 2009, the Company entered into Waiver and Amendment No. 1 (the “Waiver Agreement”) to the senior credit facility. As anticipated, as of September 30, 2009, the Company was not in compliance with certain financial covenants of the senior credit facility. Pursuant to the Waiver Agreement, the

lenders agreed to waive any violation of the interest coverage, leverage and fixed charge covenants under the senior credit facility until the earliest of (i) the occurrence of any other default under the senior credit facility, (ii) the Company’s failure to comply with any term of the Waiver Agreement or (iii) December 15, 2009 (the “Waiver Period”). The Company has formed a steering committee of its Board of Directors to explore initiatives to address long-term solutions to its credit issues. The Company is in discussions with its current lenders regarding restructuring or replacing some or all of its debt, which would be likely to include the issuance of equity to such lenders and the payment of additional fees, as well as exploring with third parties various strategic alternatives affecting the Company’s debt and equity ownership. Even with the additional time provided by the Waiver Agreement, there can be no assurance that the Company will be able to complete any initiatives to resolve its credit issues on satisfactory terms, or at all. Any such initiatives the Company pursues are likely to severely dilute its existing stockholders and may result in its existing common stock having little or no value. If the Company is unable to execute on its initiatives prior to the expiration of the Waiver Period, its failure to comply with the financial covenants of the senior credit facility as of September 30, 2009 would be a default under the facility, absent a further waiver of those terms, which may not be available at that time. The Company is seeking an additional wavier to extend the Waiver Period and provide additional Credit Agreement relief from the payment of principal and interest due. The Company anticipates that it may have insufficient cash at year end to both make its required payments under the Credit Agreement and operate its business. Accordingly, absent a waiver of some or all of the scheduled quarterly payments required under the Credit Agreement, which would require unanimous approval of the lenders of the debt outstanding under the Credit Agreement, the Company may default on its payment obligations under the Credit Agreement or seek relief through the bankruptcy courts. There can be no assurance that the Company will be able to obtain a waiver of all or any portion of the scheduled quarterly payments under the Credit Agreement from its lenders. The occurrence of an event of default under the Company’s credit facility potentially could lead to acceleration of the Company’s loan obligations by its lenders, termination of its interest rate swap agreements by the counterparties, reorganization under Chapter 11 of the U.S. Bankruptcy Code and the initiation of insolvency proceedings against us in some non-U.S. jurisdictions.

As the Company is uncertain that it will be able to complete any alternative, long-term solutions to its credit issues or to obtain a further waiver prior to expiration of the Waiver Agreement, the Company is no longer able to support that the variable-rate interest payments (hedged transactions) under its senior credit facility are probable of occurring and therefore, effective September 1, 2009, the Company was required to discontinue cash flow hedge accounting prospectively for its interest rate swaps so that the mark to market changes in their fair value are charged or credited to interest expense.

Net Sales

Three Months Ended
September 30,

Percent decrease in net

sales from Q3 2008 to

Q3 2009

Clothing

Roll Covers

Total

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net sales

Costs and expenses:

Cost of products sold

Selling

General and administrative

Restructuring and impairments

Research and development

Curtailment/settlement gains

Income from operations

Interest expense

Interest income

Foreign exchange gain (loss)

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Net income (loss) per share:

Basic

Diluted

Shares used in computing net income (loss) per share:

Basic

Diluted

Nine Months Ended

September 30,

Balance sheet data (at end of period):

Cash and cash equivalents

Total assets

Senior debt

Total debt

Total stockholders’ equity (deficit)

Cash flow data:

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Other financial data:

Depreciation and amortization

Capital expenditures

Net income (loss)

Income tax provision

Interest expense, net

Depreciation and amortization

EBITDA

Amendment/termination costs

Change in fair value of interest rate swaps

Restructuring expenses

Inventory write-offs under restructuring programs

Non-cash compensation and related expenses

Non-cash impairment charges

Adjusted EBITDA

Net income (loss)

Income tax provision

Interest expense, net

Depreciation and amortization

EBITDA

Unrealized foreign exchange gain on indebtedness, net

Amendment/termination costs

Change in fair value of interest rate swaps

Change in fair value of other derivatives

Restructuring expenses

Inventory write-offs under restructuring programs

Growth program costs

Non-cash compensation and related expenses

Non-cash impairment charges

Adjusted EBITDA